/raid1/www/Hosts/bankrupt/TCREUR_Public/150717.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
Friday, July 17, 2015, Vol. 16, No. 140
Headlines
G E R M A N Y
GFKL FINANCIAL: Moody's Assigns '(P)B2' Corporate Family Rating
PATERNOSTER HOLDING: Moody's Assigns 'B1' CFR, Outlook Stable
G R E E C E
GREECE: Parliament Approves New Austerity Measures
I R E L A N D
RMF EURO CDO III: S&P Raises Rating on Class V Notes to BB+
L U X E M B O U R G
GARFUNKELUX HOLDCO: S&P Assigns 'B+' ICR, Outlook Stable
STAHL GROUP: Moody's Assigns 'B2' Corporate Family Rating
M O N T E N E G R O
RUDNICI BOKSITA: Fifth Tender Fails to Attract Bidders
N E T H E R L A N D S
CONISTON CLO: Moody's Raises Rating on Class F Notes to B3
NEPTUNO CLO I: S&P Lowers Ratings on 2 Note Classes to CCC-
TIKEHAU CLO: Moody's Assigns 'B2' Rating to Class F Notes
P O R T U G A L
ATLANTES MORTGAGES: Moody's Raises Rating on Class C Notes to Ba2
R U S S I A
MDM BANK: S&P Affirms 'B+/B' Counterparty Ratings, Outlook Neg.
S P A I N
LA SEDA: Plastipak Back in Profit Despite Liquidation
U K R A I N E
KYIVSKA RUS: Deposit Guarantee Fund Recommends Liquidation
UKRAINE: Debt Restructuring Talks with Creditors Make Progress
U N I T E D K I N G D O M
AUBURN SECURITIES: Moody's Assigns (P)Ba1 Rating to Class F Notes
ITHACA ENERGY: S&P Revises Outlook to Neg. & Affirms 'B' CCR
MONACO NPL: Creditors May File Claims Until August 5
X X X X X X X X
* BOOK REVIEW: The Money Wars
*********
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G E R M A N Y
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GFKL FINANCIAL: Moody's Assigns '(P)B2' Corporate Family Rating
---------------------------------------------------------------
Moody's Investors Service assigned a provisional (P)B2 Corporate
Family Rating (CFR) to GFKL Financial Services AG (GFKL). Moody's
has also assigned a (P)B2 rating to the proposed EUR365 million
senior secured note issued by Garfunkelux Holdco 3 S.A. (HoldCo),
GFKL's parent company. This is the first time that Moody's has
rated GFKL.
Moody's issues provisional ratings in advance of the final sale
of securities and these ratings reflect Moody's preliminary
credit opinion regarding the transaction only. Upon a conclusive
review of the final versions of all the documents and legal
opinions, Moody's will endeavor to assign definitive corporate
family and senior secured ratings. A definitive rating may differ
from a provisional rating. The provisional ratings assigned to
GFKL and the note assume a successful issuance of the above
mentioned note, as well as the confirmation that the final set of
documentation does not materially differ from the draft
documentation.
These ratings are contingent upon the successful completion of
the acquisition of a majority stake in GFKL by Permira V fund
(unrated) from Advent Carl Luxembourg Finance S.a r.l. (unrated)
and the issuance of a EUR365 million senior secured note by the
HoldCo. The proceeds of the issuance will mainly be used to pay
existing debt and to fund the acquisition process.
RATINGS RATIONALE
GFKL is specialized in third-party debt collection, debt
purchasing and business process outsourcing services for
unsecured debt. It exclusively operates in Germany, where it is
the leading non-captive management company in terms of revenues.
As of end-2014, 63% of GFKL's revenues were generated by the
third-party debt collection and other servicing, while the
remainder came from its debt purchase business. The company has
access to a wide range of non-performing consumer receivables,
ranging from insurance, to healthcare, telecom and retail and
other sectors. GFKL benefits from a solid client network and
long-term contracts which ensure a certain degree of future
earnings predictability and transparency.
The CFR of (P)B2 positively reflects the company's: (1) strong
franchise and leading position in its core geographical market;
(2) balanced business model which makes GFKL more diversified
compared to traditional debt purchasing companies; (3) access to
a wide range of receivables and solid client network; (4)
improving profitability and EBITDA metrics; and (5) favorable
operating environment.
GFKL's CFR is constrained by: (1) some weaknesses in its
corporate governance, given the absence of independent members in
the supervisory board; (2) a risk management division which does
not directly report to the Supervisory Board and the absence of a
formal Chief Risk Officer; (3) material key relationship
concentrations; (4) full reliance on wholesale, secured funding;
and (5) if the transaction proceeds, weak solvency and leverage
metrics.
The provisional rating also incorporates the sale of a majority
stake in the company to the private equity firm Permira. GFKL's
current shareholder, Advent, will sell its full equity share. The
rating agency understands that the minority shareholders, which
at the closing of the transaction will hold 2.05%, will be
"squeezed out" at a later stage according to a legal process
quite common in the German legal system.
GFKL went through a significant turnaround process between 2009
and 2012 and is now exclusively focused on its core geographical
market in Germany. Moody's believes that the company's business
model is effective and balanced and anticipates a gradual
increase in GFKL's profitability over the next two years, also
owing to the favorable operating environment for debt collectors,
servicers and purchasers. However, Moody's notes that the debt
purchasing and debt collection businesses are highly exposed to
changes in conduct regulation and related reputational damage to
a firm's franchise which could result from customers' complaints.
These risks are partially mitigated by GFKL's very low historical
level of complaints and a domestic regulatory framework that is
not expected to materially change in the near future.
Since the company's voting shares are fully owned by a private
equity firm, Moody's incorporates an element of uncertainty
regarding the time and method of exit into the rating. However,
Moody's expects Permira to manage its exit without compromising
the company's strategy or financial positioning.
WHAT COULD CHANGE THE RATING UP/DOWN
Upward rating pressure could arise from combined improvements in
leverage metrics (debt-to-adjusted EBITDA) to around 3.5x,
interest coverage to around 4.5x and strengthening of the firm's
capital ratios. An increase in funding or operational
diversification could also contribute to a rating upgrade.
The rating could be downgraded because of: (1) a further increase
in leverage or sustained decline in operating performance,
leading to a debt ratio which is higher than 6x adjusted EBITDA;
(2) a significant decline in interest coverage, with an adjusted
EBITDA-to-interest expense ratio around or below 1.5x; (3) a
protracted decrease in profitability; or (4) any deterioration in
the franchise or market position of GFKL.
PATERNOSTER HOLDING: Moody's Assigns 'B1' CFR, Outlook Stable
-------------------------------------------------------------
Moody's Investors Service assigned a definitive B1 corporate
family rating (CFR) and a probability of default rating (PDR) of
B1-PD to Paternoster Holding III GmbH ("PH III" or "the Issuer"),
the (indirect) parent company of Wittur International Holding
GmbH (Wittur). At the same time Moody's has assigned a definitive
B3 instrument rating with LGD5 to the Issuer's EUR225 million 8-
year Senior Notes and a definitive Ba2 rating with LGD2 to the
EUR195 million 7-year Term Loan B (Term Loan) and the EUR65
million Revolving Credit Facility raised by the Paternoster
Holding IV GmbH ("PH IV"), a fully owned subsidiary of the
Issuer. The outlook on the ratings is stable.
RATINGS RATIONALE
Moody's assigned definitive ratings upon a conclusive review of
the documentation with the final terms of the Senior Facility
Agreement, the Senior Notes Prospectus, the Shareholder Loan
Agreement and the Deferred Consideration Agreement being mostly
in line with the drafts reviewed to assign the provisional
ratings. Moody's definitive ratings are in line with the
provisional ratings assigned on February 2, 2015.
PH III's B1 corporate family rating (CFR) reflects (1) the
group's limited product offering, mitigated by scale advantages
given its product focus; (2) highly concentrated customer base,
with four Western multinational customer representing 68.4% of
revenues in 2014, with particular reliance on one of them; and
(3) high reliance on the new build market, which generated
approximately two-thirds of group sales in 2014; with particular
concentration in China owing to urbanization trends; in addition
to (4) high initial financial leverage, with debt to EBITDA
anticipated to improve below 5.5x in 2015 and below 5.0x in 2016,
predominantly driven by a continuous improvement in
profitability. Moody's expects that Wittur will improve its
initially limited liquidity position over the course of 2015 year
thanks to meaningful free cash flow generation and anticipates a
cash balance of EUR25 million at the end of this year.
However, these negatives are partially offset by the group's (1)
healthy profit margins and free cash flow generation in the past
three years; (2) significant aftermarket sales estimated at
around 50% in Europe (but only around 5% in China); (3) its long
term relationships with original equipment manufacturers of
elevators, supported to a degree by lengthy homologation and
certification processes and by robust structural drivers that
have driven the strong growth of the Elevators and Escalators
(E&E) industry in recent years, which the rating agency believes
will remain intact over the next 12-18 months.
The rating is initially weakly positioned within its rating
category and incorporates Moody's expectation that EBITDA will
improve in 2015 supported by ongoing growth in China and other
Asian markets (albeit at a lower rate than in previous years).
The issuers Q1 2015 results have been in line with Moody's
expectations. Sales increased in the three months ending March
2015 by 14% to EUR126.7 million vs Q1 2014, while reported
adjusted EBITDA margin decreased from 13.2% to 12.3% in the same
period, mainly as a result of ramping up new production capacity
and increased indirect labor costs due to a gradual strengthening
of management, sales force and other support functions. Moody's
understands that the recent slowdown in the Chinese new
construction market should impact company's order intake with a
delay of 6-12 months.
In its loss-given-default (LGD) assessment, Moody's ranks first
the EUR195 million 7-year Term Loan and EUR65 million 6-year RCF.
The Term Loan and the RCF will be guaranteed, secured over the
shares of each guarantor and certain assets of the guarantors
(will rank pari passu to each other) and structurally as well as
contractually senior to the Senior Notes.
The EUR225 million 8-year Senior Notes will benefit from senior
subordinated guarantees from the term loan issuer and the same
guarantors of the Term Loan but, unlike the Term Loan, will not
benefit from any security from the operating companies. The notes
will therefore be subordinated to the Term Loan, thus resulting
in an upward notching of the Term Loan to Ba2 (LGD2), reflecting
the instrument's seniority in the event of an enforcement of the
collateral. Accordingly, the Senior Notes are notched down to B3
(LGD5).
WHAT COULD CHANGE THE RATING UP/DOWN
The ratings could be upgraded if the company reduced its main
dependencies, in particular in terms of customer concentration.
Ratings could also be upgraded if we were to expect the financial
ratios to improve such that adjusted debt-to-EBITDA leverage (pro
forma at above 6.0x by the end of 2014) would be sustained at or
below 4.0x, EBITDA interest coverage approaches 3.0x, while free
cash flow to adjusted debt exceeded 10%.
The ratings could be downgraded if the company's financial policy
became more aggressive, including an expectation for leverage to
be sustained over 5.5x, which Moody's views as most likely to
occur through debt-funded acquisitions. Downward pressure would
also follow adverse economic conditions in Wittur's growth
markets, such as in Asia, or a deterioration in the mature
European markets. A deterioration of liquidity could also result
in a downgrade.
Based in Germany, Wittur is a private-equity-owned manufacturer
of elevator components. The company produces and sells elevator
components such as automatic elevator doors, lift cars, safety
components, drives, elevator frames and complete elevators.
Wittur had revenues of EUR522 million in 2014 and around 3,250
employees. In December 2014, funds advised and managed by Bain
Capital agreed to acquire Wittur from Triton and Capvis. The
transaction was closed on March 31, 2015.
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G R E E C E
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GREECE: Parliament Approves New Austerity Measures
--------------------------------------------------
Suzanne Daley and James Kanter at The New York Times report that
under threat from the nation's creditors to move quickly or lose
any chance of obtaining a desperately needed new bailout package,
Greece's Parliament approved painful new austerity measures early
on July 16, virtually guaranteeing that life would get harder for
millions of Greeks.
With banks closed and the economy on the verge of collapse,
Prime Minister Alexis Tsipras had urged the adoption of the
measures, saying that while it was a difficult deal the creditors
were offering, it was the only one available and would avert a
humanitarian and fiscal disaster, The Times relates.
The measures passed easily, with a vote of 229 to 64, with six
abstentions, The Times discloses. Yet much of the support came
from opposition parties, The Times notes. According to
The Times, 32 members of Mr. Tsipras's own Syriza party voted no,
including three of his ministers, throwing the stability of his
left-wing coalition government into question.
Mr. Tsipras, as cited by The Times, said the alternative -- exile
from the eurozone -- was the greater evil.
While Mr. Tsipras signed an agreement with his creditors on
July 13, there are still many potential pitfalls, including the
fact that the accord must win parliamentary approval in each of
the other eurozone countries, The Times notes. France has
already given its approval, and German legislators could take up
the issue today, July 17, The Times says.
According to The Times, under the terms of the agreement reached
after a weekend of contentious negotiations, the creditors would
not forgive any debt and offered only a general assurance of
further discussions about reducing annual debt payments by
stretching out payment periods or reducing interest rates.
The bailout would be the third for Greece in five years and would
involve new loans from the other countries that use the euro, the
European Central Bank and the monetary fund, The Times notes.
Bridge Loan
BBC News reports that eurozone ministers have agreed to give
Greece a EUR7 billion (GBP5 billion) bridging loan from an
EU-wide fund to keep its finances afloat until a bailout is
approved.
The loan is expected to be confirmed on today, July 17, by all EU
member states, BBC discloses.
In another development, the European Central Bank agreed to
increase emergency funding to Greece for the first time since it
was frozen in June, BBC relates.
The decisions were made after Greek MPs passed tough reforms as
part of a eurozone bailout deal, BBC notes.
Greek banks have been closed for almost three weeks, BBC states.
According to BBC, the EUR7 billion bridge loan was agreed in a
conference call on July 16 to tap the EU's EFSM emergency fund.
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I R E L A N D
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RMF EURO CDO III: S&P Raises Rating on Class V Notes to BB+
-----------------------------------------------------------
Standard & Poor's Ratings Services raised its credit ratings on
RMF Euro CDO III PLC's class III, IV, and V notes.
The upgrades follow S&P's analysis of the transaction using data
from the trustee report dated June 8, 2015, and the application
of S&P's relevant criteria.
Since S&P's April 29, 2014 review, the class I and II notes have
fully amortized. As a result, the remaining classes of notes
have benefited from an increase in par coverage.
Par
Amount coverage
as of Current as of
Current last par last
amount review coverage review
Class (mil. EUR) (mil. EUR) (%) (%) Interest
Deferrable
Six-
month
EURIBOR
plus
I 0.00 66.00 N/A 55 0.25% No
Six-
month
EURIBOR
plus
II 0.00 20.10 N/A 41 0.40% No
Six-
month
EURIBOR
plus
III 12.42 14.70 80 31 0.65% Yes
Six-
month
EURIBOR
plus
IV 23.30 23.30 43 16 1.70% Yes
Six-
month
URIBOR
plus
V 4.82 4.82 35 12 4.85% Yes
Subordinated 36.40 36.40 0 0 N/A N/A
N/A--Not available.
S&P subjected the capital structure to its cash flow analysis to
determine the break-even default rate (BDR) for each class of
notes at each rating level. The BDRs represent S&P's estimate of
the level of asset defaults that the notes can withstand and
still fully pay interest and principal to the noteholders. As a
result of the increase in par coverage, S&P believes the rated
notes are now able to withstand a larger amount of asset
defaults.
S&P has estimated future defaults in the portfolio in each rating
scenario by applying its corporate collateralized debt obligation
(CDO) criteria.
S&P's analysis shows that the available credit enhancement for
all remaining classes of notes is now commensurate with higher
ratings than those previously assigned. Therefore, S&P has
raised its ratings on the class III, IV, and V notes.
Given the high concentration of the portfolio (21 obligors), the
application of S&P's largest obligor test (a supplemental stress
test that S&P outlines in its corporate CDO criteria) capped its
rating on the class IV and V notes at 'BBB+(sf)' and 'BB+ (sf)',
respectively. S&P has therefore raised to 'BBB+ (sf)' from 'B+
(sf)' its rating on the class IV notes and to 'BB+ (sf)' from
'B (sf)' its rating on the class V notes.
RMF Euro CDO III is a cash flow collateralized loan obligation
(CLO) transaction managed by Pemba Credit Advisers. A portfolio
of loans to mainly European speculative-grade corporate firms
backs the transaction. RMF Euro CDO III closed in August 2005
and its reinvestment period ended in August 2011.
RATINGS LIST
RMF Euro CDO III PLC
EUR357 mil secured floating-rate notes
Rating Rating
Class Identifier To From
III 74963GAC8 AAA (sf) A+ (sf)
IV 74963GAD6 BBB+ (sf) B+ (sf)
V 74963GAE4 BB+ (sf) B (sf)
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L U X E M B O U R G
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GARFUNKELUX HOLDCO: S&P Assigns 'B+' ICR, Outlook Stable
--------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'B+' long-term
and 'B' short-term issuer credit ratings to Luxembourg-based
Garfunkelux Holdco 3 SA, with primary operating company Germany-
based finance company GFKL Financial Services AG (GFKL). The
outlook is stable.
At the same time, S&P assigned a 'BB' issue rating to the
proposed EUR60 million revolving credit facility issued by
special-purpose entity Blitz F15-269 GmbH (Bidco), with a '1'
recovery rating, indicting S&P's expectation of very high (90%-
100%) recovery in the event of a default.
S&P furthermore assigned a 'B+' issue rating to the proposed
EUR365 million senior secured notes issued by Garfunkelux Holdco
3 S.A., with a '4' recovery rating, indicating S&P's expectation
of 30%-50% recoveries (lower half of the range).
On May 18, 2015, Permira agreed to acquire GFKL from Advent
International for approximately EUR600 million. Permira has a
broad range of international holdings across industries and S&P
considers it a financial sponsor to GFKL under Standard & Poor's
group ratings methodology. Upon the acquisition, the group will
issue two debt instruments: a EUR365 million senior secured note,
and a EUR60 million revolving credit facility (RCF). These
issues will replace a large majority of GFKL's approximately
EUR80 million in outstanding debt at closing and significantly
increase leverage. S&P expects that there will be no additional
debt in the capital structure by the end of 2015. The
transaction is expected to significantly increase GFKL's balance
sheet from consolidated year-end 2014 levels of EUR220 million.
Garfunkelux Holdco 3 S.A. is an intermediate holding company
owned by Permira Funds, consolidating Blitz F15-269 and primary
operating company, GFKL Financial Services AG and all of its
operating subsidiaries and companies that form the group under
the senior secured notes.
The ratings reflect S&P's view of GFKL, its consolidated
subsidiaries, and debt-issuing holding companies upon the
completion of its acquisition by Permira Funds, a U.S. private
equity fund. S&P do not perceive any material barriers to cash
flows within the group or any significant issues regarding
fungibility of capital between the parent company, the debt-
issuing holding companies, or the key subsidiaries under the new
structure.
The stable outlook reflects S&P's expectation that GFKL will
improve adjusted EBITDA over time as it increases the scale of
its debt purchasing. S&P assumes that GFKL will remain prudent
in pricing and continue to generate positive returns from these
investments, supporting its ability to service its obligations
over the next two years.
S&P could lower the ratings if adjusted debt to EBITDA were to
increase towards the 5x threshold and cash flow improvements from
additional debt purchasing and collections revenues did not
materialize. A downgrade could also occur if S&P reviewed its
assessment of the owner's intentions to allow the projected
deleveraging to occur over time, which could lead S&P to review
the "aggressive" financial risk profile. S&P could also lower
the rating if the German regulatory environment was to increase
pressure on the industry materially, which could result in a
lower assessment of GFKL's business position. In either scenario
S&P would consider whether the negative peer adjustment remained
relevant before downgrading.
While unlikely in the next 12-18 months, S&P could raise the
rating if it believed GFKL had materially reduced its adjusted
debt to EBITDA sustainably below 4x. This would result in a
reassessment of S&P's view of Permira as a relatively aggressive
financial sponsor.
STAHL GROUP: Moody's Assigns 'B2' Corporate Family Rating
---------------------------------------------------------
Moody's Investors Service assigned a B2 corporate family rating
(CFR) and B2-PD probability of default rating (PDR) to Stahl
Group SA ('Stahl' or the 'Company'). Concurrently, Moody's has
assigned a provisional (P)B2 to the USD600 million senior secured
Term Loan B and to the EUR 45 million-equivalent multi-currency
senior secured revolving credit facility (the 'RCF'), which will
be borrowed by Dutch Newco, a 100% owned subsidiary of Stahl, to
repay in full the existing indebtedness of the Company, to fund
an extraordinary distribution, and to pay associated transaction
costs. The transaction is expected to close by the end of July
2015. The outlook on all ratings is stable.
This is the first time Moody's has assigned a rating to the
Company.
The ratings on the Term Loan and RCF are provisional, as they are
contingent upon the closing of the transaction, and are based on
the review of draft documentation. Upon completion of the deal
and conclusive review of the final loan documentation, Moody's
will assign definitive ratings to the Term Loan and RCF. A
definitive rating may differ from a provisional rating.
RATINGS RATIONALE
The CFR is supported by Stahl's (1) strong and defensible
position in its reference leather chemical market, with a
comprehensive product portfolio further enhanced after the recent
acquisition and integration of Clariant Leather Services ('CLS'),
a former competitor; (2) long term relationships with customers
due to the company's ability to provide sophisticated customer
service and tailored solutions, via a global network of
facilities, laboratories, R&D centers and highly trained and
experienced technical sales staff; (3) resilient and good
profitability, due to its relatively low fixed cost base, ability
to pass on raw material price increases to customers, and focus
on the more profitable and less price sensitive segments of the
main end markets served, namely premium automotive and leather
goods; (4) historical and projected positive free cash flow
generation, due to limited capex and working capital
requirements.
The supportive credit considerations highlighted are to some
extent offset by the Company's (1) relatively small size and high
concentration in its leather chemical core business and a few
small, albeit highly profitable, performance coating niche
products; (2) exposure to cyclical and low single-digit growth
markets, mainly automotive, footwear and leather goods, albeit
the bias towards premium segments can provide some cushion in a
downturn; (3) lack of long term contracts with customers,
resulting in a short term backlog of spot orders, with limited
visibility on revenues beyond next 2/3 months; (4) single
supplier relationships for several raw materials, which increases
potential for supply disruption; and (5) a relatively high
initial gross financial leverage which looks consistent with
Moody's assessment of shareholder-driven financial policy.
The assigned CFR incorporates the expectation that leverage will
reduce gradually, driven by a continuous improvement in absolute
EBITDA, and that interest cover metrics will display a good
headroom, with EBITDA/Interest ratios at or above 2.5x at all
times, also driven by gradually rising EBITDA. The expectation of
gradually improving metrics is underpinned by Moody's expectation
of a moderately benign macroeconomic environment with no major
global downturn envisaged over the next 18 to 24 months. However,
Moody's assessment of the degree of projected improvement in
credit metrics incorporates a further degree of caution stemming
from the severe debt restructuring the company went through back
in 2010, after the 2009 recession adversely affected Stahl's
financial performance. Even if the Company is today bigger and
competitively better positioned after the acquisition of CLS, it
is still exposed to cyclical end-markets, namely automotive, and
remains highly reliant upon its leather finishing business, which
in a downturn could be rapidly and severely affected by
customers' destocking policies.
The CFR considers the expectation that Stahl will maintain an
adequate liquidity profile throughout the forecast period, with
projected positive free cash flows supporting the build-up of
cash on balance sheet, and no need to use the available RCF,
except for possible seasonal working capital swings.
STRUCTURAL CONSIDERATIONS
The (P)B2 rating on the Term Loan and RCF is in line with the
CFR, and reflects the dominant position of these secured debt
instruments in the capital structure of Stahl following the debt
refinancing. All the rated debt instruments rank pari passu
between them on a senior secured and guaranteed basis. This is
because they benefit from upstream guarantees from the main
operating subsidiaries representing in aggregate at least 85% of
consolidated EBITDA and assets of Stahl group; and a
comprehensive collateral package, including the main assets of
the group. As a result, the Term Loan and RCF are the only
secured debt in the capital structure, with no other meaningful
financial liabilities and unsecured debt currently contemplated.
Moody's has assumed a 50% expected family recovery rate for this
capital structure, albeit it is an all senior secured bank debt
structure, due to the cov-lite terms of the Term Loan, the main
bank debt instrument within the capital structure.
OUTLOOK
The stable outlook reflects Moody's expectation that the company
will maintain adequate liquidity at all times, and will gradually
deleverage. The outlook also assumes the achievement of the
majority of the cost savings and synergies targeted by management
under the integration plan for CLS started last year.
WHAT COULD CHANGE THE RATING UP/DOWN
Moody's would consider upgrading the rating over time if the
company were able to improve its credit metrics, with a total
debt/EBITDA adjusted ratio of less than 4.5x and a RCF/Net Debt
ratio above 15%, both on a sustained basis, while maintaining
positive free cash flow generation and adequate liquidity.
Moody's would consider downgrading the rating if the company were
to perform materially below expectations, which would translate
into a weaker financial and liquidity profile compared to Moody's
expectations. A downgrade could be triggered if gross leverage,
as adjusted by Moody's, would exceed 5.5x, and RCF/Net Debt would
fall below 5%. A more shareholder-friendly than anticipated
financial policy contemplating additional special distributions
to shareholders or debt-financed acquisitions, which would
prevent deleveraging and result in a weaker liquidity position,
may also contribute to exert negative rating pressure.
Stahl is one of the leading global suppliers of chemical
solutions for leather processing as well as performance coatings
and polymers for all kinds of substrates. It has a leading
position in leather chemicals ("LC") with number one global
market share position and a strong position in a few niche
performance coating ("PC") segments. In April 2014, Stahl
completed the acquisition of the Clariant Leather Services
Business ('CLS'). The acquisition enabled Stahl to cover the full
leather production value chain with a wider specialty chemicals
portfolio. Stahl is owned by Wendel SE, an investment company
which entered into Stahl jointly with Carlyle's private equity
funds in 2006, and in 2010 become the main reference shareholder,
after supporting the Company with an equity infusion. As part of
the agreement to acquire CLS in April 2014, Stahl made a payment
consideration in cash and shares, which enabled the seller,
Clariant AG (Ba1, stable) to become a minority shareholder in
Stahl with a 23% stake. In 2014, Stahl generated sales of EUR598
million, pro-forma for the acquisition of CLS.
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M O N T E N E G R O
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RUDNICI BOKSITA: Fifth Tender Fails to Attract Bidders
------------------------------------------------------
SeeNews reports that the fifth tender for the sale of the assets
of Rudnici Boksita for EUR5.99 million (US$6.6 million) has
failed to attract bidders for the bankrupt company.
According to SeeNews, broadcaster RTCG, citing the company's
court-appointed manager Mladen Markovic, said the deadline for
sending bids expired on July 15, as a new tender with a reduced
price of some 10% will be launched by the end of July.
The estimated value of Rudnici Boksita is about EUR14 million,
SeeNews discloses.
Rudnici Boksita, which went bankrupt last year, hit a deadlock
after its 3-month partnership agreement with Neksan, which
allowed the latter to manage its bankrupt peer, ran out on
April 20, SeeNews recounts.
Rudnici Boksita is a Montenegrin bauxite mining firm.
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N E T H E R L A N D S
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CONISTON CLO: Moody's Raises Rating on Class F Notes to B3
----------------------------------------------------------
Moody's Investors Service has taken the following rating actions
on the following classes of notes issued by Coniston CLO B.V.:
EUR226.9 million (current outstanding balance of EUR47.1M) Class
A1 Senior Floating Rate Notes due 2024, Affirmed Aaa (sf);
previously on Nov 24, 2014 Affirmed Aaa (sf)
EUR56.7 million Class A2 Senior Floating Rate Notes due 2024,
Affirmed Aaa (sf); previously on Nov 24, 2014 Upgraded to Aaa
(sf)
EUR24.6 million Class B Deferrable Interest Floating Rate Notes
due 2024, Upgraded to Aaa (sf); previously on Nov 24, 2014
Upgraded to Aa1 (sf)
EUR24 million Class C Deferrable Interest Floating Rate Notes due
2024, Upgraded to Aa2 (sf); previously on Nov 24, 2014 Upgraded
to A2 (sf)
EUR17.6 million Class D Deferrable Interest Floating Rate Notes
due 2024, Upgraded to Baa1 (sf); previously on Nov 24, 2014
Upgraded to Baa3 (sf)
EUR19.6 million Class E Deferrable Interest Floating Rate Notes
due 2024, Upgraded to Ba3 (sf); previously on Nov 24, 2014
Upgraded to B1 (sf)
EUR6.4 million (current outstanding balance of EUR 3.8M) Class F
Deferrable Interest Floating Rate Notes due 2024, Upgraded to B3
(sf); previously on Nov 24, 2014 Upgraded to Caa1 (sf)
Coniston CLO B.V. issued in August 2007, is a single currency
Collateralised Loan Obligation ("CLO") backed by a portfolio of
mostly high yield European loans. The portfolio is managed by 3i
Debt Management Ltd and it is predominantly composed of senior
secured loans. This transaction ended its reinvestment period in
July 2013.
RATINGS RATIONALE
The rating actions on the notes are primarily a result of the
significant deleveraging of the Class A1 and the subsequent
increase in the overcollateralization ratios ("OC ratios") across
the capital structure. Class A1 has paid down by EUR67.4 million
(29.7% of its closing balance) since the quarterly payment date
in October 2014.
As a result, the OC ratios for all classes of notes have
increased since the last rating action in November 2014. As per
the latest trustee report dated May 2015, the Class A-1, Class
A-2, Class B, Class C, Class D and Class E overcollateralization
ratios are reported at 195.08%, 157.70%, 132.86%, 119.11%,
106.79% and 104.71% respectively, compared to 158.65%, 138.72%,
123.58%, 114.41%, 105.69% and 103.96% in October 2014.
Additionally, Moody's notes that Class E benefits over time from
a turbo feature, which has led to a substantial reduction of the
notes original balance.
The credit quality of the collateral pool has worsened as
reflected in the average credit rating of the portfolio (measured
by the weighted average rating factor, or WARF). As of the
trustee's May 2015 report, the WARF was 2,989 compared with 2,795
in October 2014. Over the same period, the reported diversity
score reduced from 37 to 31.
The key model inputs Moody's uses in its analysis, such as par,
weighted average rating factor, diversity score and the weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool as having a
performing par and principal proceeds balance of EUR205.7
million, and defaulted par of EUR8.3 million, a weighted average
default probability of 21.2% (consistent with a WARF of 3066 over
a weighted average life of 4.15 years), a weighted average
recovery rate upon default of 46.63% for a Aaa liability target
rating, a diversity score of 29 and a weighted average spread of
3.75%.
The default probability derives from the credit quality of the
collateral pool and Moody's expectation of the remaining life of
the collateral pool. The estimated average recovery rate on
future defaults is based primarily on the seniority of the assets
in the collateral pool. For a Aaa liability target rating,
Moody's assumed that 90.2% of the portfolio exposed to senior
secured corporate assets would recover 50% upon default, while
the non first-lien loan corporate assets would recover 15%. In
each case, historical and market performance and a collateral
manager's latitude to trade collateral are also relevant factors.
Moody's incorporates these default and recovery characteristics
of the collateral pool into its cash flow model analysis,
subjecting them to stresses as a function of the target rating of
each CLO liability it is analyzing.
Methodology Underlying the Rating Action:
The principal methodology used in this rating was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
February 2014.
Factors that would lead to an upgrade or downgrade of the rating:
In addition to the base-case analysis, Moody's conducted
sensitivity analyses on the key parameters for the rated notes.
Moody's ran a model in which it reduced the weighted average
recovery rate by 5%; the model generated outputs that are
unchanged for Classes A1, A2 and B, and within one to two notches
of the base case results for Classes C, D, E and F.
This transaction is subject to a high level of macroeconomic
uncertainty, which could negatively affect the ratings on the
notes, in light of uncertainty about credit conditions in the
general economy. CLO notes' performance may also be impacted
either positively or negatively by 1) the manager's investment
strategy and behavior and 2) divergence in the legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Additional uncertainty about performance is due to the following:
1) Portfolio amortization: The main source of uncertainty in this
transaction is the pace of amortization of the underlying
portfolio, which can vary significantly depending on market
conditions and have a significant impact on the notes' ratings.
Amortization could accelerate as a consequence of high loan
prepayment levels or collateral sales by the collateral manager
or be delayed by an increase in loan amend-and-extend
restructurings. Fast amortization would usually benefit the
ratings of the notes beginning with the notes having the highest
prepayment priority.
2) Recoveries on defaulted assets: Market value fluctuations in
trustee-reported defaulted assets and those Moody's assumes have
defaulted can result in volatility in the deal's over-
collateralization levels. Further, the timing of recoveries and
the manager's decision whether to work out or sell defaulted
assets can also result in additional uncertainty. Moody's
analyzed defaulted recoveries assuming the lower of the market
price or the recovery rate to account for potential volatility in
market prices. Recoveries higher than Moody's expectations would
have a positive impact on the notes' ratings.
In addition to the quantitative factors that Moody's explicitly
modelled, qualitative factors are part of the rating committee's
considerations. These qualitative factors include the structural
protections in the transaction, its recent performance given the
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, can influence the final rating decision.
NEPTUNO CLO I: S&P Lowers Ratings on 2 Note Classes to CCC-
-----------------------------------------------------------
Standard & Poor's Ratings Services took various credit rating
actions in Neptuno CLO I B.V.
Specifically, S&P has:
-- Raised its ratings on the class A-T, A-R, B1, and B2 notes
and the class Y combination notes;
-- Affirmed its ratings on the class C and D notes;
-- Lowered its ratings on the class E1 and E2 notes; and
-- Withdrawn its rating on the class Z combination notes.
The rating actions follow S&P's analysis of the transaction's
recent performance and the application of its relevant criteria.
Since S&P's previous review on Feb. 26, 2014, the rated notes
have been positively affected by an increase in the par coverage
resulting from the class A-T and A-R notes' amortization. The
portfolio's weighted-average spread has decreased to 3.90% from
3.98% and the weighted-average recoveries in 'AAA', 'AA', 'A',
'BB', 'B', and 'CCC' rating scenarios have also decreased.
S&P has applied its corporate collateralized debt obligation
(CDO) criteria to perform its credit and cash flow analysis.
The results of S&P's analysis show that the available credit
enhancement for the class A-T, A-R, B1, and B2 notes and the
class Y combination notes is now commensurate with higher ratings
than those currently assigned. S&P has therefore raised its
ratings on these classes of notes.
S&P's analysis shows that the available credit enhancement for
the class C and D notes is still commensurate with their current
ratings. S&P has therefore affirmed its ratings on these classes
of notes.
The available credit enhancement for the class E1 and E2 notes is
now commensurate with lower ratings than those currently
assigned. S&P has therefore lowered its ratings on these classes
of notes.
The class Z combination notes have fully repaid their initial
rated balance. Therefore, S&P has withdrawn its rating on the
class Z combination notes. The notes will continue to receive
distributions from their underlying components.
Neptuno CLO I is a cash flow collateralized loan obligation (CLO)
transaction managed by BNP Paribas Asset Management. It is
backed by a portfolio of loans to corporate firms. The
transaction closed in May 2007 and its reinvestment period ended
in Nov. 2014.
RATINGS LIST
Neptuno CLO I B.V.
EUR512.081 mil senior secured fixed- floating-rate revolving
and deferrable notes
Rating Rating
Class Identifier To From
A-T 640804AA8 AA+ (sf) A+ (sf)
A-R 640804AB6 AA+ (sf) A+ (sf)
B1 640804AC4 AA- (sf) A+ (sf)
B2 640804AD2 AA- (sf) A+ (sf)
C 640804AE0 A (sf) A (sf)
D 640804AF7 BBB- (sf) BBB- (sf)
E1 640804AG5 CCC- (sf) B (sf)
E2 640804AH3 CCC- (sf) B (sf)
Y Combo 640804AK6 Ap (sf) BBB+p (sf)
Z Combo 640804AL4 NR AAp (sf)
NR--Not rated.
TIKEHAU CLO: Moody's Assigns 'B2' Rating to Class F Notes
---------------------------------------------------------
Moody's Investors Service announced that it has assigned the
following definitive ratings to notes issued by Tikehau CLO B.V.:
EUR161,000,000 Class A-1 Senior Secured Floating Rate Notes due
2028, Definitive Rating Assigned Aaa (sf)
EUR40,000,000 Class A-2 Senior Secured Fixed/Floating Rate Notes
due 2028, Definitive Rating Assigned Aaa (sf)
EUR39,000,000 Class B Senior Secured Floating Rate Notes due
2028, Definitive Rating Assigned Aa2 (sf)
EUR20,000,000 Class C Senior Secured Deferrable Floating Rate
Notes due 2028, Definitive Rating Assigned A2 (sf)
EUR18,000,000 Class D Senior Secured Deferrable Floating Rate
Notes due 2028, Definitive Rating Assigned Baa2 (sf)
EUR25,000,000 Class E Senior Secured Deferrable Floating Rate
Notes due 2028, Definitive Rating Assigned Ba2 (sf)
EUR10,000,000 Class F Senior Secured Deferrable Floating Rate
Notes due 2028, Definitive Rating Assigned B2 (sf)
RATINGS RATIONALE
Moody's definitive rating of the rated notes addresses the
expected loss posed to noteholders by legal final maturity of the
notes in 2028. The definitive ratings reflect the risks due to
defaults on the underlying portfolio of loans given the
characteristics and eligibility criteria of the constituent
assets, the relevant portfolio tests and covenants as well as the
transaction's capital and legal structure. Furthermore, Moody's
is of the opinion that the collateral manager, Tikehau Capital
Europe Limited ("Tikehau"), has sufficient experience and
operational capacity and is capable of managing this CLO.
Tikehau CLO B.V. is a managed cash flow CLO. At least 90% of the
portfolio must consist of senior secured obligations and up to
10% of the portfolio may consist of senior unsecured obligations,
second-lien loans, mezzanine obligations and high yield bonds.
The portfolio is expected to be 60% ramped up as of the closing
date and to be comprised predominantly of corporate loans to
obligors domiciled in Western Europe. The remainder of the
portfolio will be acquired during the six-month ramp-up period in
compliance with the portfolio guidelines.
Tikehau will manage the CLO. It will direct the selection,
acquisition and disposition of collateral on behalf of the Issuer
and may engage in trading activity, including discretionary
trading, during the transaction's four-year reinvestment period.
Thereafter, purchases are permitted using principal proceeds from
unscheduled principal payments and proceeds from sales of credit
risk obligations or credit improved obligations, and are subject
to certain restrictions.
In addition to the seven classes of notes rated by Moody's, the
Issuer has issued EUR 41,700,000 of subordinated notes which are
not rated.
The transaction incorporates interest and par coverage tests
which, if triggered, divert interest and principal proceeds to
pay down the notes in order of seniority.
Factors that would lead to an upgrade or downgrade of the rating:
The rated notes' performance is subject to uncertainty. The
notes' performance is sensitive to the performance of the
underlying portfolio, which in turn depends on economic and
credit conditions that may change. Tikehau's investment decisions
and management of the transaction will also affect the notes'
performance.
Loss and Cash Flow Analysis:
Moody's modeled the transaction using CDOEdge, a cash flow model
based on the Binomial Expansion Technique, as described in
Section 2.3 of the "Moody's Global Approach to Rating
Collateralized Loan Obligations" rating methodology published in
February 2014. The cash flow model evaluates all default
scenarios that are then weighted considering the probabilities of
the binomial distribution assumed for the portfolio default rate.
In each default scenario, the corresponding loss for each class
of notes is calculated given the incoming cash flows from the
assets and the outgoing payments to third parties and
noteholders. Therefore, the expected loss or EL for each tranche
is the sum product of (i) the probability of occurrence of each
default scenario and (ii) the loss derived from the cash flow
model in each default scenario for each tranche.
Moody's used the following base-case modeling assumptions:
Par Amount: EUR 340,000,000
Diversity Score: 35
Weighted Average Rating Factor (WARF): 2750
Weighted Average Spread (WAS): 4.10%
Weighted Average Coupon (WAC): 5.00%
Weighted Average Recovery Rate (WARR): 40.00%
Weighted Average Life (WAL): 8 years
Stress Scenarios:
Together with the set of modelling assumptions above, Moody's
conducted an additional sensitivity analysis, which was an
important component in determining the definitive rating assigned
to the rated notes. This sensitivity analysis includes increased
default probability relative to the base case. Below is a summary
of the impact of an increase in default probability (expressed in
terms of WARF level) on each of the rated notes (shown in terms
of the number of notch difference versus the current model
output, whereby a negative difference corresponds to higher
expected losses), holding all other factors equal.
Percentage Change in WARF: WARF + 15% (to 3163 from 2750)
Ratings Impact in Rating Notches:
Class A-1 Senior Secured Floating Rate Notes: 0
Class A-2 Senior Secured Fixed/Floating Rate Notes: 0
Class B Senior Secured Floating Rate Notes: -2
Class C Senior Secured Deferrable Floating Rate Notes:-2
Class D Senior Secured Deferrable Floating Rate Notes: -2
Class E Senior Secured Deferrable Floating Rate Notes: -1
Class F Senior Secured Deferrable Floating Rate Notes:0
Percentage Change in WARF: WARF +30% (to 3575 from 2750)
Class A-1 Senior Secured Floating Rate Notes: -1
Class A-2 Senior Secured Fixed/Floating Rate Notes: -1
Class B Senior Secured Floating Rate Notes: -3
Class C Senior Secured Deferrable Floating Rate Notes: -4
Class D Senior Secured Deferrable Floating Rate Notes: -3
Class E Senior Secured Deferrable Floating Rate Notes: -2
Class F Senior Secured Deferrable Floating Rate Notes: -2
===============
P O R T U G A L
===============
ATLANTES MORTGAGES: Moody's Raises Rating on Class C Notes to Ba2
-----------------------------------------------------------------
Moody's Investors Service upgraded the ratings of 15 tranches,
confirmed 1 tranche and affirmed 6 tranches in 6 Portuguese RMBS
transactions.
RATINGS RATIONALE
The rating actions reflect (1) the update of several of Moody's
cross-sector, primary and secondary rating methodologies for
structured finance securities, to incorporate the new
Counterparty Risk (CR) Assessment that it introduced for banks as
part of its revised bank rating methodology (see "Banks,"
published on March 16, 2015); (2) completion of rating review
actions of banks and the assignment of its Counterparty Risk
Assessment to the relevant Portuguese and other banks acting as
counterparties to the affected transactions, following the
application of Moody's bank methodology.
Moody's has also affirmed or confirmed the ratings of the notes
where the current Credit Enhancement was commensurate with the
current ratings.
APPLICATION OF MOODY'S STRUCTURED FINANCE RATING METHODOLOGIES
Moody's updated several of its cross-sector methodologies to
incorporate the CR Assessments in its analysis of structured
finance transactions in March 2015 (see "Banks"). Moody's now
matches banks' exposure in structured finance transactions to one
of three reference points: the CR Assessment, bank deposit rating
or senior unsecured rating.
Moody's has used CR Assessments in its analysis to measure the
risk of default for (1) operational risk exposures (specifically
exposures to servicers); (2) exposures to swap counterparties;
and (3) exposures to servicers in relation to commingling risk.
The ratings of class B, C and D in Douro Mortgages No. 1 and
class B and C in Hipototta No. 1 plc were constrained due to swap
exposure.
Moody's has used the bank deposit rating to measure the default
risk for exposures associated with account banks. Additionally,
for bank-related exposures (e.g., deposits held at a defaulting
bank) Moody's has assumed a recovery rate of 45% in instances
when the risk is measured or modelled.
REVISION OF KEY COLLATERAL ASSUMPTIONS
As part of the rating action, Moody's reviewed the key collateral
assumptions of the securitized pools. For Atlantes Mortgages No.1
Plc the EL assumption was increased from 2.90% to 3.00% as a
percentage of original pool balance while the MILAN CE assumption
was increased from 7.10% to 8.20%. For the remaining deals, the
key collateral assumptions remained unchanged as part of this
review. The performance of the underlying asset portfolios remain
in line with Moody's assumptions. Moody's also has a stable
outlook
Principal Methodology:
The principal methodology used in these ratings was "Moody's
Approach to Rating RMBS Using the MILAN Framework", published in
January 2015.
The analysis undertaken by Moody's at the initial assignment of
ratings for RMBS securities may focus on aspects that become less
relevant or typically remain unchanged during the surveillance
stage.
Factors that would lead to an upgrade or downgrade of the
ratings:
Factors or circumstances that could lead to an upgrade of the
ratings include (1) lower sovereign risk; (2) better-than-
expected performance of the underlying collateral; (3)
deleveraging of the capital structure; and (4) improvements in
the credit quality of the transaction's counterparties.
Conversely, factors or circumstances that could lead to a
downgrade of the ratings include (1) higher sovereign risk; (2)
worse-than-expected performance of the underlying collateral; (3)
deterioration in the notes' available credit enhancement; and (4)
deterioration in the credit quality of the transaction's
counterparties.
LIST OF AFFECTED RATINGS
Issuer: Atlantes Mortgages No.1 Plc
EUR462.5 million A Notes, Affirmed A1 (sf); previously on Jan
23, 2015 Upgraded to A1 (sf)
EUR22.5 million B Notes, Upgraded to A1 (sf); previously on Mar
20, 2015 A3 (sf) Placed Under Review for Possible Upgrade
EUR12.5 million C Notes, Upgraded to Ba2 (sf); previously on
Jan 23, 2015 Affirmed Ba3 (sf)
EUR2.5 million D Notes, Affirmed B3 (sf); previously on Jan 23,
2015 Affirmed B3 (sf)
Issuer: DOURO MORTGAGES No.1
EUR1434 million A Notes, Upgraded to A2 (sf); previously on Mar
20, 2015 A3 (sf) Placed Under Review for Possible Upgrade
EUR24.75 million B Notes, Confirmed at Ba2 (sf); previously on
Mar 20, 2015 Ba2 (sf) Placed Under Review for Possible Upgrade
EUR22.5 million C Notes, Affirmed B1 (sf); previously on Jan
23, 2015 Upgraded to B1 (sf)
EUR18.75 million D Notes, Upgraded to B2 (sf); previously on
Jan 23, 2015 Affirmed B3 (sf)
Issuer: DOURO MORTGAGES No.2
EUR315 million A1 Notes, Affirmed A1 (sf); previously on Jan
23, 2015 Upgraded to A1 (sf)
EUR1125 million A2 Notes, Upgraded to A2 (sf); previously on
Mar 20, 2015 Baa1 (sf) Placed Under Review for Possible Upgrade
EUR27.75 million B Notes, Upgraded to Ba2 (sf); previously on
Mar 20, 2015 Ba3 (sf) Placed Under Review for Possible Upgrade
EUR18 million C Notes, Upgraded to B1 (sf); previously on Jan
23, 2015 Upgraded to B2 (sf)
EUR14.25 million D Notes, Upgraded to B3 (sf); previously on
Jan 23, 2015 Affirmed Caa1 (sf)
Issuer: DOURO MORTGAGES No.3
EUR1441.5 million A Notes, Upgraded to A3 (sf); previously on
Mar 20, 2015 Baa2 (sf) Placed Under Review for Possible Upgrade
Issuer: HIPOTOTTA NO. 1 PLC
EUR1053.2 million A Notes, Affirmed A1 (sf); previously on Jan
23, 2015 Upgraded to A1 (sf)
EUR32.5 million B Notes, Upgraded to A3 (sf); previously on Mar
20, 2015 Baa1 (sf) Placed Under Review for Possible Upgrade
EUR14.3 million C Notes, Upgraded to Baa1 (sf); previously on
Mar 20, 2015 Baa3 (sf) Placed Under Review for Possible Upgrade
Issuer: HIPOTOTTA NO. 5 PLC
EUR1693 million A2 Notes, Affirmed A1 (sf); previously on Jan
23, 2015 Upgraded to A1 (sf)
EUR26 million B Notes, Upgraded to Baa1 (sf); previously on Mar
20, 2015 Baa3 (sf) Placed Under Review for Possible Upgrade
EUR24 million C Notes, Upgraded to Baa3 (sf); previously on Jan
23, 2015 Upgraded to Ba1 (sf)
EUR26 million D Notes, Upgraded to Ba3 (sf); previously on Jan
23, 2015 Upgraded to B1 (sf)
EUR31 million E Notes, Upgraded to B3 (sf); previously on Jan
23, 2015 Affirmed Caa1 (sf)
===========
R U S S I A
===========
MDM BANK: S&P Affirms 'B+/B' Counterparty Ratings, Outlook Neg.
---------------------------------------------------------------
Standard & Poor's Ratings Services affirmed its 'B+/B' long- and
short-term counterparty credit ratings on Russia-based MDM Bank.
The outlook is negative. S&P also affirmed the 'ruA' Russia
national scale rating on the bank.
The rating action balances S&P's view of MDM Bank's weak earnings
capacity and high level of nonperforming loans (NPLs) against the
sizable injection of (RUB) 7.5 billion (approximately
$135 million) of Tier 1 capital S&P expects the bank's
shareholders to inject over the next nine months. This injection
would mitigate potential additional credit losses and prevent
erosion of MDM Bank's capital buffer.
The ratings on MDM Bank continue to reflect the 'bb-' anchor for
banks operating in Russia. The ratings also incorporate S&P's
opinion of the bank's "moderate" business position, "moderate"
capital and earnings, "moderate" risk position, "average"
funding, and "adequate" liquidity, as our criteria define these
terms. The stand-alone credit profile (SACP) is 'b'.
MDM Bank's "moderate" business position is balanced by the bank's
modest market share of 0.42% in corporate lending and 0.37% in
retail lending, on the one hand, and stronger brand name and
pricing power in some regions of operation like the Urals and
Siberia, on the other. With total assets of RUB318 billion at
June 1, 2015, MDM Bank remains one of the top 25 banks in Russia.
Given the still-high share of NPLs (12.6%), slow new business
growth, weak earnings capacity, and the deteriorating economic
conditions in Russia, S&P cannot exclude the need for additional
provisions. As such, S&P expects the bank to post losses in 2015
and in 2016. However, S&P projects that the RUB7.5 billion
Tier 1 capital injection from MDM Bank's shareholders, expected
in the coming nine months, will support the bank's capital
position. Taking into account this capital increase, S&P's
projected risk-adjusted capital (RAC) ratio will remain within
the 5.4%-5.6% range over the next 12-18 months. Therefore, S&P
continues to assess MDM Bank's capital and earnings as
"moderate."
In S&P's view, the bank's "moderate" risk position is driven by
the still-high share of NPLs -- 12.6% at end-2014 versus 10.9% at
end-2013 -- which is comparable with peers but slightly higher
than the average of the Russian banking sector. Moreover, S&P
estimates that an additional 10%-15% of the loan portfolio has
been either restructured or is showing signs of impairment, which
may require additional provisioning. Taking these factors into
account, S&P considers the loan-loss provisioning coverage ratio
of 144% as of end-2014 to be adequate, but not excessive.
However, S&P believes that the anticipated capital injection
would help the bank to potentially absorb additional losses.
S&P considers MDM Bank's funding to be "average" given its
moderate deposit concentration, loan-to-deposit ratio of 80%, and
stable funding ratio of 120% as of end-2014, which is in line
with Russian peers'. MDM Bank's liquidity position is "adequate"
with narrow liquid assets accounting for almost 30% of total
assets as of end-2014.
The long-term counterparty credit rating is one notch higher than
the bank's SACP, which S&P assess at 'b'. Given the bank's
significant positions in the Urals and Siberia, together with
substantial penetration into retail segment, S&P thinks that the
failure of MDM Bank would trigger a loss of confidence in the
Russian banking system. As such, S&P believes there is a
"moderate" likelihood that the Russian government would support
MDM Bank if needed. At the same time, S&P acknowledges that if
it was to see material deterioration of the bank's market share
and if the selected form of integration with Russia-based B&N
Bank led to the end of MDM Bank's existence, S&P could reassess
its view of MDM Bank's systemic importance.
The negative outlook on MDM Bank reflects S&P's view that the
bank's financial profile remains vulnerable, exacerbated by the
negative developments in the Russian economy and the banking
sector. In S&P's view, a more challenging operating environment
could impede management and new shareholders' efforts to improve
the bank's financial performance, facilitate the recovery of
existing problem loan portfolio, and develop new business.
S&P would consider lowering the ratings over the next 12-18
months if it observed that:
-- The quality of the loan portfolio deteriorated more
significantly than S&P expects for the banking sector as a
whole; or
-- The bank operated with capital close to the minimum
regulatory requirements (within less than 100 basis
points), in which case, under S&P's criteria, it would
assess capital and earnings as "weak," at best, regardless
of the forecast RAC.
In addition, S&P could take a negative rating action if it was to
observe a gradual decrease of the bank's "moderate" systemic
importance as a result of a substantial loss of market share.
A positive rating action seems remote, in S&P's view, and would
hinge on a revision of the outlook on Russia to stable as well as
significantly better-than-expected loss performance.
=========
S P A I N
=========
LA SEDA: Plastipak Back in Profit Despite Liquidation
-----------------------------------------------------
Stephen Farrell at Insider Media reports that Wrexham-based
packaging specialist APPE, now renamed Plastipak Packaging
following a recent takeover, has reported a return to profit in
its latest financial results.
The growth comes despite the liquidation of its former parent La
Seda de Barcelona SA Group during the year, Insider Media notes.
Earlier this month, the sale of APPE to Plastipak Packaging was
completed following approval from the European Commission,
Insider Media relays.
In the latest accounts for APPE UK Ltd., covering the year ending
December 31, 2014, the company reported a pre-tax profit of
GBP5.9 million, compared with a loss of GBP27.6 million the year
before, Insider Media discloses.
In their report accompanying the accounts, the directors, as
cited by Insider Media, said: "The business achieved significant
volume growth of 9% during 2014. Several long-term contracts
were secured which will lead to substantial growth in future
years.
"The directors consider that, with the exception of the
insolvency of the parent company, the trading performance is
satisfactory and consistent with the previous year.
"Despite the parent company situation, APPE UK continues to grow
and to seek new opportunities. While commodity preforms remain
by far the biggest component of volumes and continues to grow,
the company has ambitious plans to diversify into new sectors."
Regarding the sale of the business, the directors said that La
Seda de Barcelona had been "adversely affected by the worsening
of the competitive environment of its PET [polyethylene
terephthalate] business" since 2011, Insider Media relates.
LSB attempted to refinance its debt facility but no agreement was
reached and it applied for voluntary insolvency, which was
accepted by Commercial Court number 1 in Barcelona in July 2013,
Insider Media recounts.
In January 2014, it applied to begin its liquidation, Insider
Media relays. This was accepted leading to the replacement of
the board with an insolvency administrator, Insider Media notes.
The liquidator began plans to sell the European arm of the
business in July 2014, with a sale to Plastipak agreed in
November 2014, Insider Media discloses.
La Seda de Barcelona is a Spanish plastics bottle maker. The
Catalonia-based company makes bottles in Europe, Turkey and North
Africa.
=============
U K R A I N E
=============
KYIVSKA RUS: Deposit Guarantee Fund Recommends Liquidation
----------------------------------------------------------
Ukrainian News Agency reports that the Deposit Guarantee Fund
recommends that the National Bank of Ukraine liquidate the
insolvent Kyivska Rus bank.
The Fund explains this decision with termination of the
provisional administrator's work in the bank, Ukrainian News
notes.
Seeing the necessity for the Fund to finish the full technology
cycle of compiling the list of depositors liable to receive
compensations in the process of the bank receivership, payouts to
depositors were suspended from July 13, Ukrainian News discloses.
The Deposit Guarantee Fund notifies that payouts to depositors
will resume within seven days after cancellation of the banking
license and start of the receivership procedure, Ukrainian News
relays.
The Deposit Guarantee Fund took Kyivska Rus into provisional
administration on March 20 for three months, Ukrainian News
recounts.
On June 17, the Fund extended the provisional administration
until July 20, Ukrainian News relates.
UKRAINE: Debt Restructuring Talks with Creditors Make Progress
--------------------------------------------------------------
Marton Eder and Natasha Doff at Bloomberg News report that
Ukraine and its creditors will hold further talks next week after
making progress on "substantive issues" regarding the country's
US$19 billion restructuring plan.
"Parties have agreed to focus their attention on narrowing the
gaps," Bloomberg quotes them as saying in a joint statement after
meetings in Washington attended by Finance Minister Natalie
Jaresko on July 15. "Additional meetings between the two sides
have been scheduled next week, with the common aim of finalizing
the terms of Ukraine's debt operation as soon as possible."
The minister joining the debt talks has helped end a two-month
deadlock on negotiations as the two sides disagreed on the need
for a reduction to bond principal to meet restructuring targets,
Bloomberg discloses. They agreed to take talks private on
July 1, which means creditors, led by Franklin Templeton, can't
trade the bonds, Bloomberg relays.
"Both parties have begun to realize that time is running out,"
Vitaliy Sivach, a Kiev-based bond trader at Investment Capital
Ukraine, as cited by Bloomberg, said by e-mail. "There's a need
to find a win-win solution before the holiday season, otherwise
everyone should brace for a possible default in September."
Creditors say goals laid out in the country's US$40 billion
International Monetary Fund aid package can be met by lowering
coupons and extending maturities alone, Bloomberg notes.
===========================
U N I T E D K I N G D O M
===========================
AUBURN SECURITIES: Moody's Assigns (P)Ba1 Rating to Class F Notes
-----------------------------------------------------------------
Moody's Investors Service has assigned provisional long-term
credit ratings to Notes to be issued by Auburn Securities 9 plc:
Issuer: Auburn Securities 9 plc
GBP Class A Mortgage Backed Floating Rate Notes due 2047,
Assigned (P)Aaa (sf)
GBP Class B Mortgage Backed Floating Rate Notes due 2047,
Assigned (P)Aa1 (sf)
GBP Class C Mortgage Backed Floating Rate Notes due 2047,
Assigned (P)Aa3 (sf)
GBP Class D Mortgage Backed Floating Rate Notes due 2047,
Assigned (P)A2 (sf)
GBP Class E Mortgage Backed Fixed Rate Notes due 2047, Assigned
(P)Baa2 (sf)
GBP Class F Mortgage Backed Fixed Rate Notes due 2047, Assigned
(P)Ba1 (sf)
This transaction is the latest securitization in Capital Home
Loans Limited ("CHL"), and the eight under the "Auburn" label.
The portfolio consists of UK first lien buy-to-let home loans,
originated by CHL. Subject to certain conditions the final pool
will comprise up to GBP million of loans originated by CHL.
RATINGS RATIONALE
The ratings 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 [2.2]% and the MILAN required credit
enhancement of [13.5]% serve as input parameters for Moody's cash
flow model and tranching model.
Portfolio expected loss of [2.2]%: this is in line with the UK
buy-to-let sector average and is based on Moody's assessment of
the lifetime loss expectation taking into account: (i) the
performance of CHL loans, (ii) the current macroeconomic
environment in the UK and (iii) benchmarking with similar UK buy-
to-let transactions.
MILAN CE of [13.5]%: this is in line with the UK buy-to-let
sector average and follows Moody's assessment of the loan-by-loan
information taking into account the historical performance and
the pool composition including the weighted average current LTV
for the pool of [77.42]%, which is in line with comparable
transactions.
The Liquidity Reserve Fund will be fully funded at closing from
the Subordinate Notes and will be [3]% of the class A to Z2 notes
balance. The target of the reserve fund will be [3]% of the
outstanding note balance. The liquidity reserve fund will be
available for class A and B while these classes are outstanding
and for the remaining classes once class B has been paid down.
The Excess Amount of the Liquidity Reserve Fund will be used to
fund the General Reserve Fund. The General Reserve Fund can be
used to cover shortfalls of senior expenses interest on classes A
to F and PDL on classes A to F.
Operational Risk Analysis: Capital Home Loans Limited is both
servicer and cash manager in the transaction. In order to
mitigate the operational risk, there will a back-up servicer
facilitator and Homeloan Management Limited (Not rated) as warm
back-up servicer and warm back-up cash bond 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 the equivalent of
[4.4] months liquidity.
Interest Rate Risk Analysis: The majority of the loans in the
pool are BBR linked with the remaining small proportion linked to
CHL's SVR. Moody's has also taken the absence of swap into
account in the stressed margin vector used in the cash flow
modelling.
The provisional ratings address the expected loss posed to
investors by the legal final maturity of the Notes. Moody's
issues provisional ratings in advance of the final sale of
securities, but these ratings represent only Moody's preliminary
credit opinions. Upon a conclusive review of the transaction and
associated documentation, Moody's will endeavor to assign
definitive ratings to the Notes. A definitive rating may differ
from a provisional rating. Other non-credit risks have not been
addressed, but may have a significant effect on yield to
investors.
Stress scenarios:
Moody's Parameter Sensitivities: If the portfolio expected loss
was increased from [2.2]% to [3.3]% of current balance, and the
MILAN CE was increased from [13.5]% to [21.6]%, 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.
The principal methodology used in this rating was "Moody's
Approach to Rating RMBS Using the MILAN Framework" published in
January 2015.
The analysis undertaken by Moody's at the initial assignment of a
rating for an RMBS security may focus on aspects that become less
relevant or typically remain unchanged during the surveillance
stage. Please see Moody's Approach to Rating RMBS Using the MILAN
Framework for further information on Moody's analysis at the
initial rating assignment and the on-going surveillance in RMBS.
Factors that would lead to an upgrade or downgrade of the rating:
Significantly different loss assumptions compared with Moody's
expectations at close due to either a change in economic
conditions from Moody's 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 a 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.
ITHACA ENERGY: S&P Revises Outlook to Neg. & Affirms 'B' CCR
------------------------------------------------------------
Standard & Poor's Ratings Services said that it has revised its
outlook on U.K.-based oil and gas development and production
company Ithaca Energy Inc. to negative from stable. S&P affirmed
the long-term corporate credit rating on Ithaca at 'B'.
At the same time, S&P affirmed its 'CCC+' issue rating on
Ithaca's $300 million senior unsecured notes due 2019. The
recovery rating on the notes is unchanged at '6'.
The outlook revision to negative reflects the pressure on
Ithaca's financial profile from weaker cash flow generation
because of lower oil prices, combined with the increase in debt
stemming from high capital expenditure (capex). The delay in the
start of production at the Greater Stella Area (GSA) development
will result in a much weaker financial risk profile in 2015 and
2016 than S&P previously anticipated. This is because when S&P
assigned the rating in July 2014, oil prices were much higher
(above $100 per barrel) and S&P expected production at the GSA to
start in 2015. That said, Ithaca's cash flow generation is
partially protected by the hedges it has in place, and the
company's renegotiation of its committed facilities announced in
April 2015 means that Ithaca is unlikely to face any liquidity
issues in the next two years, based on S&P's projections.
Reflecting Ithaca's anticipated higher leverage, S&P has revised
its assessment of Ithaca's financial risk profile downward to
"aggressive" from "significant." This results in a lower anchor
of 'b', in line with the rating. S&P no longer applies a
negative comparable rating analysis modifier.
S&P's assessment of Ithaca's business risk profile and
competitive position as "vulnerable" reflects S&P's view of the
company's limited, albeit soon to expand, scale of production and
its low diversity of operations. Ithaca operates almost
exclusively on the U.K. Continental Shelf with an interest in 13
production fields. Ithaca's business model is to focus on
production and development, rather than riskier exploration
activities.
Ithaca's "aggressive" financial risk profile reflects S&P's
forecast that Ithaca's Standard & Poor's-adjusted debt to EBITDA
will remain at a peak of about 5.5x-6.0x in 2015. S&P's
assessment also reflects Ithaca's negative free operating cash
flow generation in full year 2015, due to high capex in the first
half of 2015. S&P forecasts that the company will deleverage
from 2016, toward sustaining debt to EBITDA below 4x.
S&P's base case assumes:
-- A Brent Oil price of $55 per barrel (/bbl) in 2015, $65/bbl
in 2016, and $75/bbl in 2017;
-- That the GSA development will produce its first oil from
mid-2016;
-- $60 million proceeds received from the sale of its Norway
subsidiary, Ithaca Petroleum Norge AS, which completed in
July 2015;
-- A significant increase in production toward 24,000 barrels
of oil equivalent by 2017; and
-- A decrease in the overall contribution of gas to about 65%
in 2017 from 95% today.
Based on these assumptions, S&P arrives at these credit measures:
-- Adjusted debt to EBITDA of about 5.5x-6.0x in 2015,
decreasing to below 4x on a sustainable basis from 2016.
-- Negative free operating cash flow in 2015, turning neutral
to positive from 2016.
The negative outlook reflects the current limited headroom for
the rating in Ithaca's financial risk profile before the company
increases its production in the U.K. North Sea from 2016. S&P
forecasts that Ithaca's adjusted debt to EBITDA will peak at
5.5x-6.0x in 2015 before deleveraging below 4x from 2016. S&P
anticipates that liquidity will remain "adequate" over the next
12 months.
S&P could lower the rating if Ithaca does not meet its forecast
material step-up in production growth or if the anticipated
rapid, material deleveraging toward 4x debt to EBITDA doesn't
materialize. This could occur as a result of unexpected
operational issues or if the GSA is subject to further material
production delays or start-up issues. Pressure could also result
from large debt-funded acquisitions or liquidity issues, although
S&P do not currently anticipate either of these.
S&P could revise the outlook back to stable when it has certainty
on the timing of the start of production at the GSA development,
assuming no change in Ithaca's financial policy.
MONACO NPL: Creditors May File Claims Until August 5
----------------------------------------------------
A.V. Lomas, S.A. Pearson, G.E. Bruce and J.G. Parr, the Joint
Administrators of Monaco NPL (No.1) Limited, intend to make a
distribution (by way of paying an interim dividend) to the
preferential creditors (if any) and to the unsecured, non-
preferential creditors of Monaco NPL.
Proofs of debt may be lodged at any point until August 5,
2015. Creditors, however, are requested to lodge their proofs of
debt at the earliest possible opportunity.
Creditors may be required to provide further details or produce
documents or other evidence to their claims as the Joint
Administrators deem necessary.
The Joint Administrators will not be obliged to deal with proofs
lodged after the last date for proving but they may do so if they
think fit.
The Joint Administrators intend to make the announced
distribution within the period of two months from the last date
of proving claims.
For further information, contact details, and proof of debt
forms, please visit http://is.gd/tvLELW
Creditors must complete and return a proof of debt form together
with relevant supporting documents, to PricewaterhouseCoopers
LLP, 7 More London Riverside, London SE1 2RT marked for the
attention of Jennifer Hills. Alternatively, they may email a
completed proof of debt form to lehman.affiliates.uk.pwc.com
===============
X X X X X X X X
===============
* BOOK REVIEW: The Money Wars
-----------------------------
Author: Roy C. Smith
Publisher: Beard Books
Softcover: 370 pages
List Price: $34.95
Review by David Henderson
Get your own personal today at
http://www.amazon.com/exec/obidos/ASIN/1893122697/internetbankrup
t
Business is war by civilized means. It won't get you a tailhook
landing on an n aircraft carrier docked in San Diego, but the
spoils of war can be glorious to behold.
Most executives do not approach business this way. They are
content to nudge along their behemoths, cash their options, and
pillage their workers. This author calls those managers "inertia
ridden." He quotes Carl Icahn describing their companies as run
by "gross and widespread incompetent management."
In cycles though, the U.S. economy generates a few business
warriors with the drive, or hubris, to treat the market as a
battlefield. The 1980s saw the last great spectacle of business
titans clashing. (The '90s, by contrast, was an era of the
investment banks waging war on the gullible.) The Money Wars is
the story of the last great buyout boom. Between 1982 and 1988,
more than ten thousand transactions were completed within the
U.S. alone, aggregating more than $1 trillion of capitalization.
Roy Smith has written a breezy read, traversing the reader
through an important piece of U.S. history, not just business
history. Two thirds of the way through the book, after covering
early twentieth century business history, the growth of financial
engineering after WWII, the conglomerate era, the RJR-Nabisco
story, and the financial machinations of KKR, we finally meet the
star of the show, Michael Milken. The picture painted by the
author leads the reader to observe that, every now and then, an
individual comes along at the right time and place in history who
knows exactly where he or she is in that history, and leaves a
world-historical footprint as a result. Whatever one may think of
Milken's ethics or his priorities, the reader will conclude that
he is the greatest financial genius this country has produced
since J.P. Morgan.
No high-flying financial era has ever happened in this country
without the frothy market attracting common criminals, or in some
cases making criminals out of weak, but previously honest men
(and it always seems to be men). Something there is about
testosterone and money. With so many deals being done, insider
trading was inevitable. Was Michael Milken guilty of insider
trading? Probably, but in all likelihood, everybody who attended
his lavish parties, called "Predators' Balls," shared the same
information.
Why did the Justice Department go after Milken and his firm,
Drexel Burnham Lambert with such raw enthusiasm? That history has
not yet been written, but Drexel had created a lot of envy and
enemies on the Street.
When a better history of the period is written, it will be a
study in the confluence of forces that made Michael Milken's
genius possible: the sclerotic management of irrational
conglomerates, a ready market for the junk bonds Milken was
selling, and a few malcontent capitalist like Carl Icahn and Ted
Turner, who were ready and able to wage their own financial
warfare.
This book is a must read for any student of business who did not
live through any of these fascination financial eras.
Roy C. Smith is a professor of entrepreneurship, finance and
international business at NYU, and teaches on the faculty there
of the Stern School of Business. Prior to 1987, he was a partner
at Goldman Sachs. He received a B.S. from the Naval Academy in
1960 and an M.B.A. from Harvard in 1966.
*********
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
is compiled on the Friday prior to publication. Prices reported
are not intended to reflect actual trades. Prices for actual
trades are probably different. Our objective is to share
information, not make markets in publicly traded securities.
Nothing in the TCR constitutes an offer or solicitation to buy or
sell any security of any kind. It is likely that some entity
affiliated with a TCR editor holds some position in the issuers'
public debt and equity securities about which we report.
Each Tuesday edition of the TCR contains a list of companies with
insolvent balance sheets whose shares trade higher than US$3 per
share in public markets. At first glance, this list may look
like the definitive compilation of stocks that are ideal to sell
short. Don't be fooled. Assets, for example, reported at
historical cost net of depreciation may understate the true value
of a firm's assets. A company may establish reserves on its
balance sheet for liabilities that may never materialize. The
prices at which equity securities trade in public market are
determined by more than a balance sheet solvency test.
Each Friday's edition of the TCR includes a review about a book
of interest to troubled company professionals. All titles are
available at your local bookstore or through Amazon.com. Go to
http://www.bankrupt.com/booksto order any title today.
*********
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-
published by Bankruptcy Creditors' Service, Inc., Fairless Hills,
Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA.
Valerie U. Pascual, Marites O. Claro, Rousel Elaine T. Fernandez,
Joy A. Agravante, Ivy B. Magdadaro, and Peter A. Chapman,
Editors.
Copyright 2015. All rights reserved. ISSN 1529-2754.
This material is copyrighted and any commercial use, resale or
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Information contained herein is obtained from sources believed to
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