/raid1/www/Hosts/bankrupt/TCREUR_Public/150325.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
E U R O P E
Wednesday, March 25, 2015, Vol. 16, No. 59
Headlines
A N D O R R A
CREDIT ANDORRA: Fitch Puts BB Pref. Shares Rating on Watch Neg.
B E L G I U M
SOBELMAR ANTWERP: Belgian Carrier Pursues Restructuring in U.S.
SOBELMAR ANTWERP: Wants Court to Remind Creditors of Stay
SOBELMAR ANTWERP: Proposes to Pay US$455K to Critical Vendors
SOBELMAR ANTWERP: Wants to Use HSH's Cash Collateral
G R E E C E
SEADRILL PARTNERS: S&P Alters Outlook to Neg.; Affirms BB-/B CCR
I R E L A N D
LANSDOWNE MORTGAGE 1: S&P Puts 'CC' Note Ratings on Watch Neg.
ZOO ABS 4: S&P Raises Ratings on 2 Note Classes to B+
L U X E M B O U R G
INTELSAT SA: S&P Lowers CCR to 'B'; Outlook Stable
N E T H E R L A N D S
DECO 14-PAN EUROPE 5: Fitch Affirms 'CCsf' Ratings on 2 Notes
P O L A N D
TVN SA: S&P Puts 'B+' CCR on CreditWatch Positive
P O R T U G A L
METRO DE LISBOA: S&P Revises Outlook to Pos. & Affirms 'BB' ICR
PORTUGAL: S&P Revises Outlook to Pos. & Affirms BB/B' Ratings
R U S S I A
BANK TAVRICHESKY: S&P Withdraws 'R' Counterparty Ratings
DAGENERGOBANK: Central Bank Revokes License
ENEL RUSSIA: Moody's Affirms Ba3 CFR; Outlook Negative
KONGRESS-BANK: Central Bank Revokes License
MTSB JSC: Moody's Lowers Rating on Class A Notes to 'Ba1'
ORENBURG REGION: Fitch Affirms 'BB' IDR; Outlook Stable
RUSSIAN LENINGRAD: S&P Affirms 'BB+' ICR; Outlook Negative
UNITED CONFECTIONERS: Fitch Affirms 'B' IDR; Outlook Negative
S P A I N
AYT GENOVA: Fitch Affirms 'Bsf' Rating on Class D Notes
IM PRESTAMOS: Moody's Reviews 'B1' Rating on Cl. A Notes
ISOLUX CORSAN: S&P Puts 'B' CCR on CreditWatch Negative
TP FERRO: Seeks Judicial Protection to Avert Bankruptcy
* Moody's Reviews for Upgrade 38 SMICBs
S W E D E N
SAAB AUTOMOBILE: Swedish Court Approves Debt-Writedown
U K R A I N E
AEROSVIT: Kyiv Court Commences Bankruptcy Proceedings
UKREXIMBANK: Fitch Lowers Issuer Default Ratings to 'CC'
VAB BANK: Depositors to Contest in Court NBU Decision
U N I T E D K I N G D O M
BUTTERCROSS TRADING: Brought Out of Administration
LMF LEISURE: Goes Into Liquidation
MACLAY GROUP: Placed on the Market Following Administration
OSPREY ACQUISITIONS: Fitch Affirms 'BB' IDR; Outlook Stable
RESIDENTIAL MORTGAGE 28: Moody's Rates Class E Notes 'Ba2'
YORKSHIRE WATER: Moody's Cuts Medium-Term Note Rating to (P)Ba1
X X X X X X X X
* Moody's Takes Rating Actions on Multiple EMEA RMBS & ABS Notes
* Moody's Reviews Ratings on 36 Repackaged Deals
*********
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A N D O R R A
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CREDIT ANDORRA: Fitch Puts BB Pref. Shares Rating on Watch Neg.
---------------------------------------------------------------
Fitch Ratings has placed Andorra Banc Agricol Reig's (Andbank),
Credit Andorra's and Mora Banc Grup, SA's Long- and Short-term
Issuer Default Ratings (IDRs) of 'A-' and 'F2', respectively, and
their Viability Ratings (VRs) of 'a-' on Rating Watch Negative
(RWN).
The RWN reflects Fitch's view that the operating environment and
franchises of Andorra's domestic banks need to be reassessed in
light of potential spill-over effects from the resolution of Banca
Privada d'Andorra (BPA; 'Restricted Default').
KEY RATING DRIVERS - IDRs AND VR
The RWNs indicate likely rating downgrades from the 'A-' levels
for all three Andorran banks. The extent of the downgrades will
depend on Fitch's re-assessment in particular of aspects related
to the operating environment (including the regulatory framework
and the economic outlook), company profiles (business models and
franchises) and funding and liquidity profiles. The extent of
downgrades will also depend on developments in the coming weeks,
especially with respect to deposit outflows and, potentially, how
the resolution of BPA affects other banks.
While the U.S. Department of the Treasury's Financial Crimes
Enforcement Network's (FinCEN) allegations are specific to BPA,
the escalation of events at BPA has underlined more uncertainty
around access to funding and liquidity than was previously
factored into the Andorran banks' ratings, in particular in view
of their relatively high dependence on non-residential customer
deposits and the absence of a lender of last resort.
On March 10, 2015, the FinCEN named BPA as a foreign financial
institution of primary money laundering concern and proposed the
imposition of special measures. Subsequently, BPA and its
subsidiaries were intervened by the relevant authorities, the
Spanish subsidiary applied for insolvency proceedings and
temporary precautionary measures were implemented by BPA's
administrators, among other developments.
All three Andorran banks' 'A-' ratings have so far reflected the
development of their private banking franchises, sound management,
healthy profitability, strong capitalization and ample liquidity.
The ratings also take into account the weak operating environment
in Andorra, which has put pressure on asset quality indicators,
and the banks' high single-name risk concentrations.
RATING SENSITIVITIES - IDRs AND VR
The operating environment is a constraining factor for these
banks' ratings and Fitch's assessment is sensitive to a potential
downward revision of domestic economic growth prospects and a
possible recalibration of its view on aspects related to the
effectiveness of the regulatory framework in Andorra.
Fitch's assessment of the banks' company profiles is primarily
sensitive to the evolution of confidence in the Andorran banking
system. Despite a swift and strong response to BPA's crisis by all
parties involved, the reputation of the system and therefore the
banks' franchises may be damaged, potentially affecting growth
prospects and the stability of their businesses models.
Fitch will also review the stability of banks' deposits and funds
under management, in particular in view of the high proportion of
non-residential customers, which exposes them to flight risk. In
this context the lack of a lender of last resort in Andorra is a
disadvantage versus international peers.
Fitch will carry full reviews of IDRs and VRs of Credit Andorra,
Andbank and MoraBanc in the coming weeks.
KEY RATING DRIVERS - SUPPORT RATING AND SUPPORT RATING FLOOR
The banks' Support Ratings (SRs) of '5' and Support Rating Floors
(SRFs) of 'No Floor' reflect Fitch's view that the probability of
Andorran banks receiving support in case of need is low. Although
Fitch does not publish a rating for Andorra, the banking system's
large size relative to the Andorran economy means that while the
authorities' propensity to provide support may be high, it cannot
be relied upon given limited resources at their disposal.
RATING SENSITIVITIES - SUPPORT RATING AND SUPPORT RATING FLOOR
A change to the SRs and SRFs is unlikely. It could only arise in
the highly unlikely event of a material increase in resources
available to the Andorran authorities to support the banks or if a
bank was acquired by a strong, supportive institution.
KEY RATING DRIVERS AND SENSITIVITIES - CREDIT ANDORRA'S PREFERRED
STOCK
Credit Andorra's preferred stock is rated five notches below its
VR to reflect higher loss severity than the average for senior
unsecured creditors and the higher-than-average risk of non-
performance given that the payment of coupons is discretionary. It
has been placed on RWN to mirror the placement of Credit Andorra's
VR on RWN. Credit Andorra's preferred stock ratings are broadly
sensitive to the same considerations that might affect its VR.
Fitch has taken the following rating actions:
Credit Andorra:
Long-term IDR: 'A-' placed on Rating Watch Negative
Short-term IDR: 'F2' placed on Rating Watch Negative
VR: 'a-' placed on Rating Watch Negative
Preference shares: 'BB' placed on Rating Watch Negative
Support Rating: affirmed at '5'
Support Rating Floor: affirmed at 'No Floor'
Andbank:
Long-term IDR: 'A-' placed on Rating Watch Negative
Short-term IDR: 'F2' placed on Rating Watch Negative
VR: 'a-' placed on Rating Watch Negative
Support Rating affirmed at '5'
Support Rating Floor affirmed at 'No Floor'
MoraBanc:
Long-term IDR: 'A-' placed on Rating Watch Negative
Short-term IDR: 'F2' placed on Rating Watch Negative
VR: 'a-' placed on Rating Watch Negative
Support Rating affirmed at '5'
Support Rating Floor affirmed at 'No Floor'
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B E L G I U M
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SOBELMAR ANTWERP: Belgian Carrier Pursues Restructuring in U.S.
---------------------------------------------------------------
Sobelmar Antwerp N.V., the Belgian owner of four handysize bulk
carriers, sought bankruptcy protection in the United States after
it couldn't reach a deal with its primary lender, HSH Nordbank AG.
Three debtor-subsidiaries of Sobelmar owe HSH Nordbank the
principal of US$41,625,000 under a loan used to finance the
purchase of vessels Brasschaat, Vyritsa, and Kovdor. A fourth
subsidiary owes HSH US$14,000,000 on a loan used to acquire the
vessel Zarachensk. The vessels were delivered in 2009 and 2010
and were used to renew the Debtors' fleet of three debt-free,
older handysize vessels.
The facilities are secured by first priority mortgages on each of
the vessels. The HSH facilities provide that the loans will be
paid in 32 quarterly installments with maturity eight years after
delivery of the relevant vessel. The Debtors were also required
to make "scrap tranche" payments of US$3 million following the
sale of each former vessel.
While the Debtors continued to make debt service payments required
under the HSH facilities, the Debtors were unable to provide full
repayment of US$6,000,000 of the Scrap Tranches by HSH's Dec. 15,
2014 deadline. On Dec. 22, 2014, HSH terminated HSH Facility 1
and demanded immediate repayment of the full amount.
The Debtors pursued an out-of-court agreement with HSH but
negotiations were unsuccessful.
Filing in the U.S.
Vladimir Terechtchenko, owner of 50.2 percent of the equity
interests, and the managing director, explains that because, at
any particular time, the Debtors' primary assets -- the
vessels -- are in international waters or foreign ports, there is
no single logical location for an insolvency filing.
After considering the possibility of filings in Belgium and
Germany, the Debtors concluded that the United States provided the
most meaningful opportunity due to, among other reasons, the
extraterritorial reach of the automatic stay and the practical
enforceability of the stay against creditors such as HSH with
business operations in the United States.
The Debtors were also aware of the commencement of Chapter 11
cases by numerous other international maritime transportation
companies for similar reasons, including recent filings by Taiwan-
based TMT Shipping (Houston), Athens-based Excel Maritime (New
York), Bermuda-based Nautilus Shipping (New York), Athens-based
Omega Navigation (Houston), and Amsterdam-based Marco Polo
Seatrade (New York).
Road to Bankruptcy
Mr. Terechtchenko explains in a court filing that the shipping
industry is highly cyclical, with attendant volatility in charter
hire rates and profitability. Following record charter rate
levels in 2007 and 2008, charter rates in many sectors of shipping
quickly plummeted to decade-low levels as a result of the global
recession. In the years leading up to the global recession, the
Debtors were in process of renewing their aging fleet. After
taking possession of the four new vessels, the Debtors faced
increasing liquidity pressure but continued servicing their debt
and meeting operating expenses.
According to Mr. Terechtchenko, realizing the need to restructure
their bank debt obligations, the Debtors hired outside consultants
and engaged in good faith restructuring negotiations with its
lenders. Unfortunately, and despite the beginnings of rising
charter rates, the parties were unable to come to terms despite
several attempts at a consensual deal. During the course of
negotiations, it became apparent that the Debtors' primary lender,
HSH, was intent on including the Debtors' vessels in a bundled
investment product rather than in restructuring the HSH
Facilities.
HSH had launched a new investment product, bundling vessels and
related debt and then selling them to investors. Navios, a Greek
company, was the first buyer of the new HSH product (the "HSH-
Navios Platform"). In November 2014, HSH provided the Debtors an
ultimatum: the Debtors could include their fleet of vessels in a
product similar to the HSH-Navios Platform and use HSH as broker
in that transaction, or HSH would enforce its mortgages on the
vessels. The Debtors rejected the ultimatum as HSH and Navios
would effectively expropriate all value associated with the
vessels from the vessel owners.
In order to preserve their assets and maximize value for all
stakeholders, the Debtors filed for Chapter 11 protection.
First Day Motions
The Debtor on the Petition Date filed motions to:
-- jointly administer their Chapter 11 cases;
-- enforce and restate the automatic stay;
-- maintain their existing insurance policies;
-- pay or honor obligations to foreign creditors;
-- maintain their cash management system;
-- use cash collateral; and
-- pay prepetition wages and benefits to employees.
About Sobelmar Antwerp
Sobelmar Antwerp N.V., a Belgium corporation provides worldwide
seaborne transportation services, operating a fleet of four
handysize bulk carriers. The vessels Brasschaat, Vyritsa, Kovdor,
and Zarachensk, are owned that are all Marshall Islands
corporations.
Sobelmar Antwerp N.V. and its affiliates sought Chapter 11
bankruptcy protection (Bankr. D. Conn. Lead Case No. 15-20423) in
Hartford, Connecticut, in the United States on March 17, 2015.
The Debtors have approximately US$66.2 million in assets and US$63
million in liabilities as of Dec. 31, 2014.
The Debtors tapped Bracewell & Giuliani LLP, in Hartford,
Connecticut, as counsel.
The formal schedules of assets and liabilities are due March 31,
2015.
SOBELMAR ANTWERP: Wants Court to Remind Creditors of Stay
---------------------------------------------------------
Sobelmar Antwerp N.V. and its debtor-affiliates ask the U.S.
Bankruptcy Court for the District of Connecticut to enter an order
enforcing and restating the automatic stay and ipso facto
provisions of the U.S. Bankruptcy Code.
Evan D. Flaschen, Esq., at Bracewell & Giuliani LLP, explains that
the Debtors' business operations are conducted worldwide with
significant assets moving through international waters at any
given time. As a result, the Debtors have many foreign creditors
and counterparties to contracts who may not be well versed in the
restrictions of the Bankruptcy Code. Many of these creditors do
not transact business on a regular basis with companies that have
filed for chapter 11, or are unfamiliar with the scope of a debtor
in possession's authority to conduct its business. These
creditors may be unfamiliar with the operation of the automatic
stay and other provisions of the Bankruptcy Code. Furthermore, the
Debtors' largest secured lender, HSH Nordbank AG, contacted
certain of the Debtors' charter counterparties prior to the
Petition Date, seeking to collect charter fees directly from the
charter counterparties.
Thus, Mr. Flaschen tells the Court, various interested parties may
attempt to seize assets located outside of the United States to
the detriment of the Debtors, their estates and creditors, or take
other actions in contravention of the automatic stay of Sec. 362
of the Bankruptcy Code. In addition, upon learning of the
Debtors' bankruptcy, counterparties to leases and executory
contracts may attempt to terminate those leases or contracts
pursuant to ipso facto provisions in contravention of Section 365.
About Sobelmar Antwerp
Sobelmar Antwerp N.V., a Belgium corporation provides worldwide
seaborne transportation services, operating a fleet of four
handysize bulk carriers. The vessels Brasschaat, Vyritsa, Kovdor,
and Zarachensk, are owned that are all Marshall Islands
corporations.
Sobelmar Antwerp N.V. and its affiliates sought Chapter 11
bankruptcy protection (Bankr. D. Conn. Lead Case No. 15-20423) in
Hartford, Connecticut, in the United States on March 17, 2015.
The Debtors have approximately US$66.2 million in assets and US$63
million in liabilities as of Dec. 31, 2014.
The Debtors tapped Bracewell & Giuliani LLP, in Hartford,
Connecticut, as counsel.
The formal schedules of assets and liabilities are due March 31,
2015.
SOBELMAR ANTWERP: Proposes to Pay US$455K to Critical Vendors
-------------------------------------------------------------
Sobelmar Antwerp N.V. and its debtor-affiliates ask the U.S.
Bankruptcy Court for the District of Connecticut for approval to
pay all or part of the claims of certain vendors, including many
foreign based entities, that have provided (a) essential goods to,
or on behalf of, the Debtors that were received by the Debtors
before the Petition Date; and/or (b) essential services that were
rendered to, or on behalf of, the Debtors before the Petition
Date.
The Debtors estimate that the Critical Vendor payments will not
exceed US$455,439 in the aggregate. Critical Vendor payments
fluctuate in general between US$800,000 and US$1,000,000 and
represent less than 2% of the Debtors' aggregate debt obligations
as of the Petition Date. The Debtors contemplate making payments
on prepetition Critical Vendor Claims that become payable
postpetition in the ordinary course of their businesses as and
when they become due.
The Debtors will use their best efforts to condition payments as
to Critical Vendors, as is practical, upon each Critical Vendor's
agreement to continue supplying goods and services to the Debtors
on the normal and customary trade terms, practices and programs
that were in effect prior to the Petition Date.
SOBELMAR ANTWERP: Wants to Use HSH's Cash Collateral
----------------------------------------------------
Sobelmar Antwerp N.V. and its debtor-affiliates ask the U.S.
Bankruptcy Court for the District of Connecticut for interim and
final approval to use cash collateral in which HSH Nordbank AG may
assert an interest.
The Debtors intend to provide adequate protection, to the extent
of the aggregate decrease in value of Cash Collateral from and
after the Petition Date and to the extent of HSH's interest
therein, by: (i) maintaining the value of HSH's asserted interest
in the Cash Collateral by continuing to operate the business and
thereby generating new cash; (ii) granting HSH postpetition
replacement liens pursuant to Sec. 361(2) in accounts receivable,
including cash generated or received by the Debtors subsequent to
the Petition Date, but only to the extent that the HSH had valid,
perfected prepetition liens and security interests in such
collateral as of the Petition Date; and (iii) providing HSH a
superpriority claim pursuant to Sec. 507(b) over all
administrative expense claims and unsecured claims, of any kind or
nature whatsoever, whether in existence on or arising after the
Petition Date subject to a Carve-Out.
Evan D. Flaschen, Esq., at Bracewell & Giuliani LLP, tells the
Court that as of the Petition Date, the Debtors do not have
unencumbered cash sufficient to fund all of their business
operations and pay present operating expenses. Notably, HSH
currently approves and releases all electronic funds transfer
requests in connection with certain of the Debtors' bank accounts.
Recently, HSH has refused to approve and release electronic funds
transfer requests the Debtors initiated to pay crew wages in a
timely manner, imperiling the Debtors' businesses and Vessel
safety, jeopardizing the Vessels' insurance coverage, and
potentially breaching applicable laws as to employee payments.
Unless the Court grants the relief requested, the Debtors will be
unable to meet basic operating expenses, which will further
imperil the survival of their business. Therefore, the Debtors
have an urgent need for the immediate use of Cash Collateral
pending a final hearing on the Motion.
Three debtor-subsidiaries of Sobelmar owe HSH Nordbank the
principal of US$41,625,000 under a loan used to finance the
purchase of vessels Brasschaat, Vyritsa, and Kovdor. A fourth
subsidiary owes HSH US$14,000,000 on a loan used to acquire the
vessel Zarachensk. The vessels were delivered in 2009 and 2010
and were used to renew the Debtors' fleet of three debt-free,
older handysize vessels. The facilities are secured by first
priority mortgages on each of the vessels, and are further secured
by assignments of earnings by the vessel owners and pledges of the
Debtors' deposit accounts held at HSH.
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G R E E C E
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SEADRILL PARTNERS: S&P Alters Outlook to Neg.; Affirms BB-/B CCR
----------------------------------------------------------------
Standard & Poor's Ratings Services revised to negative from stable
its outlook on Marshall Islands-domiciled offshore drilling
company Seadrill Partners LLC and its subsidiary, Seadrill
Capricorn Holdings LLC. At the same time, S&P affirmed its 'BB-
/B' corporate credit ratings.
The outlook revision reflects S&P's view that funding needs in
2015 for debt maturities and new vessels at Seadrill Ltd. could
have implications for Seadrill Partners, in which Seadrill Ltd.
has material and strategic interests. In S&P's view, Seadrill
Partners may pay increased distributions to its shareholders and
Seadrill Ltd. could finance further sales to Seadrill Partners of
an interest in one of its vessels (vessel drop downs) by
increasing debt at Seadrill Partners. S&P sees the current rating
headroom for Seadrill Partners' financial metrics as limited and
therefore consider that such transactions could lead to an overall
increase in leverage above the level that S&P finds commensurate
with the rating (for example, adjusted debt to EBITDA above 4x).
Furthermore, in a downside scenario in which Seadrill Ltd. has
reduced or insufficient access to external funding, S&P would
probably lower its rating on Seadrill Partners.
The ratings on Seadrill Partners reflect S&P's assessment of the
company's business risk profile as "fair" and its financial risk
profile as "significant." S&P's business risk assessment
recognizes Seadrill Partners' very modern, high-specification
fleet of contracted vessels, which had a revenue backlog of $5.6
billion on Dec. 31, 2014. The contracts have relatively high day
rates and an average remaining contract term of 3.3 years.
However, Seadrill Partners did not manage to extend the contract
on West Vencedor, which expires at the end of March 2015. The rig
will remain uncontracted until Seadrill Partners finds new
employment for it. That said, the rest of the contracts offer
medium-term visibility on revenues and operating cash flow
generation, as a result of cost escalation clauses. Clients are
renegotiating with other drilling operators to decrease day rates
and S&P expects Seadrill Partners to face similar pressure if oil
prices remain low for a prolonged period. Rig utilization in the
last quarter of 2014 was 90%, in line with the previous quarter.
S&P projects that utilization rates will remain broadly stable in
2015 and S&P expects increased profitability thanks to the
increased contribution of West Vela, which Seadrill Partners
acquired in 2014 from Seadrill Ltd.
S&P forecasts free operating cash flow (FOCF) will be positive
because the modern vessels require only modest capital
expenditure. Seadrill Partners is likely to avoid construction,
start-up, initial contracting, and associated funding and
liquidity risks, as these are largely borne by its main
shareholder, the large Bermuda-based offshore driller Seadrill
Ltd. S&P assess Seadrill Partners as strategically important to
Seadrill Ltd.
Maintenance covenants would allow debt to EBITDA of up to 5x,
closer to the leverage at Seadrill Ltd., although S&P do not
project this in its base case for Seadrill Partners in 2015 or
2016.
Operationally, Seadrill Ltd. has four ultra-deepwater floaters,
three drillships, two barges, and one tender rig, so more than a
few days off day-rate for one or more vessels has a meaningful
effect on performance. Although Seadrill Partners has indirect
stakes in these nine vessels, Seadrill Ltd. has the remaining,
material interests. The debt-raising entities have 100% ownership
of the rigs, apart from collateral vessel West Capella, in which
Seadrill Ltd. has a 44% interest. In S&P's analysis, it
consolidates Seadrill Partners and its controlled entities, in
line with the International Financial Reporting Standards
accounts. S&P notes the cross-default clauses between these
entities, but also see Seadrill Partners' 30% interest in borrower
Seadrill Operating LP and 51% interest in borrower Seadrill
Capricorn Holdings LLC as a structural shortcoming, resulting in
material dividend leakage to Seadrill Ltd.
In S&P's view, Seadrill Partners' organizational complexity,
including partial ownership of assets and consequent dividend
leakage, is a relative weakness. In addition, its credit metrics
are at the weaker end of the range S&P considers commensurate with
a "significant" financial risk profile. S&P reflects this
assessment through our comparable rating analysis modifier -- it
applies a one-notch downward adjustment to the company's 'bb'
anchor to result in the 'bb-' stand-alone credit profile. The
current chief financial officer has announced his resignation and
so S&P will be alert to any potential changes in financial policy.
S&P's base case assumes:
-- A Brent oil price of $55 per barrel (/bbl) in 2015 and
$65/bbl in 2016.
-- Day rates as contracted and average utilization of over 90%
in 2015 and 2016. S&P forecasts no revenues from West
Vencedor in 2015 and 2016, once the contract expires at the
end of March.
-- EBITDA margins of more than 60%.
-- No modeled drop downs or acquisitions of interests in
specific rigs. However, given the limited headroom under
credit metrics, further drop downs, especially if combined
with increased cash distributions, could increase Seadrill
Partners' leverage to above 4.0x.
Based on these assumptions, S&P arrives at these credit measures:
-- Adjusted funds from operations to debt of 20%-25% in 2015
and 2016.
-- Adjusted debt to EBITDA of 3.5x-4.0x in 2015 and 2016.
-- Positive FOCF, after maintenance capital investment and
before distributions, of $600 million-$700 million in 2015
and 2016.
The negative outlook reflects S&P's view that pressure for a
downgrade is increasing in the context of both adverse industry
conditions and tightening financial flexibility at the level of
Seadrill Partner's major shareholder, Seadrill Ltd. Because the
debt coverage measures are already at the weaker end of the range,
they may fall below the level that S&P considers to be
commensurate with a "significant" financial risk profile.
S&P could consider a negative rating action if Standard & Poor's-
adjusted FFO to debt were to decline below 20%, adjusted debt to
EBITDA were to increase to more than 4x, or discretionary cash
flow/debt decreases below 5% on a sustained basis. This could
arise from deteriorating operational performance, unforeseen debt-
funded acquisitions, or increasing cash distributions to
unitholders. This would be exacerbated if Seadrill Partners were
to acquire an uncontracted vessel, or if S&P was to observe any
liquidity pressure at this level.
The negative outlook reflects S&P's view that the rating headroom
is limited given Seadrill Partners' forecast financial metrics and
might not remain commensurate with the "significant" category over
2015 and 2016, especially if liquidity pressures at Seadrill Ltd.
were to materialize.
S&P do not see an upgrade as likely in the near term. S&P could
raise the ratings, however, if FFO to debt reaches more than 30%
on a sustained basis and discretionary cash flow at least breaks
even. This could happen if operating performance is stronger than
S&P's base case assumes and the increased assets at Seadrill
Partners are funded prudently.
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I R E L A N D
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LANSDOWNE MORTGAGE 1: S&P Puts 'CC' Note Ratings on Watch Neg.
--------------------------------------------------------------
Standard & Poor's Ratings Services placed on CreditWatch negative
all of its credit ratings in Lansdowne Mortgage Securities No. 1
PLC and Lansdowne Mortgage Securities No. 2 PLC.
The CreditWatch negative placements reflect the issuer's
cancellation of the liquidity facility agreement and the
additional indemnity amount that the issuer paid to Barclays Bank
PLC--as the liquidity facility provider.
On March 9, 2015, the issuer canceled the liquidity facility in
both transactions following a noteholder meeting. Under the
liquidity facility agreement, the issuer is required to cover
certain increased costs, reductions in amounts receivable, or
reductions in the return on capital of the liquidity facility
provider. On March 2, 2015, the issuer received a letter from
Barclays Bank requesting the immediate payment of an indemnity
amount: EUR56,872 in relation to Lansdowne Mortgage Securities
No. 1 and EUR1,030,079 in relation to Lansdowne Mortgage
Securities No. 2. The issuer paid Barclays Bank the amounts on
the March 2015 interest payment date. However, these amounts for
Lansdowne Mortgage Securities No. 1 and No. 2 only cover the
periods between Feb. 9, 2015 and March 9, 2015 and Jan. 12, 2015
and March 9, 2015, respectively. Therefore, the issuer may
receive additional claims to cover the increased costs from
previous periods.
The combined cancellation of the liquidity facility agreement and
the reduction in available credit enhancement, due to the payment
of the indemnity amounts claimed to date, could have a negative
impact on S&P's ratings on the outstanding notes in both
transactions. Therefore, S&P has placed on CreditWatch negative
S&P's ratings on Lansdowne Mortgage Securities No. 1's class A2,
B1, B2, M1, and M2 notes, and Lansdowne Mortgage Securities No.
2's class A2, B, M1, and M2 notes.
S&P will resolve these CreditWatch negative placements following
discussions with the transaction participants to gauge the
likelihood of additional claims, taking into account the effect of
the cancellation of the liquidity facility and any further
reduction in available credit enhancement due to the payment of
indemnity amounts.
Lansdowne Mortgage Securities No. 1 and No. 2 are Irish
nonconforming residential mortgage-backed securities transactions
with loans originated by Start Mortgages Ltd.
RATINGS LIST
Class Rating Rating
To From
Ratings Placed On CreditWatch Negative
Lansdowne Mortgages Securities No. 1 PLC
EUR370.05 Million Residential Mortgage-Backed Fixed- And Floating-
Rate Notes
A2 B (sf)/Watch Neg B (sf)
M1 B- (sf)/Watch Neg B- (sf)
M2 B- (sf)/Watch Neg B- (sf)
B1 CCC (sf)/Watch Neg CCC (sf)
B2 CCC (sf)/Watch Neg CCC (sf)
Lansdowne Mortgages Securities No. 2 PLC
EUR525.05 Million Residential Mortgage-Backed Fixed- And Floating-
Rate Notes
A2 B- (sf)/Watch Neg B- (sf)
M1 CCC (sf)/Watch Neg CCC (sf)
M2 CCC (sf)/Watch Neg CCC (sf)
B CCC (sf)/Watch Neg CCC (sf)
ZOO ABS 4: S&P Raises Ratings on 2 Note Classes to B+
-----------------------------------------------------
Standard & Poor's Ratings Services raised its credit ratings on
ZOO ABS 4 PLC's class C, D, and E notes. At the same time, S&P
has affirmed its ratings on the class A-1R, A-1A, A-1B, A-2, and B
notes.
The rating actions follow S&P's credit and cash flow analysis of
the transaction using data from the note valuation trustee report
dated Dec. 29, 2014, and the application of S&P's relevant
criteria.
S&P conducted its cash flow analysis to determine the break-even
default rate (BDR) for each rated class of notes. The BDR
represents S&P's estimate of the maximum level of gross defaults,
based on its stress assumptions, that a tranche can withstand and
still fully repay the noteholders. S&P used the portfolio balance
that it considers to be performing, the reported weighted-average
spread, and the weighted-average recovery rates that S&P
considered to be appropriate. S&P incorporated various cash flow
stress scenarios using our shortened and additional default
patterns and levels for each rating category assumed for each
class of notes, combined with different interest stress scenarios
as outlined in S&P's criteria.
The transaction's reinvestment period ended in May 2012. Since
S&P's previous review, all rated classes of notes have amortized.
Principal proceeds will continue to be applied to the repayment of
the notes in a pro rata redemption sequence until there is a
sequential redemption event. A sequential redemption event occurs
if on any payment date there is either a breach of any
overcollateralization test or the aggregate balance of the
portfolio falls below 75% of the target par amount. S&P's
analysis indicates that the total paydown since its previous
review amounts to approximately EUR68.2 million.
Additionally, the underlying portfolio's overall credit quality
has improved. For example, assets rated in the 'CCC' category
('CCC+', 'CCC', and 'CCC-'), have decreased to EUR16.613 million
(representing 3.94% of the current portfolio balance) from
EUR29.586 million (representing 6.02% of the then portfolio
balance) since S&P's previous review. The level of defaulted
assets (rated 'CC','C', 'SD' [selective default], or 'D') in the
collateral pool has remained unchanged since S&P's previous
review. As a result, S&P notices a decrease in its scenario
default rates (SDRs) at each liability rating. The SDR represents
the minimum level of portfolio defaults S&P expects each
collateralized debt obligation (CDO) tranche to be able to support
the specific rating level using Standard & Poor's CDO Evaluator.
For the class C, D, and E notes, S&P's credit and cash flow
results indicate that current BDRs are now able to sustain SDRs at
higher ratings than those currently assigned. S&P has therefore
raised its ratings on the class C, D, and E notes.
S&P's results also indicate that the available credit enhancement
for the class A-1R, A-1A, A-1B, A-2, and B notes is commensurate
with the currently assigned ratings. S&P has therefore affirmed
its ratings on the class A-1R, A-1A, A-1B, A-2, and B notes.
ZOO ABS 4 is a cash flow mezzanine structured finance CDO
transaction that closed in April 2007.
RATINGS LIST
ZOO ABS 4 PLC
EUR514.2 mil floating-rate notes
Rating Rating
Class Identifier To From
A-1R BBB+ (sf) BBB+ (sf)
A-1A XS0298493072 BBB+ (sf) BBB+ (sf)
A-1B XS0298495523 BBB+ (sf) BBB+ (sf)
A-2 XS0298496505 BBB (sf) BBB (sf)
B XS0298496927 BB+ (sf) BB+ (sf)
C XS0298497495 BB (sf) BB- (sf)
D XS0298498386 B+ (sf) B (sf)
E XS0298498972 B+ (sf) B (sf)
===================
L U X E M B O U R G
===================
INTELSAT SA: S&P Lowers CCR to 'B'; Outlook Stable
--------------------------------------------------
Standard & Poor's Ratings Services lowered its corporate credit
rating on Intelsat S.A. to 'B' from 'B+'. S&P removed the ratings
from CreditWatch, where it placed them with negative implications
on Feb. 19, 2015. The rating outlook is stable.
At the same time, S&P lowered its issue-level rating on the
secured debt at Intelsat Jackson Holdings S.A. to 'BB-' from 'BB'.
The recovery rating remains '1', reflecting S&P's expectation for
very high (90%-100%) recovery for lenders in the event of a
payment default.
In addition, S&P revised its recovery rating on the unsecured
guaranteed notes at Jackson to '2' from '4' based on a
reevaluation of Intelsat's net enterprise value under S&P's
hypothetical default scenario. The '2' recovery rating reflects
S&P's expectation for substantial (70-90%, at the upper end of the
range) recovery for lenders in the event of a payment default. As
a result of the revised recovery rating, the 'B+' issue-level
rating on this debt remains unchanged.
S&P also lowered its issue-level rating on the unsecured
unguaranteed 6.625% notes at Jackson and the unsecured debt at
Intelsat Luxembourg S.A. to 'CCC+' from 'B-'. The recovery rating
on this debt remains '6', reflecting S&P's expectation for
negligible (0%-10%) recovery for lenders in the event of a payment
default.
"The ratings downgrade reflects our expectation that adjusted
leverage will remain above 8x through 2016, and that free
operating cash flow will be only modestly positive this year,"
said Standard & Poor's credit analyst Michael Altberg. "In our
view, a resumption of revenue growth and improvement in leverage
metrics is increasingly dependent on the success of Intelsat's
Epic platform, which we don't expect to be a material revenue
contributor until 2017. We continue to have a favorable view of
the company's business risk profile, similar to other FSS
providers, due to the company's global scale, the material
barriers to entry in the industry, and highly predictable revenue
streams. However, due to its revenue mix, we believe Intelsat
faces more near-term challenges than its peers of a similar size
that have greater exposure to media services. This is due to the
company's strong legacy position as the leading global satellite
provider of conventional telecom and data services," added Mr.
Altberg.
For 2014, network services contributed 46% of revenue, and S&P
expects this segment to decline 7%-10% in 2015 due to fiber
competition on point-to-point services in certain markets and the
roll-off in legacy channel services. In addition, it is very
uncertain whether the government segment (17% of revenue) can
return to growth in 2016. For these reasons, S&P is revising its
business risk profile to "satisfactory" from "strong." The
revised business risk profile mainly reflects S&P's 2015-2016
outlook, and S&P will look to reassess it once it has greater
clarity on the impact of the IS-29e satellite launch.
=====================
N E T H E R L A N D S
=====================
DECO 14-PAN EUROPE 5: Fitch Affirms 'CCsf' Ratings on 2 Notes
-------------------------------------------------------------Fitch
Ratings has upgraded DECO 14 - Pan Europe 5 B.V. (DECO 14)'s class
A-2 and A-3 floating-rate notes due 2020 and affirmed the
remaining tranches as:
EUR82.9 million class A-2 (XS0292121802) upgraded to 'AA+sf' from
'AAsf'; Outlook Stable
EUR64.6 million class A-3 (XS0292122289) upgraded to 'Asf' from
'A-sf'; Outlook Stable
EUR99.4 million class B (XS0291365137) affirmed at 'BBsf'; Outlook
revised to Stable from Negative
EUR64.6 million class C (XS0291365566) affirmed at 'Bsf'; Outlook
Negative
EUR100.8 million class D (XS0291367182) affirmed at 'CCsf';
Recovery Estimate (RE) 30%
EUR25.8 million class E (XS0291367422) affirmed at 'Csf'; RE 0%
EUR11.9 million class F (XS0291368156) affirmed at 'Csf'; RE 0%
The transaction is a securitization of originally 11 commercial
real estate loans originated by Deutsche Bank AG (rated
A+/Stable), including one jointly with Lehman Commercial Paper
Inc. In March 2015, seven loans remained, with collateral in
Italy, Germany and Bulgaria.
KEY RATING DRIVERS
The upgrades and Outlook revision reflect the full repayment of
the EUR127.1 million Puma MF loan and sequential principal
allocation. While Fitch expected no losses in a 'Bsf' scenario,
recoveries have exceeded expectations in higher stress scenarios.
The affirmation of the class B to F notes reflects our largely
unchanged recovery expectations on the six defaulted loans, all of
which have now passed their maturities. The Negative Outlook on
class C reflects potential protracted workouts of defaulted loans.
The largest remaining loan, EUR126.7 million Armilla Clarice 2,
remains in primary servicing and is scheduled to mature in October
2016. It is secured on 14 office properties located in various
Italian cities. The assets are fully let to Telecom Italia SPA
(rated BBB-/Negative), with a weighted average remaining lease
term (WARLT) of 6.9 years. There has been no revaluation since
closing in 2006 and Fitch estimates the loan to value (LTV) in
excess of the reported 52.3% (at approximately 80%).
Despite fixed interest payments, the interest coverage ratio was
reported at a healthy 2.8x in January 2015. Given the sound asset
performance and lease profile, a full loan repayment is expected,
by maturity or thereafter.
The EUR105.1 million Arcadia loan has been in special servicing
since 2010 and switched to floating rate interest at maturity in
January 2014. One of the 24 German mixed-use properties securing
the loan was sold in January 2015 and the principal will be
allocated to the notes in April 2015. Seven more properties had
sales and purchase agreements notarized. The agreed cumulative
sales prices exceeded the 2013 values by approximately 9%.
However, due to a reported LTV of 212.4%, Fitch expects a
significant loss.
The EUR94.5 million CGG - Tambelle REDO 3 loan has entered
preliminary insolvency proceedings and all borrower accounts have
been blocked by the administrator until the opening of final
proceedings. However, the loan benefits from a EUR3.1 million
reserve account; and one of the 14 underlying German mixed-use
properties has been sold. The sales proceeds marginally exceeded
the 2014 valuation. The most recent ICR stood high at 6.2x on the
floating-rate (senior) loan, despite a low occupancy rate at 65%.
With a senior LTV of 122.7%, Fitch expects a moderate loss.
The EUR49 million Sofia Business Park loan was previously
restructured and extended until October 2015. However, the
borrower did not meet certain conditions which triggered another
loan default and a transfer into special servicing. The
collateral comprises 11 assets located in Sofia, Bulgaria. Almost
30% of the rent is derived from Hewlett Packard (rated
A-/RWN) and the assets are fully let, although on a fairly short
weighed average lease term (WALT 4.4 years).
Fitch estimates the senior LTV above the reported 54.4% (based on
a 2012 valuation). The prospect of full senior repayment could be
improved by lease re-gearing but may also depend on investor
appetite.
The collateral for the EUR39.6 million Cottbus Shopping Centre
loan is 99% let and tenant Kaufland accounts for 95% of the rent
(although its space is partly sublet). The WALT is short at 1.25
years. While no updated valuation has been announced yet (the loan
defaulted in January 2015), Fitch believes that no equity remains.
The agency expects a moderate ultimate loss, although the recent
switch to floating interest payments improves the cash trap/sweep;
and lease re-gearing would affect recovery prospects positively.
The EUR44 million Mansford Nord Bayern loan is secured on 22
retail assets located in Germany. The assets are fully let to
EDEKA and Netto (part of the same group) which account for 71.4%
and 28.6% of the rent, respectively. The WARLT was reported at 5
years in January 2015. The loan is in standstill until July 2015;
and the special servicer is in discussion with the tenants
regarding possible lease extensions. Despite a 6.8x ICR, Fitch
expects a significant loss on the highly leveraged (162.6% LTV)
loan.
The collateral formerly securing the DD Karstad Hilden loan has
been sold via auction and EUR2.2 million of proceeds have been
allocated to the notes. The remaining funds (around EUR0.3
million) have been reserved for costs/ expenses by the special
servicer. Any surplus, including final recoveries received from
involved courts, will be passed on to the noteholders before the
final loss on the remaining EUR2.9 million balance is determined.
Fitch estimates 'B' recoveries of EUR348 million.
RATING SENSITIVITIES
Protracted workouts and recoveries below Fitch's 'Bsf'
expectations could affect the class C and D ratings and their
recovery estimates.
===========
P O L A N D
===========
TVN SA: S&P Puts 'B+' CCR on CreditWatch Positive
-------------------------------------------------
Standard & Poor's Ratings Services placed its 'B+' long-term
corporate credit rating on Poland-based TV operator TVN S.A. and
its 'B-' long-term corporate credit rating and issue ratings on
Polish Television Holding B.V. (PTH) on CreditWatch with positive
implications.
The CreditWatch placement follows U.S.-based cable network perator
Scripps Networks Interactive Inc.'s (Scripps; BBB/Stable/--)
announcement on March 16, 2015, that it will acquire N-Vision B.V.
from Canal+ and ITI Group for a cash consideration of EUR584
million. N-Vision is the parent company of Polish Television
Holding B.V. (PTH), which owns 52.7% of Poland-based TV operator
TVN S.A. (TVN).
S&P understands that Scripps must launch a tender offer for TVN's
stock to increase its controlling stake to 66% in accordance with
the Polish securities laws. The acquisition is subject to
regulatory approval.
S&P placed the ratings on CreditWatch to reflect its view that S&P
could raise the ratings on TVN and PTH once it has more visibility
on their strategic importance within the Scripps group. Under
S&P's group rating methodology, these ratings could benefit from
one notch of support if it was to assess them as being "moderately
strategic" to Scripps. They could benefit from more than one
notch of support, depending on S&P's view of Scripps's long-term
financial and strategic commitment to TVN and PTH, which could
take the form of, for example, a cross-default provision in the
financing documents.
S&P aims to resolve the CreditWatch placement within the next
three months.
The resolution will incorporate S&P's assessment of TVN's and
PTH's strategic importance within the Scripps group, which is
likely to result in a positive rating action for both TVN and PTH.
S&P views a one-notch upgrade as most likely. However, S&P could
raise the ratings by more than one notch, depending on Scripps
long-term financial and strategic commitment to PTH and TVN.
===============
P O R T U G A L
===============
METRO DE LISBOA: S&P Revises Outlook to Pos. & Affirms 'BB' ICR
---------------------------------------------------------------
Standard & Poor's Ratings Services revised its outlook on
Portuguese subway operator Metropolitano de Lisboa E.P. (Metro) to
positive from stable and affirmed its 'BB' long-term issuer credit
rating on the company.
RATIONALE
The rating action follows S&P's outlook revision on the Republic
of Portugal (unsolicited BB/Positive/B) on March 20, 2015.
S&P equalizes its long-term rating on Metro with that on Portugal,
based on S&P's view of the almost certain likelihood that Metro
would receive timely and sufficient extraordinary support from the
Portuguese government in the event of financial distress.
S&P regards Metro as a government-related entity (GRE) under S&P's
criteria. S&P bases its assessment of the likelihood of
government support on its view of Metro's critical role for and
integral link with Portugal, the company's 100% owner.
S&P believes Metro's role for Portugal is critical because Metro
is key in implementing the government's policy of fostering urban
mobility in the capital city of Lisbon. Moreover, most of Metro's
debt is guaranteed by the government and contains cross-default
clauses regarding all of the company's financial obligations.
S&P thinks that Metro has an integral link with the government.
S&P continues to see Metro as an extension of the Portuguese
government in charge of managing and enlarging the subway network
in the Lisbon area, in strict accordance with government plans.
S&P assess Metro's stand-alone credit profile (SACP) at 'cc'. S&P
assigns a 'cc' SACP to an issuer when it expects default to be a
virtual certainty, unless it receives extraordinary support from a
parent or government.
LIQUIDITY
S&P views Metro's liquidity as very weak based on the latest
information available to us. In 2015, Metro must honor
approximately EUR190 million in debt service. Its cash holdings
will be about EUR6 million monthly, by our estimate. S&P expects
positive nonfinancial cash flows of EUR5 million and government
capital injections of roughly EUR190 million over 2015.
OUTLOOK
The positive outlook on Metro reflects that on Portugal. S&P
could upgrade Metro if S&P upgraded Portugal. Conversely, S&P
could change its outlook on Metro to stable if S&P took a similar
action on the sovereign.
Although S&P views this as highly unlikely, it could downgrade
Metro if it revised downward its view of the likelihood of
extraordinary support from the Portuguese government. In
particular, this could happen if S&P considered that the
Portuguese government's decision to concession out Metro's
operations to a private party could diminish its commitment to
continue supporting Metro's debt service through timely and
sufficient capital injections.
PORTUGAL: S&P Revises Outlook to Pos. & Affirms BB/B' Ratings
-------------------------------------------------------------
Standard & Poor's Ratings Services revised its outlook on the
Republic of Portugal to positive from stable. At the same time,
S&P affirmed the unsolicited long- and short-term foreign and
local currency sovereign credit ratings on Portugal at 'BB/B'.
RATIONALE
The outlook revision reflects S&P's view of the gradual recovery
of Portugal's real and nominal growth prospects, alongside
policymakers' commitment to consolidating public finances over the
medium term. S&P now believes that Portugal's real GDP will
likely rise on average by about 1.8% per year during 2015-2016, on
average about 0.2 percentage points higher than S&P projected at
its last review in November 2014.
Domestic demand continues to recover. In 2014, demand boosted
economic growth -- for the first time since 2010 -- while the
contribution of net exports to growth turned slightly negative.
While a firming of domestic demand is likely to continue to drive
import growth, the positive impact of the Eurozone economic
recovery, coupled with a significant decline in oil prices since
second-half 2014 and the depreciation of the euro, should support
Portugal's net export performance during 2015, despite weakening
Portuguese exports to non-European trade partners such as Angola.
A gradually improving labor market -- the unemployment rate fell
to 13.3% in January 2015 from 17.5% in January 2013 (and S&P
expects it to fall further) -- alongside rising disposable income,
should also support growth. While S&P considers that improving
employment data confirms the relative effectiveness of job market
reforms implemented by the Coelho government since 2012, S&P
believes that current educational and other policies may not
sufficiently address skilled labor shortages, or the high
percentage of structural unemployment that is both long term and
relates to low skilled workers. Portugal's job market remains
more regulated compared with most of its peers, with sectoral
collective bargaining starting to recover -- albeit from low
levels. Additionally, recent minimum wage increases may hold back
the creation of lower-skilled jobs, to the detriment of a faster
recovery (and with negative fiscal implications). S&P takes the
view that parts of Portugal's services sectors, including
professional services, have not been sufficiently reformed to
contribute further to the economy's competitiveness. Failure to
complete the structural reform agenda could weigh on future direct
investment in the Portuguese economy, to the detriment of growth.
Private investment has been increasing, although overall
investment to GDP, at 15%, remains well below the pre-2008 level
of 23%. Capital expenditure rose last year, however; in
particular, there was a steady recovery in investment spending on
equipment and machinery (up by 8.3% in 2014) as well as in sales
of commercial vehicles.
In light of the mentioned trends, S&P believes that Portugal will
likely post modest current account surpluses over 2016-2018, but
this will be insufficient for a substantial reduction of the
persisting external vulnerabilities. S&P estimates average narrow
net external debt at about 280% of current account receipts during
2015-2016, and a net external liability position of 111% of GDP.
In S&P's view, high private sector leverage, and weak demographics
continue to weigh on growth prospects. Data from the Portuguese
central bank, Banco de Portugal, indicate that resident private
nonfinancial sector gross debt was still at a high 227% of GDP at
the end of 2014, although down from 244% at the end of 2010.
Despite recent declines, external borrowing costs for the
economy's private sector are still relatively high. According to
European Central Bank data, interest rates for new loans in
Portugal are still high compared with other eurozone members, at
4.99% in January 2015, pointing in S&P's view to a still impaired
monetary transmission mechanism. Moreover, S&P believes that
deflation has decelerated the pace of deleveraging. The latest
available annual average consumer price index (CPI) data (February
2015) show the deflation rate at 0.3%, with core CPI inflation
(that is, excluding food and energy) at 0.1%.
While the government remains committed to further reforms to
improve the business environment, S&P believes that it is unlikely
to introduce new policy measures in the run-up to the general
elections to be held in the fourth quarter of this year.
Furthermore, steady economic recovery, the successful exit from
the economic adjustment program supported by the European
Stability Mechanism (ESM) and the International Monetary Fund
(IMF) in 2014, and a significant reduction in government borrowing
costs that is reflected in the government's ability to repay early
a part of the IMF loan -- while in themselves positive -- may
induce policy complacency and slow the pace of reform
implementation. Nevertheless, S&P continues to believe that
significant policy deviations or reversals are unlikely,
reflecting a relatively strong policy consensus and to date the
absence of new populist parties that would credibly threaten the
traditionally pro-European bias of Portugal's political parties.
Should they materialize, however, policy slippages could
jeopardize the currently promising medium-term fiscal and economic
trajectory. S&P also believes that external financing conditions
could deteriorate significantly should the government's reform and
adjustment agenda stall.
S&P projects that the improved economic performance, supported by
the recovery in domestic demand and gradual reduction in
unemployment benefits, will contribute to deficit reduction in
2015. After meeting its 2014 deficit target of 4.8% of GDP
(including one-off expenditures of about 1% of GDP, mainly related
to the reclassification of Carris and STCP), S&P believes the
government will this year post a deficit of 2.9% of GDP, slightly
short of its target of 2.7% of GDP. S&P expects Portugal's net
general government debt will be about 118% of GDP during 2015-
2016, before declining to about 113% of GDP in 2018, excluding the
guarantees related to the European Financial Stability Facility.
At the same time, average general government interest payments
will likely represent slightly more than 10% of general government
revenues during 2015-2018. S&P expects that Portugal's currently
sizable cash buffer (which we estimate at 7.1% of GDP at end-2014)
will gradually decline over the coming years.
Over recent years, Portugal's public debt profile has
significantly improved. S&P notes that the average maturity of
the Portuguese government's debt stock at the end of February 2015
was 8.6 years. Moreover, the exact final maturity date of each
EFSM individual loan to Portugal will be fixed when the original
loans are rolled over, while the Portuguese authorities do not
expect that Portugal will have to refinance any of its EFSM loans
before 2026 (EUR26 billion, that is, about 11% of S&P's estimate
of general government debt in 2014).
"The rating remains constrained by what we view as Portugal's high
private and public sector indebtedness, and a weak external
economic balance sheet. Public and private sector debt remained
at 392% of GDP at the end of 2014, down from the peak of 410% in
2012, but well above pre-crisis levels. The narrow net external
debt as a share of current account receipts (at 282% in 2014) is
among the highest of all 129 sovereigns currently rated by
Standard & Poor's. At 152% of current account receipts on average
over 2015-2017, short-term external debt by remaining maturity
remains high, although it has declined from an average of 191% in
the five years leading to 2014. At close to 230% of current
account receipts and foreign exchange reserves, Portugal's gross
external financing requirements remain high, albeit on an
improving trend. A weak monetary transmission mechanism appears
to prevent cost competitiveness in parts of Portugal's corporate
sector from improving further. Despite the pickup in economic
growth, we consider the growth potential and long-term per capita
growth performance to be still somewhat below that of countries at
similar levels of prosperity, a result of the ongoing deleveraging
weighing on domestic demand," S&P said.
The sovereign credit ratings on Portugal are supported by S&P's
view of its relatively solid GDP per capita, ongoing budgetary
consolidation, a significantly improved government debt maturity
profile, and an accommodative monetary stance, contributing to
maintaining government borrowing costs at sustainable levels.
OUTLOOK
The positive outlook incorporates the possibility that S&P could
raise the rating on Portugal within the next 12 months if it
observes that:
-- The government continues to implement structural reforms to
improve the economy's growth potential and contribute to
its ongoing rebalancing;
-- Budgetary consolidation succeeds in bringing the budget
deficit and government debt down in line with S&P's
forecasts; and
-- Orderly private sector deleveraging is accelerated by a
pronounced and sustained improvement in credit conditions,
coupled with an improvement in the effectiveness of the
monetary transmission mechanism.
S&P could revise the outlook to stable if:
-- It thinks the government will be unable to implement
further structural reforms, for example due to policy
complacency or reversals ahead of or after the 2015 general
election; or
-- The government's budgetary position deviates significantly
and negatively from S&P's expectations or the external
adjustment stalls.
In accordance with S&P's relevant policies and procedures, the
Rating Committee was composed of analysts that are qualified to
vote in the committee, with sufficient experience to convey the
appropriate level of knowledge and understanding of the
methodology applicable. At the onset of the committee, the chair
confirmed that the information provided to the Rating Committee by
the primary analyst had been distributed in a timely manner and
was sufficient for Committee members to make an informed decision.
After the primary analyst gave opening remarks and explained the
recommendation, the Committee discussed key rating factors and
critical issues in accordance with the relevant criteria.
Qualitative and quantitative risk factors were considered and
discussed, looking at track-record and forecasts.
The committee agreed that monetary rating assessment had improved.
All other key rating factors were unchanged.
The chair ensured every voting member was given the opportunity to
articulate his/her opinion. The chair or designee reviewed the
draft report to ensure consistency with the Committee decision.
The views and the decision of the rating committee are summarized
in the rationale and outlook. The weighting of all rating factors
is described in the methodology used in this rating action.
RATINGS LIST
Rating Rating
To From
Portugal (Republic of)
Sovereign credit rating
Foreign and Local Currency |U~ BB/Pos/B BB/Stable/B
Transfer & Convertibility Assessment
T&C Assessment |U~ AAA AAA
Senior Unsecured
Local Currency [#1] BB BB
Local Currency [#2] BB BB
|U~ Unsolicited ratings with no issuer participation and/or no
access to internal documents.
[#1] Issuer: Comboios de Portugal E.P.E, Guarantor: Republic
of Portugal
[#2] Issuer: Metropolitano de Lisboa E.P., Guarantor: Republic
of Portugal
===========
R U S S I A
===========
BANK TAVRICHESKY: S&P Withdraws 'R' Counterparty Ratings
--------------------------------------------------------
Standard & Poor's Ratings Services withdrew its 'R' long- and
short-term counterparty credit ratings on Russia-based Bank
Tavrichesky. S&P also withdrew the 'R' Russia national scale
rating on the bank.
S&P withdrew the ratings at Bank Tavrichesky's request. The
withdrawal follows the announcement of The Central Bank of Russia
and the Deposit Insurance Agency on March 13, 2015, regarding
their rehabilitation plan for Bank Tavrichesky.
S&P lowered the counterparty credit and national scale ratings on
Bank Tavrichesky to 'R' on Feb. 18, 2015, to reflect the Central
Bank of Russia's appointment of a temporary administration to Bank
Tavrichesky.
DAGENERGOBANK: Central Bank Revokes License
-------------------------------------------
Scott Rose at Bloomberg News reports that Russia's central bank
has revoked the license of Dagenergobank.
Makhachkala-based Dagenergobank was Russia's 419th largest by
assets as of March 1.
ENEL RUSSIA: Moody's Affirms Ba3 CFR; Outlook Negative
------------------------------------------------------
Moody's Investors Service confirmed the Ba3 corporate family
rating and Ba3-PD probability of default rating of Enel Russia,
OJSC, a wholesale thermal power generation business in Russia. The
outlook on the ratings is negative. This concludes the review for
downgrade initiated by Moody's on 23 December 2014.
The confirmation of Enel Russia's ratings reflects Moody's
expectation that the company will be able to maintain its
financial metrics within the rating agency's guidance for the
company's Ba3 rating (i.e., adjusted debt/EBITDA around 2.0x and
funds from operations/interest coverage above 6x), despite the
challenging macroeconomic environment in Russia.
This view is underpinned by Enel Russia's (1) modest and flexible
capex program for 2015-18, as the major part of its investment
program has been completed in previous periods; (2) focus on tight
cost management, which partly offsets elevated inflation in Russia
and the associated pressures on the company's margins; and (3)
prudent liquidity management, with a significant amount of undrawn
available funds. However, Moody's notes that the financial metrics
cushion that Enel Russia has in excess of the agency's guidance
for the current rating will narrow going forward due to
deteriorating macroeconomic conditions in Russia. Moody's has
reflected this likelihood in the negative outlook for the ratings.
The ratings remain constrained by Enel Russia's relatively risky
profile of a pure generator of moderate size and a degree of
uncertainty around the development of its financial profile in the
evolving Russian electricity and capacity market framework, weak
economic outlook and immature operating environment. Regulatory
pressure and uncertainty heighten the risk of cash flow volatility
as Enel Russia's business is exposed to electricity and fuel
market risks.
Conversely, the ratings continue to positively factor in (1) Enel
Russia's sustainable domestic market position supported by some
level of geographical diversification of its operations and fuel
mix; and (2) some benefits of the company's being part of the
international Enel S.p.A group (Baa2 negative), including
historical access to additional liquidity sources.
Moody's notes that Enel Russia's exposure to foreign currency
risk, with a sizable part of debt denominated in euro, is
mitigated by (1) hedging arrangements in place to manage the risk
over the next 12-18 months; and (2) the company's moderate
leverage. However, foreign-currency risks will persist over the
long-term if the weak economic conditions and volatility of the
rouble exchange rate prevail, as these factors would hamper Enel
Russia's ability to roll out its hedges at attractive exchange
rates.
The outlook on the ratings is negative, reflecting Moody's
expectations that macroeconomic conditions in Russia will remain
challenging over the next 12-18 month. This will weaken the
domestic electricity market environment and increase the risk that
Enel Russia's financial metrics depart from Moody's guidance for
the current Ba3 rating.
Upward pressure on all the ratings is unlikely at present, given
the negative outlook on the ratings. Moody's could change the
outlook on the ratings to stable if macroeconomic conditions in
Russia were to stabilize, provided there was no material
deterioration in company-specific factors, including operating and
financial performance and liquidity.
The following factors may drive a negative rating action on Enel
Russia's rating: (1) severe deterioration of the operating
environment resulting from a deeper and more protracted decline in
economic activity in Russia than previously anticipated; (2) a
negative shift in the developing regulatory and market framework,
and deteriorating margins; (3) failure to limit deterioration of
the company's financial profile, with debt/EBITDA materially and
persistently above 2x and funds from operations/interest coverage
materially below 6x; and (4) weakening liquidity position or
financial policies.
The principal methodology used in these ratings was Unregulated
Utilities and Unregulated Power Companies published in October
2014.
Enel Russia, OJSC is a wholesale thermal power generation business
in Russia, with installed capacity of 9.7 GW and electricity
output of 44,658 GWh in 2014. Enel Russia is controlled by leading
Italian electric utility Enel S.p.A. (Baa2 negative) via Enel
Investment Holding B.V., which owns a stake of 56.43% in the
company. In fiscal 2014, Enel Russia generated revenue of
RUB74.4bilion (around US$1.2 billion) and adjusted EBITDA of
around RUB16.2 billion (around US$0.3 billion)
KONGRESS-BANK: Central Bank Revokes License
-------------------------------------------
Scott Rose at Bloomberg News reports that Russia's central bank
has revoked the license of Kongress-Bank.
Moscow-based Kongress-Bank was Russia's 800th largest by assets as
of March 1.
MTSB JSC: Moody's Lowers Rating on Class A Notes to 'Ba1'
---------------------------------------------------------
Moody's Investors Service on March 20 downgraded 3 tranches and
confirmed 1 tranche in 3 Russian residential mortgage-backed
securities (RMBS) transactions and concluded its review for
downgrade for 2 transactions.
The rating actions follow the weakening of Russia's credit profile
as reflected in Moody's decision on Feb. 20, 2015 to lower
Russia's government bond rating to Ba1, and the lowering of the
local-currency bond and deposit ceilings to Baa3 from Baa2.
For additional information on the sovereign action, please refer
to the related announcement "Moody's downgrades Russia's sovereign
rating to Ba1 from Baa3; outlook negative", published on Feb. 20,
2015.
The rating action also reflects the long-term domestic bank
deposit rating of MTS Bank, PJSC, formerly known as MTS Bank, OJSC
(B2/NP), the long-term senior unsecured debt ratings of the Agency
for Housing Mortgage Lending OJSC (Ba1/NP) and the long-term
domestic bank deposit rating of VTB24 (Ba1/NP). These entities act
as originators and servicers in the three transactions being
considered.
In addition, in CJSC Mortgage Agent of AHML 2013-1, AHML acts as a
surety provider for the senior notes. In CJSC Mortgage Agent VTB
2013-1, VTB24 acts as a provider of financial assistance.
The rating of the tranche A in Closed Joint Stock Company
"Mortgage agent MTSB" is downgraded due to the increase in country
risk associated with the lowering of Russia's local-currency bond
ceiling to Baa3 from Baa2. The ratings of the tranches A1 and A2
in CJSC Mortgage Agent of AHML 2013-1 are downgraded based on the
decrease in the local-currency bond ceiling, in conjunction with
the negative effect of Agency for Housing Mortgage Lending OJSC's
downgrade.
The reduction of the local-currency bond ceiling reflects an
increased probability of high losses on the underlying collateral
resulting from any political, economic or financial dislocation
accompanying a material deterioration in Russia's credit
environment.
The rating of the tranche A in CJSC Mortgage Agent VTB 2013-1 has
been confirmed, as the credit enhancement in this transaction and
the financial assistance provided by VTB24 are sufficient to
sustain the decrease in the local-currency bond ceiling and the
negative effect of VTB24's downgrade.
Moody's have also taken into account the introduction of the
revised bank rating methodology and the revised cross-sector
structured finance methodologies, including a new counterparty
risk (CR) assessment. The CR assessment reflects an issuer's
ability to avoid defaulting on certain obligations and contractual
commitments, to include payment obligations associated with
derivatives, letters of credit, third party guarantees, servicing
and trustee obligations and other operational obligations.
Additionally, for bank-related exposures, e.g. deposits held at a
defaulting bank, Moody's now assumes a recovery rate of 45% in the
instances when the risk is measured or modelled.
Factors or circumstances that could lead to an upgrade of the
ratings include (1) a reduction in sovereign risk; (2) improved
performance of the underlying collateral that exceeds Moody's
expectations; (3) deleveraging of the capital structures; and (4)
improvements in the credit quality of the transaction
counterparties.
Factors or circumstances that could lead to a downgrade of the
ratings include (1) a further increase in sovereign risk; (2)
underlying collateral performance that is worse than Moody's
expects; (3) deterioration in the notes' available credit
enhancement; and (4) further deterioration in the credit quality
of the transaction counterparties.
The principal methodology used in these ratings was "Moody's
Approach to Rating RMBS Using the MILAN Framework" published in
January 2015.
List of affected ratings:
Issuer: Closed Joint Stock Company "Mortgage agent MTSB"
-- RUB3432.641 million Class A Notes, Downgraded to Ba1 (sf);
previously on Jun 25, 2014 Definitive Rating Assigned Baa3
(sf)
Issuer: CJSC MORTGAGE AGENT OF AHML 2013-1
-- RUB 8916 million Class A1 Notes, Downgraded to Ba1 (sf);
previously on Jan 23, 2015 Downgraded to Baa3 (sf) and
Remained On Review for Possible Downgrade
-- RUB4978 million Class A2 Notes, Downgraded to Ba1 (sf);
previously on Jan 23, 2015 Downgraded to Baa3 (sf) and
Remained On Review for Possible Downgrade
Issuer: CJSC MORTGAGE AGENT VTB 2013-1
-- RUB25937 million Class A Notes, Confirmed at Baa3 (sf);
previously on Jan 23, 2015 Downgraded to Baa3 (sf) and
Remained On Review for Possible Downgrade
ORENBURG REGION: Fitch Affirms 'BB' IDR; Outlook Stable
-------------------------------------------------------
Fitch Ratings has affirmed the Russian Orenburg Region's Long-term
foreign and local currency Issuer Default Ratings (IDRs) at 'BB',
and its Short-term foreign currency IDR at 'B'. The agency has
also affirmed the region's National Long-term rating at 'AA-
(rus)'. All Long-term ratings are on Stable Outlook.
Fitch has also affirmed the local currency long-term rating of
Orenburg Region's senior unsecured domestic bonds and JSC Orenburg
Housing Mortgage Corporation's (OHMC) senior unsecured bond,
guaranteed by the region, at 'BB' and 'AA-(rus)'.
KEY RATING DRIVERS
The affirmation reflects Orenburg region's restored fiscal
performance, satisfactory cash position, and moderate direct risk.
The ratings also factor in the concentrated nature of the region's
tax base to oil and gas companies, exacerbated by the current
negative economic trend in Russia.
Fitch expects Orenburg region to maintain sound fiscal performance
in 2015-2017 with an average operating surplus of about 7%-8% and
deficit before debt variation close to 5%-6% of total revenue. The
region restored its performance in 2014 in line with Fitch's
expectations, with an operating surplus of 10%, compared with a
deficit of 0.2% in 2013.
The recovery was led by increases in corporate and personal income
tax of 27% and 24% respectively. Swift increase in taxation is
partially attributed to significant rouble depreciation and the
tax regime for oil and gas companies. Additionally the region
reduced opex annual growth rate to 6% in 2014 from 8% in 2013.
The region's deficit before debt variation as a result narrowed to
3.8% in 2014 from 17% in 2013.
Fitch expects a modest increase in the region's direct risk to up
to 45%-47% of current revenue in 2015- 2017 to fund expected
budget deficits. This compares with 38% in 2014 and 36% in 2013.
Direct risk is composed of 51% domestic bonds, 46% loans
contracted from the federal government and 3% bank loans.
Orenburg region's payback period -- as measured by direct
debt/current balance -- was reduced to two and a half years in
2014 from negative 16 years in 2013 in line with our expectations.
The region's cash position stabilized with cash reserves at RUB1.9
billion by end-2014 (2013: RUB1.8 billion). Orenburg region also
maintains untapped standby credit lines of up to RUB1 billion.
The region's contingent risk is limited to guarantees issued to
two local companies and self-serviced debt of its public entities.
The region guaranteed OHMC's domestic bond of RUB1.5 billion
issued in 2012. None of the guarantees have been called by the
lenders while financial position of the public sector entities is
satisfactory.
The administration expects slow growth in the region's economy,
with a likely increase in GRP of about 1.5%-3% yoy in 2015-2017.
According to the administration's preliminary estimates GRP grew
0.5% yoy in 2014. Orenburg region's economy is dominated by oil
and gas companies, which provide a sustainable tax base. However,
the concentrated tax base exposes the region to potential changes
in the fiscal regime, business cycles or price fluctuations in the
sector.
RATING SENSITIVITIES
The ratings could be positively affected by a sustainable debt
payback ratio of below four years of current balance and direct
risk remaining below 40% of current revenue.
The ratings could be negatively affected by consistently weaker
budgetary performance leading to insufficient debt service
coverage (direct debt/current balance) of the region.
RUSSIAN LENINGRAD: S&P Affirms 'BB+' ICR; Outlook Negative
----------------------------------------------------------
Standard & Poor's Ratings Services affirmed its 'BB+' long-term
issuer credit rating and its 'ruAA+' Russia national scale rating
on the Russian region Leningrad Oblast. The outlook is negative.
RATIONALE
The ratings on Leningrad Oblast reflect S&P's view of Russia's
volatile and unbalanced institutional framework, which translates
into a weak budgetary flexibility for Russian regions; the
oblast's weak economy; and weak financial management in an
international context. In S&P's view, the oblast's average
budgetary performance and adequate liquidity have a neutral impact
on the oblast's creditworthiness and are both subject to
volatility. The ratings are supported by the oblast's very low
debt burden and very low contingent liabilities. The long-term
issuer credit rating on the oblast is equal to its stand-alone
credit profile (SACP). The SACP is not a rating but a means of
assessing a local and regional government's (LRG's) intrinsic
creditworthiness, under the assumption that there is no sovereign
rating cap.
Leningrad Oblast's economy benefits from its favorable location
surrounding the City of St. Petersburg and on the transit routes
to the EU, as well as from a continued inflow of investments into
transport and energy infrastructure and the manufacturing sector.
However, S&P assess the oblast's wealth level as weak in an
international context, and S&P believes that gross regional
product per capita will remain at less than US$11,000 over the
next three years.
Similar to most Russian LRGs, Leningrad Oblast suffers from weak
budgetary flexibility and predictability under Russia's volatile
and unbalanced institutional framework. The oblast has very
limited control over its revenues, about 95% of which come from
federally regulated taxes and transfers from the federal
government. In the past two years, changes to the national tax
legislation have markedly affected the oblast's budgetary
performance and translated into higher tax-base concentration for
the oblast. In 2013-2014, the oblast benefited from the creation
of consolidated groups by its largest taxpayers, which
redistributed payments to the oblast from several other regions.
So, in 2014, the share of the top 10 taxpayers -- including the
single largest contributor, oil company Surgutneftegaz --increased
to about 40% of the oblast's tax revenues (or about 30% of
operating revenues), up from less than 30% of tax revenues in
2013.
S&P believes that, in the coming years, Leningrad Oblast's key
revenue source, corporate profit tax, will remain volatile, which
might prompt large fluctuations in the oblast's overall budgetary
performance. In S&P's view, the oblast's leeway in managing
expenditures, which might help it counter the revenue volatility,
will remain constrained by the federal government's control over
regional budget expenditure and by its requirement to increase
inflexible social expenditure.
"Under our base-case scenario, we therefore expect budgetary
performance to remain average in the international context over
the next three years. We forecast operating margins of about 4%
of operating revenues on average in 2015-2017, in line with the
2012-2013 average and down from a very high 21% in 2014, which we
consider to be a one-time peak. Our forecast is based on the
assumption that 2015 operating revenues will decrease compared
with those in 2014 following a drop in corporate profit tax, and
will recover only gradually in 2016-2017, in line with the
nationwide economic slowdown. At the same time, we expect the
deficit after capital accounts will remain only modest at about 5%
of revenues on average in 2015-2017. This is because we think the
oblast's management will remain committed to fiscal discipline and
might use its flexibility within the capital program to reduce the
deficit if budget revenues underperform," S&P said.
"We anticipate that, in 2015-2016, the oblast will decrease tax-
supported debt, because it will use the cash that it had
accumulated in 2014 to finance the deficit and repay maturing
direct debt. Tax-supported debt will therefore remain very low
and won't exceed 15% of consolidated operating revenues over
20152017. Apart from direct debt, we include the guarantees that
the oblast provided to its government-related entities into tax-
supported debt. We therefore view the oblast's contingent
liabilities as very low, thanks to the oblast's low involvement in
the local economy," S&P added.
S&P regards Leningrad Oblast's financial management as weak, as it
do for most Russian regional governments, mainly because of
unreliable long-term financial planning and weak management of
government-related entities compared with international peers. At
the same time, S&P views debt and liquidity management as prudent
and more sophisticated than that of most Russian peers.
LIQUIDITY
S&P considers Leningrad Oblast's liquidity to be adequate, as its
criteria define the term. The oblast has exceptional debt service
coverage, because throughout 2015 free cash will exceed debt
service falling due within 12 months by about 2x. At the same
time, S&P expects the coverage ratio will be volatile, and beyond
the 12-month horizon it will likely decrease following a gradual
depletion of cash reserves that had accumulated in 2014. S&P also
views the oblast's access to external liquidity as limited, given
the weaknesses of the domestic capital market, as S&P do for other
Russian regions.
In 2014, the oblast accumulated cash after achieving a substantial
positive balance after capital accounts and bank loans that it had
contracted on favorable terms. S&P expects that, over the next
couple of years, this cash cushion will be gradually spent to
finance the budget deficit and direct debt repayment. In 2015,
average free cash net of the deficit after capital accounts will
likely equal about Russian ruble (RUB) 6 billion (US$100 million),
exceeding debt service by about 2x. However, in 2016, average cash
will likely decrease to less than 100% of debt service, and the
oblast will rely on committed bank lines for refinancing, as it
did in 2012-2014.
S&P also assumes that debt service will remain low, at about 2%-5%
of operating revenues in 2015-2017, thanks to the gradual maturity
schedule of the oblast's outstanding debt, which mostly consists
of medium-term bank loans.
OUTLOOK
The negative outlook on Leningrad Oblast mirrors that on Russia.
S&P caps the outlook on Leningrad by S&P's outlook on Russia
because it believes that Russian LRGs cannot be rated above the
sovereign. S&P would take a negative rating on the oblast if it
took a negative rating action on Russia.
Even if the sovereign credit rating on Russia remains unchanged,
S&P could take a negative rating action if, in the face of weaker
tax revenues compared with S&P's base-case scenario, the oblast
proves unable to adjust expenditures accordingly. This could
result in a more rapid cash depletion and weaker liquidity than
S&P currently expects.
S&P could revise the outlook to stable following a similar action
on Russia, provided that Leningrad Oblast continues to perform in
line with S&P's base-case scenario.
In accordance with S&P's relevant policies and procedures, the
Rating Committee was composed of analysts that are qualified to
vote in the committee, with sufficient experience to convey the
appropriate level of knowledge and understanding of the
methodology applicable. At the onset of the committee, the chair
confirmed that the information provided to the Rating Committee by
the primary analyst had been distributed in a timely manner and
was sufficient for Committee members to make an informed decision.
After the primary analyst gave opening remarks and explained the
recommendation, the Committee discussed key rating factors and
critical issues in accordance with the relevant criteria.
Qualitative and quantitative risk factors were considered and
discussed, looking at track-record and forecasts.
The committee's assessment of the key rating factors is reflected
in the Ratings Score Snapshot.
The chair ensured every voting member was given the opportunity to
articulate his/her opinion. The chair or designee reviewed the
draft report to ensure consistency with the Committee decision.
The views and the decision of the rating committee are summarized
in the rationale and outlook. The weighting of all rating factors
is described in the methodology used in this rating action.
RATINGS LIST
Rating Rating
To From
Leningrad Oblast
Issuer Credit Rating
Foreign and Local Currency BB+/Negative/-- BB+/Negative/--
Russia National Scale ruAA+/--/-- ruAA+/--/--
UNITED CONFECTIONERS: Fitch Affirms 'B' IDR; Outlook Negative
-------------------------------------------------------------
Fitch Ratings has affirmed Russia-based OJSC Holding Company
United Confectioners' (UC) Long-term Issuer Default Rating (IDR)
at 'B' and its National Long-term rating at 'BBB-(rus)'. Outlook
is Negative. The agency has also affirmed the senior unsecured
rating on OOO United Confectioners Finance's bond due April 2023
at 'B'/'RR4'.
The ratings reflect the company's heightened corporate governance
risks and volatile operating margin as FX-driven increases in raw
materials prices cannot be fully passed on to customers. The
ratings remain supported by UC's leading position in Russia's
confectionery market, moderate leverage and satisfactory operating
cash flow generation capability.
The Negative Outlook captures potential continuation of the
company's aggressive shareholder distributions and increasing
loans to related parties, amid a challenging economic environment
in Russia and the associated pressure on the company's core
operations in 2015.
KEY RATING DRIVERS
Loose Corporate Governance Practices
Corporate governance issues remain a key credit risk, in
particular with respect to aggressive distribution of cash outside
of the group either in a form of dividends or loans to related
parties. Lack of management independence and the portion of UC's
cash kept at Guta Bank also demonstrate UC's dependence on its
shareholder Guta Group, which caps rating uplift. Fitch treats
shareholder-friendly policies as potentially adversely affecting
unsecured creditors.
Dividends and loans to related parties exceeded operating cash
flows in 2013 and we believe this was repeated in 2014.
Maintenance of cash distributions at elevated levels in 2015,
despite expected deterioration in UC's cash generation ability due
to weakening consumer sentiment and rouble devaluation, would mean
a shift towards a more aggressive financial strategy of the group
and could lead to a rating downgrade.
Subdued Consumer Sentiment
Fitch expects a decline in real disposable incomes in Russia to
translate into subdued consumer sentiment in 2015-2016 and weaker
demand for confectionery as demonstrated during the 2008/09
crisis. However, we expect any drop in UC's sales volumes to be
limited to the low single digits in 2015, which should enable the
company to outperform the market, which Fitch expects to see a
mid-single digit market contraction.
The company is well positioned to benefit from a substitution of
demand for Ukrainian confectionery (currently banned). In
addition, the company's focus on affordable sweets should help
protect sales volumes as consumers trade down.
FX Risk Exacerbates Margin Volatility
UC's operating margins are volatile primarily as a result of
swings in prices for major inputs, such as cocoa, sugar and other
agricultural commodities, given the company's inability to enter
into effective hedging. Following the sharp rouble devaluation
since end-2014, we expect UC's operating profit margin to come
under pressure in 2015-2016 due to the strong increase in the
rouble price of raw materials. This is despite our assumption
that UC will be able to increase its selling prices above
projected food inflation in 2015 and reflects the limited scope
for passing on higher costs in a challenging consumer spending
environment.
Moderate Leverage
Fitch forecasts that UC's funds from operations (FFO)-adjusted
leverage should rise to around 2.9x-3.7x in 2015-2016 (2013: 2.5x)
as a result of EBITDA margin deterioration, together with the
maintenance of large shareholder distributions and loans to
related parties. Although this leverage is still acceptable for
the company's 'B' rating, a further and sustained hike in
leverage, if not alleviated by reduced shareholder distributions
and loans to related parties, could lead to further downward
pressure on the IDR.
Leading Market Position
UC continues to hold leading positions in its core confectionery
market segments of Russia, benefiting from its strong portfolio of
nationally recognized brands. Fitch believes that the company's
focus on the medium price segment, high customer loyalty and wide
distribution network covering the whole country will enable UC to
retain its leading position in the Russian confectionery market
over the medium term and display resilient revenue performance in
the current environment.
RATING SENSITIVITIES
Negative: Future developments that may, individually or
collectively, lead to negative rating actions include:
-- Any material, sustained, deterioration in free cash flow
(FCF) generation, combined with larger-than-expected
distribution of funds to Guta Group or with operating
underperformance
-- Sustained FFO-adjusted gross leverage above 4x
-- Net outflows in relation to loans to related-parties and
dividends exceeding cash flow from operations minus
maintenance capex
Positive: An upgrade is unlikely unless corporate governance
practices improve. Future developments that may, individually or
collectively, lead to the rating Outlook being revised to Stable
include:
-- Evidence of decreased distribution of funds to Guta Group,
particularly in the event of weak cash flow generation
-- Adequate liquidity
LIQUIDITY AND DEBT STRUCTURE
Liquidity is supported by RUB0.7bn of Fitch-adjusted unrestricted
cash as of end-2014 and RUB4.9bn available bank lines relative to
short-term debt of RUB2.1bn. Fitch acknowledges that liquidity
issue may arise in 2016 in view of maturities of major revolving
credit facilities. Fitch believes that UC will be able to
refinance these credit lines, although refinancing risk may
increase if cash leakage to related parties and/or high dividends
result in further leverage growth.
KEY ASSUMPTIONS
Fitch's key assumptions within our rating case for the issuer
include:
-- USD/RUB at around 60 for 2015-2017
-- Decrease in sales volumes in the low single digits in 2015
and muted growth thereafter
-- Double-digit revenue growth in 2015 supported by high
inflation and the partial pass through of input cost
increases, before slowing to high-single-digits in
2016-2017
-- Decline in EBITDA margin to around 8.5% in 2015 as a result
of higher raw materials prices (in turn due to the rouble
devaluation)
-- Capex around 3%-4% of revenue over 2015-2018
-- Cash distributions outside of group perimeter (dividends or
loans to related parties) equal to or slightly exceeding
prior-year net profit
=========
S P A I N
=========
AYT GENOVA: Fitch Affirms 'Bsf' Rating on Class D Notes
-------------------------------------------------------
Fitch Ratings has affirmed four tranches of AyT Genova Hipotecario
X, FTH a Spanish prime RMBS comprising loan originated and
serviced by Barclays Bank, S.A., which is fully owned by CaixaBank
S.A. (BBB/Positive/F2). The class A2 and B notes have been removed
from Rating Watch Negative (RWN) following affirmation.
The rating actions are as follows:
AyT Genova Hipotecario X
Class A2 (ES0312301015) affirmed at 'AA-sf'; off RWN, Outlook
Stable
Class B (ES0312301023) affirmed at 'A+sf'; off RWN, Outlook Stable
Class C (ES0312301031) affirmed at 'BBB-sf'; Outlook Negative
Class D (ES0312301049) affirmed at 'Bsf'; Outlook Negative
KEY RATING DRIVERS
Payment Interruption Risk Adequately Mitigated
The removal of RWN on the class A2 and B notes follows the
introduction of a dedicated cash reserve aimed at mitigating
payment interruption risk on the securitized notes in the event of
servicer disruption. Fitch considers this cash reserve to
sufficiently mitigate the cash flow stresses commensurate with the
current ratings of the notes. This dedicated cash deposit is
dynamically sized every quarterly payment date to cover three
months of stressed senior classes A2 and B due interest amounts,
SPV swap payments and SPV senior expenses.
Stable Arrears Performance
The affirmations reflect the robust performance of the underlying
portfolio of residential mortgage loans. As of the latest
reporting period in March 2015, three-month plus arrears stood at
0.6% of the current pool balance, which is below Fitch's three-
month plus arrears Spanish RMBS index of 1.7%. Fitch expects to
see a continuation of the robust performance due to a more stable
macroeconomic environment and the prime quality of the underlying
portfolio, and consequently has assigned a Stable Outlook to the
senior class A2 and B notes.
Loan Modifications
The portfolio comprises 4% of loans that have been subject to
modifications, of which the majority is linked to maturity
extensions. Fitch sees a weaker credit profile on borrowers who
formalize a loan modification compared with those who maintain
initial loan terms at all times, and therefore applies an
incremental default probability to such modified loans when
estimating the credit loss rates on the portfolio.
The Negative Outlook on junior class C and D notes captures the
incremental credit risk linked to loan modifications, and
indicates that the ratings could be downgraded if credit
protection available to these notes should prove insufficient to
withstand the credit and cash flow stresses attached to the
current rating levels.
RATING SENSITIVITIES
Deterioration in asset performance may result from economic
factors, in particular the increasing effect of unemployment. A
corresponding increase in new defaults and associated pressure on
excess spread levels and reserve funds could result in negative
rating action, particularly at the lower end of the capital
structure.
IM PRESTAMOS: Moody's Reviews 'B1' Rating on Cl. A Notes
--------------------------------------------------------
Moody's Investors Service placed on review for upgrade the
following classes of notes issued by IM Prestamos Fondos Cedulas,
FTA, and the liquidity facility available to this issuer.
-- EUR344.1 million (current balance EUR 68.9 million) Class A
Notes, B1 (sf) Placed Under Review for Possible Upgrade;
previously on Aug 26, 2014 Upgraded to B1 (sf)
-- EUR6.9 million (current balance EUR 0.7 million) Class B
Notes, Caa3 (sf) Placed Under Review for Possible Upgrade;
previously on Aug 26, 2014 Affirmed Caa3 (sf)
-- EUR0.9 million Class C Notes, Caa3 (sf) Placed Under Review
for Possible Upgrade; previously on Aug 26, 2014 Affirmed
Caa3 (sf)
-- Liquidity Facility, A3 (sf) Placed Under Review for Possible
Upgrade; previously on Aug 26, 2014 Upgraded to A3 (sf)
This transaction is a static cash CBO of portions of subordinated
loans funding the reserve funds of three (at closing 14) Spanish
multi-issuer covered bonds (SMICBs), which can be considered as a
securitization of a pool of Cedulas. Each SMICB is backed by a
group of Cedulas which are bought by a Fund, which in turn issues
SMICBs. Cedulas holders are secured by the issuer's entire
mortgage book. The subordinated loans backing the IM Prestamos
transaction represent the first loss pieces in the respective
SMICB structures (or structured Cedulas). Therefore this
transaction is exposed to the risk of several Spanish financial
institutions defaulting under their mortgage covered bonds
(Cedulas).
The liquidity facility may be drawn to fund the difference between
interest accrued and due on the subordinated loans of the three
SMICBs and interest actually received on these loans. The amount
drawn under this facility is thus a function of (i) number and
value of underlying delinquent and defaulted Cedulas, (ii) level
of short term EURIBOR and (iii) time taken for final realization
of recoveries on defaulted Cedulas. While the liquidity facility
is currently not drawn, Moody's analysis assumes that a portion of
it will be drawn at some time during the remaining life of this
transaction.
Moody's said the rating action is a result of the placement on
review for upgrade, the three SMICBs whose reserve funds make up
the IM Prestamos portfolio. For more details please refer to the
rating action press release published on March 20, 2015: "Moody's
places on review for upgrade 38 Spanish multicedulas transaction".
The SMICBs were placed under review for upgrade following updates
to Moody's covered bond rating methodology and Moody's Spanish
Multi-Issuer covered bonds rating methodology. The rating agency
adjusted its reference point, the covered bond (CB) anchor, for
determining the probability that an issuer will cease making
payments under a covered bond program. Under the updated
methodologies a bank's Counterparty Risk (CR) assessment is the
new reference point for the covered bond (CB) anchor.
The rating of the Liquidity facility is compliant with Moody's
Approach to Counterparty Instrument Ratings published in March
2014.
The principal methodology used in this rating was "Moody's
Approach to Rating Corporate Synthetic Collateralized Debt
Obligations" published in November 2013.
Factors that would lead to an upgrade or downgrade of the rating:
A multiple-notch downgrade of classes of notes of IM Prestamos
might occur in certain circumstances, such as (i) a sovereign
downgrade negatively affecting the SMICBs; (ii) a multiple-notch
lowering of the CB anchor or (iii) a material reduction of the
value of the cover pool.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, which could negatively impact the
ratings of the notes and liquidity facility as evidenced by 1)
uncertainties of credit conditions in the general economy
especially as 100% of the portfolio is exposed to obligors located
in Spain 2) fluctuations in EURIBOR and 3) amount and timing of
final recoveries on defaulted Cedulas. Realization of lower than
expected recoveries would negatively impact the ratings of the
notes and the liquidity facility.
In addition to the quantitative factors that are explicitly
modeled, qualitative factors are part of the rating committee
considerations. These qualitative factors include the structural
protections in each transaction, the recent deal performance in
the current market environment, the legal environment, specific
documentation features, the collateral manager's track record, and
the potential for selection bias in the portfolio. All information
available to rating committees, including macroeconomic forecasts,
input from other Moody's analytical groups, market factors, and
judgments regarding the nature and severity of credit stress on
the transactions, may influence the final rating decision.
ISOLUX CORSAN: S&P Puts 'B' CCR on CreditWatch Negative
-------------------------------------------------------
Standard & Poor's Ratings Services said that it has placed its 'B'
long-term corporate credit rating on Spain-based engineering and
construction company Isolux Corsan S.A. on CreditWatch with
negative implications. At the same time, S&P affirmed its 'B'
short-term corporate credit rating on the company.
Also, S&P has placed the 'B' issue rating on Isolux's EUR850
million senior secured notes on CreditWatch negative. The
recovery rating on these notes is unchanged at '4'.
The CreditWatch placement reflects S&P's view that Isolux's
liquidity position has weakened. This takes into account Isolux's
very limited headroom under its financial covenants at year-end
2014 and S&P's forecast of higher cash needs than cash sources
over the coming 12 months. S&P's view also reflects weaker
performance in 2014 than it previously assumed, resulting in lower
credit ratios.
At year-end 2014, headroom under financial covenants was extremely
limited. According to management, the ratio of net debt to EBITDA
stood, for example, at 3.47x as per the definition in the loan
documentation, compared with the ceiling of 3.5x. This represents
much less headroom than we previously assumed. The loan
documentation allows cash located at the company's infrastructure
subsidiary to be netted, but it does not include its debt. S&P
understands from management that all other covenants were also met
at year-end 2014, but with limited headroom.
However, according to management, at the next covenant test, in
June 2015, the ceiling will be lowered to 3.2x. S&P therefore
foresees a risk of covenant breach at that time unless management
takes decisive action to improve liquidity. In addition,
according to S&P's definition, the ratio of cash sources to cash
needs is tight. The company faces about EUR192 million of debt
repayment over 2015 at the corporate level (including some
refinancing in the first quarter of the year), which, by S&P's
estimate, the company will not be able to meet with freely
available cash and funds from operations (FFO).
"We understand that management is planning to improve the
company's liquidity very soon through asset disposals. While
these assets are located within the infrastructure subsidiary, we
understand from management that an 81% share of the proceeds can
be used for debt reduction at the corporate level, which would
improve the covenant ratio and restore headroom. Still, the ratio
will ultimately also depend on working capital movements in 2015.
Last year, these proved very difficult to predict and highly
volatile. We understand that no contractual agreements for the
asset sales are in place yet, and we therefore do not include
proceeds in our liquidity assessment. We also note that the
company cancelled an IPO earlier this year. Overall, we expect
management to take rapid and decisive actions to restore its
liquidity situation and regain covenant headroom. In the absence
of such actions, we see the probability of a downgrade within two
months as high, as we would likely revise our assessment of
liquidity to "weak"," S&P said.
The CreditWatch placement reflects the likelihood of a one-notch
downgrade within two months if management is not successful in
executing its planned asset sales and improving the liquidity
position. In the absence of such sales, S&P would likely reassess
the liquidity profile as "weak," from currently "less than
adequate," which would trigger a downgrade to 'B-'. Even if
management is able to improve the liquidity profile, S&P could
lower the rating to 'B-' if it concluded that the liquidity
position improvement is not sustainable, and that management's
attitude toward liquidity may return the company to a similar
situation in the future.
TP FERRO: Seeks Judicial Protection to Avert Bankruptcy
-------------------------------------------------------
Fernando Fuente at International Railway Journal reports that
TP Ferro, the build-operate concessionaire for the international
high-speed line between Figueres, Spain and Perpignan, France, has
sought judicial protection in a final attempt to avoid bankruptcy
proceedings.
According to IRJ, the company, which is owned by Spanish and
French construction companies ACS and Eiffage, has debts totaling
EUR428 million which it cannot repay with its current level of
income because traffic on the line through the Pyrenees has failed
to reach projected levels.
TP Ferro now has three months to start negotiations with
creditors, which include banks Santander, RBS, BBVA, ING Direct
Caixabank and Bankia, according to press reports, IRJ discloses.
Half of TP Ferro's debt is in the hands of distressed securities
funds, IRJ notes. The Spanish government is also closely
following the process, as creditors could file claims making the
public sector liable for the lack of traffic, IRJ relays.
TP Ferro is the concessionaire for the new high-speed (HS) railway
line between Spain and France.
* Moody's Reviews for Upgrade 38 SMICBs
---------------------------------------
Moody's Investors Service on March 20, 2015, placed on review for
upgrade the ratings of 37 Spanish multi-issuer covered bonds
(SMICBs) and one subordinated loan.
The rating actions incorporate the recently published updates to
Moody's covered bond rating methodology and Moody's Spanish Multi-
Issuer covered bonds rating methodology. The rating agency has
changed its reference point -- the covered bond (CB)
anchor -- for determining the probability that an issuer will
cease making payments under a covered bond program, before any
recourse to the covered bond collateral. Under the updated
methodologies, Moody's will now use the issuers' Counterparty Risk
(CR) Assessment, when available, as the reference point for the
covered bond (CB) anchor. The revised reports, "Moody's Approach
to Rating Covered Bonds" and "Moody's Approach to Rating Spanish
Multi-Issuer Covered Bonds," are available on www.moodys.com and
can be accessed via the links provided below:
(i) Moody's Approach to Rating Covered Bonds:
http://is.gd/vVENSc
(ii) Moody's Approach to Rating Spanish Multi-Issuer Covered
Bonds: http://is.gd/xMj9HJ
A list of the affected credit ratings is available at
http://is.gd/R5QHOt
The CR Assessment, introduced by Moody's in its global bank rating
methodology released on March 16, 2015 expresses a bank's default
probability on certain types of its obligations and contractual
commitments, including covered bonds.
The new CB anchor for cedulas issuers will typically be the CR
Assessment plus one notch.
The ratings of 37 Spanish multi-issuer covered bonds (SMICBs) and
one subordinated loan are placed on review for upgrade because
Moody's expect that the vast majority of CB anchors derived from
the CR Assessments of the issuers will end above the current CB
anchor after the review process. The rating actions also take
into account the rating constraints imposed by Spain's Aa2 country
ceiling and the timely payment indicators (TPI) framework for
SMICBs.
Although Moody's will assign the CR Assessments to financial
institutions over time, the rating agency will immediately start
using approximations for CR Assessments as inputs into its credit
analysis for covered bonds. The approximate values will be used up
to the point when Moody's assigns a CR Assessment. Moody's uses
internal guidance on the CR Assessments to assess the rating
impact on outstanding covered bonds. The internal guidance is in
line with the guidance published in its updated bank rating
methodology and its responses to frequently asked bank methodology
related questions.
Moody's expects to conclude the review of these SMICBs in the
first half of 2015, the timeline for completion being dependent on
the assignment of CR assessments to Spanish issuers.
The ratings assigned by Moody's address the expected loss posed to
investors.
SMICBs can be considered as a repackaging of a pool of Spanish
covered bonds. Each SMICB is backed by a group of Spanish covered
bonds (Cedulas Hipotecarias, CHs) that are bought by a Fund, which
in turn issues SMICBs. Moody's rating for any SMICB is determined
after applying a three-step process:
First step: Calculating the Expected Loss (EL) for the Cedulas
backing the SMICB
The main driver of an SMICB's EL is the credit strength of the
Cedulas backing the SMICB. If the Cedulas perform, the SMICBs will
be fully repaid. Cedulas are rated according to our published
"Moody's Approach to Rating Covered Bonds".
Second step: Calculating the EL for the SMICBs.
In the absence of any credit support (for example, such as a
reserve fund), the EL of the SMICB is determined directly from the
weighted-average EL (weighted by their outstanding amounts) of the
Cedulas backing the SMICB. Where the SMICB benefits from a reserve
fund, the SMICB may achieve a lower EL than the weighted-average
EL of the Cedulas backing the SMICB. The EL of the SMICB is the
average EL of the single tranche ranking senior to the
subordinated loan which originally funded the reserve fund. The
loss distribution is determined by a single factor model which is
numerically solved through a Monte Carlo simulation.
Third step: Calculating the probability of default for the SMICB
or assessing the sufficiency of the Liquidity Facility (LF) for
the SMICB.
Under the SMICB rating approach, Moody's gives value to two
primary liquidity support mechanisms, which improve the
probability of timely payment if any Cedula backing the SMICB
fails to make a payment on a scheduled payment date. These are: i)
the maturity extension on the SMICB, which should ensure that a
period of at least two years is available following any default on
the Cedula. This period would be available to realise the value of
the assets backing the Cedulas; and ii) a LF that is available to
cover interest payments on the SMICB. Under the SMICB rating
method, the LF for an SMICB is sized to improve the timely payment
of the SMICB to a level commensurate with the rating of the
SMICBs. The size of the LF is primarily determined by: i) the
probability of default of the Cedulas backing the SMCIB; ii) the
correlation between these Cedulas; and iii) the level of
concentration to the different Cedulas backing the SMCIB. However,
regardless of the size of the LF, Moody's would limit the maximum
rating of the SMICB by applying its Timely Payment Indicator (TPI)
methodology for covered bonds. The TPI framework limits the rating
uplift that SMICBs may achieve over the weighted average CB anchor
of the underlying Cedulas' issuers and may constrain the final
covered bond rating to a lower level than the maximum potential
rating under the EL Model. The TPI used to assess the maximum
rating uplift over the weighted average CB anchor of the
underlying Cedulas' issuers for each SMICB is typically two levels
above the one assigned to the underlying Cedulas.
Factors that would lead to an upgrade or downgrade of the ratings:
The robustness of a structured multi-issuer covered bond rating
largely depends on the underlying issuers' credit strength as
reflected in their CB anchors, and the support provided by the
liquidity facility and reserve fund, if any.
A multiple-notch downgrade of the SMICBs might occur in certain
limited circumstances, such as (i) a sovereign downgrade
negatively affecting the issuers' CB anchor and the TPI; (ii) a
multiple-notch lowering of the CB anchor or (iii) a material
reduction of the value of the cover pool.
Methodologies Underlying the Rating Action:
The methodologies used in these ratings were "Moody's Approach to
Rating Covered Bonds" published in March 2015, and "Moody's
Approach to Rating Spanish Multi-Issuer Covered Bonds" published
in March 2015.
===========
S W E D E N
===========
SAAB AUTOMOBILE: Swedish Court Approves Debt-Writedown
------------------------------------------------------
Deutsche Presse-Agentur reports that Chinese-backed consortium
National Electric Vehicle Sweden (NEVS), owners of struggling
carmaker Saab moved a step closer to exiting bankruptcy protection
after a Swedish court approved on March 23 a
write-down of debt owed to suppliers.
NEVS, which took over the ailing carmaker in 2012, said a
write-down was necessary to complete ownership talks with two
unnamed Asian carmakers, DPA relates.
According to DPA, following the ruling by the Vanersborg District
Court, NEVS said it planned to complete its reorganization
process, which began in August, by next month.
NEVS has estimated the debt at around SEK400 million (US$47
million), DPA notes. Of Saab's 574 creditors, most are to receive
full payments of up to SEK500,000 (US$60,000), while around 100 of
them will see claims over SEK500,000 reduced by 50%, DPA states.
At the March 23 court session, 98.2% of the creditors --
representing 98.6% of the total debt -- approved the write-down,
DPA relays.
About Saab Automobile
Saab Automobile AB is a Swedish car manufacturer owned by Dutch
automobile manufacturer Swedish Automobile NV, formerly Spyker
Cars NV. Saab halted production in March 2011 when it ran out of
cash to pay its component providers. On Dec. 19, 2011, Saab
Automobile AB, Saab Automobile Tools AB and Saab Powertain AB
filed for bankruptcy after running out of cash.
Some of Saab's assets were sold to National Electric Vehicle
Sweden AB, a Chinese-Japanese backed start-up that plans to make
an electric car using Saab Automobile's former factory, tools and
designs.
On Jan. 30, 2012, more than 40 U.S.-based Saab dealerships filed
an involuntary Chapter 11 petition for Saab Cars North America,
Inc. (Bankr. D. Del. Case No. 12-10344). The petitioners,
represented by Wilk Auslander LLP, assert claims totaling US$1.2
million on account of "unpaid warranty and incentive
reimbursement and related obligations" or "parts and warranty
reimbursement." Leonard A. Bellavia, Esq., at Bellavia Gentile &
Associates, in New York, signed the Chapter 11 petition on behalf
of the dealers.
The dealers want the vehicle inventory and the parts business to
be sold, free of liens from Ally Financial Inc. and Caterpillar
Inc., and "to have an appropriate forum to address the claims of
the dealers," Leonard A. Bellavia said in an e-mail to Bloomberg
News.
Saab Cars N.A. is the U.S. sales and distribution unit of Swedish
car maker Saab Automobile AB. Saab Cars N.A. named in December
an outside administrator, McTevia & Associates, to run the
company as part of a plan to avoid immediate liquidation
following its parent company's bankruptcy filing.
On Feb. 24, 2012, the Court granted Saab Cars NA relief under
Chapter 11 of the Bankruptcy Code.
Donlin, Recano & Company, Inc., was retained as claims and
noticing agent to Saab Cars NA in the Chapter 11 case.
On March 9, 2012, the U.S. Trustee formed an official Committee
of Unsecured Creditors and appointed these members: Peter Mueller
Inc., IFS Vehicle Distributors, Countryside Volkwagen, Saab of
North Olmstead, Saab of Bedford, Whitcomb Motors Inc., and
Delaware Motor Sales, Inc. The Committee tapped Wilk Auslander
LLP as general bankruptcy counsel, and Polsinelli Shughart as its
Delaware counsel.
The Troubled Company Reporter, on July 18, 2013, reported that
the U.S. arm of Saab Automobile AB won approval of its Chapter 11
liquidation plan, marking the end of the road for Swedish auto
maker's bankruptcy proceedings.
=============
U K R A I N E
=============
AEROSVIT: Kyiv Court Commences Bankruptcy Proceedings
-----------------------------------------------------
Interfax-Ukraine reports that the Economic Court of Kyiv region on
March 4, 2015, again initiated a case on the bankruptcy of
AeroSvit, which ceased operations in early 2013.
According to Interfax-Ukraine, the decision was made due to the
airline's inability to pay debts in the amount of UAH4.44 million
to Tenak LLC.
Leonid Talan was again appointed airline asset manager, Interfax-
Ukraine discloses.
AeroSvit began bankruptcy proceedings in late December 2012, which
were later canceled by a court decision, ceased operations and
currently does not carry out flights, Interfax-Ukraine recounts.
AeroSvit was the largest Ukrainian air carrier.
UKREXIMBANK: Fitch Lowers Issuer Default Ratings to 'CC'
--------------------------------------------------------
Fitch Ratings has downgraded JSC The State Export-Import Bank of
Ukraine (Ukreximbank) and JSC State Savings Bank of Ukraine
(Oschadbank) Long-term foreign currency Issuer Default Ratings
(IDRs), and their foreign currency senior debt ratings, to 'CC'
from 'CCC'. Fitch has affirmed the banks' Long-term local
currency IDRs at 'CCC'.
KEY RATING DRIVERS
The downgrade reflects Fitch's view that defaults by both banks on
their external debt obligations now appear probable. This follows
the announcement by Ukraine's Ministry of Finance (Ministry) on
March 13, 2015, on the sovereign's external debt restructuring, in
which the Ministry indicated that the external debt of Ukreximbank
and Oschadbank, alongside that of certain other quasi-sovereign
entities, "will be included in the debt operations". At the same
time, the Ministry stated that "each entity will undergo a
separate process targeting its specific situation".
Ukreximbank has two large outstanding eurobonds: USD750 million
due on April 27, 2015 and USD600 million on Jan. 22, 2018.
Oschadbank has USD700 million eurobonds due on March 10, 2016 and
USD500 million due on March 20, 2018. The banks have yet to make
any public announcements about possible debt restructurings, if
any, and their potential terms and conditions. Oschadbank has
paid coupons on its two Eurobonds during March 2015, including one
this week after the Ministry of Finance's announcement.
Fitch views default as probable given the Ministry's announcement
and the government's full ownership of the banks. At the same
time, the reference to a "separate process" for each bank and the
absence, to date, of any announcements from the banks on any
possible restructuring mean that default is not yet quite
inevitable.
In accordance with Fitch's distressed debt exchange (DDE)
criteria, a DDE is deemed to have occurred if a restructuring
imposes a material reduction in terms compared with the original
contractual terms of an entity's financial obligations, and the
restructuring is conducted to avoid bankruptcy, insolvency or
intervention proceedings or a payment default. Execution of a DDE
on the banks' external debt would result in them being downgraded
to 'RD' (Restricted Default).
The affirmation of the banks' 'CCC' Long-term local currency IDRs
reflects the fact that their local currency-denominated
liabilities would not be affected by any restructuring process.
The banks' access to local currency liquidity, including through
the National Bank of Ukraine, in case of need, has been maintained
so far, and Fitch estimates that both banks should currently meet
minimum regulatory capital requirements reasonably comfortably,
even after the asset inflation caused by further hryvnia
depreciation year to date. At the same time, the banks' local
currency credit profiles are still under considerable pressure due
to weak asset quality and performance, the very challenging
operating environment and the limited capacity of the sovereign to
provide support.
The affirmation of the banks '5' Support Ratings and revision of
the banks' Support Rating Floors to 'No Floor' from 'CCC' reflects
Fitch's view that foreign currency support for the banks will not
be forthcoming.
The 'ccc' VRs of both banks are not affected by this rating
action, as Fitch has received limited new information on the
banks' standalone profiles since the review in January 2015. In
particular, Fitch has not been informed of Ukreximbank's current
foreign currency liquidity position, ie the extent to which it
might be in a position to meet its upcoming eurobond payment in
the absence of a restructuring. As of Jan. 26, 2015, the banks
had not accumulated sufficient foreign currency to meet upcoming
eurobond maturities.
RATING SENSITIVITIES
The banks' Long-term foreign-currency IDRs would be downgraded to
'C' on the announcement of a debt exchange offer and further to
'RD' upon completion of exchanges in respect of their external
debt obligations. The banks' ratings could be maintained at their
current levels, or moderately upgraded, if their debt is not
restructured together with that of the sovereign.
The rating actions are:
Ukreximbank:
Long-term foreign currency IDR: downgraded to 'CC' from 'CCC'
Long-term local currency IDR: affirmed at 'CCC'
Senior unsecured debt of Biz Finance PLC: downgraded to 'CC'
from 'CCC, Recovery Rating 'RR4'
Subordinated debt: affirmed at 'C'/Recovery Rating 'RR5'
Short-term foreign currency IDR: affirmed at 'C'
Support Rating: affirmed at '5'
Support Rating Floor: revised to 'No Floor' from 'CCC'
Viability Rating: 'ccc', unaffected
National Long-term rating: affirmed at 'AA-(ukr)'; Outlook
Stable
Oschadbank:
Long-term foreign currency IDR: downgraded to 'CC' from 'CCC'
Long-term local currency IDR: affirmed at 'CCC'
Senior unsecured debt of SSB No.1 PLC: downgraded to 'CC' from
'CCC, Recovery Rating 'RR4'
Short-term foreign currency IDR: affirmed at 'C'
Support Rating: affirmed at '5'
Support Rating Floor: revised to 'No Floor' from 'CCC'
Viability Rating: 'ccc', unaffected
National Long-term rating: affirmed at 'AA-(ukr)'; Outlook
Stable
VAB BANK: Depositors to Contest in Court NBU Decision
-----------------------------------------------------
en.interfax.com.ua reports that the initiative group of the major
depositors of VAB Bank (Kyiv) is intending to contest in court the
decision of the National Bank of Ukraine (NBU) on the liquidation
of the financial institution, head of the initiative group Valeriy
Mischenko has said.
Mr. Mischenko said that the initiative group of large VAB Bank
depositors proposed the National Bank and the Individuals' Deposit
Guarantee Fund create a transition bank, passing the assets and
liabilities of VAB Bank to it, which then must be purchased by the
bank's large depositors for UAH1 billion, according to
en.interfax.com.ua. Thus, the bank's large depositors were ready
to convert their deposits into the transition bank shares, as well
as additionally capitalize it, the report notes. At the same
time, they got response neither from the National Bank nor the
Individuals' Deposit Guarantee Fund, the report relatesw.
According to Mischenko, VAB Bank has 12,000 large depositors. The
funds of individual depositors, whose deposits exceed the
guaranteed amount of compensation, stand at UAH3.028 billion, the
report relays.
"We have not been heard for one reason, because they have UAH18
billion of assets [of VAB Bank], which they have turned into UAH 5
billion," the report quoted Mr. Mischenko as saying.
===========================
U N I T E D K I N G D O M
===========================
BUTTERCROSS TRADING: Brought Out of Administration
--------------------------------------------------
Insider Media Limited reports that Buttercross Trading Ltd, a
Yorkshire-headquartered wholesaler of a well-known brand of
colorful outdoor clothing, ski wear and shoes for children from
six months to ten years has been acquired out of administration in
a deal tied up by the P&A Partnership.
Ashleigh Fletcher and John Russell of the P&A Partnership were
appointed as joint administrators of Buttercross Trading Ltd,
which operates as Kozi Kidz, on March 12, 2015, according to
Insider Media Limited.
The report notes that Kozi Kidz is a range of Swedish-inspired
clothing which is said to draw on Scandinavian expertise in terms
of "design aesthetics as well as the practicalities of being
prepared for all weathers".
Buttercross Trading was a clothing manufacturer and wholesaler
trading from Sunderland Street in Doncaster, the report relates.
A sale of the business to a third party was completed on March 13,
2015. Both the company's business and its assets were sold by way
of a going concern totaling almost GBP175,000, the report relays.
Swedish co-founder Tomas Torstensson and his wife and co-founder,
Linda Torstensson, have transferred across to the new company as
part of the deal, the report notes.
Established in 2008, Kozi Kidz claimed to be one of the fastest
growing children's brands in Europe with a range which includes
products from base layers to wind and waterproof outer jackets.
It is sold in more than 30 countries around the world. Outlets in
the UK include Snow + Rock and Cotswold Outdoor.
LMF LEISURE: Goes Into Liquidation
----------------------------------
James Hanley at Music Week reports that LMF Leisure Ltd, the
company behind last year's Leicester Music Festival, has gone into
voluntary liquidation.
Documents filed with Companies House show a liquidator for
organizer LMF Leisure Ltd was appointed at the end of last month,
according to Music Week.
The report notes that ticket sales fell below expectations for the
festival's inaugural edition.
The report notes that Festival co-founder Shane Whitfield told the
Leicester Mercury: "There are no outstanding debts, nothing owed
to creditors, just ourselves as investors."
The report relates that Mr. Whitfield said he plans to start a new
company in 2016 to run a similar event, "but not in Leicester, as
Leicester is not the place."
MACLAY GROUP: Placed on the Market Following Administration
-----------------------------------------------------------
The Morning Advertiser reports that C P Dempster and G D Yuill of
Ernst and Young LLP, the joint administrators of Maclay Group PLC
and Maclay Inns Limited, have appointed advisers to dispose of 15
pubs and hotels owned by Maclay Inns
CDLH has set a closing date of on April 30, for offer for the
whole portfolio, part of or individual sites, according to The
Morning Advertiser.
The report notes that Alan Creevy, director of CDLH, said, "The
Maclay Inns estate is a series of first class businesses within
prime locations such as St Andrews, Glasgow's West End, Edinburgh
University district and other high value student areas."
'Prior to marketing we received a very high volume of interest
from a wide range of potential bidders. We anticipate receiving
offers for the entire group, part of the group and individual
assets," the report quoted Mr. Creevy as saying.
"There is no doubt that there has been a marked recovery in the
sector as a whole from the beginning of 2014 and corporate buyers,
in particular, have shown an increased presence in the market.
Increasing values have given an air of confidence as a whole and
we anticipate a great deal of interest in the Maclay assets, all
of which continue to trade as normal and will be sold as going
concern businesses," Mr. Creevy added.
OSPREY ACQUISITIONS: Fitch Affirms 'BB' IDR; Outlook Stable
-----------------------------------------------------------
Fitch Ratings has affirmed Osprey Acquisitions Limited's (Osprey)
Long-term Issuer Default Rating (IDR) at 'BB' and its senior
secured rating at 'BB+'. The Outlook on the Long-term IDR is
Stable.
Fitch has also affirmed the senior secured bond issued by Anglian
Water (Osprey) Financing Plc (AWOF) at 'BB+'. The bond is
guaranteed by Osprey, and is thus rated in line with Osprey's
senior secured rating of 'BB+'.
Osprey is a holding company of Anglian Water Services Limited
(Anglian Water or OpCo; A/BBB+/Negative), one of 10 appointed
regulated water and sewerage companies (WaSC) in England and
Wales.
The affirmation reflects the adequate dividend capacity of the
OpCo in comparison with the debt service requirements of Osprey
and expected reduction of subordination for investors at Osprey.
This is in spite of the pressures Anglian Water faces on its
credit metrics due to Ofwat's (the regulator for the UK water
sector) final determination of tariffs for the price review
covering April 2015 to March 2020 (AMP6) and a slowdown in retail
price inflation.
The rating also reflects the market-leading operational and
regulatory performance of Anglian Water, the main operating
subsidiary of the group, as well as the structurally and
contractually subordinated nature of the holding company financing
at Osprey level.
AWOF is the financing vehicle for Osprey, which is a holding
company for businesses focused on the water sector, including
ownership of Anglian Water - a regulated water and wastewater
business.
KEY RATING DRIVERS
Adequate Dividend Cover and reduced subordination at Holdco
Fitch forecasts comfortable dividend cover at 4.7x and post-
maintenance and post-tax interest cover (PMICR) at around 1.1x for
AMP6. Fitch also forecasts Osprey's pension-adjusted net
debt/regulatory asset value (RAV) will fall to around 86% by March
2020 from around 90% in the financial year to March 2015. Fitch
also expects subordination at Osprey to gradually reduce as a
result of the OpCo's expected deleveraging over AMP6. For FY14
Fitch calculates Osprey's pension-adjusted net debt/RAV at 89.9%,
dividend cover at 4.5x and post-maintenance and post-tax interest
cover (PMICR) at around 1.3x. Fitch views the strong dividend
cover as a mitigating factor for leverage being above the rating
guidance.
Low Inflation a Risk
Incremental debt at holding level of GBP450m represents around 6%
of RAV and incurs an average annual financial charge of around
GBP36m. Reduced dividend stream from Anglian Water expected for
the next price control will still allow comfortable servicing of
the debt. However, if retail price inflation remains materially
below 1.5% for an extended period of time, dividend stream from
Anglian Water would be further reduced. This could lead to
negative rating action for Osprey's ratings if shareholders do not
bear the risk of lower inflation.
KEY ASSUMPTIONS
Fitch's key assumptions within our rating case for OpCo include:
-- Regulated revenues in line with the final determination of
tariffs for April 2015 to March 2020, ie assuming no
material over- or under- recoveries
-- Combined totex outperformance and Outcome Delivery
Incentive leakage outperformance of GBP148 million in
nominal terms over the five-year period
-- Slight underperformance in retail costs
-- Non-appointed EBITDA of around GBP7.7 million per annum
-- Retail price inflation of 0.75% for FY15, 1% for FY16, 2%
for FY17 and 2.5% thereafter
In addition, for Osprey Fitch assumes:
-- Incremental debt at holding company level to remain at
GBP450 million
-- Average annual finance charge at holding company level at
around GBP36 million
RATING SENSITIVITIES
Negative: Future developments that could lead to negative rating
action include:
-- A sustainable drop of expected dividend cover below 3x, for
example due to RPI remaining materially below 1.5% over an
extended period of time
-- Forecast group gearing sustainably above 85%, coupled with
forecast dividend cover dropping to close to 3x
-- A marked deterioration in operating and regulatory
performance of Anglian Water or a material change in
business risk of the UK water sector
Positive: The ratings currently do not have any upside. A higher
rating for the holding company would be contingent on Anglian
Water materially reducing its regulatory gearing.
LIQUIDITY AND DEBT STRUCTURE
As of Sept. 30, 2014, Osprey held GBP21.3 million in cash, and
AWOF had available GBP25 million of undrawn, committed bank
facilities with maturity in November 2015. This is sufficient to
bridge short-term liquidity needs. For debt service, Osprey and
AWOF effectively rely on upstream cash flows from their operating
subsidiaries, primarily Anglian Water.
RESIDENTIAL MORTGAGE 28: Moody's Rates Class E Notes 'Ba2'
----------------------------------------------------------
Moody's Investors Service assigned definitive long-term credit
ratings to Notes issued by Residential Mortgage Securities 28 Plc
(RMS 28):
-- GBP370.5 million Class A mortgage backed floating rate notes
due June 2046, Definitve Rating Assigned Aaa (sf)
-- GBP54.6 million Class B mortgage backed floating rate notes
due June 2046, Definitve Rating Assigned Aa1 (sf)
-- GBP38.0 million Class C mortgage backed floating rate notes
due June 2046, Definitve Rating Assigned A2 (sf)
-- GBP14.0 million Class D mortgage backed floating rate notes
due June 2046, Definitve Rating Assigned Baa3 (sf)
-- GBP15.2 million Class E mortgage backed floating rate notes
due June 2046, Definitve Rating Assigned Ba2 (sf)
Moody's has not assigned ratings to the GBP 5.1M Class F1, GBP
5.1M Class F2, GBP 5.1M Class F3, GBP16.32M Class Z and GBP 25.4M
Class X1 mortgage backed floating rate notes due June 2046.
Moody's has also not assigned ratings to the Class X2 due on the
step up date falling in June 2020 and to Residual notes due June
2046.
The portfolio backing this transaction consists of UK non
conforming residential loans originally originated by Kensington
Mortgage Company Limited.
On the closing date Kensington Mortgage Company Limited will sell
the portfolio to Kayl PL S.r.l. (the "Seller", not rated). In
turn the Seller will sell the portfolio to RMS 28.
The rating take into account the credit quality of the underlying
mortgage loan pool, from which Moody's determined the MILAN Credit
Enhancement and the portfolio expected loss, as well as the
transaction structure and legal considerations. The expected
portfolio loss of 4% and the MILAN required credit enhancement of
19% serve as input parameters for Moody's cash flow model and
tranching model, which is based on a probabilistic lognormal
distribution.
Portfolio expected loss of 4%: this is marginally lower than other
pre crisis non conforming pools in the UK and is based on Moody's
assessment of the lifetime loss expectation taking into account:
(i) the originators' weaker historical performance, (ii) the
current macroeconomic environment in the UK, (iii) the strong
collateral performance to date along with an average seasoning of
6.5 years; and (iv) benchmarking with similar UK non conforming
transactions.
MILAN CE of 19%: this is higher than other UK non conforming
transactions due to (i) the originators' weaker historical
performance and (ii) the presence of 70.4% interest-only loans and
61.1% of self certified loans.
At closing the mortgage pool balance will consist of GBP 507
million of loans. The Total Reserve fund will be funded to 3.0% of
the initial mortgage pool balance. The Total Reserve fund will be
split into the Liquidity Reserve Fund and the non liquidity
reserve fund. The liquidity reserve fund will be equal to 3% of
Class A outstanding amount (available to pay interest on Class A).
The non liquidity reserve fund will be equal to the difference
between the Total reserve fund and the liquidity reserve fund,
this will be used to pay interest shortfall for Classes A to E and
to cure PDL, upon the compliance of some triggers.
Operational Risk Analysis: Kensington Mortgage Company Limited
("KMC", not rated) will be acting as servicer. KMC will sub-
delegate certain primary servicing obligations to Home Loan
Management (HML). In order to mitigate the operational risk, there
will be a back-up servicer facilitator, and Wells Fargo Bank, N.A.
(Aa3 on review for possible upgrade/P-1) will be acting as a back
up cash manager from close. To ensure payment continuity over the
transaction's lifetime the transaction documents incorporate
estimation language whereby the cash manager can use the three
most recent servicer reports to determine the cash allocation in
case no servicer report is available. The transaction also
benefits from principal to pay interest for the Classes A to E.
Interest Rate Risk Analysis: The transaction will be unhedged. In
mitigation the transaction contains a requirement for the servicer
to not reduce SVR Margins over 3 months Libor below a minimum
threshold unless the servicer has already pre funded the
difference between the minimum and the new rate. Moreover, 16.1%
of the loans are fixed rate, resetting to three-month Libor, which
leads to a fixed-floating mismatch in the transaction until reset.
Moody's Parameter Sensitivities: If the portfolio expected loss
was increased from 4% to 6% of current balance, and the MILAN CE
was increased from 19% to 22.8%, the model output indicates that
the Class A notes would still achieve Aaa(sf) assuming that all
other factors remained equal. Moody's Parameter Sensitivities
quantify the potential rating impact on a structured finance
security from changing certain input parameters used in the
initial rating. The analysis assumes that the deal has not aged
and is not intended to measure how the rating of the security
might change over time, but instead what the initial rating of the
security might have been under different key rating inputs.
Moody's Parameter Sensitivities provide a quantitative/model-
indicated calculation of the number of rating notches that a
Moody's structured finance security may vary if certain input
parameters used in the initial rating process differed.
The analysis assumes that the deal has not aged and is not
intended to measure how the rating of the security might migrate
over time, but rather how the initial rating of the security might
have differed if key rating input parameters were varied.
Parameter Sensitivities for the typical EMEA RMBS transaction are
calculated by stressing key variable inputs in Moody's primary
rating model.
The principal methodology used in this rating was "Moody's
Approach to Rating RMBS Using the MILAN Framework" published in
January 2015.
Significantly different loss assumptions compared with our
expectations at close due to either a change in economic
conditions from our central scenario forecast or idiosyncratic
performance factors would lead to rating actions. For instance,
should economic conditions be worse than forecast, the higher
defaults and loss severities resulting from a greater
unemployment, worsening household affordability and a weaker
housing market could result in downgrade of the ratings.
Deleveraging of the capital structure or conversely a
deterioration in the notes available credit enhancement could
result in an upgrade or a downgrade of the rating, respectively.
YORKSHIRE WATER: Moody's Cuts Medium-Term Note Rating to (P)Ba1
---------------------------------------------------------------
Moody's Investors Service downgraded the corporate family rating
of Yorkshire Water Services Limited to Baa2 from Baa1, because of
the risks associated with the company's significant derivatives
portfolio.
At the same time, the rating agency also downgraded to Baa1 from
A3 the senior secured ratings of Class A notes, and to Ba1 from
Baa3 the subordinated debt ratings of Class B notes, issued by
Yorkshire Water Services Finance Limited, Yorkshire Water Services
Bradford Finance Limited and Yorkshire Water Services Odsal
Finance Limited (all issuance guaranteed by Yorkshire Water).
The outlook on all ratings is stable. This rating action concludes
the rating review initiated on Feb. 26, 2015.
"Our decision to downgrade Yorkshire Water's rating reflects the
fact that a continuing low interest rate environment creates
significant mark-to-market losses on the company's sizeable
derivatives portfolio, having negative implications for its credit
quality," says Stefanie Voelz, a Moody's Vice President -- Senior
Analyst and lead analyst for Yorkshire Water.
The rating downgrade reflects Moody's view that, despite having
received a final regulatory price determination (published by the
Water Services Regulation Authority's (Ofwat), the economic
regulator for the water companies in England and Wales, on 12
December 2014) that is broadly in line with the company's business
plan submission, Yorkshire Water's credit quality continues to be
pressured by its sizeable derivatives portfolio and the material
deterioration in the mark-to-market value (MTM) of that
derivatives portfolio.
Yorkshire Water holds a portfolio of inflation-linked derivatives
with a notional amount of approximately GBP1.3 billion, equivalent
to approximately 23% of the company's regulatory capital value
(RCV). The company's derivatives portfolio is very sensitive to
movements in interest rates, and a fall (or rise) of rates can see
the MTM of the portfolio increase (or reduce) significantly. In
the continuing low interest rate environment, the MTM value of
these inflation-linked swaps stood at GBP1.6 billion as at March
2014.
Moody's believes that this negative MTM has become a persistent
feature within the company's capital structure. This high level of
negative MTM is relevant also in the context of certain swaps that
include near term breaks, thereby increasing the likelihood of a
payout of the MTM under these swaps. Moody's understands that the
company will be working on a restructuring that would see near-
term breaks removed, thus eliminating immediate liquidity
exposure. However, such restructuring will likely involve an
increase in the interest rate paid by Yorkshire Water. This in
turn would further increase the MTM value of the portfolio, albeit
modestly in the context of the overall swap portfolio, reflecting
(1) the long tenor of a number of the affected swaps; but also (2)
the relatively small proportion of swaps with near-term breaks to
be restructured. The overall comparably high rates locked in by
Yorkshire Water over an extended period of time puts the company
at a disadvantage in relation to its average funding costs when
compared with its peers in the UK water sector.
Moody's does not expect the company to face significant pressures
from its operations, taking into account that (1) Yorkshire
Water's final price determination has been largely in line with
the company's business plan submission; (2) the company has a
solid operational performance track record; and (3) management
took a prudent approach to financial policy, with gearing reduced
to 80% of net debt to RCV. However, the rating agency believes
that these positive aspects are not sufficient to fully offset the
risk embedded within the company's derivatives portfolio,
particularly considering the very long tenor of a number of the
inflation-linked swaps.
The rating outlook is stable, reflecting Moody's view that
Yorkshire Water's management will be able to manage the risks
associated with its derivatives portfolio at the Baa2 CFR rating
level. This view takes into account the company's strategy to (1)
reduce the risk of potential MTM payments by removing breaks from
the derivative contracts; and (2) maintain additional financial
flexibility to offset comparably higher cost of debt than its
peers through lower gearing that will not exceed 80% of net debt
to RCV. The stable outlook also reflects Moody's view that the
current low interest rate environment is unlikely to persist over
the medium term.
The ratings could be upgraded if (1) the risk exposure of
Yorkshire Water's derivatives portfolio reduces over time, such
that it no longer affects the company's financial flexibility in
comparison with its peers, or (2) the company managed to create
additional financial flexibility by reducing leverage below 75% of
net debt to RCV. However, before considering any upgrade, Moody's
will also consider the company's remaining derivatives exposure
and ongoing risk in light of the then present market conditions.
Conversely, the ratings could be downgraded in the event of
unexpected, severe deterioration in operating performance that
results in the company exhibiting financial metrics of net debt to
RCV persistently above 80% and/or an Adjusted Interest Cover Ratio
consistently below 1.2-1.3x. Further downward pressure could
develop in case of (1) a material change in the regulatory
framework for the UK water sector leading to a significant
increase in Yorkshire Water's business risk; or (2) unfavorable
market conditions that would affect the company's ability to
refinance debt maturities when due, also in the context of future
breaks under its existing swaps arrangements.
Downgrades:
Issuer: Yorkshire Water Services Bradford Finance Ltd
-- Backed Subordinate Medium-Term Note Program (Local
Currency), Downgraded to (P)Ba1 from (P)Baa3
-- Backed Subordinate Regular Bond/Debenture, (Local Currency),
Downgraded to Ba1 from Baa3
-- Backed Subordinate Regular Bond/Debenture (Local Currency),
Downgraded to (P)Ba1 from (P)Baa3
-- Backed Senior Secured Medium-Term Note Program (Local
Currency), Downgraded to (P)Baa1 from (P)A3
-- Backed Senior Secured Regular Bond/Debenture (Foreign
Currency), Downgraded to Baa1 from A3
-- Backed Senior Secured Regular Bond/Debenture (Local
Currency), Downgraded to Baa1 from A3
Issuer: Yorkshire Water Services Finance Limited
-- Backed Senior Secured Regular Bond/Debenture (Local
Currency), Downgraded to Baa1 from A3
-- Underlying Senior Secured Regular Bond/Debenture (Local
Currency), Downgraded to Baa1 from A3
Issuer: Yorkshire Water Services Limited
-- Corporate Family Rating (Foreign Currency), Downgraded to
Baa2 from Baa1
Issuer: Yorkshire Water Services Odsal Finance Ltd
-- Backed Senior Secured Medium-Term Note Program (Local
Currency), Downgraded to (P)Baa1 from (P)A3
-- Backed Senior Secured Regular Bond/Debenture (Local
Currency), Downgraded to Baa1 from A3
Outlook Actions:
Issuer: Yorkshire Water Services Bradford Finance Ltd
-- Outlook, Changed To Stable From Rating Under Review
Issuer: Yorkshire Water Services Finance Limited
-- Outlook, Changed To Stable From Rating Under Review
Issuer: Yorkshire Water Services Limited
-- Outlook, Changed To Stable From Rating Under Review
Issuer: Yorkshire Water Services Odsal Finance Ltd
-- Outlook, Changed To Stable From Rating Under Review
The principal methodology used in these ratings was Global
Regulated Water Utilities published in December 2009.
Yorkshire Water is the fifth largest of the ten water and sewerage
companies in England and Wales by both RCV and number of customers
served. Yorkshire Water provides drinking water to around 5
million people and around 130,000 local businesses over an area of
approximately 14,700 square kilometers encompassing the former
county of Yorkshire and part of North Derbyshire in Northern
England.
===============
X X X X X X X X
===============
* Moody's Takes Rating Actions on Multiple EMEA RMBS & ABS Notes
----------------------------------------------------------------
Moody's Investors Service on March 20 took rating actions on
asset-backed securities (ABS) and residential mortgage-backed
securities (RMBS) transactions across Europe, the Middle East and
Africa (EMEA), after the rating agency updated several of its
structured finance rating methodologies, combined with the rating
review placements for certain banks that its revised bank
methodology triggered.
Specifically, Moody's has placed 504 notes on review for upgrade
and 9 notes on review for downgrade across 182 EMEA RMBS deals,
and 42 EMEA ABS deals.
Moody's has updated several cross-sector, primary and secondary
rating methodologies for structured finance securities, to
incorporate a new counterparty risk (CR) Assessment introduced for
banks as part of its revised bank rating methodology.
The updates to the structured finance rating methodologies
combined with rating review placements for certain banks prompted
the rating review actions on the ABS and RMBS notes. Please refer
to the announcement of the changes to Moody's global approach to
rating structured finance transactions and covered bonds released
on March 16, 2015.
A list of the affected credit ratings is available at
http://is.gd/NtGxxS
The rating actions reflect (1) the updates to Moody's structured
finance rating methodologies to incorporate the new CR Assessment
for banks; and (2) the rating review actions of banks resulting
from its revised bank methodology.
The updates to the structured finance rating methodologies have an
overall positive rating impact on EMEA ABS and RMBS transactions.
In the European Union, the CR Assessment will generally be at
least at bank deposit rating level, leading to the placement on
review for upgrade of 504 notes across 220 EMEA ABS and RMBS.
Moody's has placed on review for downgrade 9 notes in 4 EMEA RMBS
following the placement on review for downgrade of some key
counterparties' deposit rating and/or senior unsecured rating.
Moody's introduced a new CR Assessment for banks as part of its
revised bank rating methodology. The CR Assessment reflects an
issuer's ability to avoid defaulting on certain obligations and
contractual commitments, to include payment obligations associated
with derivatives, letters of credit, third-party guarantees,
servicing and trustee obligations and other operational
obligations.
For the EU, Moody's expects that the probability of failing to
maintain these key operations or of defaulting on the relevant
payment obligations could be lower than indicated by the senior
unsecured debt ratings. The CR Assessment will therefore be likely
positioned at least at the level of bank deposit ratings.
Moody's uses internal guidance on the CR Assessments to assess the
rating impact on outstanding structured finance transactions. The
internal guidance is in line with the guidance published in its
updated bank rating methodology and its responses to frequently
asked bank methodology-related questions.
Where relevant, the approximate CR Assessment values used in
structured finance credit analysis will factor in guidance on
expected changes to the baseline credit assessment (BCA), senior
unsecured debt and bank deposit ratings.
Moody's has updated several of its cross-sector methodologies to
incorporate the CR Assessments in its analysis of structured
finance transactions. Moody's now matches banks' exposure in
structured finance transactions to one of the three reference
points: either the CR Assessment, bank deposit rating or senior
unsecured rating.
Moody's uses CR Assessments to measure the risk of default for (1)
operational risk exposures (including exposures to servicers, cash
managers and trustees); (2) exposures to swap counterparties; and
(3) exposures to servicers in relation to commingling risk.
Moody's uses the bank deposit rating to measure the default risk
for exposures associated with account banks and set-off.
Additionally, for bank-related exposures -- e.g., deposits held at
a defaulting bank -- Moody's now assumes a recovery rate of 45% in
instances when the risk is measured or modelled.
Moody's uses the senior unsecured debt rating for senior unsecured
debt and other exposures that carry similar credit risks.
Moody's expects to conclude the majority of the structured finance
rating reviews in the first half of 2015. The timeline to resolve
these reviews will depend on the resolution process applied to the
underlying bank ratings, as well as the assignment of CR
Assessments.
Additionally, some of the ratings already on review for upgrade in
EMEA RMBS and ABS are also impacted by the revised methodology
even if not included in the action. These ratings will be reviewed
considering the revised methodologies.
Factors or circumstances that could lead to an upgrade of the
ratings are (1) a lower probability of high-loss scenarios owing
to an upgrade of the country ceiling; (2) performance of the
underlying collateral that exceeds Moody's expectations; (3)
deleveraging of the capital structure; and (4) improvements in the
credit quality of the transaction counterparties.
Factors or circumstances that could lead to a downgrade of the
ratings are (1) an increased probability of high-loss scenarios
owing to a downgrade of the country ceiling; (2) performance of
the underlying collateral that does not meet Moody's expectations;
(3) deterioration in the notes' available CE; and (4)
deterioration in the credit quality of the transaction
counterparties.
Moody's National Scale Credit Ratings (NSRs) are intended as
relative measures of creditworthiness among debt issues and
issuers within a country, enabling market participants to better
differentiate relative risks. NSRs differ from Moody's global
scale credit ratings in that they are not globally comparable with
the full universe of Moody's rated entities, but only with NSRs
for other rated debt issues and issuers within the same country.
NSRs are designated by a ".nn" country modifier signifying the
relevant country, as in ".za" for South Africa. For further
information on Moody's approach to national scale credit ratings,
please refer to Moody's Credit rating Methodology published in
June 2014 entitled "Mapping Moody's National Scale Ratings to
Global Scale Ratings".
* Moody's Reviews Ratings on 36 Repackaged Deals
------------------------------------------------
Moody's Investors Service on March 20 took rating actions on 51
tranches in 36 Repackaged transactions. The actions are prompted
by (1) the introduction of a Counterparty Risk Assessment (CR
Assessment) as part of the bank methodology update announced on
March 16, 2015; and (2) the bank rating actions announced on
March 17, 2015.
Moody's will assign the CR Assessments to banks over time, and
immediately start using approximations for CR Assessments as
inputs into its credit analysis for structured finance
transactions. The approximated values will be used up to the time
when Moody's formally assigns a CR Assessment.
Following the expected assignment of the CR Assessments to banks
and the Banking Rating Action taken on the 17 March 2015, Moody's
has placed on review for upgrade the ratings of 42 tranches in 29
Repacks and has also placed on review for downgrade the ratings of
9 tranches in 7 Repacks.
A list of the affected credit ratings is available at
http://is.gd/5N9H0o
The main drivers for ratings being placed on review for upgrade or
downgrade are (1) the updates to the banking rating methodology
and (2) the rating action released by Moody's banking group on
March 17, 2015.
(1) the change to using the CR Assessment rather than the
senior unsecured debt rating for banks that act as key
structured transaction parties, as per Approach to
Assessing Swap Counterparties in Structured Finance Cash
Flow Transactions.
(2) the placement on review for upgrade or downgrade of the
senior unsecured ratings for those banks that act as
underlying collateral or issuer in the repackaged
transactions that this press release covers.
The principal methodology used in these ratings was "Moody's
Approach to Rating Repackaged Securities" published in December
2014.
Moody's expects to conclude the majority of the structured finance
rating reviews in the first half of 2015. The timeline to resolve
these reviews will depend on the resolution process applied to the
underlying bank ratings, the conclusions stemming from the bank
rating actions, as well as the assignment of CR Assessments.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, which could negatively impact the
ratings of the notes, as evidenced by 1) uncertainties of credit
conditions in the general economy, 2) more specifically, any
uncertainty associated with the underlying credits in the
transaction could have a direct impact on the repackaged
transaction and 3) additional expected loss associated with
hedging agreements in this transaction may also negatively impact
the ratings.
This analysis only applies to transactions carrying the (sf)
indicator.
Moody's quantitative analysis focuses on the risks relating to the
credit quality of the assets backing the repack and of the
counterparties. Moody's generally determine the expected loss
posed to securities holders by adding together the severities for
loss scenarios arising from either Underlying Asset default, and
if applicable, hedge counterparty risk, each weighted according to
its respective probability. Moody's then translate the expected
loss to a rating using our idealized loss rates.
*********
Monday's edition of the TCR delivers a list of indicative prices
for bond issues that reportedly trade well below par. Prices are
obtained by TCR editors from a variety of outside sources during
the prior week we think are reliable. Those sources may not,
however, be complete or accurate. The Monday Bond Pricing table
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trades are probably different. Our objective is to share
information, not make markets in publicly traded securities.
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affiliated with a TCR editor holds some position in the issuers'
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Each Tuesday edition of the TCR contains a list of companies with
insolvent balance sheets whose shares trade higher than US$3 per
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Each Friday's edition of the TCR includes a review about a book of
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*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Europe is a daily newsletter co-
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Copyright 2015. All rights reserved. ISSN 1529-2754.
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