/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/150930.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, September 30, 2015, Vol. 16, No. 193 Headlines F R A N C E NOVAFIVES SAS: Moody's Lowers CFR to B1, Outlook Negative G R E E C E ATHENS CITY: Moody's Confirms Caa3 Issuer Rating, Outlook Stable GREEK BANKS: Moody's Affirms Caa3 Debt Ratings on 3 Institutions * Dentons Launches Greek Desk in Brussels I T A L Y ALITALIA SPA: Former Execs Get Jail Terms Over 2008 Bankruptcy POPOLARE DI VICENZA: Fitch Assigns 'BB-' Rating to EUR200MM Notes N E T H E R L A N D S ALTICE NV: S&P Affirms 'B+' Corp. Credit Rating, Outlook Negative PANTHER CDO IV: Fitch Hikes Class C Debt Rating to 'CCCsf' R U S S I A CB MAST-BANK: Liabilities Exceed Assets, Inspection Reveals KALUGA REGION: Fitch Affirms 'BB' LT Issuer Default Ratings LIPETSK REGION: Fitch Affirms 'BB' LT Issuer Default Ratings ROSEVROBANK: S&P Assigns 'BB-/B' Counterparty Credit Ratings TULA REGION: Fitch Affirms 'BB' LT Issuer Default Ratings TULSKII PROMYSHLENNIK: Provisional Administration Ends TRANSAERO AIRLINES: Aeroflot Acquisition Offer Deadline Breached S P A I N ENCE ENERGIA: Moody's Affirms 'Ba3' CFR, Outlook Stable S W E D E N BRAVIDA HOLDING: S&P Affirms 'B' CCR, Outlook Stable U K R A I N E PRIVATBANK JSC: S&P Lifts Counterparty Rating to CC, Outlook Neg U N I T E D K I N G D O M LOTUS F1: HMRC Case Adjourned, Renault Set to Take Over ********* =========== F R A N C E =========== NOVAFIVES SAS: Moody's Lowers CFR to B1, Outlook Negative --------------------------------------------------------- Moody's Investors Service has downgraded the corporate family rating (CFR) of Novafives S.A.S. to B1 from Ba3 and its probability of default rating (PDR) to B1-PD from Ba3-PD. The senior secured rating has been downgraded to B2 from B1. In addition, Moody's has changed the outlook on all ratings to negative from stable. RATINGS RATIONALE Moody's has downgraded Novafives to B1 from Ba3 and changed the outlook to negative from stable due to the company's much weaker than forecast operating performance and our expectation that ongoing earning pressures will now challenge the company's ability to improve gross adjusted debt/EBITDA to around 5.5x over the next 12-18 months. Moody's also expects Novafives may be challenged to generate sufficient free cash flow (FCF) to allow FCF/Debt to exceed the mid-single digit range, levels considered more commensurate for a B1 rating in the context of Novafives' business profile. As at H1-15, gross adjusted debt/EBITDA was in excess of 6.5x, while FCF in H1-15 was negative, and below 2% FCF/Debt on an LTM basis. Moody's had previously expected that leverage would improve to 4.5x by 2016 and that FCF/Debt would be in the mid to low double-digit range. Moody's still forecasts some improvement in leverage and the generation of positive FCF by 2015 given our expectations that Novafives' H2-15 performance will be stronger relative to H1-15 on account of the company's order backlog (around EUR1.7billion, 2014: EUR1.5 billion). In 2016, Novafives also expects a strengthening in its Aerospace businesses as well as further improvements in its cement and logistics businesses. For example, it expects to benefit from increased investments from its key Aerospace customers (H1-15 was impacted by delays to orders placed). However, given the company's continued underperformance compared with our forecasts, and its own expectations but also the company's relatively small aftermarket business (typically around 20% of revenues), the degree to which Novafives' operating performance will improve in H2-15, and indeed in 2016, is uncertain. Moreover, Moody's highlights that Novafives' much weaker than expected operating performance, reflected in the company's 60% decline in reported EBITDA to around EUR24 million in H1-15 from H1-14, was due to a number of factors that may continue to pressure operating profitability over the next 12-18 months, namely: the fall in the oil price; Russian sanctions; a recent weakening in some of Novafives' US businesses (aerospace/heavy manufacturing); and a slowdown in emerging countries including China. The slowdown in emerging markets is important given we believe this was contributory factor in the company's ability to sustain the last economic downturn relatively well. The rating also currently benefits from the company's good geographic and product diversification, but the company's still good-performing cement and logistics' businesses have been unable to sufficiently offset delays in orders placed particularly in the company's Energy, Metals and Aerospace and Heavy Manufacturing divisions. Moody's also questions whether Novafives' diversity into niche products globally, has potentially limited economies of scale, which has exacerbated the company's ability to absorb fixed costs, but also expose the company to greater competition despite relatively good market positions. Novafives' rating remains supported by the company's good liquidity profile and long track record of prudent cash management. As at H1-15 the company had a cash balance of EUR133 million, which is more than sufficient to cover swings in working capital, forecasted capital expenditures and modest upcoming debt maturities in the next 12 to 18 months. Novafives also has access to an undrawn EUR90 million RCF. However, headroom under covenants is limited given the recent increase in leverage. In a scenario where net debt/EBITDA (unadjusted) exceeds 4.9x at a given quarter end, Novafives would only be able to draw up to EUR30 million during the following quarter. As at H1-15, net debt/EBITDA was 4.79x. OUTLOOK The negative outlook reflects the expectation that ongoing operating pressures will challenge the company's ability to generate sufficient FCF and deleverage to levels considered commensurate with the B1 rating and in the context of Novafives' business profile. STRUCTURAL CONSIDERATIONS Novafives S.A.S. is the top company in the restricted group and the reporting entity for the consolidated group. The EUR200 million Senior Secured Floating Rate Notes and the EUR380 million Senior Secured Notes are secured by share pledges over shares of Fives S.A. The EUR90 million Super Senior Revolving Credit Facility (RCF) is borrowed by Novafives S.A.S and Fives S.A. The RCF ranks pari passu with all existing and future senior secured debt and shares the same collateral package, but benefits from a priority of claim in an enforcement scenario. The B2 instrument rating on the senior notes, one notch below the CFR, reflects the fact that in an enforcement scenario they would rank behind the RCF. WHAT COULD CHANGE THE RATING UP -- Gross adjusted debt/EBITDA sustainably below 4.5x (excluding unrealized gains and losses from FX) and FCF/Debt in excess of 10% -- Improvement in EBITDA margins to greater than 10% WHAT COULD CHANGE THE RATING DOWN -- Gross adjusted debt/EBITDA sustainably in excess of 5.5x (excluding unrealized gains and losses from FX) and FCF / Debt sustainably below 5% -- A meaningful reduction in liquidity, reflecting both a reduction in cash including the inability to fully draw down on its EUR90 million RCF CORPORATE PROFILE Novafives S.A.S is a global industrial engineering group. The company designs machines, process equipment and production lines for use in a number of different industries including; automotive, logistics, steel, aluminium, glass, energy, cement, mineral and aerospace sectors. As of Dec. 31, 2014, (2014), Novafives employed approximately 8,000 people. In 2014 the company generated sales of EUR1.56 billion. Its largest market is Europe accounting for around 35% of 2014 turnover followed by the Americas accounting for around 29%, the Asia and Oceania region contributing around 25% and Africa and the Middle East accounting for the remainder. =========== G R E E C E =========== ATHENS CITY: Moody's Confirms Caa3 Issuer Rating, Outlook Stable ---------------------------------------------------------------- Moody's Public Sector Europe has confirmed City of Athens's Caa3 issuer rating and changed the outlook to stable. This concludes the review for downgrade initiated in July 2015. This rating action follows Moody's decision to confirm Greece's government bond rating at Caa3 and change the outlook to stable on Sept. 25, 2015. RATINGS RATIONALE The rating action on the City of Athens reflects Moody's assessment of the stabilizing operating environment for Greek sub- sovereigns, as captured in the rating action on the sovereign bond rating. The sovereign action indicates that systemic risk -- arising from the City of Athens' close operational and financial linkages with the Greek government -- is unlikely to heighten. In addition, institutional linkages intensify the close ties between the two levels of government through the sovereign's ability to change the institutional framework under which Greek municipalities operate. Although Athens has a large degree of autonomy in its management, it is highly reliant on central government transfers for operations and capital investments, and its local economic base is heavily integrated with that of the national economy. The City of Athens derives around 40% of its operating revenues from central government transfers (representing its second-largest source of income) and capital investments are almost entirely funded by government grants and EU funds. RATIONALE FOR CONFIRMING THE RATING The confirmation of Athens' rating reflects the city's record in sustaining positive financial results and reducing its debt amid a challenging economic environment. The rating is also underpinned by the city administration's ongoing commitment to maintaining a prudent budgetary policy. Moody's notes that the city's self- imposed fiscal discipline has helped Athens to consolidate its rigid budget and pursue financial equilibrium for the fourth consecutive year. Moody's expects that Athens will maintain a cautious approach to expenditures. The city has no plans to borrow until the end of 2016, which would likely enable a further decline of its debt levels to below 30% of operating revenue. WHAT COULD CHANGE THE RATING UP/DOWN -- An upgrade of Athens' rating would depend on the strengthening of Greece's sovereign profile. -- A deterioration of the sovereign's credit strength would apply downward pressure on Athens' rating given the close financial and operational linkages between the two. Fiscal slippage or the emergence of significant liquidity risks would also exert downward pressure on Athens' rating. The specific economic indicators, as required by EU regulation, are not available for Athens, City of. The following national economic indicators are relevant to the sovereign rating, which was used as an input to this credit rating action. Sovereign Issuer: Greece, Government of GDP per capita (PPP basis, US$): 25,859 (2014 Actual) (also known as Per Capita Income) Real GDP growth (% change): 0.8% (2014 Actual) (also known as GDP Growth) Inflation Rate (CPI, % change Dec/Dec): -2.6% (2014 Actual) Gen. Gov. Financial Balance/GDP: -3.5% (2014 Actual) (also known as Fiscal Balance) Current Account Balance/GDP: 0.9% (2014 Actual) (also known as External Balance) External debt/GDP: [not available] Level of economic development: Moderate level of economic resilience Default history: At least one default event (on bonds and/or loans) has been recorded since 1983. On Sept. 25, 2015, a rating committee was called to discuss the rating of the Athens, City of. The main points raised during the discussion were: The systemic risk in which the issuer operates has materially decreased. The principal methodology used in these ratings was Regional and Local Governments published in January 2013. The weighting of all rating factors is described in the methodology used in this rating action, if applicable. GREEK BANKS: Moody's Affirms Caa3 Debt Ratings on 3 Institutions ---------------------------------------------------------------- Moody's Investors Service on Sept. 28 confirmed the (P)Caa3 and Caa3 long-term government-guaranteed senior unsecured debt ratings of Alpha Bank AE, Eurobank Ergasias S.A. and National Bank of Greece S.A. The outlook on the ratings is stable. This rating action concludes the review for downgrade on Greek banks' government-guaranteed senior unsecured debt ratings, initiated in July 2015. RATINGS RATIONALE The rating confirmation reflects the unconditional and irrevocable guarantee from the Greek government attached to these securities, and as such their ratings are linked to that of the sovereign. Today's rating action follows the confirmation of the sovereign rating at Caa3 with a stable outlook on Sept. 25, 2015. These government-guaranteed bonds are issued by Greek banks and retained (not made available to investors) in order to be posted as collateral at the Bank of Greece for the purpose of obtaining emergency liquidity assistance (ELA). These securities are rated at par with the sovereign rating of Caa3 (stable), while the banks' non-guaranteed senior unsecured bond ratings were downgraded to C from Caa3 (on review for downgrade) on 4 September 2015. WHAT COULD MOVE THE RATINGS UP/DOWN Any change in the sovereign rating would have a direct impact on these banks' government-guaranteed debt ratings. AFFECTED RATINGS Issuer: Alpha Bank AE Backed Senior Unsecured Medium-Term Note Program, Confirmed at (P)Caa3 Issuer: Eurobank Ergasias S.A. Backed Senior Unsecured Medium-Term Note Program, Confirmed at (P)Caa3 Issuer: National Bank of Greece S.A. Backed Senior Unsecured Regular Bond/Debenture, Confirmed at Caa3 with a stable outlook Backed Senior Unsecured Medium-Term Note Program, Confirmed at (P)Caa3 All other ratings for all the banks above were not affected by the rating action. The principal methodology used in these ratings was Banks published in March 2015. All banks affected by the rating actions are headquartered in Athens, Greece: -- National Bank of Greece S.A. reported total consolidated assets of EUR119.3 billion as of March 2015 -- Eurobank Ergasias S.A. reported total consolidated assets of EUR77.5 billion as of March 2015 -- Alpha Bank AE reported total consolidated assets of EUR73 billion as of March 2015 * Dentons Launches Greek Desk in Brussels ----------------------------------------- Dentons announced the launch of its Greek Desk operating from the Firm's Brussels office to provide Greek, other European, US and other clients with innovative cross-border business and legal solutions on a broad range of practices including core corporate and financial regulatory legal services, expert counseling on energy, EU competition, privatization, infrastructure, debt restructuring, bank reorganization, international dispute resolution, restructuring, insolvency and bankruptcy. The wide scale reforms and the Greek Government's impending privatizations, set to be one of the largest undertaken in recent times, will see increased interest from international companies looking to establish a presence in Greece. Dentons' Greek Desk will operate as a one-stop shop for the Firm's clients already active in the Greek market as well as those considering entering for the first time. The team has a strong network of contacts in both the Greek Government and the market including in the energy, financial institutions, government, infrastructure and PPP, private equity and real estate industries. In addition, the Desk will be uniquely positioned to assist clients active in related markets in the broader Southeastern Mediterranean region, including Cyprus. Counsel Orestis Omran will head the Greek Desk. Orestis Omran is both Greek and US qualified, with extensive experience advising international and Greek companies on a full range of corporate and finance matters. A graduate of the University of Chicago Law School and a frequent speaker at international business and legal conferences on both EU and Greek law, Mr. Omran has successfully represented clients in international arbitrations and litigation before Greek courts and has handled Greek aspects of US and cross-border litigation, oil & gas, infrastructure and PPP projects, investment funds and insolvency matters, and he has strong contacts in the Greek Government and the wider market. About Dentons Dentons -- http://www.dentons.com-- is a global law firm driven to provide a competitive edge in an increasingly complex and interconnected world. A top 20 firm on the Acritas 2015 Global Elite Brand Index, Dentons is committed to challenging the status quo in delivering consistent and uncompromising quality in new and inventive ways. Dentons' clients now benefit from 3,000 lawyers and professionals in more than 80 locations spanning 50-plus countries. With a legacy of legal experience that dates back to 1742 and builds on the strengths of our foundational firms -- Salans, Fraser Milner Casgrain (FMC), SNR Denton and McKenna Long & Aldridge -- the Firm serves the local, regional and global needs of private and public clients. ========= I T A L Y ========= ALITALIA SPA: Former Execs Get Jail Terms Over 2008 Bankruptcy -------------------------------------------------------------- Gavin Jones at Reuters reports that two former chief executives of Alitalia and three other former managers were given hefty jail terms on Sept. 28 over wrongdoing connected to the airline's bankruptcy in 2008. A Rome court sentenced Giancarlo Cimoli, who ran the company from 2004 to 2007, to eight years and eight months for culpable bankruptcy and market-rigging, while his predecessor Francesco Mengozzi got a five-year sentence, Reuters relates. After the 2008 bankruptcy, a series of managers failed to turn the company around despite the sale of a 25% stake to Air France KLM in 2009, Reuters discloses. Former financial directors Gabriele Spazzadeschi and Pierluigi Ceschia both received sentences of more than six years, Reuters relates. All four jail sentences were longer than those requested by the public prosecutor and the four managers were ordered to pay damages of more than EUR355 million, according to Reuters. Mr. Cimoli, 75, a former head of Italy's state railway, was also fined EUR240,000 and banned from holding a management role in any company for a year, Reuters states. The managers are not expected to go to prison unless the sentences are confirmed after Italy's lengthy appeals processes, Reuters notes. About Alitalia Alitalia-Compagnia Aerea Italiana has navigated its way through a successful restructuring. After filing for bankruptcy protection in 2008, Alitalia found additional investors, acquired rival airline Air One, and re-emerged as Italy's leading airline in early 2009. Operating a fleet of about 150 aircraft, the airline now serves more than 75 national and international destinations from hubs in Fiumicino (Rome), Milan, Turin, Venice, Naples, and Catania. Alitalia extends its network as a member of the SkyTeam code-sharing and marketing alliance, which also includes Air France, Delta Air Lines, and KLM. An Italian investor group owns a majority of the company, while Air France- KLM owns 25%. POPOLARE DI VICENZA: Fitch Assigns 'BB-' Rating to EUR200MM Notes ----------------------------------------------------------------- Fitch Ratings has assigned Banca Popolare di Vicenza's (BB/bb/ Rating Watch Negative) EUR200 million subordinated Tier 2 notes due 2025 (ISIN: XS1300456420) a Long-term rating of 'BB-' on Rating Watch Negative (RWN). The notes, which are issued under the bank's EUR7 billion EMTN program, have an original maturity in 2025 with an issuer call option in 2020. They pay quarterly coupons at 9.5% fixed annual rate until 2020 and will reset to a new fixed rate based on the underlying five-year swap rate plus the initial margin thereafter. The notes will be listed on the Luxemburg Stock Exchange. The notes qualify as Tier 2 capital under Capital Requirements Directive (CRD) IV. They contain contractual loss absorption features, which will be triggered after the bank becomes non- viable, with no equity conversion. The terms of the notes include a reference to noteholders consenting to be bound by Italian bail- in power. The notes can be redeemed in whole but not in part at par on 29 September 2020 (call date) or at any time upon a regulatory event or a withholding tax event, subject to regulatory approval and the conditions to redemption. The subordinated notes are on RWN and therefore at risk of being downgraded shortly, alongside the bank's Viability Rating (VR) and Long-term Issuer Default Rating (IDR) if, following the recently reported losses, Fitch believes that the balance of asset quality and capital profile of the bank, including any capital strengthening action and restructuring initiative, has materially weakened. KEY RATING DRIVERS The notes are rated one notch below Banca Popolare di Vicenza's VR of 'bb/RWN', in accordance with Fitch's "Global Banks Rating Criteria", to reflect one notch for loss severity and zero notches for non-performance risk. The one notch for loss severity reflects the below-average recovery prospects of the notes. Fitch has applied zero notches for incremental non-performance risk, as the write-down of the notes will only occur once the point of non-viability is reached and there is no coupon flexibility prior to non-viability. RATING SENSITIVITIES The subordinated debt rating is on RWN and is sensitive to the same factors that may affect the bank's VR and Long-term IDR. Banca Popolare di Vicenza's VR and Long-term IDR was placed on RWN on 15 July 2015 to reflect Fitch's expectation that the bank would report large losses in 1H15 and that it may require additional material capital. Fitch expects to resolve the RWN on the bank's VR shortly after the bank's board of directors approves a new strategic plan, which we expect to take place in the coming days. Should the VR be downgraded, this would also result in a downgrade of the Tier 2 subordinated debt rating. The notes' rating is also sensitive to a change in notching should Fitch change its assessment of loss severity or non-performance risk. ===================== N E T H E R L A N D S ===================== ALTICE NV: S&P Affirms 'B+' Corp. Credit Rating, Outlook Negative ----------------------------------------------------------------- Standard & Poor's Ratings Services affirmed the 'B+' long-term corporate credit rating on cable and telecommunications holding company Altice N.V. The outlook is negative. The affirmation follows the Altice group's announcement that it has entered into a definitive agreement to acquire U.S. cable operator Cablevision from existing shareholders at an enterprise value of US$17.7 billion. The transaction will be funded using about US$14.5 billion of debt at Cablevision (including the rollover of most of the existing debt), reflecting Standard & Poor's-adjusted leverage for the U.S. subsidiary for 2015 of about 7.6x on a pro forma basis. The remainder of the acquisition cost will be funded from equity to be issued by Altice N.V. Given the relatively high leverage multiple for this transaction, S&P expects the group's leverage to initially increase by about 0.5x following this acquisition. Pro forma leverage is forecast to increase to 6.5x, compared with S&P's previous base case of 6x. That said, the affirmation reflects management's declared intention of reducing the group's leverage over the next three quarters by at least 0.5x, and maintaining lower leverage in the future. In S&P's view, this commitment should effectively limit Altice's capacity to make further substantial acquisitions in the future, unless it issues a meaningful amount of equity. The entire debt will be raised at an unrestricted subsidiary, which is ringfenced to the Altice restricted group. Altice Group is expected to provide funding only in the form of equity. This should contain the overall risk at the European level, but provide some benefits from the increased diversity and cash flows generated in the U.S. Although S&P looks at the Altice Group on a consolidated basis, and think it likely that the group would provide some support to the U.S. subsidiaries if needed, S&P views these as being of lesser importance to Altice than its core European subsidiaries. S&P still sees some rating pressures linked to execution risk as Altice plans to create meaningful cost efficiencies at its newly acquired assets. In S&P's view, if not executed carefully, extracting meaningful cost efficiencies could damage the reputation of the newly acquired companies, causing increased subscriber churn. S&P also sees the Numericable-SFR acquisition as likely to remain the greatest source of risk. The integration of Numericable-SFR is taking place while the market is not yet fully stabilized and the group remains exposed to potential further pricing pressures initiated by Bouygues and Iliad. In S&P's view, Cablevision's competitive position is supported by good revenue visibility, advanced cable network, well-clustered operations, and good demographics. However, Cablevision operates in a very mature market and is exposed to competition from aggressive competitor, Verizon Fios, in over 50% of its market area, resulting in video customer losses. Cablevision's relatively low profitability indicates that there is potential to increase its operating efficiency. However, given the competitive landscape, S&P sees execution of the cost efficiencies as a key factor. S&P's base-case operating scenario for Altice's pro forma consolidation of the U.S. subsidiaries and Portugual Telecom (PT) assumes: -- Revenue declines of about 1% in 2015 and 2016, reflecting continued pressure in the French retail division and fierce competition on triple and quadruple play bundles in Portugal, only somewhat offset by continued growth in the U.S.; -- About 6% increase in group EBITDA by 2016 on a pro forma basis following the transactions, reflecting the positive impact of merger-related synergies and cost efficiencies in the U.S.; and -- Capital expenditure (capex) at about 16% of sales. Based on these assumptions, S&P arrives at these credit measures, on a pro forma basis: -- Funds from operations (FFO) to debt of 10%; -- Debt to EBITDA of about 6.5x declining to 6x in 2016; -- Adjusted interest coverage of about 2.5x in 2015, increasing to 2.8x in 2016; and -- Adjusted free operating cash flow (FOCF) to debt of about 3%. The negative outlook reflects the potential for a one-notch downgrade if Altice does not reduce leverage over the next three quarters, in line with its current commitment, or if deleveraging is skewed by higher-than-expected revenue pressures in its key markets. S&P may downgrade the group if leverage (taking into account the full-year consolidation of U.S. assets) does not decline to 6x in 2016. This may happen, for example, if the group suffers more intense competition in France and Portugal than S&P currently forecasts; or if Altice engages in further consolidation in the U.S. through a largely debt-financed acquisition. S&P could revise the outlook to stable over the next 12 months if Altice's leverage declines by at least 0.5x, in line with its commitment, following the successful execution of cost efficiencies, and future growth opportunities do not cause it to increase leverage again. PANTHER CDO IV: Fitch Hikes Class C Debt Rating to 'CCCsf' ---------------------------------------------------------- Fitch Ratings has upgraded Panther CDO IV B.V. notes, as follows: EUR108.2 million class A1 (ISIN XS0276065124) affirmed at 'Asf'; Outlook Stable EUR34 million class A2 (ISIN XS0276066361) upgraded to 'BBBsf' from 'Bsf'; Outlook Stable EUR28 million class B (ISIN XS0276068730) upgraded to 'Bsf' from 'CCCsf'; Outlook Positive EUR19.8 million class C (ISIN XS0276070553) upgraded to 'CCCsf' from 'CCsf' Panther CDO IV B.V. is a managed cash arbitrage securitization of a diverse pool of assets, including high-yield bonds, asset-backed securities, senior loans, second lien loans and mezzanine loans. The portfolio is managed by M&G Investment Management Limited. KEY RATING DRIVERS The upgrade of the class A2, B and C notes reflects an increase in credit enhancement over the last 12 months due to continuing deleveraging of the transaction following the end of the reinvestment period in March 2014 and slight improvement in the credit quality of the performing pool. The Positive Outlook on the class B notes reflects potential further upgrades if repayments continue as per last year. The class A1 notes' rating is constrained by the transaction's structure, which triggers an event of default in the case of non- payment of interest on the class A2 notes. Credit enhancement has increased on the class A1 to 48.5% from 39.1%, on the class A-2 notes to 32.4% from 25.7%, on the B notes to 19% from 13.8% and on the class C notes to 9.6% from 6.1% since September 2014. The class A1 notes have paid down by EUR26.3 million as of the March 2015 payment date and EUR27.8 million as of the September 2015 payment date. Fitch do not expect the transaction to be able to reinvest in the future given that the rating of the class A and B notes have been downgraded by one or more notch compared with their initial ratings and that the ratings of the class C, D and E notes have been downgraded by two or more notches compared with their initial ratings. The Fitch weighted average rating factor has improved to 14.77 from 16.09 over the last 12 months. Defaults currently stand at EUR24.9 million, down from EUR39.7 million a year ago. This reflects mainly the resolution of one defaulted asset and the sale of two previously defaulted assets. There were no new defaults over the period. Overcollateralization has improved during the same period, as the class A notes' par value test is now passing with a buffer of 8.7% and the class B's OC test is passing for the first time since 2009 with a buffer of 12 bps. As a consequence, excess spread has been used to repay EUR2.3 million of deferred interest on the class B notes. As of the September 2015 payment date report, the transaction has been paying timely interest on the class A1, A2, B and C notes. As per the interest priority of payment, deferred interest on the class C, D and E notes will only be paid if the the class C, D and E's par value tests are passing. As of the September 2015 trustee report, fixed-rate securities represented approximately EUR30.9 million. The transaction has a macro interest rate swap in place where the issuer is paying a fixed rate in exchange of Euribor 6 months. Given the current low interest rate environment, the issuer is making a substantial payment to the hedge counterparty on each payment date. The notional amount of the macro swap is currently EUR11.4 million for the period September 2015 to March 2016 and will decrease to EUR8.4 million for the period March 2016 to September 2016. The swap will expire in September 2016. The transaction is also paying deferred placement fee until the payment date in March 2017. After maturity of the swap and full payment of the deferred placement fees, available excess spread should increase. RMBS and CMBS assets represent 23% and 11% respectively of the portfolio. Fitch analyzed the portfolio's maturity using two approaches; first assuming the asset's legal final maturity and second using a Fitch-adjusted maturity. Fitch assumed a weighted average maturity of 16 and 27 years from closing for amortizing and non-amortizing RMBS loans, respectively. For CMBS assets, Fitch assumes the legal maturity with a floor of three years. As a result, Fitch estimates a weighted average life for the performing portfolio of 8.4 years, relative to the legal final maturity estimate of 13.2 years. RATING SENSITIVITIES In its ratings sensitivity analysis Fitch found that an increase of the default probability by 25% would likely result in a downgrade of up to two notches on the class A1 notes. A decrease of recovery assumptions by 25% would not impact the current ratings. DATA ADEQUACY Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring. The majority of the underlying assets have ratings or credit opinions from Fitch and/or other Nationally Recognised Statistical Rating Organisations and/or European Securities and Markets Authority registered rating agencies. Fitch has relied on the practices of the relevant Fitch groups and/or other rating agencies to assess the asset portfolio information. Overall, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. =========== R U S S I A =========== CB MAST-BANK: Liabilities Exceed Assets, Inspection Reveals ----------------------------------------------------------- During the inspection of financial standing of the credit institution, the provisional administration of OJSC CB MAST-Bank appointed by Bank of Russia Order No. OD-1437 dated June 24, 2015, due to the revocation of its banking license, revealed that the value of the bank's assets did not exceed RUR7.5 billion, while its obligations to creditors amounted to RUR14.3 billion. During the inspection of financial standing of the credit institution, the provisional administration revealed that in the run-up to the license revocation management and owners of CB MAST-Bank conducted transactions to divert and replace liquid assets -- monetary funds borrowed from households and corporates. During the period when the bank experienced solvency problems amid untimely execution of clients' settlements, the bank returned to a shareholder in cash free financial assistance previously provided to the bank. Besides, the bank's management replaced highly liquid Eurobonds with non-exchange traded shares of issuers with dubious creditworthiness. Lending operations in the total amount of at least RUR6.3 billion have signs of asset diversion from the bank: borrowers do not exist at the indicated registration addresses, have terminated debt servicing, including interest payments, after the bank's license was revoked. On June 19, 2015, the Court of Arbitration of the city of Moscow recognized CB MAST-Bank as insolvent (bankrupt) and initiated bankruptcy proceedings. The state corporation Deposit Insurance Agency was appointed as a receiver. The Bank of Russia submitted the information on financial transactions bearing the evidence of the criminal offence conducted by the former management and owners of CB MAST-Bank to the Prosecutor General's Office of the Russian Federation, the Ministry of Internal Affairs of the Russian Federation and the Investigation Committee of the Russian Federation for consideration and procedural decision making. KALUGA REGION: Fitch Affirms 'BB' LT Issuer Default Ratings ----------------------------------------------------------- Fitch Ratings has affirmed Russian Kaluga Region's Long-term foreign and local currency Issuer Default Ratings (IDRs) at 'BB' with Stable Outlooks, and its Short-term foreign currency IDR at 'B'. The agency has also affirmed the region's National Long-term rating at 'AA-(rus)' with Stable Outlook. Kaluga's senior unsecured domestic debt has also been affirmed at 'BB' and 'AA- (rus)'. The affirmation reflects Fitch's unchanged base line scenario regarding the region's sound operating performance and expectation on direct risk stabilisation in relative term. KEY RATING DRIVERS The 'BB' rating reflects the administration's efficient and proactive management, the region's rapid investment-driven economic development and sound budgetary performance. The ratings also factor in increasing pressure on operating expenditure and our expectation of a slowdown of economic activity in the region following the negative national trend. Fitch expects Kaluga to continue demonstrating a solid operating performance, supported by its diversified tax base. The agency expects operating balance to be at 11%-12% of operating revenue in 2015-2017, in line with the 12.0% average in 2013-2014. Tax revenue growth will decelerate but continue in 2015 due to the inflationary expansion of tax base and some increased tax rates. Operating spending will remain under pressure as a result of inflation-driven growth of social transfers to population and spending on goods and services. Kaluga is focused on local economic development and has been successful in attracting foreign investments, and promoting industrial production and innovation. This policy has allowed the local economy to grow at a cumulative 23.4% in 2011-2014, well above the 10.5% average for the Russian Federation. However, Fitch forecasts a 3.5% contraction of national GDP in 2015, and Fitch believes the region will also face economy contraction, which would have negative repercussions for the region's tax revenue in the medium term. Based on the budget execution in 1H15, Fitch expects the region's deficit before debt variation to reduce twofold to 5.3% of total revenue from average 11.2% in 2013-2014. This will mostly result from lower capital expenditure and the overall intention of the region's government to implement cost control measures. Fitch therefore forecasts direct risk growth to decelerate in absolute terms during 2015-2017, while operating revenue growth should allow the overall debt burden to stabilise below 75% of current revenue (2014: 73.7%). Kaluga actively uses PSEs to finance local investment projects. It established the Development Corporation of Kaluga Region (DCKR), which at end-2014 borrowed RUB5.6 billion to finance the development of regional industrial zones. The region provides subsidies to cover the principal and interest on DCKR's debt. Consequently, Fitch considers DCKR's liabilities as the region's direct risk. Positively, PSEs liabilities have a long-term maturity profile till 2022. At September 1, 2015, the region had no outstanding debt due in 2015. However, as with most Russian regions, Kaluga is exposed to refinancing pressure in the medium term. It faces repayment of 81% of its outstanding liabilities, including DCKR's debt, in 2016- 2018. Fitch expects the region will roll over maturing budget loans and substitute part of maturing bank loans with new loans from the federal budget. The remaining maturing bank loans will be rolled over with the same banks. However, volatile interest rates in domestic markets could make new debt more expensive and may put pressure on the region's current margin. RATING SENSITIVITIES Maintaining sound operating performance with an operating margin of 12%-14% and restoring direct debt coverage to be in line with the region's average debt maturity could lead to an upgrade. Continued deficit before debt variation leading to direct risk increasing above 75% of current revenue and deterioration in direct debt coverage beyond 10 years would lead to a downgrade. LIPETSK REGION: Fitch Affirms 'BB' LT Issuer Default Ratings ------------------------------------------------------------ Fitch Ratings has affirmed the Russian Lipetsk Region's Long-term foreign and local currency Issuer Default Ratings (IDR) at 'BB', Short-term foreign currency IDR at 'B' and National Long-term rating at 'AA-(rus)'. The Outlooks on the Long-term IDRs National Long-term rating are Stable. The region's outstanding senior unsecured domestic bonds have been affirmed at Long-term local currency 'BB' and National Long-term 'AA-(rus)'. The affirmation reflects Fitch's unchanged baseline scenario regarding Lipetsk region's sound budgetary performance. The Stable Outlook reflects Fitch's opinion that upside and downside risks to the ratings are currently well balanced. KEY RATING DRIVERS The ratings reflect the region's moderate direct risk, adequate operating performance and strengthened liquidity. They also take into account the high concentration of the regional economy in ferrous metallurgy, which makes Lipetsk dependent on the fluctuations in the steel market, leading to volatile tax revenue. Fitch expects the region will maintain an operating balance of 7%- 9% of operating revenue over the medium term, which is in line with 2012-2013 actuals. This will be supported by moderate growth of tax revenue and control of operating expenditure. In 2014, the region demonstrated outstanding performance with an operating balance at 14.4% driven by 22% growth of tax revenue. The region's top taxpayer, OJSC Novolipetsk Steel (BBB-/Negative) is an export- oriented company, which benefited from sharp rouble depreciation in 2H14 and largely contributed to the 42% growth in the region's corporate income tax proceeds in 2014. Fitch assumes the region will demonstrate a moderate budget deficit in 2015-2017 around 5% of total revenue, which will limit the growth of debt over the medium term. In 2014, the budget was close to balance while the liquidity position strengthened significantly to RUB5.8bn at the beginning of 2015 from RUB1.4bn a year before. The region plans to use part of the accumulated cash reserves to finance the deficit in 2015. In Fitch's view, the region's direct risk will remain moderate, stabilising at below 50% of current revenue over the medium term (2014: 45.9%). The region's maturity profile is better than most of its national peers, which limits refinancing pressure. Until end-2015 the region has to repay only RUB1.1 billion of market debt, which corresponds to 5% of total direct risk. The majority of this amount will be refinanced by a new RUB0.9 billion budget loan, which the region will receive in 4Q15, and the remainder will be covered by own resources. The structure of the region's direct risk favourably changed towards the higher proportion of subsidised medium-term budget loans, which will allow Lipetsk to save on interest payments. In April 2015, the region received a RUB2bn budget loan, which was used to refinance part of the bank loans ahead of schedule. As a result, the proportion of budget loans will be 18% by the beginning of 2016 versus only 3.5% one year earlier. The budget loans have three-year maturity and bear negligible 0.1% annual interest rate. The region's economy is developed with wealth metrics in line with the national median. The economy is concentrated in ferrous metallurgy, which contributed 58% of the region's industrial output in 2014, making it vulnerable to fluctuations in the domestic and international steel markets and contributing to the volatility of the region's taxes. RATING SENSITIVITIES Widening deficit before debt variation leading to an increase in direct risk to above 60% of current revenue could lead to negative rating action. A strong operating balance at about 15% of operating revenue on a sustained basis accompanied by debt coverage (direct risk to current balance) below four years (2014: 4.3 years) could lead to positive rating action. ROSEVROBANK: S&P Assigns 'BB-/B' Counterparty Credit Ratings ------------------------------------------------------------ Standard & Poor's Ratings Services assigned its 'BB-/B' long- and short-term counterparty credit ratings to Russia-based Rosevrobank. The outlook is stable. S&P also assigned its 'ruAA-' Russia national scale rating to the bank. The ratings on Rosevrobank reflect S&P's view of the bank's stable business position in the Russian banking sector. In particular, the bank's track record of revenue generation for the past 10 years is stronger than that of its domestic peers. S&P factors this into its "adequate" assessment of Rosevrobank's business position. S&P also takes into account the bank's solid revenue diversification and strong corporate governance compared to local peers. S&P thinks these strengths are offset, however, by a lack of scale and size -- Rosevrobank is Russia's 47th largest bank, with a balance sheet of Russian ruble (RUB) 149 billion (US$2.2 billion) as of Sept. 1, 2015. S&P also considers that Rosevrobank has strong risk management practices that enable the bank to maintain better-than-sector- average asset quality and preserve adequate capitalization that provides a sound buffer against external shocks. These strengths are offset by the risks of business concentration in the Russian banking sector, which is vulnerable to slowing economy and constrained systemwide funding. S&P assesses Rosevrobank's capital and earnings as "adequate," based on S&P's assumption that the bank will maintain its relatively high capital buffers supported by sound revenue generation. S&P forecasts the bank's risk-adjusted capital (RAC) ratio before adjustment for concentration and diversification will be about 8.5%-9.0% in the next 12-18 months, down from 9.1% on June 30, 2015, due to S&P's expectations that the bank will resume lending growth in 2016 and 2017. S&P anticipates that Rosevrobank will demonstrate higher profitability than midsize peer banks in 2015-2017 on the back of strong cost efficiency and high margins. "Our assessment of Rosevrobank's risk position as "adequate" reflects the sound quality and diversity of the bank's loan portfolio and solid risk management practices that smoothly steered the bank through the recent financial crises. The bank's 2014 financial results were adversely affected by an unusually large negative revaluation of its securities portfolio because of the fall in prices of Russian assets at year-end. Still, we note that valuations rebounded in the first half of 2015, in line with overall market trends. Also, we think the bank follows a conservative approach toward market risk by not investing in equity securities or engaging in carry trade transactions, unlike many other local peers," S&P said. "We assess Rosevrobank's funding as "average" and its liquidity as "adequate." We expect the bank's funding base will likely remain stable and that its liquidity buffers will cover liquidity needs in the coming 12 to 18 months. The bank's loan-to-deposit and stable funding ratios at 72% and 144%, respectively, on June 30, 2015, compare favorably with peers'. Nevertheless, we regard the funding profile as a neutral factor because of the dominance of customer accounts in the funding base with a relatively narrow share of alternative resources," S&P added. The stable outlook on Rosevrobank reflects S&P's assumption that it will maintain its current creditworthiness over the next 12-18 months despite a flagging economy and tight operating conditions for banks in Russia. In particular, S&P expects the bank will demonstrate strong profitability in the next 12-18 months, supporting existing capital buffers and maintaining the solid quality of its loan portfolio with the share of nonperforming loans at less than 4% of total loans, markedly below the average level for local peers. S&P could take a negative rating action on Rosevrobank if its profitability weakened materially as a result of higher credit losses than S&P currently anticipates or decreased margins. These deterrents could constrain the bank's capitalization and negatively affect S&P's view of the bank's capital and earnings position if they led to a RAC ratio before adjustment for concentration and diversification below 7%. S&P would also consider a downgrade if the bank experienced material deposit outflows that deplete its currently adequate liquidity buffers. Although not S&P's base-case scenario, it could upgrade Rosevrobank if its capitalization strengthened significantly, with S&P's RAC ratio staying sustainably above 10% as a result of capital injections or earnings retention. Given S&P's view of negative trends for the Russian banking sector, it currently considers this scenario unlikely. TULA REGION: Fitch Affirms 'BB' LT Issuer Default Ratings --------------------------------------------------------- Fitch Ratings has affirmed the Russian Tula Region's Long-term foreign and local currency Issuer Default Ratings (IDR) at 'BB', Short-term foreign currency IDR at 'B' and National Long-term rating at 'AA-(rus)'. The Outlooks on the Long-term IDRs and National Long-term rating are Stable. The region's outstanding senior unsecured domestic bonds have been affirmed at Long-term local currency 'BB' and National Long-term 'AA-(rus)'. The affirmation reflects Fitch's unchanged baseline scenario regarding Tula region's budgetary performance. The Stable Outlook reflects Fitch's opinion that operating balance and direct risk will be commensurate with 'BB' ratings in the medium term. KEY RATING DRIVERS The ratings reflect Tula's moderate direct risk, satisfactory operating performance, with a positive current balance and a well- diversified tax base. They also reflect the deterioration of the national economic environment, which could put pressure on Tula's budgetary performance over the medium term. Fitch expects the region will record stable budgetary performance over the medium term, with an operating balance around 10% of operating revenue. The agency assumes that deceleration of some taxes in 2015 (most importantly, excises and personal income tax) will be off-set by growth of corporate income tax. This will be accompanied by control over opex. In 2014, the region's operating balance peaked at a one-off of 13.4%, as tax proceeds grew by an exceptionally high 30% yoy. Fitch assumes the region will control the budget deficit before debt at around 3%-5% of total revenue per year in 2015-2017 through limiting capex and continuing cost-efficiency measures. The budget deficit narrowed to 3.3% of total revenue in 2014 from a high 10.8% a year before, supported by a strengthened operating balance. Tula's direct risk will remain moderate over the medium term at below 35% of current revenue (in 2014: 27.3%). As of September 1, 2015, direct risk totalled RUB15.8 billion remaining almost unchanged since the beginning of the year. While the debt portfolio is dominated by market debt as bank loans and issued debt accounted for 77% of total direct risk at August 1, Fitch expects the proportion of subsidised budget loans will increase to around 22% by end-2015 from 13% one year before. In April 2015, the region received RUB1.625 billion of budget loans, which it used to refinance half of the market debt due in 2015. In September to October 2015, the region will receive another RUB1 billion budget loan from the federal government. The region plans to issue new RUB5 billion amortising domestic bond in 4Q15 with four to five years maturity. If successfully placed, the new bond will shift refinancing pressure from 2016, when the region has to redeem RUB6.7 billion of market debt (42% of the region's total direct risk) and will lengthen the average direct risk maturity profile to three years. The regional economy has a well-diversified processing industry. Nevertheless, the region's economic profile is modest, with GRP per capita at 88% of the national median in 2013. At the same time, Tula's economic growth has outpaced the national average for three years in a row. In 2014, the regional economy grew 5.1%, significantly outperforming the national growth of 0.6%. Fitch projects the national economy will contract by 3.5% in 2015, which could lead to a slowdown of the region's economy. RATING SENSITIVITIES A sustained sound operating balance above 10% of operating revenue, accompanied by debt payback being in line with average debt maturity would lead to positive rating action. Conversely, inability to maintain stable operating performance with an operating margin consistently above 5% resulting in weak debt payback exceeding 10 years could lead to a downgrade. TULSKII PROMYSHLENNIK: Provisional Administration Ends ------------------------------------------------------- Due to the ruling of the Court of Arbitration of the Tula Region, dated September 4, 2015, on case No. A68-7564/2014 on recognizing insolvent (bankrupt) Tula-based credit institution Bank Tulskii Promyshlennik PJSC and appointing a receiver in compliance with Clause 3 of Article 18927 of the Federal Law "On the Insolvency (Bankruptcy)", the Bank of Russia took a decision (Order No. OD- 2583, dated September 25, 2015) to terminate from September 28, 2015, the activity of the provisional administration of Commercial Bank Tulskii Promyshlennik, appointed by Bank of Russia Order No. OD-1776, dated July 24, 2015, "On the Appointment of the Provisional Administration to Manage the Tula-Based Credit Institution PUBLIC JOINT-STOCK COMPANY COMMERCIAL BANK TULSKII PROMYSHLENNIK or BANK TULSKII PROMYSHLENNIK PJSC". TRANSAERO AIRLINES: Aeroflot Acquisition Offer Deadline Breached ---------------------------------------------------------------- RBC, citing Kommersant newspaper, reports that the deadline of the offer made to Aeroflot to acquire a 75% stake in Transaero has been breached. Kommersant set out key reasons why the deadline was missed. Transaero's shareholders failed to present a block of shares (75% plus one share) that Aeroflot was supposed to buy for RUR1, RBC discloses. According to RBC, Kommersant sources named two possible reasons: unwillingness of minority shareholders to part with shares and stance of VTB holding 25% of the air carrier as a pledge. An inter-government committee headed by First Deputy Prime Minister Igor Shuvalov approved the terms of the deal on Transaero's acquisition by Aeroflot, RBC relates. It was agreed that Aeroflot would accept the offer to buy a stake in Transaero for RUR1 during 24 days starting from Sept. 3, RBC recounts. The deadline passed, but the deal did not go through, RBC notes. Kommersant writes that one of the reasons is unwillingness of Transaero's minority shareholders to part with shares, RBC discloses. One of them is a co-owner of Vnukovo airport Vitaly Vantsev who holds 4.5% of Transaero told the newspaper that shares of majority shareholders and perhaps minority shareholders should be consolidated for the company to be bought, RBC relates. He mentioned two new deadlines: Oct. 1 or Dec. 1 when the procedure and outline of the bail-out plan would be clear RBC relays. According to RBC, sources say another reason for the missed deadline is the fact that VTB maintains a 25% stake in the airline as a pledge. One of them said the bank would be happy if the air carrier's debt was restructured for 15-20 years instead of the company just being sold for one ruble, RBC notes. However, the bank insisted that the delay had nothing to do with the bank's stance or actions, according to RBC. In mid-September, chairman of Sberbank's executive board did not rule out the possibility of a bankruptcy procedure unless creditors agree on the restructuring of Transaero's RUR250 billion, RBC recounts. OJSC Transaero Airlines is a Russian airline with its head office in Saint Petersburg. It operates scheduled and charter flights to 103 domestic and international destinations. ========= S P A I N ========= ENCE ENERGIA: Moody's Affirms 'Ba3' CFR, Outlook Stable ------------------------------------------------------- Moody's Investors Service has changed ENCE Energia y Celulosa, S.A.'s (ENCE) rating outlook to stable from negative and affirmed the corporate family rating (CFR) at Ba3, the Ba3-PD probability of default rating (PDR) and the B1 senior secured notes rating. "The stabilization of the outlook reflects the success of management's restructuring plans initiated in 2014 that have been successful in recovering profitability and improving credit metrics now fully commensurate with the Ba3 rating level", says Matthias Volkmer, lead analyst at Moody's for ENCE. "However, ENCE's pulp operations have been benefitting from a combination of elevated USD/EUR exchange rates and historically high pulp price levels bound to come down as substantial production capacities come on stream over the next 2 years," Mr. Volkmer added. Affirmations: Issuer: ENCE Energia y Celulosa, S.A. Probability of Default Rating, Affirmed Ba3-PD Corporate Family Rating, Affirmed Ba3 Senior Secured Regular Bond/Debenture, Affirmed B1 Outlook Actions: Issuer: ENCE Energia y Celulosa, S.A. Outlook, Changed To Stable From Negative RATINGS RATIONALE ENCE's Ba3 CFR is constrained by (i) the fairly small scale when compared to peers as indicated by sales of EUR662 million in the last twelve months ending June 2015 and limited geographic diversification; (ii) a highly focused product portfolio on pulp production; (iii) the inherent volatility of the industry with pulp being one of the most volatile commodities in the forest products industry in terms of demand and pricing. Moody's expects continued pricing pressure for pulp due to periods of oversupply. Conversely, the Ba3 corporate family rating is supported by (i) ENCE's position in the production of hardwood pulp in Europe, with a solid focus on the rather stable tissue end market; (ii) its long-term debt maturity profile, (iii) its expected relatively low financial gross leverage of below 3.5x by year end 2015 as well as (iv) its solid liquidity position to support management's continuing recovery plan to competitiveness. Despite its immediate adverse effects on ENCE's business profile, the approval and retrospective implementation of the new regulatory framework for sources of renewable energy, cogeneration and waste, has removed any remaining uncertainties regarding ENCE Group's electricity generation facilities, eliminating greater performance fluctuations in the medium-term. STRUCTURAL CONSIDERATIONS The B1 rating assigned to the EUR225 million senior secured notes due in Feb 2020 is one notch below the group's corporate family rating. The rating on this instrument reflects its junior ranking behind the sizeable EUR90 million super senior revolving credit facility (RCF). The RCF and the senior secured notes share the same collateral package, consisting of a pledge over certain assets (share pledge in most operating companies, pledge of intercompany loans and pledges over receivables and accounts) as well as upstream guarantees from most of the group's operating subsidiaries, representing more than 80% of aggregate assets and EBITDA. However, RCF lenders benefit from priority treatment in a default scenario as their claims will be discharged before any remaining proceeds will be distributed to the holders of the proposed senior secured notes. LIQUIDITY ENCE's liquidity profile is solid. Key internal cash sources are cash available of approximately EUR100.1 million as of end June 2015 and access to EUR85 million under its factoring lines (of which EUR32 million were drawn as at June 30, 2015,) and an undrawn RCF of EUR90 million due in February 2018. Lending arrangements do not include any maintenance financial covenants but only debt incurrence tests. These sources as well as intermittent positive free cash flow generation should be sufficient to cover operational cash needs such as working capital and increased capex spending and investments in support of management's recovery plan of competitiveness. RATIONALE FOR THE STABLE OUTLOOK Uncertainties remain with regard to the global supply-demand balance for hardwood pulp and its effect on prices given the ramp up of substantial capacity in Latin America over the next 2 years and potentially slowing Asian demand. The stable outlook is based on Moody's expectation that execution risk related to ENCE's recovery plan aiming to recover lost profitability by 2016 through measures of cost management and investments in operational efficiency and production mix improvements is manageable. Further, ENCE is expected to maintain levels of credit protection metrics commensurate with the Ba3 rating, reflected in Moody's adjusted consolidated gross debt/EBITDA around 3.5x, Retained Cash Flow / Debt around the mid teen percentages and EBITDA/ interest expense around 3.5x through the cycle. WHAT COULD CHANGE THE RATINGS UP ENCE's ratings could be upgraded if (1) ENCE continues to successfully execute its recovery plan of competitiveness including cost management, efficiencies and a restructured product mix leading to a sustainable improvement of credit metrics including (1) consistent positive free cash flow; (2) consolidated adjusted gross debt/EBITDA being reduced to below 3.0x and (3) RCF/ gross Debt around 20%, through the cycle. WHAT COULD CHANGE THE RATINGS DOWN ENCE's ratings could be downgraded if (1) FCF generation is negative for a prolonged period of time; (2) if adjusted gross debt/EBITDA moves above 4x and RCF/ gross Debt trending towards the low teen percentages. Consistent deterioration of liquidity could also be a negative factor. The principal methodology used in these ratings was Global Paper and Forest Products Industry published in October 2013. With sales of EUR662 million in the last twelve months ending June 2015, ENCE, headquartered in Spain, is a European producer of hardwood pulp with sizable alternative energy operations in Spain. Following the closure of its Huelva pulp mill operations, ENCE has production capacities of about 960k tonnes p.a. of bleached eucalyptus kraft pulp at two mills in Spain as well as Biomass cogeneration (lignin) operations that allow the pulp business to be run broadly energy self- sufficient (accounting for approximately 86,5% of group sales). In its energy business, the group operates three independent energy generation facilities with an installed capacity of approximately 112MW. ENCE also has substantial forestry operations in Iberia. =========== S W E D E N =========== BRAVIDA HOLDING: S&P Affirms 'B' CCR, Outlook Stable ---------------------------------------------------- Standard & Poor's Ratings Services said that it had affirmed its 'B' long-term corporate credit rating on Bravida Holding AB, the parent of Sweden-based provider of multi-technical services Bravida. The outlook is stable. At the same time, S&P affirmed its 'B' issue rating on Bravida's senior secured notes. The recovery rating is unchanged at '4', indicating S&P's expectation of average recovery in the higher half of the 30%-50% range in the event of a default. The affirmation reflects that, although Bravida intends to launch an IPO, S&P do not yet have information on how the transaction, if successful, would affect the group's financial risk profile. For instance, S&P do not know whether the company is anticipating raising proceeds from additional equity that it could use to reduce debt. Likewise, S&P has no information on what is likely to happen to the shareholder loan in the capital structure. If the shareholder loan and payment-in-kind (PIK) notes were to remain in the capital structure, S&P would likely continue to assess the company's financial risk profile as "highly leveraged." "The ratings are currently constrained by our view that Bravida has a "highly leveraged" financial risk profile, reflecting debt consisting of Swedish krona (SEK) 3.3 billion (about EUR350 million) in senior secured notes, PIK notes of SEK1.7 billion, and the remaining SEK875 million of the shareholder loan (structured as preference shares), which we treat as debt under our criteria. These preference shares are, however, deeply subordinated and accrue interest. To arrive at our adjusted debt figure, we do not deduct cash on the balance sheet, owing to the group's ownership by a private-equity sponsor. We forecast that, over the next two years, the ratio of adjusted funds from operations (FFO) to debt will improve to about 7%-8%, and that debt to EBITDA will be at about 6x-7x. We expect the ratio of FFO to cash interest to remain between 2.8x and 3.3x," S&P said. Although Bravida now has a presence in Finland through its acquisition of the Peko group, the main constraints to its business risk profile remain its limited scale and scope of operations and geographic diversity, in S&P's view. However, S&P believes that Bravida's concentration in three dynamic and expanding economies, Sweden, Norway, and Denmark somewhat offsets the geographic concentration. Moreover, Bravida has a diverse customer base and a high number of smaller contracts, many of which are recurring, which diversify risk and support the very low volatility of earnings. Also, S&P believes Bravida's very low capital intensity supports the group's cash flow generation; annual investments in assets represent less than 1% of group sales. The stable outlook reflects S&P's expectation that over the next two years Bravida will likely continue to generate positive free operating cash flow and maintain sufficient headroom to cover debt-service costs. S&P expects Standard & Poor's-adjusted FFO cash interest cover to remain above 2.5x and adjusted debt to EBITDA to remain below 7x. S&P could consider raising the rating on Bravida if the IPO was successful and resulted in lower leverage, for example, if Bravida raised new equity to reduce debt or the shareholder loan were converted into equity. S&P could also raise the rating to 'B+' if, in its view, the change in ownership would support a less- aggressive financial policy. This is because S&P would regard such a situation as being consistent with FFO to debt improving beyond 12% on a sustainable basis. Downward rating pressure could emerge if any additional shareholder-friendly action were undertaken, leading S&P to view Bravida's cash interest burden as high, reflected by an FFO-to- cash-interest ratio below 2x. The ratings could also come under pressure if an unexpected, sharp economic downturn in Scandinavia squeezed Bravida's EBITDA margin to less than 5%, or if the group engaged in large debt-funded acquisitions resulting in a significant increase in leverage. ============= U K R A I N E ============= PRIVATBANK JSC: S&P Lifts Counterparty Rating to CC, Outlook Neg ---------------------------------------------------------------- Standard & Poor's Ratings Services raised its long-term counterparty credit rating on Ukraine-based PrivatBank JSC to 'CC' from 'SD' and its short-term counterparty credit rating to 'C' from 'SD'. The outlook is negative. The upgrade follows PrivatBank's agreement with the creditors of its US$200 million bonds due Sept. 23, 2015, to extend their maturity to Jan. 15, 2016 (extendable to 2018 subject to a restructuring of subordinated debt due February 2016), and change the interest rate to 10.25% from 9.375%. On Sept. 23, 2015, the bank paid a coupon to 2015 bondholders, in accordance with the supplement loan agreement. S&P bases the 'CC/C' ratings on its expectations that non-payment on the banks US$150 million subordinated bonds due February 2016 and the US$200 million bonds with maturities extended to January 2016 is a virtual certainty. In July 2015, PrivatBank initiated the extension of its two Eurobond maturities due September 2015 and February 2016 in light of the very difficult economic conditions in Ukraine. The extension request is also in line with the National Bank of Ukraine's requirements to increase its capitalization and ease pressure on Ukraine's currency market. The bank is currently in negotiations with bondholders to extend the maturity of the bonds due February 2016, which S&P would regard as a distressed exchange offer and tantamount to a selective default, as per S&P's criteria. This is based on S&P's understanding that the affected bondholders would not receive the full value of the bonds on time as originally agreed. S&P expects that the nonpayment will be a selective default ('SD') -- versus a general default -- and that PrivatBank would continue to honor its other obligations as they come due, especially to its depositors within the limits allowed by the National Bank of Ukraine. However, we are continuing to monitor the situation in case a general default occurs. S&P's assessment of PrivatBank's stand-alone credit profile (SACP) stands unchanged at 'ccc', reflecting the bank's "adequate" business position, "weak" capital and earnings, "adequate" risk position, and "weak" funding and liquidity profile. The bank continues to rely on the National Bank of Ukraine for liquidity assistance to address continuing deposit outflows. S&P does not rate any debt issued by PrivatBank. The negative outlook on PrivatBank reflects S&P's view that nonpayment on senior unsecured bonds due January 2016 and subordinated bonds due February 2016 is a virtual certainty. S&P expects to view the forthcoming distressed exchange offer as a de facto default with respect to the securities involved and S&P would likely therefore lower its ratings on PrivatBank to 'SD'. =========================== U N I T E D K I N G D O M =========================== LOTUS F1: HMRC Case Adjourned, Renault Set to Take Over ------------------------------------------------------- Estelle Shirbon at Reuters reports that French car maker Renault announced plans on Sept. 28 to return to Formula One under its own name next year by taking over the Lotus team, a deal that staved off the threat of administration for the cash-strapped outfit. Renault said it had signed a letter of intent to take a controlling stake in British-based Lotus, which is facing legal action in London over unpaid taxes and risked having its fate decided by a judge had Renault not come to the rescue, Reuters relates. "The signature of this Letter of Intent marks Renault's first step towards the project of a Renault Formula 1 team from the 2016 racing season, thereby extending 38 years of commitment of the brand to the world's premier motorsport championship series," Reuters quotes Renault as saying in a statement. The London court case was brought by Britain's tax authority, HMRC, which is owed some GBP2.715 million in missed income tax and national insurance payments relating to July, August and September, plus interest, Reuters recounts. The High Court in London had given Lotus until Sept. 28 to make a deal with Renault that could potentially satisfy creditors, or face administration, Reuters notes. At a hearing on Sept. 28, lawyers for Renault and Lotus said a deal had been agreed overnight and they asked for an adjournment until Dec. 7 to allow time to finalize the transaction and deal with pressing issues, Reuters relays. "It is hoped that HMRC will be paid this week," lawyer Tina Kyriakides, representing Lotus, told the court, Reuters recounts. According to Reuters, HMRC says it is owed a further GBP1.4 million relating to Lotus's tax affairs between 2009 and 2014, but that amount is disputed and is not expected to be paid in the immediate future. HMRC's lawyer Jeremy Bamford consented to the adjournment, which was granted by Judge Colin Birss, Reuters relates. In the meantime, Lotus will enjoy protection from other creditors, including Malaysian car manufacturer Proton, the firm which owns the Lotus brand and allows the Formula One team to use the name under license, Reuters states. Lawyer Lloyd Tamlyn, representing Proton at the London court hearing, objected to the adjournment and said Proton had received "no offer of payment whatsoever" from Lotus or Renault, Reuters relays. "All we've been offered is a conference call or a meeting over the next two weeks," Mr. Tamlyn, as cited by Reuters, said, arguing that the adjournment should be much shorter or that HMRC's case should be dismissed, freeing Proton to bring an action of its own. Judge Birss rejected Mr. Tamlyn's argument, saying that the best chance for Lotus's creditors, Reuters notes. Lotus is an Enstone-based Formula One team. ********* 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 publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Europe subscription rate is US$775 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter Chapman at 215-945-7000 or Nina Novak at 202-362-8552. * * * End of Transmission * * *