/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/151218.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, December 18, 2015, Vol. 16, No. 250 Headlines A U S T R I A HETA ASSET: Creditors Have Enough Support to Block Bond Deal C Y P R U S BANK OF CYPRUS: Moody's Affirms 'caa3' Deposits Rating LAIKI BANK: Administrator Opposes Transfer of Assets to Creditors F R A N C E SPCM SA: Moody's Affirms 'Ba2' Corporate Family Rating I T A L Y ALITALIA SPA: Appoints Cramer Ball as New Chief Executive Officer CORDUSIO RMBS 2007: Moody's Hikes Class D Notes Rating to Ba1(sf) L I T H U A N I A LITHUANIAN SHIPPING: Shares Removed From Secondary Trading List L U X E M B O U R G ALISON MIDCO: Moody's Changes Outlook to Stable From Positive R U S S I A EVRAZ GROUP: Moody's Says Tender Offer are Credit Positive MECHEL OAO: Nears Debt Restructuring Deal with Sberbank TRANSAERO AIRLINE: Placed Under External Supervision U N I T E D K I N G D O M ADVANTAGE INSURANCE: Moody's Withdraws 'Ba1' IFS Rating BOSTON PRIME: January 5 Client Money Claims Bar Date Set NEW WORLD: Moody's Affirms Caa3 Corp. Family Rating, Outlook Neg. X X X X X X X X * BOOK REVIEW: Transnational Mergers and Acquisitions ********* ============= A U S T R I A ============= HETA ASSET: Creditors Have Enough Support to Block Bond Deal ----------------------------------------------------------- Alexander Weber at Bloomberg News reports that creditors in Heta Asset Resolution AG say they have enough support to block a EUR11 billion bond deal that would force them to take losses to rescue the Austrian "bad" bank's indebted home province. Opponents of the deal -- including Commerzbank AG, Dexia SA's German unit and Deutsche Pfandbriefbank AG -- issued a statement on Dec. 16 saying they collectively hold more than EUR5 billion (US$5.5 billion) of Heta bonds guaranteed by the province of Carinthia, Bloomberg relates. That would leave less than the required two-thirds participation in the planned offer, to be launched as soon as next week, Bloomberg notes. The creditors' refusal to take losses on the bonds isn't new, Carinthia's finance secretary, Gaby Schaunig, as cited by Bloomberg, said in a statement. "The bond buyback offer will be within the legal framework." Heta Asset Resolution AG is a wind-down company owned by the Republic of Austria. Its statutory task is to dispose of the non-performing portion of Hypo Alpe Adria, nationalized in 2009, as effectively as possible while preserving value. =========== C Y P R U S =========== BANK OF CYPRUS: Moody's Affirms 'caa3' Deposits Rating ------------------------------------------------------ Moody's Investors Service affirmed the Baa3 ratings on the mortgage covered bonds of Bank of Cyprus Public Company Limited ((BoC) the issuer, deposits Caa3 stable; adjusted baseline credit assessment caa3; Counterparty Risk (CR) Assessment Caa2(cr)). RATINGS RATIONALE The affirmation reflects Moody's view that the effective servicing of the cover pool and the likely recoveries from the assets are commensurate with a Baa3 rating. The affirmation follows two significant rating actions in the last month: (1) the upgrade of Cyprus' government bond rating to B1 from B3 with the assignment of a stable outlook and the concurrent raising of Cyprus' local-currency and foreign-currency bond ceilings to Baa1 from Baa3 on November 13, 2015; and (2) the change in Moody's outlook on Cyprus' banking system to stable from negative on December 8, 2015. Moody's country ceilings reflect a range of un-diversifiable risks to which issuers in any jurisdiction are exposed, including economic, legal and political risks. The local-currency ceiling also determines the maximum credit rating achievable for a structured finance transaction, including covered bonds, for which domestic assets or residents generate the cash flows that the issuer uses to pay interest and principal on the notes. Although Cyprus' local- and foreign-currency bond ceilings were raised to Baa1, Moody's considers that the covered bonds cannot achieve the same rating level as the country ceiling at present because of the overall weak credit profile of the Cyprus banking system and the high correlation of risks within that banking system, given the small number of players and their large size relative to the size of the economy. In a hypothetical scenario where the sovereign were to default and a covered bond anchor event were to occur for the Bank of Cyprus, a disruption of servicing may result in a weakening of collections activities, leading to increased delinquencies, lower recoveries, and ultimately higher losses on the cover pool. Moody's considers that the effective servicing of the cover pool and the likely recoveries from the assets are commensurate with a Baa3 rating. KEY RATING ASSUMPTIONS/FACTORS Moody's determines covered bond rating using a two-step process: an expected loss analysis and a timely payment indicator (TPI) framework analysis. EXPECTED LOSS In situations where the TPI framework is not applied, Moody's may modify its Expected Loss (EL) Model to take account of the reduced level of linkage to the issuer. Accordingly, Moody's made the following adjustments to its modelling: (1) it removed the value it would otherwise attribute to the issuer's primary obligation to make payments under the covered bonds. This payment obligation relies on the issuer's credit strength and therefore is a primary source of linkage to the issuer in our EL Model; and (2) it removed the refinancing-risk component from its quantitative modelling, due to the effectiveness of the conditional pass-through feature in the transaction. Moody's may consider giving certain value to the credit strength of the issuer if the credit strength of the issuer improves. Moody's uses its cash flow model to determine a rating based on the expected loss on the bond. Collateral risk measures losses resulting directly from cover pool assets' credit quality. Moody's derives collateral risk using an expected loss multiples approach. Based on the most recent performance overview as of 30 June 2015, the collateral risk for this program is currently 45%. The minimum OC level consistent with the Baa3 rating target is 47% and as of 29 September 2015 BoC is providing 47% OC in a "committed" form. These numbers show that Moody's is not relying on "uncommitted" OC in its expected loss analysis. For further details on cover pool losses, collateral risk, market risk, collateral score and TPI Leeway across covered bond programs rated by Moody's, please refer to "Moody's Global Covered Bonds Monitoring Overview", published quarterly. TPI FRAMEWORK: Moody's assigns a TPI, which measures the likelihood of timely payments to covered bondholders following a CB anchor event. The TPI framework limits the covered bond rating to a certain number of notches above the CB anchor. Moody's has not applied the TPI framework to Bank of Cyprus' covered bonds program. Factors that would lead to an upgrade or downgrade of the rating: Factors that may cause an upgrade of the ratings include a significantly better-than-expected performance of the pool, a significant improvement of the credit profile of the issuer and / or of the overall credit profile of the Cyprus banking system. Factors that may cause a downgrade of the ratings include a decline in the overall performance of the pool or a downgrade of Cyprus' local currency bond ceiling below the rating of the program. LAIKI BANK: Administrator Opposes Transfer of Assets to Creditors ----------------------------------------------------------------- Angelos Anastasiou at Cyprus Mail reports that Legacy Laiki administrator Chris Pavlou has warned parliament that transferring control over the entity's assets from the Resolution Authority to the failed lender's creditors could have disastrous effects on the ongoing process of liquidating its assets, it emerged on Dec. 16. As the House plenum is poised to approve an amendment allowing Laiki's depositors to wrest control of its remaining assets, which include 9.6% of share capital in the Bank of Cyprus and ownership stakes in subsidiary banks in six countries, Mr. Pavlou argued against the move in a letter to deputies on Dec. 15, on grounds that it would shatter the trust shown by the host countries, as well as potential buyers, to the administrators, Cyprus Mail relates. According to Cyprus Mail, Mr. Pavlou told lawmakers, "The only reason the six subsidiaries are allowed to operate as going concerns is the tolerance shown by the Central Banks of the countries in which they operate, which has been repeatedly stated to arise exclusively from the fact that administration lies directly with the Resolution Authority." "The representatives of creditors and 'haircut' depositors, who are asking to change Legacy Laiki's administrative structure through this legislative amendment, have not sought, nor have they received, any assurance from the oversight authorities in these countries that they could be accepted as owners or administrators of these subsidiaries." As a result, Mr. Pavlou argued, any change in the administration of Legacy Laiki would inevitably trigger the revocation of the subsidiaries' licenses, and therefore cause their disorderly bankruptcy, Cyprus Mail relays. "The only recourse available will then be the immediate sale or liquidation of the subsidiaries under pressure and panic, with possibly disastrous results," Cyprus Mail quotes Mr. Pavlou as saying. In addition, he said, parties that have expressed interest in acquiring Legacy Laiki's assets may submit lower offers, or even withdraw from the process altogether, because of the perceived inability to manage the entity after the bank's creditors take over, Cyprus Mail discloses. "In any case, such a change would substantially delay the already expedited process of selling the subsidiaries," the administrator, as cited by Cyprus Mail, said. Laiki was founded in 1901 as the Popular Savings Bank Limassol. =========== F R A N C E =========== SPCM SA: Moody's Affirms 'Ba2' Corporate Family Rating ------------------------------------------------------ Moody's Investors Service affirmed the Corporate Family Rating (CFR) and Probability of Default Rating (PDR) of SPCM SA (SPCM), the holding company for SNF Floerger group, at Ba2 and Ba2-PD, respectively. Concurrently, Moody's upgraded the $250 million senior notes, due 2022, issued by SPCM to Ba2 from Ba3. The outlook is revised to stable from positive. RATINGS RATIONALE The affirmation of the Ba2 CFR follows the company's good performance so far in 2015, with improvements in sales, EBITDA margins and retained cash flow. The favorable results were driven by the increased gross profit margin in the polyacrylamide (PAM) business driven by reduced raw material prices as well as a significant impact from the weaker euro. SPCM has also shown the resilience of its business despite the weak oil and gas markets and Moody's now expects it to generate positive free cash flow next year for the first time since 2012. Consequently, for FY2014, Moody's adjusted EBITDA margin was 14.1% and for the last-twelve-months (LTM) ended September 2015 improved to 16.1%. However, the outlook was revised to stable from positive as debt/EBITDA increased to 3.3x in FY2014 from 2.3x in FY2013 and only declined to 3.1x for the LTM ended September 2015 with retained cash flow/debt of 19.8%, down from 28.5% in FY2013 and only a small improvement on the 19.7% of FY2014 (ratios adjusted with Moody's standard adjustments). These credit metrics are more appropriate for a stable Ba2 rating considering the company's small scale and product concentration. The rating of the $250 million senior notes due 2022 was upgraded one notch to Ba2 from Ba3 and in line with the CFR, as debt that ranks equal with it now accounts for the vast majority of the capital structure after the revolving credit facility (RCF, unrated) was upsized and EUR400 million of notes due 2020 were replaced with EUR550 million notes due 2023 earlier this year. SPCM's Ba2 CFR reflects Moody's positive view that SPCM (1) is a leading specialty chemicals producer for the global PAM industry with a diverse customer base across several applications; (2) has a proven ability to generate solid sales and EBITDA growth, while maintaining low leverage, through global and European economic cycles and recent oil price weakness; (3) has a resilient business model, as demonstrated by solid operating performance and growth; and (4) has historically been able to pass on material and production costs while simultaneously improving marginal income, despite the high degree of competition in the US markets and the challenging trading environment in Europe. However, the Ba2 CFR also reflects its limited scale and product concentration with historic muted free cash flow generation, which limits the company's ability to handle unforeseen, yet probable challenges to its business plan, such as sharp raw material price volatility, raw material supply limitations, or the substitution of other products for polyacrylamide (PAM). Furthermore, SPCM's global competition can come from the PAM division of substantially larger and more financially flexible companies such as BASF (SE) (A1 stable), Ecolab, Inc. (Baa1 stable), and Kemira (unrated). SPCM is also exposed to FX movements, with recent operating performance boosted by the weak euro. Finally around 20% of sales come from the oil and gas industry although around only 6% of group sales are from the fracking and drilling part, which currently exhibit the most weakness. Over the last few years, the company's growth has been driven by demand from its oil and gas customers. While Moody's now expects this to remain subdued and some parts such as fracking and drilling to decline further in 2015 and 2016, overall sales to the oil and gas industry only represented 20% of 2015 revenues. Moody's expects growth in sales to the water treatment and paper industries should help counter this weakness. At the end of 2014, Moody's had expected adjusted leverage to increase to up to 3.5x by the end of 2015. However, there are now greater tailwinds from a stronger dollar and lower raw material prices such as for propylene, as well as the potential for the company to pare back its capital expenditure as growth slows. As a result, Moody's anticipates leverage will peak closer to 3.0x and remain there for a few years. Moody's views SPCM's liquidity as good over the next 12-18 months. As of September 30, 2015, the company had EUR157 million cash on balance sheet and approximately EUR334 million available under credit facilities that include a recently upsized EUR350 million revolving credit facility that expires in 2020. In FY 2014, SPCM generated negative free cash flow of EUR195 million, mostly due to high capital expenditures related to its capacity expansion that peaked in 2015. Going forward, although Moody's expects the company to continue to invest in its existing and new plants, the rating agency expects the company to generate slightly positive free cash flow in 2016 onwards. SPCM is subject to net leverage and interest coverage covenants that are tested semi-annually. As of June 30, 2015, SPCM exhibited 32% headroom on its leverage covenant despite high capital expenditure. Moody's expects the company to continue to show comfortable headroom on both covenants going forward. RATING OUTLOOK The stable outlook reflects the fact that Moody's expects SPCM will continue to exhibit a resilient business, despite pressure in the oil and gas market, maintaining EBITDA margins around 15% and slowly deleveraging. It also assumes the company maintains good liquidity. WHAT COULD CHANGE THE RATING UP/DOWN Positive rating pressure could develop if SPCM reduces adjusted debt/EBITDA towards 2.5x and retained cash flow/debt is maintained around 20%. Conversely, negative rating pressure could develop if the conditions for a stable outlook are not being met. The rating could then be downgraded if adjusted debt/EBITDA exceeds 3.5x for an extended period of time, retained cash flow/debt falls to the low teens in percentage terms, the company pursues a more aggressive financial policy or liquidity deteriorates. SPCM SA is the parent holding company of the SNF Group (SNF). SNF is one of the world's leading producers of polyacrylamide, which is a water-soluble specialty chemical used in water treatment, oil and gas applications, mineral extraction, and pulp and paper manufacturing. The company is family-owned and was formed as a result of a buy-out of the flocculants business of WR Grace in 1978. SNF, headquartered in Saint-Etienne, France, reported revenues and EBITDA of approximately EUR2.1 billion and EUR297 million respectively for FY2014. ========= I T A L Y ========= ALITALIA SPA: Appoints Cramer Ball as New Chief Executive Officer ----------------------------------------------------------------- Tommaso Ebhardt and Deena Kamel at Bloomberg News report that Alitalia SpA appointed Cramer Ball, head of Indian ally Jet Airways, as its chief executive officer. He succeeds Silvano Cassano, who stood down in September after less than a year in charge of Italy's biggest airline, Bloomberg discloses. According to Bloomberg, Mr. Ball, appointed CEO of Jet in May 2014, will take over at Alitalia next March, the Rome-based company said on Dec. 17. The two carriers are linked by their membership of the seven- strong Equity Alliance developed by Etihad Airways PJSC, which owns 49% of Alitalia and 24% of Jet, Bloomberg notes. As reported by the Troubled Company Reporter-Europe on November 17, 2014, The Financial Times related that Brussels on Nov. 14 gave the go-ahead for Etihad Airways to become the largest shareholder in lossmaking Alitalia, as part of a EUR1.7 billion rescue of Italy's flagship carrier that will see the deep- pocketed Gulf carrier step up its expansion in Europe. For Alitalia, the deal enables it to avoid the possibility of a second bankruptcy in six years, the FT said. Alitalia has not reported a full-year net profit since 2002, but is now seeking to generate earnings by 2017, the FT noted. 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%. CORDUSIO RMBS 2007: Moody's Hikes Class D Notes Rating to Ba1(sf) ----------------------------------------------------------------- Moody's Investors Service taken rating actions on three Italian residential mortgage backed securities (RMBS) transactions. Specifically, Moody's has downgraded one note and affirmed five notes of Capital Mortgage S.r.l. (BIPCA Cordusio RMBS) and upgraded six notes and affirmed three notes of Cordusio RMBS - UCFin S.r.l. and Cordusio RMBS Securitisation S.r.l. - Series 2007. RATINGS RATIONALE The downgrade of tranche B of Capital Mortgage S.r.l. (BIPCA Cordusio RMBS) results from the correction of an error identified in Moody's previous analysis of the transaction, namely the analysis of eligible investments. The upgrades of tranches in Cordusio RMBS - UCFin S.r.l. and Cordusio RMBS Securitisation S.r.l. - Series 2007 reflect (1) the reduced uncertainty related to the collateral assumption of these seasoned portfolios, and (2) the deleveraging of the transactions. The ratings of other tranches in the deals have been affirmed given credit enhancement is commensurate with current ratings. ELIGIBLE INVESTMENT The rating previously assigned to tranche B of Capital Mortgage S.r.l. (BIPCA Cordusio RMBS) did not adequately take into account the definition of eligible investment present in the transaction. Indeed the rating of class B notes is constrained due to (i) our assessment of medium linkage of the transaction funds held in eligible investments, and (ii) the minimum rating of Baa3 required for the eligible investments with maturities up to one month and Baa2 for those with maturities of more than one month and less than three months. As a result it can only achieve Aa3(sf) according to "The Temporary Use of Cash in Structured Finance Transactions: Eligible Investment and Bank Guidelines" (December 2015). The ratings of other tranches in the deal have been affirmed given credit enhancement is commensurate with current ratings. REVISION OF KEY COLLATERAL ASSUMPTIONS Our collateral performance outlook for Italian RMBS is stable. The recent more favorable economic conditions (low interest rates, slightly higher GDP growth and slightly improved unemployment rate) have benefited some of Italian RMBS borrowers and the delinquencies and defaults of the Italian RMBS market remained relatively stable in recent months. However, the pace of recovery is slow and we still see deterioration of performance in some deals. Notwithstanding, we believe uncertainty in the sector in general and, in some transactions of this seasoned portfolio in particular, has reduced. Due to the reduced uncertainty in the sector, we have removed the additional stress analysis of key collateral assumptions Moody's has reassessed its lifetime loss expectations (EL) for the three transactions, taking into account the transactions' underlying collateral performance to date, and maintained previous assumption. MILAN CE assumptions remain unchanged for the three deals. DELEVERAGING OF TRANSACTIONS Repayment of principal collections has contributed to increase credit enhancement. In addition Principal Deficiencies Ledger of Cordusio RMBS Securitisation S.r.l. - Series 2007 reduced in the last two payments date. This, together with the removal of additional stress analysis of key collateral assumptions, resulted in the above mentioned upgrades of Cordusio RMBS - UCFin S.r.l. and Cordusio RMBS Securitisation S.r.l. - Series 2007. Principal Methodology: The principal methodology used in these ratings was "Moody's Approach to Rating RMBS Using the MILAN Framework" published in January 2015. Please see the Credit Policy page on www.moodys.com for a copy of this methodology. 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) better-than-expected performance of the underlying collateral; (2) deleveraging of the capital structure; and (3) improvements in the credit quality of the transaction counterparties and (4) a decreased probability of high loss scenarios owing to a upgrade of the country ceiling. Factors or circumstances that could lead to a downgrade of the ratings include: (1) an increased probability of high loss scenarios owing to a downgrade of the country ceiling; (2) a 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 counterparties. LIST OF AFFECTED RATINGS: Issuer: Capital Mortgage S.r.l. (BIPCA Cordusio RMBS) EUR666.3M A1 Notes, Affirmed Aa2 (sf); previously on Jul 10, 2015 Affirmed Aa2 (sf) EUR185.5M A2 Notes, Affirmed Aa2 (sf); previously on Jul 10, 2015 Affirmed Aa2 (sf) EUR 61.8M B Notes, Downgraded to Aa3 (sf); previously on Jul 10, 2015 Upgraded to Aa2 (sf) EUR14.3M C Notes, Affirmed A2 (sf); previously on Jul 10, 2015 Affirmed A2 (sf) EUR18.0M D Notes, Affirmed Baa1 (sf); previously on Jul 10, 2015 Upgraded to Baa1 (sf) EUR5.5M E Notes, Affirmed Baa3 (sf); previously on Jul 10, 2015 Affirmed Baa3 (sf) Issuer: Cordusio RMBS - UCFin S.r.l. EUR1735M A2 Notes, Affirmed Aa2 (sf); previously on Apr 9, 2015 Upgraded to Aa2 (sf) EUR75M B Notes, Upgraded to Aa2 (sf); previously on Apr 9, 2015 Upgraded to A1 (sf) EUR25M C Notes, Upgraded to Aa3 (sf); previously on Apr 9, 2015 Upgraded to A3 (sf) EUR48M D Notes, Upgraded to Baa2 (sf); previously on Apr 9, 2015 Upgraded to Ba1 (sf) Issuer: Cordusio RMBS Securitisation S.r.l. - Series 2007 EUR2227.6M A2 Notes, Affirmed Aa2 (sf); previously on Apr 9, 2015 Upgraded to Aa2 (sf) EUR738.6M A3 Notes, Affirmed Aa2 (sf); previously on Apr 9, 2015 Upgraded to Aa2 (sf) EUR71.1M B Notes, Upgraded to Aa2 (sf); previously on Apr 9, 2015 Upgraded to A1 (sf) EUR43.8M C Notes, Upgraded to A1 (sf); previously on Apr 9, 2015 Upgraded to A3 (sf) EUR102M D Notes, Upgraded to Ba1 (sf); previously on Apr 9, 2015 Upgraded to Ba2 (sf) ================= L I T H U A N I A ================= LITHUANIAN SHIPPING: Shares Removed From Secondary Trading List --------------------------------------------------------------- Nasdaq Vilnius on Dec. 15 disclosed that it decided to remove shares (LJL1L, ISIN code LT0000125999) of Lithuanian Shipping Company from the Secondary Trading List from 31-12-2015 provided that the decision of the Klaipeda District Court as of December 14, 2015 comes into effect where bankruptcy proceedings to PC Lithuanian Shipping Company were initiated. These financial instruments will be removed from the Secondary Trading List following the provisions of item 19.1.4 of the Nasdaq Vilnius listing rules. By the decision of Regional Court of Klaipeda dated December 14, 2015, the bankruptcy proceedings of PC Lithuanian Shipping Company have been initiated. The decision comes into force 10 days after its adoption. =================== L U X E M B O U R G =================== ALISON MIDCO: Moody's Changes Outlook to Stable From Positive ------------------------------------------------------------- Moody's Investors Service changed to stable, from positive, the outlook on all the ratings of Alison Midco S.a.r.l. (ARVOS Group), a manufacturer of components and products for the power generation and petrochemical industries. Concurrently, we have affirmed: (1) the B3 corporate family rating (CFR) and B3-PD probability of default rating (PDR) assigned to Alison Midco S.a.r.l. (ARVOS Group), an entity fully owned by Triton funds, and the holding company for the operating subsidiaries; (2) the B2 ratings assigned to the first lien senior secured term loan and the senior secured revolving credit facility (RCF) of Arvos BidCo S.a.r.l.; and (3) the Caa2 ratings assigned to the second lien senior secured term loan of Arvos Inc. The outlooks of Arvos BidCo S.a.r.l. and Arvos Inc. have also been changed to stable from positive. RATINGS RATIONALE "The change in outlook reflects the increasingly tough environment for coal-fired power generation because of lower commodity prices and the implementation of stringent environmental legislation," says Scott Phillips, a Moody's Vice President -- Senior Analyst and lead analyst for Arvos. "As a manufacturer of products for the utility and oil & gas industries, Arvos is somewhat sensitive to the demand from companies operating within these segments," added Mr. Phillips. Since the ratings were first assigned to Arvos in 2014, leverage for the group (as measured by adjusted debt / EBITDA) has fallen from above 7x to around 6.2x as of September 2015. While Moody's expects that the existing order backlog will drive an increase in both revenue and earnings in FY 2015/16, the agency sees additional deleveraging beyond current levels as challenging. This reflects the deteriorating outlook for coal generators in Arvos' main markets of the United States, Europe and Japan which have suffered because of lower commodity prices and may well lead to lower levels of investment in those assets. In addition, the agency believes that an increasing focus on carbon emissions will lead to tougher environmental regulation (particularly in light of the global agreement made in Paris in December 2015) that will negatively affect the orders of new equipment and may potentially reduce the size of Arvos' future addressable market. The B3 CFR assigned to Arvos takes into consideration: (1) the group's small scale, as reflected by revenue of EUR472 million in FY 2015, which is low when compared with other rated issuers in the manufacturing industry; (2) limited corporate history (albeit a long-standing operational history) as the group has only existed in its current form since August 2014; (3) high financial leverage, with debt/EBITDA (as adjusted by Moody's) expected to be close-to, or above 6x for the financial year 2015/16; (4) limited product diversification, with around 60% of group revenue generated by the Air Preheaters ("APH") division; (5) relatively high exposure to the mature coal-powered electricity markets of Europe, the United States, and Japan, which collectively face structural challenges because of tightening environmental legislation; and (6) dependence on the investment decisions of companies operating in the cyclical oil & gas sector. These negatives are, however, offset by the group's (1) strong competitive position in certain niche areas of the global steam auxiliary components market with a broad product portfolio and global production capability; (2) established position in a mature industry, which is supported by long-standing customer relationships, as well as existing technological know-how; (3) a sizeable aftermarket business (which accounts around 50% of group turnover), which offers a higher level of revenue and earnings stability than the new equipment business; (4) historically good profitability as indicated by an EBITDA margin of around 18% (unadjusted) in the financial year 2014/15, and (5) an ability to generate modest amounts of positive free cash flow after interest payments and taxes as result of low maintenance capital expenditure and limited working capital needs. LIQUIDITY Moody's considers Arvos' liquidity to be adequate. At the end of September 2015, the company had EUR 27 million of cash on the balance sheet and had access to a EUR 40 million revolving credit facility (RCF), which was partially drawn (by EUR 4 million) at the end of September. Over the next twelve months, Moody's expects that Arvos will generate around EUR 40-50 million of Funds From Operations (FFO) as well as positive levels of net cash (as evidenced by free cash flow (FCF) / debt of around 5- 6%). WHAT COULD CHANGE THE RATING UP/DOWN Given the recent change in outlook, Moody's considers an upgrade to be unlikely in the 12-18 months. Nevertheless, if Arvos was able to deleverage well below 5.5x debt / EBITDA and maintain FCF / debt in the mid-single digits, Moody's could consider an upgrade. Conversely, downwards rating pressure would result if leverage were to rise above 6.5x on a sustained basis. A deterioration in liquidity would also be a driver for a possible downgrade. Alison Midco S.a.r.l. (ARVOS Group) is an auxiliary power equipment provider operating in new equipment and aftermarkets through three business units: Air Preheaters (APH), Heat Transfer Solutions (HTS) and Mills. In FY 2015 Arvos generated EUR472 million of sales and EBITDA (unadjusted, pre-exceptionals) of EUR88 million. Arvos is owned by private equity funds managed by Triton. =========== R U S S I A =========== EVRAZ GROUP: Moody's Says Tender Offer are Credit Positive ---------------------------------------------------------- Moody's Investors Service said that it views as credit positive for Russian steel and mining company Evraz Group S.A. (Evraz; Ba3 stable) the results of its tender offer for outstanding notes and the concurrent placement of its new $750 million notes with maturity in January 2021, as announced on 14 December 2015. The transaction will improve Evraz's liquidity, extend its debt maturity profile and reduce medium-term refinancing risks, without sustainably increasing its leverage and interest burden. As a result of the tender offer, Evraz will purchase $524 million out of the total outstanding $1.96 billion of three issues of its notes maturing in 2017-18. The total amount of Evraz's debt maturing in 2017 and 2018 will decline by $314 million and $210 million, respectively, further improving the already solid liquidity. Evraz is going to use around $200 million of the proceeds from the placement of the new notes, which will remain after the settlement of the tendered notes principal plus accrued interest, to repay other debt due 2016-17. Moody's projects that Evraz's debt/EBITDA will somewhat exceed 3.5x and that its EBIT interest cover will decline below 2.5x in 2016, compared with 2.9x and 3.1x at 30 June 2015 (all metrics are Moody's-adjusted), because of the continuing decline in steel prices. However, the rating agency expects that Evraz will pursue its deleveraging strategy and will be able to restore its financial metrics in 2017, with debt/EBITDA declining to below 3.0x and EBIT interest cover rising above 3.0x (all metrics are Moody's- adjusted), owing to the company's sustainable cash flow generation, assuming steel prices stabilise by that time. The new notes' coupon rate of 8.25% is higher than the coupon rates on two of three tendered issues of outstanding notes. However, Moody's estimates that the weighted average coupon rate on the four notes issues affected by the transaction will be less than 20 basis points higher than the weighted average coupon rate on the three tendered issues before the transaction. Moody's also recognizes Evraz's proactive approach towards refinancing its medium-term debt maturities, which reduces the company's refinancing risk, and times the placement in anticipation of the increase in borrowing costs in the international markets following the expected rise of the US Federal Reserve's interest rate. In addition, the placement of the new notes demonstrates Evraz's continuing access to international long-term public debt markets despite the company's exposure to the challenging macroeconomic environment in Russia, weak global market for steel, and low oil and gas prices, which continue to exert pressure on the company's US and Canadian assets' operating and financial performance. Evraz is one of the largest vertically integrated steel, mining and vanadium companies in Russia. Evraz's principal assets are steel plants (in Russia, North America, Europe, South Africa, Kazakhstan and Ukraine), iron ore and coal mining facilities, as well as logistics and trading assets located predominantly in Russia. In the last 12 months to June 30, 2015, Evraz generated revenues of $11.1 billion (2014: $12.8 billion) and Moody's- adjusted EBITDA of $2.0 billion (2014: $2.3 billion). EVRAZ plc currently holds 100% of the company's share capital and is itself jointly controlled by Mr. Roman Abramovich, Mr. Alexander Abramov, Mr. Alexander Frolov and Mr. Eugene Shvidler. MECHEL OAO: Nears Debt Restructuring Deal with Sberbank ------------------------------------------------------- Svetlana Burmistrova and Andrey Kuzmin at Reuters report that Mechel OAO said on Dec. 16 it had entered a "finishing line" on its debt deal with Sberbank. Mechel, which employs over 60,000 people, had to ask its lenders to delay debt repayments after Russia's economic downturn and a decline in coal and steel prices put an end to its strategy of borrowing heavily to finance large investments, Reuters relates. Mechel is a Russian steel and coal producer. TRANSAERO AIRLINE: Placed Under External Supervision ---------------------------------------------------- Polina Montag-Girmes at Air Transport World reports that the Arbitration Court of Saint Petersburg and Leningrad region has put Transaero Airline under external supervision, in a decision published on the court's Web site Dec. 16. Russia's Sberbank filed a bankruptcy motion against Transaero on Oct. 19, after Aeroflot's plans to acquire Transaero fell through, ATW recounts. According to ATW, Interfax agency, quoting Sberbank president Herman Gref, reported Sept. 4 that Transaero's overall debt reached RUB250 billion (US$3.72 billion). Sberbank is one of Transaero's biggest creditors, ATW notes. Russia's Federal Air Transport Agency, Rosaviatsia, suspended Transaero Airlines' ticket sales from Oct. 1, 2015, ATW relays. The carrier's air operator's certificate was canceled Oct. 26, ATW discloses. 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. =========================== U N I T E D K I N G D O M =========================== ADVANTAGE INSURANCE: Moody's Withdraws 'Ba1' IFS Rating ------------------------------------------------------- Moody's Investors Service has withdrawn the Ba1 insurance financial strength rating and stable outlook on Advantage Insurance Company Limited, the main insurance operating entity of Hastings Group Holdings plc. Moody's has withdrawn the rating for its own business reasons. The following Advantage Insurance Company Limited ratings were withdrawn: Insurance Financial Strength rating of Ba1 Withdrawn Stable Outlook Withdrawn Here's the revised notice. Thanks. BOSTON PRIME: January 5 Client Money Claims Bar Date Set -------------------------------------------------------- Michael David Rollings -- mike.rollings@rollingsoliver.com -- and Steven Edward Butt -- steve.butt@rollingsoliver.com -- in their capacity as Joint Special Administrators for Boston Prime Limited, intend to make a final distribution of all client money held by the Company. On November 30, 2015 the High Court of Justice in England and Wales made an order prescribing the procedure that shall apply for the purpose of distributing client money held by the Company to clients. Clients who have not yet submitted a client money claim, but who wish to do so, must submit their claim in writing to the Special Administrators by 5:00 p.m. (London time) on January 5, 2016 (the "Last Date for Proving") at the registered office address for the Company at 6 Snow Hill, London, EC1A 2AY, or via e-mail to boston.prime@rollingsoliver.com Clients who do not submit a client money claim by the Last Date for Proving in accordance with this notice will not be entitled to share in the proposed distribution of client money. Clients who submit a client money claim which is rejected by the Special Administrators will also not be entitled to share in the proposed distribution of client money, except in the event that they successfully appeal against the Special Administrators' adjudication of their client money claim. Should clients wish to appeal against the Special Administrators' adjudication of their client money claim, they are required to file an application with the High Court of Justice in England and Wales. Details of the appeals process are contained within the Order. A copy of the Order can be viewed at: http://rollingsoliver.com/files/Court%20Order%2002.12.2015.pdf NEW WORLD: Moody's Affirms Caa3 Corp. Family Rating, Outlook Neg. ----------------------------------------------------------------- Moody's Investors Service affirmed the Caa3 corporate family rating (CFR) and the Caa3-PD probability of default rating (PDR) of New World Resources N.V. ('NWR'). The Caa2 rating of the EUR300 million senior secured notes due in 2020 has been also affirmed. Concurrently, Moody's has changed the outlook on all ratings to negative. RATINGS RATIONALE The CFR of Caa3 reflects NWR's very weak credit metrics and the expectation of protracted negative free cash flows affecting its already weak liquidity position. It additionally reflects Moody's expectation of a very high probability of default for the company within the next 12 to 18 months. The material deterioration of the coal market environment during 2015, with benchmark thermal coal and metallurgical coal prices falling by approximately 16% and 34% respectively since the start of the year, and the absence of a catalyst for their possible recovery anytime soon, is actually exacerbating the structural vulnerabilities of the company. Such structural weaknesses relate to an unsustainable capital structure, which is burdened by too much debt, notwithstanding the debt restructuring actions completed in October 2014, and loss making mining operations, which are characterized by still very high fixed costs, notwithstanding ongoing cost-cutting and efficiency initiatives being implemented by management on an ongoing basis to lower the average cash cost position of the mines. Furthermore, broader environmental concerns particularly around the thermal coal business, which still accounts for approximately 40% of the company's revenues, will increasingly pose considerable challenges to the long term viability of a material portion of the business. Moody's acknowledges management efforts made so far to preserve liquidity, by reducing cost and capital expenditures to historically low levels, by locking selling prices with customers at fixed levels pre-agreed at the beginning of 2015 for all the thermal coal and 74% of the metallurgical coal produced in 2015, and by opting so far to capitalize interest rather than paying cash interest on the senior secured notes and on the convertible notes, exploiting the pay-in-kind (PIK) toggle option permitted by the existing bond indentures. However, in spite of these actions, the company has already burned more than EUR50 million of cash since the beginning of the year, and is facing refinancing risk on its EUR 35 million super senior revolving credit facility, which is currently drawn and matures in October 2016. Rating outlook The change of the outlook to negative reflects Moody's expectation that NWR's credit metrics and liquidity are likely to deteriorate further in 2016, due to a still very challenging outlook on thermal coal and, to a lesser extent, on coking coal, which the rating agency believes cannot be sufficiently mitigated by ongoing management actions. The outlook is also consistent with Moody's negative fundamental view on the coal sector over the next 12 to 18 months, which prompted the rating agency to revise further down its price assumptions for both metallurgical coal and thermal coal, whose average prices are now assumed at $80/t and $55/t respectively for 2016 -- lower levels compared to the average 2015 levels. What could change the rating UP Upward pressure on the ratings is currently not envisaged. A stabilization of NWR's ratings would require a meaningful and sustained improvement in the company's liquidity position, which in turn would need a sustained recovery in the reference coal markets and/or some sort of external liquidity support, making the company more able to sustain its required capital expenditure plans to improve the competitiveness of its mining asset base. What Could Change the Rating DOWN Negative pressure on the ratings would result if the weak liquidity of the company deteriorates further, with an acceleration of the cash burn and an increased likelihood of breaching the minimum cash buffer maintenance financial covenant required to be tested quarterly according to the terms of the super senior facility maturing in October 2016. Furthermore, lack of a plan to proactively address this debt maturity in 2016 will contribute to exert negative rating pressure. The principal methodology used in these ratings was Global Mining Industry published in August 2014. Headquartered in the United Kingdom, NWR is the largest hard coal mining group in the Czech Republic through its subsidiary OKD, a.s. The company has four operating coal mines which during 2014 led to annual sales of 8.3mt of coal. The company reported consolidated revenues of EUR676 million in 2014. The investment company CERCL Mining BV, following the completion of the restructuring completed in October 2014, holds approximately a 51% stake in NWR. =============== X X X X X X X X =============== * BOOK REVIEW: Transnational Mergers and Acquisitions ----------------------------------------------------- Author: Sarkis J. Khoury 103 Publisher: Beard Books Softcover: 292 pages List Price: $34.95 Review by Gail Owens Hoelscher Order your personal copy today at http://is.gd/hl7cni Transnational Mergers and Acquisitions in the United States will appeal to a wide range of readers. Dr. Khoury's analysis is valuable for managers involved in transnational acquisitions, whether they are acquiring companies or being acquired themselves. At the same time, he provides a comprehensive and large-scale look at the industrial sector of the U.S. economy that proves very useful for policy makers even today. With its nearly 100 tables of data and numerous examples, Khoury provides a wealth of information for business historians and researchers as well. Until the late 1960s, we Americans were confident (some might say smug) in our belief that U.S. direct investment abroad would continue to grow as it had in the 1950s and 1960s, and that we would dominate the other large world economies in foreign investment for some time to come. And then came the 1970s, U.S. investment abroad stood at $78 billion, in contrast to only $13 billion in foreign investment in the U.S. In 1978, however, only eight years later, foreign investment in the U.S. had skyrocketed to nearly #41 billion, about half of it in acquisition of U.S. firms. Foreign acquisitions of U.S. companies grew from 20 in 1970 to 188 in 1978. The tables had turned an Americans were worried. Acquisitions in the banking and insurance sectors were increasing sharply, which in particular alarmed many analysts. Thus, when it was first published in 1980, this book met a growing need for analytical and empirical data on this rapidly increasing flow of foreign investment money into the U.S., much of it in acquisitions. Khoury answers many of the questions arising from the situation as it stood in 1980, many of which are applicable today: What are the motives for transnational acquisitions? How do foreign firms plans, evaluate, and negotiate mergers in the U.S.? What are the effects of these acquisitions on competition, money and capital markets; relative technological position; balance of payments and economic policy in the U.S.? To begin to answer these questions, Khoury researched foreign investment in the U.S. from 1790 to 1979. His historical review includes foreign firms' industry preferences, choice of location in the U.S., and methods for penetrating the U.S. market. He notes the importance of foreign investment to growth in the U.S., particularly until the early 20th century, and that prior to the 1970s, foreign investment had grown steadily throughout U.S. history, with lapses during and after the world wars. Khoury found that rates of return to foreign companies were not excessive. He determined that the effect on the U.S. economy was generally positive and concluded that restricting the inflow of direct and indirect foreign investment would hinder U.S. economic growth both in the short term and long term. Further, he found no compelling reason to restrict the activities of multinational corporations in the U.S. from a policy perspective. Khoury's research broke new ground and provided input for economic policy at just the right time. Sarkis J. Khoury holds a Ph.D. in International Finance from Wharton. He teaches finance and international finance at the University of California, Riverside, and serves as the Executive Director of International Programs at the Anderson Graduate School of Business. ********* 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 * * *