/raid1/www/Hosts/bankrupt/TCREUR_Public/160217.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, February 17, 2016, Vol. 17, No. 033
Headlines
G E R M A N Y
MAPLE BANK: German Insolvency Administrator Files Chapter 15
MAPLE BANK: Canada's Banking Regulator Seizes Control of Assets
RWE AG: Moody's Puts Ba1 Sub. Bond Rating on Review for Downgrade
I R E L A N D
ADELPHI CENTRE: Hibernia Reit Appoints Frank Nowlan as Receiver
IRELAND: Fitch Lowers Mortgage Refinance Spread Assumptions
LOMBARD STREET: Moody's Raises Rating on Class E Notes to Ba1
VIRIDIAN GROUP: Moody's Affirms B2 Rating on Sr. Sec. Notes
I T A L Y
BANCO POPOLARE: Fitch Plans to Withdraw 'BB+' Rating
N E T H E R L A N D S
LEO MESDAG: Fitch Cuts Class E Notes Rating to 'CCCsf'
R U S S I A
BANK POIDEM: DIA's Provisional Administration Functions Halted
EXPRESS-VOLGA: DIA's Provisional Administration Functions Halted
MECHEL OAO: Gazprombank to Gain Elga Project Under Debt Deal
PERVOBANK JSC: Moody's Withdraws B2 Deposit Ratings
RUSSLAVBANK JSC: Deemed Insolvent, Prov. Administration Halted
S P A I N
GAS NATURAL: Moody's Affirms Ba1 Jr. Subordinated Hybrid Rating
GRUPO ISOLUX: Fitch Cuts Long-Term Issuer Default Rating to 'B-'
VIESGO GENERACION: Moody's Affirms B1 CFR, Outlook Stable
U N I T E D K I N G D O M
ANGLO AMERICAN: Moody's Lowers Sr. Unsecured Ratings to (P)Ba3
ARBOUR CLO III: Fitch Assigns 'B-sf' Rating to Class F Notes
BLUE QUBE: Ventrolla Fears Losing Money Amid Firm's Liquidation
BRANTANO: Rescue Deal Saves Close to 1,400 Jobs
BRANTANO: 58 Scottish Stores Still at Risk Despite Rescue Deal
GEMGARTO 2015-1: Fitch Affirms 'BB-sf' Rating on Class X1 Debt
MELTON RENEWABLE: Moody's Lowers CFR to Ba3, Outlook Negative
PARAGON OFFSHORE: Case Summary & 30 Largest Unsecured Creditors
PARAGON OFFSHORE: Files in the U.S. to Cut $1.1-Bil. Debt
PARAGON OFFSHORE: Files Proposed Reorganization Plan
PARAGON OFFSHORE: Seeks Joint Administration of Cases
PARAGON OFFSHORE: Targeting June 10 Confirmation of Plan
PARAGON OFFSHORE: Wants to Use Secured Parties' Cash Collateral
PARAGON OFFSHORE: S&P Lowers CCR to 'D' on Ch. 11 Filing Plan
X X X X X X X X
* Atradius: Insolvencies Continue to Hit Global Markets in 2016
* Moody's Takes Rating Actions on 30 European Utility Groups
*********
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G E R M A N Y
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MAPLE BANK: German Insolvency Administrator Files Chapter 15
------------------------------------------------------------
Peg Brickley at The Wall Street Journal reports that a German
insolvency administrator has asked a bankruptcy court in New York
to shield the U.S. assets of Maple Bank GmbH while its affairs are
sorted.
Michael C. Frege -- michael.frege@cms-hs.com -- who has been
appointed Maple Bank's insolvency administrator in Germany, filed
a Chapter 15 bankruptcy case on Feb. 15 in the U.S. Bankruptcy
Court in New York, the Journal relates. That followed a move by
Canadian banking regulators to take control of Maple Bank's assets
in Canada to preserve them after an investigation in Germany found
what the regulators believed to be tax-law violations, the Journal
relays, citing a statement from Canada's Office of the
Superintendent of Financial Institutions.
Canada's Office of the Superintendent of Financial Institutions
took action after insolvency proceedings began in the courts of
Germany, the Journal discloses.
In early February, Germany's Federal Financial Supervisory
Authority, or BaFin, closed Maple Bank's operations in that
country, following an investigation into trading activities
involving tax years 2006 to 2010, the Journal recounts. German
authorities are seeking to hold Maple Bank liable for alleged tax
liabilities of up to EUR392 million (US$437.3 million), court
papers say, the Journal states.
In the U.S., Maple Bank's assets consist of cash held in banks in
New York, the Journal says, citing court papers filed by Charlotte
Schildt, lawyer for the insolvency administrator
Mr. Frege. Court papers do not state the amount of cash in the
U.S. bank accounts, the Journal notes.
Maple Bank GmbH is based in Frankfurt.
MAPLE BANK: Canada's Banking Regulator Seizes Control of Assets
---------------------------------------------------------------
Rita Trichur and Paul Vieira at The Wall Street Journal report
that Canada's top banking regulator announced on Feb. 15 it has
taken "permanent control" of the assets of Frankfurt-based Maple
Bank GmbH's Canadian branch.
According to the Journal, the Office of the Superintendent of
Financial Institutions, or OSFI, has also asked Canada's attorney
general to pursue a winding-up order with respect to the lender's
Canadian assets. The watchdog said it couldn't provide a
timetable as to when such an order would be granted, the Journal
notes.
OSFI, as cited by the Journal, said the added steps were taken to
protect depositors and creditors of the bank's Canadian
operations. Last week, OSFI said it was taking temporary control
of the Canadian branch's assets in light of a German investigation
into alleged tax irregularities, the Journal relays.
More than a week ago, Germany's financial watchdog BaFin
effectively closed the German unit of the bank amid an
investigation into alleged tax irregularities, the Journal
discloses. The German probe, first disclosed last September, is
centering on the tax years 2006 to 2010, the Journal recounts.
Maple Bank GmbH is based in Frankfurt.
RWE AG: Moody's Puts Ba1 Sub. Bond Rating on Review for Downgrade
-----------------------------------------------------------------
Moody's Investors Service has placed on review for downgrade the
Baa2 and (P)Baa2 senior unsecured ratings of RWE AG (RWE), and RWE
Finance B.V., its guaranteed subsidiary. Concurrently, Moody's
has placed the Ba1 subordinated debt ratings on review for
downgrade. The Prime-2 and (P)Prime-2 short term ratings of RWE
and RWE Finance BV are also placed on review for downgrade.
RATINGS RATIONALE
The rating action reflects RWEs exposure to a weakening price
environment. Forward baseload prices in Germany have declined by
more than 20% in the last three months, reflecting a decline in
commodity prices, notably coal and CO2 which dropped by 20% and
33% during the same period respectively. Current one-year forward
baseload prices of around EUR23/MWh are below Moody's estimates
published in June 2015 of a EUR30-35/MWh range over 2015.
RWE's generation fleet is primarily fixed-cost in nature, with
over half of output represented by lignite and nuclear, making it
particularly exposed to movements in wholesale power prices as
RWE's hedges roll off. Lower prices will likely result in a
further reduction in its operating cash flow.
The review will focus on the impact of lower power prices on RWE's
metrics and, in particular, consider whether the company can
achieve Moody's guidance for the current rating of at least
FFO/net debt in the upper teens and RCF/net debt in the low teens
in percentage terms over the medium term. In its assessment,
Moody's will take account of any measures that management may take
in support of the group's financial profile. The rating agency
notes that the group has indicated that its dividend payments from
fiscal 2015 onwards will be flexible and based on the
sustainability of RWE's financial condition taking into account
operating cash flows, indebtedness and earnings.
In its assessment, Moody's will further take into account RWE's
shift toward more contracted earnings through its emphasis on
growth capex in renewables and that the group will increasingly
derive a higher proportion of earnings from lower risk regulated
or contracted activities such as renewables. This trend will be
further reinforced as the group focuses its moderate capex budget
in these areas.
Finally, an important factor will also be the outcome, if known,
of the deliberations by the government-appointed nuclear
commission to consider a partial or full externalization of
funding to cover the industry's nuclear obligations, to be backed
by contributions from the generators. Moody's expects that while
a pragmatic solution is sought, key considerations will be any
potential residual exposure of the generators to the somewhat
unquantifiable risks relating to final storage, in addition to the
pace and scale of any such funding. RWE's plans to restructure
the group and release cash via an IPO of its more regulated and
contracted activities, should create additional liquidity in a
scenario of early funding requirements of these obligations.
WHAT COULD CHANGE THE RATING UP/DOWN
The ratings could be confirmed if (1) the adverse effect of the
power prices trends discussed above are sufficiently mitigated
either by measures taken by the company or positive changes in its
operating environment; or (2) any measures in relation to the
prefunding or externalization of nuclear liabilities proving
sufficient to support RWE's financial profile in line with
guidance for the current rating category.
The ratings could be downgraded if these risks are not offset by
mitigating measures that would create adequate financial headroom.
Moody's expects any downgrade as a result of the rating review to
be limited to a maximum of one notch. Moody's expects to conclude
the review within 90 days.
LIST OF AFFECTED RATINGS
Issuer: RWE AG
Senior Unsecured Regular Bond/Debenture, Placed on Review for
Downgrade, currently Baa2
Subordinated Regular Bond/Debenture, Placed on Review for
Downgrade, currently Ba1
Senior Unsecured MTN, Placed on Review for Downgrade, currently
(P)Baa2
Commercial Paper, Placed on Review for Downgrade, currently P-2
Other Short-Term, Placed on Review for Downgrade, currently
(P)P-2
Outlook, Changed To Rating Under Review From Negative
Issuer: RWE Finance B.V.
BACKED Senior Unsecured Regular Bond/Debenture, Placed on
Review for Downgrade, currently Baa2
BACKED Senior Unsecured MTN, Placed on Review for Downgrade,
currently (P)Baa2
BACKED Other Short-Term, Placed on Review for Downgrade,
currently (P)P-2
Outlook, Changed To Rating Under Review From Negative
PRINCIPAL METHODOLOGY
The methodology used in these ratings were Unregulated Utilities
and Unregulated Power Companies published in October 2014.
Headquartered in Essen, Germany, RWE AG is one of the largest
listed European utilities with core activities in electricity
generation, distribution and supply. It reported group EBITDA of
EUR7.1 billion in 2014.
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I R E L A N D
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ADELPHI CENTRE: Hibernia Reit Appoints Frank Nowlan as Receiver
---------------------------------------------------------------
Barry O'Halloran at The Irish Times reports that listed real
estate investment trust Hibernia Reit has appointed a receiver to
the Adelphi Centre in Dun Laoghaire in advance of the property's
sale.
Hibernia acquired the building when it bought a number of property
loans from Ulster Bank to developer Gerry Haughey's Dorville
group, which was also behind the Wyckham Point apartment blocks in
Dundrum, Dublin, The Irish Times relays.
According to documents just filed with the Companies' Office,
Hibernia appointed Frank Nowlan -- fnowlan@wkn.ie -- of WK Nowlan
as receiver over the Adelphi Centre on foot of the original debt
that Dorville Homes owed to Ulster Bank, The Irish Times
discloses. However, Hibernia said that it appointed Mr. Nowlan as
receiver over the common areas of the building -- the stairs and
corridors -- "to ensure the orderly transfer of these areas" to a
management company once the building is sold, The Irish Times
relates.
The company added that this is in line with best practice and that
his appointment followed the discharge of receivers over Dorville
Homes's other assets, The Irish Times notes.
IRELAND: Fitch Lowers Mortgage Refinance Spread Assumptions
-----------------------------------------------------------
Fitch Ratings has revised downward its refinancing stress
assumptions for Irish residential mortgage loans financed through
covered bonds. The 'B' rating spread level (RSL) of Irish owner-
occupied mortgages (OO) has been reduced to 325bps from 425bps and
of buy-to-let mortgages to 475bps from 575bps.
The review was triggered by the upgrade of Ireland's Issuer
Default Rating to 'A' from 'A-'.
The lower RSL reflects a notable decrease in the observed
secondary spreads of Irish RMBS, supported by the positive
macroeconomic outlook and improving financial conditions of the
Irish sovereign. Fitch has considered the current low spread
environment when assessing the sustainability of the updated RSL
for an Irish residential mortgage pool.
RSL assumptions are used to derive the stressed value of a cover
pool, should the source of covered bond payments switch to the
cover pool.
There have been no changes made to the agency's mortgage liquidity
and refinancing stress criteria addendum published on September
23, 2015.
LOMBARD STREET: Moody's Raises Rating on Class E Notes to Ba1
-------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on these notes
issued by Lombard Street CLO I P.L.C.:
EUR19.25 mil. Class B Deferrable Secured Floating Rate Notes
due 2023, Upgraded to Aaa (sf); previously on Feb 15, 2013,
Upgraded to Aa2 (sf)
EUR18.2 mil. Class C Deferrable Secured Floating Rate Notes due
2023, Upgraded to Aaa (sf); previously on Feb. 15, 2013,
Upgraded to A2 (sf)
EUR23.8 mil. Class D Deferrable Secured Floating Rate Notes due
2023, Upgraded to A2 (sf); previously on Feb. 15, 2013
Affirmed Ba1 (sf)
EUR18.375 mil. (Current balance outstanding: EUR9.9 mil.)
Class E Deferrable Secured Floating Rate Notes due 2023,
Upgraded to Ba1 (sf); previously on Feb. 15, 2013, Affirmed
Ba3 (sf)
EUR10 mil. (Current rated balance: EUR6.5 mil.) Class T
Combination Notes due 2023, Upgraded to Aaa (sf); previously
on Feb. 15, 2013, Upgraded to A1 (sf)
Moody's also affirmed the ratings on these notes issued by Lombard
Street CLO I P.L.C.:
EUR166.25 mil. (Current balance outstanding: EUR31.4 mil.)
Class A Senior Secured Floating Rate Notes due 2023, Affirmed
Aaa (sf); previously on Feb. 15, 2013, Affirmed Aaa (sf)
EUR70 mil. (Current balance outstanding: EUR19.6 mil.)
Revolving Loan Facility Notes, Affirmed Aaa (sf); previously
on Feb. 15, 2013, Affirmed Aaa (sf)
Lombard Street CLO I P.L.C., issued in December 2006, is a multi-
currency collateralized Loan Obligation backed by a portfolio of
mostly high yield European senior secured loans. The portfolio is
managed by KKR Credit Advisors (Ireland) (originally managed by
KBC Financial Products UK Limited). The transaction's
reinvestment period ended in February 2013.
RATINGS RATIONALE
The rating actions on the notes are primarily a result of the
improvement in their over-collateralization (OC) ratios since the
last payment date. On August 2015 payment date, Revolving Loan
Facility notes and Class A notes were paid by approximately
EUR67.8 million or 29% of their original aggregate balance. As a
result of this deleveraging, the OC ratios have increased.
According to the December 2015 trustee report the OC ratios of
Classes B, C, D and E are 216.40%, 171.88%, 135.45% and 124.44%
compared to 159.28%, 140.74%, 122.15% and 115.41%, respectively,
in August 2015. According to the latest trustee report dated
December 2015 the principal proceeds balance is EUR22 million
which will be used at the next payment date in February 2016 to
pay Revolving Loan Facility notes and Class A notes thus further
increasing OC ratios of the notes.
The ratings of the Combination Notes address the repayment of the
Rated Balance on or before the legal final maturity. For Class T,
the 'Rated Balance' is equal at any time to the principal amount
of the Combination Note on the Issue Date minus the aggregate of
all payments made from the Issue Date to such date, either through
interest or principal payments. The Rated Balance may not
necessarily correspond to the outstanding notional amount reported
by the trustee.
The key model inputs Moody's uses in its analysis, such as par,
weighted average rating factor, diversity score and the weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool as having a
performing par of EUR112.9 million and USD17.2 million, principal
proceeds balance of EUR20 million and USD 2.1 million, EUR6.7
million of defaulted assets, a weighted average default
probability of 20.24% (consistent with a WARF of 2,769 with a
weighted average life of 4.68 years), a weighted average recovery
rate upon default of 44.99% for a Aaa liability target rating, a
diversity score of 17 and a weighted average spread of 3.39%. The
non-Euro denominated liabilities are naturally hedged by the non-
Euro assets.
The default probability derives from the credit quality of the
collateral pool and Moody's expectation of the remaining life of
the collateral pool. The estimated average recovery rate on
future defaults is based primarily on the seniority of the assets
in the collateral pool. Moody's generally applies recovery rates
for CLO securities as published in "Moody's Approach to Rating SF
CDOs". In some cases, alternative recovery assumptions may be
considered based on the specifics of the analysis of the CLO
transaction. In each case, historical and market performance and
a collateral manager's latitude to trade collateral are also
relevant factors. Moody's incorporates these default and recovery
characteristics of the collateral pool into its cash flow model
analysis, subjecting them to stresses as a function of the target
rating of each CLO liability it is analyzing.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's
Global Approach to Rating Collateralized Loan Obligations"
published in December 2015.
Factors that would lead to an upgrade or downgrade of the ratings:
In addition to the base-case analysis, Moody's conducted
sensitivity analyses on the key parameters for the rated notes,
for which it assumed a lower weighted average recovery rate of the
portfolio. Moody's ran a model in which it lowered the weighted
average recovery rate of the portfolio by 5%; the model generated
outputs that were consistent with the base-case for senior notes
and within two notches of the base-case results for Class D and
Class E notes.
This transaction is subject to a high level of macroeconomic
uncertainty, which could negatively affect the ratings on the
note, in light of uncertainty about credit conditions in the
general economy. CLO notes' performance may also be impacted
either positively or negatively by 1) the manager's investment
strategy and behavior and 2) divergence in the legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Additional uncertainty about performance is due to:
1) Portfolio amortization: The main source of uncertainty in
this transaction is the pace of amortization of the
underlying portfolio, which can vary significantly depending
on market conditions and have a significant impact on the
notes' ratings. Amortization could accelerate as a
consequence of high loan prepayment levels or collateral
sales by the collateral manager or be delayed by an increase
in loan amend-and-extend restructurings. Fast amortization
would usually benefit the ratings of the notes beginning
with the notes having the highest prepayment priority.
2) Recovery of defaulted assets: Market value fluctuations in
trustee-reported defaulted assets and those Moody's assumes
have defaulted can result in volatility in the deal's over-
collateralization levels. Further, the timing of recoveries
and the manager's decision whether to work out or sell
defaulted assets can also result in additional uncertainty.
Moody's analyzed defaulted recoveries assuming the lower of
the market price or the recovery rate to account for
potential volatility in market prices. Recoveries higher
than Moody's expectations would have a positive impact on
the notes' ratings.
3) Around 7.33% of the collateral pool consists of debt
obligations whose credit quality Moody's has assessed by
using credit estimates. As part of its base case, Moody's
has stressed large concentrations of single obligors bearing
a credit estimate as described in "Updated Approach to the
Usage of Credit Estimates in Rated Transactions", published
in October 2009 and available at:
http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_120461
4) Long-dated assets: The presence of assets that mature beyond
the CLO's legal maturity date exposes the deal to
liquidation risk on those assets. Moody's assumes that, at
transaction maturity, the liquidation value of such an asset
will depend on the nature of the asset as well as the extent
to which the asset's maturity lags that of the liabilities.
Liquidation values higher than Moody's expectations would
have a positive impact on the notes' ratings.
5) Foreign currency exposure: The deal has significant exposure
to non-EUR denominated assets. Volatility in foreign
exchange rates will have a direct impact on interest and
principal proceeds available to the transaction, which can
affect the expected loss of rated tranches.
In addition to the quantitative factors that Moody's explicitly
modeled, qualitative factors are part of the rating committee's
considerations. These qualitative factors include the structural
protections in the transaction, its recent performance given the
market environment, the legal environment, specific documentation
features, the collateral manager's track record and the potential
for selection bias in the portfolio. All information available to
rating committees, including macroeconomic forecasts, input from
other Moody's analytical groups, market factors, and judgments
regarding the nature and severity of credit stress on the
transactions, can influence the final rating decision.
VIRIDIAN GROUP: Moody's Affirms B2 Rating on Sr. Sec. Notes
-----------------------------------------------------------
Moody's Investors Service has affirmed the B2 rating of the Senior
Secured Notes due 2020 issued by Viridian Group FundCo II Limited,
with a loss given default (LGD) assessment of LGD4. Concurrently,
Moody's has affirmed the B1 corporate family rating (CFR) and B1-
PD probability of default rating of the restricted group of
companies owned by Viridian Group Investments Limited (VGIL, and
collectively referred to as Viridian), and the Ba1 rating of the
GBP225 million guaranteed super senior revolving credit facility
with an LGD assessment of LGD1 entered into by Viridian Group
Limited. The outlook on all ratings is stable.
RATINGS RATIONALE
The affirmation follows a review by the rating agency of
Viridian's exposure to a weakening power price environment, and
reflects Viridian's relatively low exposure to commodity price
risk in the current environment and solid positioning within the
current rating category.
Power prices in the Irish Single Electricity Market (SEM) have
declined by more than 20% since the last summer, reflecting a
decline in commodity prices, notably gas and CO2 prices which
dropped 15.3% and 33.4% respectively. Current prices around
EUR40/MWh are below Moody's estimates published in June 2015 of
EUR53-58/MWh.
Moody's estimates that over two thirds of Viridian's EBITDA has
limited or no exposure to power prices. With low utilization,
revenues from the Huntstown CCGT plant (estimated around 10% of
FY2015 EBITDA) come mostly from capacity payments while in the PPA
business (10-15% of FY2015 EBITDA), Viridian is compensated if it
sells power for less than the government-set REFIT price.
Viridian remains exposed to some power price risk in relation to
its Northern Ireland-based contracts accredited under the Northern
Ireland Renewable Obligation scheme (roughly 40% of the capacity
under PPA contracts); however the share of revenues under this
scheme from the sale of renewables obligation certificates, which
Moody's estimate is in excess of 50%, is unaffected by commodity
prices.
Viridian's B1 CFR positively reflects the group's earnings
diversity across its businesses, including: generation capacity
payments, price-regulated supply in Northern Ireland, unregulated
energy supply and a portfolio of contracted wind farm output.
Exposure to a further decline in power prices is limited, and the
re-design of the Irish Single Electricity Market (SEM) due to be
implemented by the end of 2017 is expected to be positive overall
for Viridian.
However, the company's credit profile is constrained by (1) its
high level of financial leverage, which increased following the
February 2015 refinancing, (2) the expected significant short-term
increase in (mainly debt-funded) capital expenditure to grow the
portfolio of owned operational onshore wind assets; (3) the
remaining uncertainty about the future profitability of its core
businesses resulting from the re-design of the Irish SEM; (4) the
limited owned assets supporting its market activities and
concentration risk at the Huntstown site; and (5) the expected
gradual decrease in the contribution to earnings from price-
regulated businesses in Northern Ireland.
RATIONALE FOR THE STABLE OUTLOOK
The stable outlook reflects Moody's expectation that the issuer
will maintain financial metrics in line with the guidance for its
B1 CFR: FFO interest coverage ratio comfortably above 2x, FFO/ net
debt above 10%, and net debt/EBITDA trending below 4.5x by 2017.
WHAT COULD CHANGE THE RATING UP/DOWN
Given the high level of leverage and the material investment
programme, upward pressure on the ratings is unlikely to arise in
the short term. Conversely, downward pressure could arise in the
event of (1) an adverse outcome from the I-SEM review or serious
technical problems, which affected Huntstown's ability to receive
capacity payments; (2) unexpected difficulties in relation to the
onshore wind build-out including cost overruns; (3) significant
loss of market share as the supply business in Northern Ireland
remains deregulated; (4) weaker-than-expected retail margins in
the growing domestic retail business in the Republic of Ireland;
and (5) a shift in financial strategy following the possible sale
by current owners, Arcapita, such that it became materially more
equity-friendly (through enhanced dividends or investments) than
the current management plan.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Unregulated
Utilities and Unregulated Power Companies published in October
2014.
Viridian Group Investments Limited and its subsidiaries are an
integrated power utility based in Belfast and operating across the
island of Ireland. The Group generated revenue of GBP613 million
in the six months to September 2015.
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I T A L Y
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BANCO POPOLARE: Fitch Plans to Withdraw 'BB+' Rating
----------------------------------------------------
Fitch Ratings plans to withdraw the rating on Banco Popolare's
(BP) Obbligazioni Bancarie Garantite (OBG) in the next 30 days for
commercial reasons.
Fitch reserves the right in its sole discretion to withdraw or
maintain any rating at any time for any reason it deems
sufficient. Fitch believes that investors benefit from its rating
coverage and is providing approximately 30 days' notice to the
market on the withdrawal. Ratings are subject to analytical review
and can change up to the time Fitch withdraws the ratings.
Fitch rates BP's OBG at their 'BB+' rating floor, which is given
by the Issuer Default Rating (IDR) as adjusted by the IDR uplift,
for counterparty reasons. The 80.7% asset percentage (AP) that the
issuer undertakes in its quarterly test performance report
theoretically allows the OBG rating to exceed the 'BB+' rating
floor. However, in Fitch's view, provisions that apply to BP as
Italian account bank, combined with the magnitude of the exposure
towards this counterparty, which represents almost 15% of the
cover pool, prevent a recovery uplift above the 'BB+' covered
bonds rating floor.
Fitch downgraded BP's OBG rating to 'BB+' from 'BBB+', removed
them from Rating Watch Negative (RWN) and assigned a Stable
Outlook on 29 September 2015 (see 'Fitch Downgrades Banco
Popolare's OBG'). The rating actions followed the program's
amendments, which related among others to provisions applicable to
the account bank. The BP's OBG were last reviewed by Fitch on
February 11, 2016 as part of the peer review of the five OBG
programs issued by large Italian banks.
=====================
N E T H E R L A N D S
=====================
LEO MESDAG: Fitch Cuts Class E Notes Rating to 'CCCsf'
------------------------------------------------------
Fitch Ratings has downgraded Leo Mesdag B.V.'s class E notes and
affirmed the others, as follows:
EUR435.9 million class A (XS0266637171) affirmed at 'Asf';
Outlook Stable
EUR17.4 million class B (XS0266638146) affirmed at 'Asf';
Outlook Stable
EUR95.6 million class C (XS0266642171) affirmed at 'BBsf';
Outlook Stable
EUR121.1 million class D (XS0266642767) affirmed at 'Bsf';
Outlook revised to Negative from Stable
EUR69.7 million class E (XS0266644383) downgraded to 'CCCsf'
from 'Bsf'; Recovery Estimate 50%
The transaction is a securitization of a single commercial
mortgage loan secured against 53 department stores, predominantly
let to let to three major Dutch retailers: Hema, Bijenkorf and
V&D, and two car parks located throughout the Netherlands and
originated by NIBC Bank N.V.
KEY RATING DRIVERS
The downgrade of the class E notes and revision of the Outlook on
the class D notes reflects continued weakness in the Dutch retail
occupational markets (outside Amsterdam) as well as uncertain
prospects for the V&D properties, whose tenant entered bankruptcy
late last year. For the senior notes, these risks are contained by
debt repayments from past refinancing and the cash sweep flowing
sequentially. This is despite adverse selection risks associated
with the borrower's freedom to extract more equity via partial
refinancings, whereas for junior notes the disapplication of
release premiums increases risk.
With the level of incentives afforded by the loan restructuring,
Fitch considers the recent inactivity in refinancing terms in the
last 12-18 months as a signal of rising risk that the borrower
will fail to repay the EUR740 million loan at maturity in August
2016. If this plays out, it would be a negative signal about
whether market or lender appetite for properties in the pool can
support the reported LTV of 63%. However, it would also imply
lower scope for adverse selection. Fitch considers the junior
notes at risk from refinancing activity or inactivity between now
and loan maturity.
The overall loan amount has fallen by approximately EUR40 million
since the last rating action. Fitch understands that the sponsor
(IEF Capital) is in negotiations to refinance large portions of
the debt in the coming months, although this remains subject to
uncertainty. It will not be helped by the bankruptcy of V&D, the
third-largest tenant, representing 14.6% of rent. Recent media
coverage has focused on proposals by Dutch fashion retailer,
CoolCat, and Canadian retailer, Hudson's Bay, to take over the V&D
business and/or properties.
Pending resolution, non-payment of V&D rent will act as a drag on
the interest coverage ratio (ICR). The loss of the full EUR8.9m
per year will reduce the ICR to approximately 1.3x, squeezing the
level of cash sweep available. Prior to this bankruptcy, the
strong lease structure meant that net operating income (EUR53.8m),
ICR and vacancy (0.1%) were all stable.
In general, Fitch believes the property portfolio is well-located
and fit-for-purpose. There is some differentiation, with "trophy"
assets such as the Amsterdam and The Hague De Bijenkorf department
stores alongside smaller Hema and V&D stores in second tier
locations. The three main retailers are privately held, so little
information is available regarding sales performance in the
stores. Meanwhile the Dutch retail sector outside Amsterdam
continues to suffer declining rental values, which suggests a
similar trend for trading performance.
While moderately long leases of over 11 years on a weighted
average basis supports refinancing, tenant concentration presents
a risk, which will be at the forefront of property investors'
minds with the demise of V&D. Fitch estimates an LTV over 100% in
its 'Bsf' scenario, since yields are below long-term averages.
RATING SENSITIVITIES
Fitch estimates the 'Bsf' recoveries to be EUR712 million (based
on sustainable long-term value). Signs of further falls in market
rents or adverse selection on the part of the borrower in case of
partial refinancings could bring further pressure on the junior
notes. The senior notes are less exposed to rating action, also
given that upgrades above 'Asf' are not consistent with only
having three years until bond maturity in case the loan defaults.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation
to this rating action.
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.
Fitch did not undertake a review of the information provided about
the underlying asset pool ahead of the transaction's initial
closing. The subsequent performance of the transaction over the
years is consistent with the agency's expectations given the
operating environment and Fitch is therefore satisfied that the
asset pool information relied upon for its initial rating analysis
was adequately reliable.
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
===========
BANK POIDEM: DIA's Provisional Administration Functions Halted
--------------------------------------------------------------
The Bank of Russia took a decision (Order No. OD-519, dated
February 12, 2016) to terminate from February 13, 2016, the
functions of the provisional administration the state corporation
Deposit Insurance Agency performs for open joint-stock company
Commercial Bank Poidem!
Previously, the Bank of Russia, via Order No. OD-2079, dated
August 12, 2015, appointed the agency to perform the functions of
the provisional administration for the entity.
EXPRESS-VOLGA: DIA's Provisional Administration Functions Halted
----------------------------------------------------------------
The Bank of Russia took a decision (Order No. OD-517, dated
February 12, 2016) to terminate from February 13, 2016, the
functions of the provisional administration the state corporation
Deposit Insurance Agency performs for joint-stock company
Commercial Bank of Stabilisation and Cross-sectoral Development
EXPRESS-VOLGA.
The Bank of Russia previously appointed the agency to perform the
functions of the provisional administration for the entity, by
Order No. OD-2077, dated August 12, 2015.
MECHEL OAO: Gazprombank to Gain Elga Project Under Debt Deal
------------------------------------------------------------
Oksana Kobzeva and Katya Golubkova at Reuters, citing two banking
sources, report that Russia's Gazprombank will receive Mechel's
Elga coal project in exchange of paying off some of the coal and
steel company's debt to Sberbank, according to preliminary debt
restructuring deal.
The agreement is a part of a wider restructuring process,
announced by Mechel this month, which involves Sberbank,
Gazprombank, VTB and a consortium of international lenders,
Reuters notes.
According to Reuters, the restructuring process, if approved by
Mechel's shareholders next month, will mark the end of two years
of talks between the company and creditors.
"Gazprombank will buy out part of Sberbank's debt and will get the
company's assets," one of the sources told Reuters.
Mechel, majority owned by the chairman of its board Igor Zyuzin
and his family, this month announced a preliminary agreement with
its creditors to restructure US$5.1 billion in debt, about 80%of
its total debt, Reuters relates.
One of the conditions of the plan, which is to be voted on at an
extraordinary shareholders' meeting on March 4, is for Mechel's
debt to Gazprombank and VTB to be converted into roubles, lifting
the rouble share of the debt to 60 percent from 35%, Reuters
discloses.
Mechel needs to pay off US$551 million of the debt to Sberbank
this year as part of the restructuring deal, Reuters says, citing
the company's presentation.
Mechel is a Russian steel and coal producer.
PERVOBANK JSC: Moody's Withdraws B2 Deposit Ratings
---------------------------------------------------
Moody's Investors Service has withdrawn the B2/Not-Prime local and
foreign-currency deposit ratings, b3/b2 baseline credit assessment
(BCA)/Adjusted BCA and the B1(cr)/Not-Prime(cr) Counterparty Risk
Assessments of Pervobank JSC, based in Russia (Ba1 stable). At
the time of the withdrawal the bank's long-term deposit ratings
carried a positive outlook.
Moody's has withdrawn the rating for its own business reasons.
Headquartered in Samara, Russia, Pervobank JSC reported total
assets of RUB47.1 billion and total equity of RUB4.3 billion under
unaudited IFRS as of July 1, 2015.
RUSSLAVBANK JSC: Deemed Insolvent, Prov. Administration Halted
--------------------------------------------------------------
The Arbitration court of the city of Moscow entered a ruling dated
January 26, 2016, on case A40-244375/15, recognizing that credit
institution Commercial Bank Russlavbank, joint-stock company is
insolvent and ordering the appointment of a receiver for the
entity.
Accordingly, by virtue of the Arbitration Court ruling, the Bank
of Russia decided, via Order No. OD-526, dated February 15, 2016,
to terminate from February 15, 2016, the activity of the
provisional administration of Russlavbank.
The Bank of Russia previously appointed the provisional
administration of Russlavbank, via Order No. OD-3096, dated
November 10, 2015, following the revocation of the entity's
banking license.
=========
S P A I N
=========
GAS NATURAL: Moody's Affirms Ba1 Jr. Subordinated Hybrid Rating
---------------------------------------------------------------
Moody's Investors Service has affirmed the Baa2 ratings of Gas
Natural SDG, S.A. (Gas Natural Fenosa, 'the group') and its
guaranteed subsidiaries. Concurrently, Moody's has affirmed the
Baa2/Prime-2 issuer ratings of Gas Natural Fenosa, as well as the
guaranteed Baa2 and provisional (P)Baa2 ratings of Gas Natural
Capital Markets, S.A. and Gas Natural Fenosa Finance B.V. The Ba1
junior subordinated (hybrid) ratings were also affirmed. The
guaranteed Prime-2 short-term rating of Gas Natural Fenosa Finance
B.V. was also affirmed. The outlook is stable.
RATINGS RATIONALE
The rating affirmation follows a review by the rating agency of
GNF's exposure to a weakening power price environment. Power
prices in Spain have declined by 11% in the past three months,
reflecting a fall in commodity prices including coal and gas,
which dropped by about 20% over the same period. Current one year
forward baseload prices of around EUR41/MWh are below Moody's
estimates, published in June 2015, of a EUR45-50/MWh range over
2015-20.
The rating affirmation reflects GNF's limited exposure to outright
power prices, strong contribution from regulated earnings and
moderately flexible financial profile for the rating category.
GNF generates around 19% of EBITDA from generation. However, GNF
has limited exposure to outright power (around 22% of output), as
the majority of its generation portfolio in Spain is linked to
gas, and coal to a more limited extent. The majority - 86% - of
its international generation is under long-term power purchase
agreements in Mexico. The company has some moderate exposure to
renewables.
The affirmation reflects GNF's moderately flexible financial
profile, as reflected in the recent preliminary 2015 results.
Moody's estimates that the company's FFO/net debt is around 20%
and RCF/net debt of 14% against guidelines of FFO/net debt in the
high teens to low twenties and RCF/net debt in the mid-teens for
the current rating category. The company was free-cash-flow
positive.
The rating affirmation further reflects GNF's high proportion of
EBITDA from regulated and contracted earnings in 2015: Regulated
gas and electricity networks contribute around 49% of EBITDA, of
which a further 9% is from the largely regulated Chilean CGE,
whilst gas infrastructure assets contribute 5%. This strong
proportion of fairly stable earnings is supportive of the group's
business and financial profile and EBITDA rose by 8.6% to
EUR5.6 billion in 2015, which included the full year's
contribution from CGE.
However, the group retains exposure to higher risk international
gas procurement and supply contracts, which represent 15% of
EBITDA in 2015. Rapidly rising international gas supply volumes
and low worldwide commodity prices have maintained pressure on
margins, resulting in a 13% fall in EBITDA in this segment over
the period. Despite the diversification by geography and
commodity indexation of its procurement contracts which are linked
to its supply markets, GNF has a fairly high sensitivity to oil
prices in its LNG portfolio and gas oversupply is expected to
maintain pressure on margins.
The ratings also factor in (1) a still fragile macroeconomic
situation in Spain (Baa2 positive) and (2) higher foreign-currency
risks in LatAm operations which are partially mitigated by index-
linked distribution tariffs in certain countries in LatAm, funding
in local currencies and other risk management techniques.
The company has deferred updating its 2016-19 strategic plan to Q2
2016, in order to take account of the volatile market environment.
Moody's expects that the company will continue to balance (1) the
pressures on cash flows as a result of the current environment,
(2) possible growth opportunities in LatAm in increasing gas
penetration, and growing its presence in distribution and
generation; and (3) dividend expectations, whilst seeking to
protect its credit profile.
RATING OUTLOOK
The stable rating outlook reflects Moody's expectation that Gas
Natural Fenosa will continue to maintain a financial profile
consistent with a Baa2 rating, with FFO/net debt in the high teens
to low twenties, RCF/net debt in the mid-teens and FFO/net
interest cover of more than 4x.
WHAT COULD CHANGE THE RATING UP/DOWN
Given the challenging business environment, Moody's sees limited
prospects of positive pressure developing on the rating.
Nonetheless, positive pressure could develop, assuming that GNF
could demonstrate a stable business profile and strengthen its
financial standing, with sustainable credit metrics of FFO/net
debt comfortably in the twenties in percentage terms; RCF/net debt
in the upper teens in percentage terms, and FFO interest cover of
more than 4.5x.
Conversely, negative pressure could develop on Gas Natural
Fenosa's ratings in the event of pressure on earnings as a result
of the difficult commodity and currency environment within core
markets that was not offset by corporate measures such that credit
metrics appeared likely to deteriorate, trending to FFO/net debt
in the mid teens and RCF/net debt in the low double digits/low
teens and below.
LIST OF AFFECTED RATINGS
Affirmations:
Issuer: Gas Natural SDG, S.A.
LT Issuer Rating, Affirmed Baa2
ST Issuer Rating, Affirmed P-2
Outlook, Remains Stable
Issuer: Gas Natural Capital Markets, S.A.
BACKED Senior Unsecured Regular Bond/Debenture, Affirmed Baa2
BACKED Senior Unsecured MTN, Affirmed (P)Baa2
Outlook, Remains Stable
Issuer: Gas Natural Fenosa Finance B.V.
BACKED Senior Unsecured Regular Bond/Debenture, Affirmed Baa2
BACKED Junior Subordinated Regular Bond/Debenture, Affirmed Ba1
BACKED Senior Unsecured MTN, Affirmed (P)Baa2
BACKED Commercial Paper, Affirmed P-2
Outlook, Remains Stable
Gas Natural SDG, S.A. is one of the three major players in the
Iberian power and gas markets. It ranks as the leading gas supply
company and third in power generation. It has 14.8 GW of
installed capacity worldwide. Following its acquisition of the
Chilean Compania General de Electricidad, S.A. (CGE) in November
2014, the group has 6.8 million gas connections and 3.1 million
electricity connections in Latin America (LatAm) and is the
leading gas distributor. As at FYE 2015, it had net sales of
EUR26 billion.
GRUPO ISOLUX: Fitch Cuts Long-Term Issuer Default Rating to 'B-'
----------------------------------------------------------------
Fitch Ratings has downgraded Spanish engineering and construction
(E&C) group Grupo Isolux Corsan, S.A.'s (Isolux) Long-term Issuer
Default Rating (IDR) to 'B-' from 'B' and its senior unsecured
debt rating to 'B-'/'RR4' from 'B'/'RR4'. Fitch maintains Isolux's
IDR and senior unsecured debt ratings, including that on Grupo
Isolux Corsan Finance B.V.'s EUR850 million guaranteed bond, on
Rating Watch Negative (RWN).
The rating actions reflect delays in receiving disposal proceeds
(no announcement of completion of disposals yet), a tightening in
liquidity as the group operates through 1Q and 2Q, which
historically have been periods of working-capital outflow, and the
likely rating of the remaining E&C-weighted group after planned
debt reduction. Fitch expects to resolve the RWN when the group's
liquidity profile becomes more robust.
KEY RATING DRIVERS
No Material Progress on Disposals
The company has not announced any final agreement on the disposal
of T-Solar or the transmission line concessions in Brazil.
However, Isolux refinanced the debt at the T-Solar level, which
could make a disposal easier. Nonetheless, we previously assumed
Isolux would have made some meaningful progress on the disposal by
early 1Q16.
Liquidity Still a Concern
Isolux now enters the least favorable part of its working-capital
cycle (1Q and 2Q) without having sold assets. It has experienced
working-capital outflows close to EUR150 million during 1H in
previous years. We also note the recent Brazilian subsidiaries'
scheme of arrangement and are concerned by the impact it may have
on perceptions of the company. The potential impact of a peer,
Abengoa, and its recent court protection and ongoing debt
restructuring hangs over the wider Spanish E&C sector.
Proceeds' Likely Destination Is Bank Debt
Fitch understands that the proceeds from an asset sale are likely
to be used to repay bank debt. A successful sale of the concession
assets, although positive from an IDR perspective, could
negatively affect recovery expectations for 2021 bondholders due
to the group's resulting reduced asset base.
FY15 Results
Fitch expects the group to announce its 2015 results in March this
year.
KEY ASSUMPTIONS
Isolux will sell relevant assets by end-2Q16 to repay bank debt.
Other bank, factoring and confirming funding facilities will be
rolled over as required.
Creditors will waive the end-December 2015 bank covenant (leverage
of 3.75x) if it is breached.
The E&C activity will not experience disruptive working-capital
payment terms.
RATING SENSITIVITIES
Positive: Developments that could lead to positive rating action,
including the resolution of the RWN, are:
-- Disposal of assets and improvement of the underlying
profitability of the E&C business.
-- Improvement in liquidity.
Negative: Developments that could lead to a negative rating action
include:
-- Deterioration in Isolux's liquidity as a result of working-
capital outflows or material project losses.
-- Breach of financial covenants.
-- Failure to deliver on the asset disposal program.
-- Reputational damage affecting the sustainability of the E&C
business.
LIQUIDITY
Liquidity Challenges
Liquidity appears tight and is entering a period of working-
capital cash outflows. Fitch expects disposal of assets to support
debt reduction plans.
FULL LIST OF RATING ACTIONS
Grupo Isolux Corsan, S.A.
-- Long-term IDR downgraded to 'B-' from 'B'; on RWN
-- Senior unsecured debt rating downgraded to 'B-'/'RR4' from
'B'/'RR4'; on RWN
-- Short-term IDR affirmed at 'B'
Grupo Isolux Corsan Finance, B.V.
-- Senior unsecured debt rating downgraded to 'B-'/'RR4'; from
'B'/'RR4'; on RWN
VIESGO GENERACION: Moody's Affirms B1 CFR, Outlook Stable
---------------------------------------------------------
Moody's Investors Service has affirmed the B1 corporate family and
debt ratings, and the B1-PD probability of default rating (PDR) of
Viesgo Generacion S.L. The rating outlook is stable.
RATINGS RATIONALE
The rating affirmation follows a review by the rating agency of
Viesgo's exposure to a weakening power price environment. Power
prices in Spain have declined by 11% in the past three months,
reflecting a fall in commodity prices, including coal and gas
which dropped by about 20% over the same period. Current one-year
forward baseload prices of around EUR41/MWh are below Moody's
estimates published in June 2015 of a EUR45-50/MWh range over
2015-20.
The affirmation reflects Viesgo's generation mix and hedging
strategy, which the rating agency expects to mitigate the effects
on earnings of lower power prices. It also factors in the faster-
than-expected progress on deleveraging, which should allow the
company to absorb the negative impact of a prolonged period of low
power prices, and maintain a leverage profile consistent with
Moody's guidance for the B1 rating.
The B1 rating factors in that as a merchant power generator,
Viesgo's exposure to lower power prices is mitigated by the nature
of its assets, which include the 361MW pumped storage plant at
Aguayo, and its hedging strategy, which sells forward planned
thermal output and most of its hydro output. Nevertheless Moody's
estimates that, as hedges roll off in the medium term, lower power
prices will result in lower operating cashflow of between EUR7-10
million from fixed cost hydro output (approximately 1TWh).
The rating affirmation reflects that lower earnings will be offset
by the faster-than-expected progress made by the company on
deleveraging during 2015 thanks to a good operating performance,
and monetization of regulatory receivables. Moody's estimates
that cash holdings at end-2015 were above EUR100 million following
good cash flow generation during the second half of the year.
Moody's expects therefore that the company will continue to reduce
leverage as planned and improve gradually it financial risk
profile in the medium term.
Viesgo's B1 rating continues to be supported by (1) the company's
generation mix; (2) an improving macro and regulatory environment
in Spain, which should underpin power demand and lower regulatory
risk; and (3) shareholders' targeted deleveraging within a
reasonably short timeframe. The rating remains constrained by (1)
the company's small scale and concentration risk which in our view
exposes profitability to output and power price risk; (2) the
significant contribution from ancillary services which remain
exposed to changes in market conditions and regulatory "re-think";
(3) execution risk with respect to capital investment, as well as
the decommissioning of certain plants; and (4) high initial
indebtedness and some residual uncertainty around the timing of
the monetisation of its remaining regulatory receivables, which
combined with potential volatility of Viesgo's earnings could
delay planned deleveraging.
RATIONALE FOR STABLE OUTLOOK
The rating outlook is stable, reflecting Moody's expectation that
the business will de-lever gradually over 2015-16, with FFO/gross
debt strengthening to 20% in 2016.
WHAT COULD MOVE THE RATING UP/DOWN
The rating could be raised following a track record of operational
delivery, monetization of receivables and a reduction of leverage
with FFO/debt sustainably in the mid-20s in percentage terms.
Conversely, downward pressure could arise if the group were to
deleverage more slowly than expected whether because of
operational underperformance, or slower than planned monetization
of receivables and inventories -- such that FFO/debt was to be in
the low double digits to mid-teens.
PRINCIPAL METHODOLOGY
The methodology used in these ratings was Unregulated Utilities
and Unregulated Power Companies published in October 2014.
LIST OF AFFECTED RATINGS
Issuer: VIESGO Generacion S.L.
Affirmations:
Probability of Default Rating, Affirmed B1-PD
LT Corporate Family Rating, Affirmed B1
Senior Secured Bank Credit Facility , Affirmed B1
Outlook, Remains Stable
Headquartered in Madrid, Spain, Viesgo Generacion S.L. owns and
operates power plants with a gross installed capacity of 3.3GW in
Spain.
===========================
U N I T E D K I N G D O M
===========================
ANGLO AMERICAN: Moody's Lowers Sr. Unsecured Ratings to (P)Ba3
--------------------------------------------------------------
Moody's Investors Service has downgraded the senior unsecured
ratings of Anglo American plc (AAL or the company) and its
subsidiaries to (P)Ba3 from (P)Baa3 and converted the company's
Baa3 long-term issuer rating into a Ba3 corporate family rating
(CFR), in line with the rating agency's practice for corporates
with non-investment-grade ratings.
Concurrently, the rating agency downgraded the rated senior
unsecured guaranteed debt instruments at Anglo American Capital
Plc to Ba3 from Baa3, AAL's short-term ratings to (P)NP from (P)P-
3 and the company's national scale ratings to Baa2.za/P-2.za from
A3.za/P-1.za.
At the same time, Moody's assigned a Ba3-PD probability of default
rating (PDR) to AAL. The outlook on all ratings is negative.
This rating action concludes the review for downgrade process
initiated by Moody's on Dec. 10, 2015.
RATINGS RATIONALE
The downgrade of AAL's ratings to Ba3 from Baa3 primarily reflects
Moody's assessment that the company now faces a higher business
risk due to deterioration in commodities market conditions and a
longer and more uncertain deleveraging period than previously
expected.
Moody's assessment of a higher business risk reflects concerns
over the potential for a further deterioration in AAL's bulk
commodities portfolio, particularly in iron ore, amid low
commodity prices. AAL has a large portfolio of bulk commodities
assets, including iron ore, where it is implementing further cuts
to unit costs in 2016 to support at least a free cash flow neutral
position. In response to falling prices, in December 2015 Anglo
American announced the broad restructuring initiative that is
expected to result in a material downsizing of its production
portfolio and reorganization of the existing activities over the
next few years. The downgrade to Ba3 rating incorporates high
execution risk associated with this restructuring plan as
challenging market conditions are likely to slow the pace of the
portfolio transformation.
The downgrade also reflects a significant deterioration in AAL's
debt capacity and its debt protection metrics that occurred in
2015. The leverage increased as a result of the precipitous drop
in prices for AAL's key commodities, with current spot prices
below the company's average realized prices in 2015. Moody's
estimates AAL's leverage, as measured by Moody's adjusted gross
debt/EBITDA ratio, to be around 4.2x in 2015 (versus 2.6x in 2014
and 3.3x LTM 1H 2015), after the projected decline in AAL's
adjusted EBITDA of around 35% in 2015.
Moody's expects that weak production currencies, including the
South African Rand and Brazilian Real, will continue to cushion
AAL's profitability. However, assuming relatively stable earnings
in 2016-17 based on Moody's current base case price assumptions
for AAL's key commodities, the rating agency does not expect AAL
to generate sufficient operating cash flows to deliver substantial
organic debt reduction in the next two years. The price declines
also offset the management team's success in driving costs down
since 2013, and the company targets to deliver $2.1 billion in
further savings over the next two years.
Moody's notes that AAL is working on plans to reduce debt as part
of the restructuring plan and indicated it may consider
divestments to help reduce debt in the near term. Pending further
announcements by the company, the rating agency believes that
divestments of non-core assets would be difficult to execute in
the current environment, particularly at valuations to allow
deleveraging from the current level. While Moody's recognizes
that AAL retains a number of options to raise capital and to
accelerate debt reduction, the rating agency considers the
deleveraging prospects to be uncertain and does not factor future
divestments into its base case assessment.
Finally, the downgrade of AAL's ratings reflects Moody's view that
the current environment is not a normal cyclical downturn, but a
fundamental shift in the operating environment for the global
mining sector. The Ba3 rating therefore takes into account the
ongoing wholesale recalibration of Moody's ratings in the mining
industry initiated earlier this year. With the downturn likely to
be deeper and longer than previously anticipated, the rating
agency believes that price risk remains to the downside, given
global economic uncertainties and slowing growth in China.
LIQUIDITY POSITION
The Ba3/Ba3-PD ratings recognize that AAL maintains a defensive
cash balance, estimated at close to $7 billion at the end of 2015.
The group also has around $7.9 billion of funds available under
its committed credit facilities (as reported at end-H1 2015),
which includes unguaranteed bi-lateral facilities at its South
African subsidiaries that have financial covenants. The rating
assumes that the group will continue to manage its bank
relationships effectively.
Moody's expects that AAL will maintain sufficient resources-at-
hand to meet its near-term bond and bank maturities in December
2015, AAL said it targets $2 billion in divestment proceeds in
2016 that will add to cash balances, if executed, and will help to
cover costs of the forthcoming restructuring.
RATIONALE FOR NEGATIVE OUTLOOK
The negative outlook reflects uncertainty with respect to AAL's
ability to execute on the restructuring and to substantively
reduce debt and strengthen its balance sheet. The outlook also
captures the risk of further price compression in iron ore,
copper, platinum or a delayed recovery in the diamonds market
beyond 2016-17.
STRUCTURAL CONSIDERATIONS
AAL has a complex multi-layer organizational structure. The
Ba3/Ba3-PD corporate family ratings are assigned at the level of
AAL, the group's top holding company (UK domiciled). AAL
indirectly holds majority stakes at various production companies
in different jurisdictions, including without limitation South
Africa, Chile and Australia.
The group issues bonds at the level of Anglo American Capital Plc,
a subsidiary of AAL. The bonds are issued on senior unsecured
basis and benefit from the senior unsecured guarantee from the top
holding company.
The group also maintains significant long-term and working capital
senior unsecured loans, as well as trade payables obligations, at
the level of operating companies, including in South Africa and
Brazil. Moody's views the current capital structure as
transitional, given the stated intent to reduce debt as part of
the ongoing operating restructuring.
WHAT COULD CHANGE THE RATING DOWN/UP
The rating could be downgraded if the company's leverage, as
measured by Moody's adjusted debt/EBITDA, were to remain above 4x.
The rating could also be downgraded if the company's liquidity
profile were to meaningfully contract, as Moody's expects AAL to
use cash balances and/or bank facilities to repay its maturing
obligations.
An upgrade would require the company to demonstrate successful
progress in its restructuring program and sustained solid
performance as AAL is reshaping its portfolio. A delivery beyond
current expectations on the restructuring, strong liquidity,
positive free cash flow generation and reduced leverage, with
Moody's adjusted debt/EBITDA maintained below 3.5x, would put
positive pressure on the ratings.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Global Mining
Industry published in August 2014.
LIST OF AFFECTED RATINGS
Downgrades:
Issuer: Anglo American Capital Plc
Backed Senior Unsecured Commercial Paper, Downgraded to NP from
P-3
Backed Senior Unsecured Medium-Term Note Program, Downgraded to
(P)Ba3 from (P)Baa3
Backed Senior Unsecured Medium-Term Note Program, Downgraded to
(P)NP from (P)P-3
Backed Senior Unsecured Regular Bond/Debenture, Downgraded to
Ba3 from Baa3
Senior Unsecured Regular Bond/Debenture, Downgraded to Ba3 from
Baa3
Issuer: Anglo American plc
Senior Unsecured Medium-Term Note Program, Downgraded to (P)Ba3
from (P)Baa3
Senior Unsecured Medium-Term Note Program, Downgraded to (P)NP
from (P)P-3
Issuer: Anglo American SA Finance Limited
Backed Senior Unsecured Medium-Term Note Program, Downgraded to
Baa2.za from A3.za
Backed Senior Unsecured Medium-Term Note Program, Downgraded to
P-2.za from P-1.za
Backed Senior Unsecured Regular Bond/Debenture, Downgraded to
Baa2.za from A3.za
Assignments:
Issuer: Anglo American plc
Corporate Family Rating, Assigned Ba3
Probability of Default Rating, Assigned Ba3-PD
Withdrawals:
Issuer: Anglo American plc
Issuer Rating, Withdrawn , previously rated Baa3
Issuer Rating, Withdrawn , previously rated P-3
Outlook Actions:
Issuer: Anglo American Capital Plc
Outlook, Changed To Negative From Rating Under Review
Issuer: Anglo American plc
Outlook, Changed To Negative From Rating Under Review
Issuer: Anglo American SA Finance Limited
Outlook, Changed To Negative From Rating Under Review
ARBOUR CLO III: Fitch Assigns 'B-sf' Rating to Class F Notes
------------------------------------------------------------
Fitch Ratings has assigned Arbour CLO III Limited notes final
ratings, as follows:
Class A-1: 'AAAsf'; Outlook Stable
Class A-2: 'AAAsf'; Outlook Stable
Class B-1: 'AAsf'; Outlook Stable
Class B-2: 'AAsf'; Outlook Stable
Class C: 'Asf'; Outlook Stable
Class D: 'BBBsf'; Outlook Stable
Class E: 'BBsf'; Outlook Stable
Class F: 'B-sf'; Outlook Stable
Subordinated notes: not rated
Arbour CLO III Limited is an arbitrage cash flow collateralized
loan obligation (CLO). Net proceeds from the issuance of the notes
will be used to purchase a EUR400m portfolio of European leveraged
loans and bonds. The portfolio is managed by Oaktree Capital
Management (UK) LLP. The transaction features a four-year
reinvestment period.
KEY RATING DRIVERS
'B'/'B+' Portfolio Credit Quality
Fitch places the average credit quality of obligors in the
'B'/'B+' range. The agency has public ratings or credit opinions
on all but two of the obligors in the identified portfolio. The
weighted average rating factor of the identified portfolio is
30.6.
High Recovery Expectations
At least 90% of the portfolio comprises senior secured
obligations. Fitch has assigned Recovery Ratings to all but two
assets in the identified portfolio. The covenanted minimum Fitch
weighted average recovery rate (WARR) for assigning the final
ratings is 69.5%. The WARR of the indicative portfolio is 75.4%.
Diversified Portfolio
The transaction contains a covenant that limits the top 10
obligors to either 21% or 23% of the portfolio balance depending
on the matrix point selected by the investment manager. In
addition portfolio profile tests limit exposure to the top Fitch
industry to 20% and the top three Fitch industries to 40%. This
ensures that the asset portfolio is not exposed to excessive
obligor concentration.
Partial Interest Rate Hedge
Between 5% and 15% of the portfolio may be invested in fixed rate
assets, while fixed rate liabilities account for 8.75% of the
target par amount. The collateral manager will not be able to buy
floating rate assets while the test is below 5%.
Limited FX Risk
The transaction is allowed to invest in non-euro-denominated
assets, provided these are hedged with perfect asset swaps within
six months of purchase. Unhedged non-euro assets may not exceed
2.5% of the portfolio at any time and can only be included if at
the trade date of such assets the portfolio balance is above the
target par amount when their principal balance converted into euro
at spot rate are subject to a haircut of 50%.
Documentation Amendments
The transaction documents may be amended subject to rating agency
confirmation or noteholder approval. Where rating agency
confirmation relates to risk factors, Fitch will analyze the
proposed change and may provide a rating action commentary if the
change has a negative impact on the ratings. Such amendments may
delay the repayment of the notes as long as Fitch's analysis
confirms the expected repayment of principal at the legal final
maturity.
If in the agency's opinion the amendment is risk-neutral from a
rating perspective Fitch may decline to comment. Noteholders
should be aware that the structure considers the confirmation to
be given if Fitch declines to comment.
RATING SENSITIVITIES
A 25% increase in the expected obligor default probability would
lead to a downgrade of up to three notches for the rated notes. A
25% reduction in expected recovery rates would lead to a downgrade
of up to four notches for the rated notes.
DUE DILIGENCE USAGE
All but two of the underlying assets have ratings or credit
opinions from Fitch. Fitch has relied on the practices of the
relevant Fitch groups to assess the asset portfolio information.
Overall, Fitch's assessment of the asset pool information relied
upon for the agency's rating analysis according to its applicable
rating methodologies indicates that it is adequately reliable.
BLUE QUBE: Ventrolla Fears Losing Money Amid Firm's Liquidation
---------------------------------------------------------------
Henley Standard reports that a Henley trader stands to lose
GBP17,500 after a building firm went into liquidation.
Ventrolla, of Newtown Road, carried out GBP9,200 worth of
restoration work at the former magistrates' court building in
Northfield End, Henley, which is being converted into seven flats,
and a further GBP8,300 on a scheme in Twyford, according to Henley
Standard.
The company, which repairs and replaces sash windows, was hired
for both projects by Bracknell firm Blue Qube Construction, the
report notes.
It said it has spent the past three months chasing payments and
now fears it may never see the money after the liquidation was
announced, the report relates.
Manager Ian Maguire, who was married at the premises when it
housed the town's register office, said his firm spent several
months on and off at the site last year, the report discloses.
They fixed or exchanged every window on the three-storey, Grade II
listed building. Mr. Maguire said: "We kept asking for the money
but they told us we'd get it once they'd been paid by other
creditors, which started ringing alarm bells, the report notes.
"We've contacted the liquidators but we're bound to be a long way
down their list of creditors and probably won't see anything.
There was never anyone on site at the same time as us so I don't
know who else might be affected locally but there must be others,"
Mr. Maguire said.
"When I carried out the work, I paid my suppliers and laborers
upfront but it looks like that's just dead money now. We'll get
through it but it's going to be very, very tight as it puts more
pressure on us to pay our own creditors. I know these things are
unavoidable but it's very annoying," Mr. Maguire added.
"I was really proud to get that contract because I got married
there but now it's all turned sour," Mr. Maguire said.
Stanley Carter, of Fair Mile, Henley, who owns the building, said
the conversion was almost three-quarters finished when Blue Qube
made the announcement, the report notes.
Mr. Carter said he paid the company everything it was owed, often
in advance, and any sub-contractors should contact the liquidator.
He is now in talks with other companies about finishing the work,
the report relays.
The report discloses that Mr. Carter said: "It's very sad and I
accept that it's difficult for anyone who was working for Blue
Qube. The contract was properly placed and tendered and we found
the project was very well-managed.
"We are now trying to pick up the pieces as best we can. It will
delay the work and we don't know when it will be completed but
we're making every effort to get it back on track," Mr. Carter
added.
Blue Qube could not be reached for comment and its liquidator CVR
Global did not respond.
BRANTANO: Rescue Deal Saves Close to 1,400 Jobs
-----------------------------------------------
The Telegraph reports that Brantano, the shoe retailer, has been
bought out of administration by its former owner, investment firm
Alteri, rescuing 1,372 jobs.
Alteri, an investment firm that specializes in retail turnarounds,
bought the shoe maker in October last year, according to The
Telegraph. Just four months later, it called in administrators at
PricewaterhouseCoopers after difficult Christmas trading.
At the time, administrator Tony Barrell -- tony.barrell@uk.pwc.com
-- said Brantano had been "hit hard by the change in consumers'
shopping habits and the evolution of the UK retail environment,"
the reports discloses.
Alteri paid GBP12 million for the business in October along with
better-known chain Jones Bootmaker from Dutch retail group
Macintosh, the report notes. However, Jones, which first opened
in 1857, was unaffected by Brantano's troubles, the report relays.
Alteri has now bought 81 Brantano stores and 59 concessions, a
total 140 shops, out of the 200 shops from the administrators.
As a result, there are still 628 jobs at risk, the report
discloses.
Property agents at GCW have been instructed to find a buyer for
the remaining 57 stores and one concession, considered to be the
worst performing stores, the report says. It is understood GCW is
keen to find a buyer before the next quarterly rent payment falls
due in April, the report discloses.
Buyers are likely to include discounters, such as B&M Bargains and
Poundland. Aldi and Lidl may also look at the stores if there is
suitable planning consent for the sale of groceries, the report
relays.
Brantano shops are mainly located in out-of-town retail parks.
"Following the acquisition of Jones and Brantano in October last
year, and a subsequent review of Brantano, it was clear that the
business required fundamental restructuring", said Gavin George,
Alteri chief executive, the report notes.
"Every action possible was taken to restructure the business on a
solvent basis including extensive renegotiations with landlords",
said Mr. George, the report discloses.
"Unfortunately the landlords were unable to revise their terms to
a viable level, and with the additional complexity brought on by
the insolvency of previous parent company Macintosh Retail Group,
administration was the only route available. The restructured
business is well placed for future development as an out of town,
family footwear specialist and both Jones and Brantano are now
able to move forward on a solid financial and strategic footing,"
Mr. George added.
BRANTANO: 58 Scottish Stores Still at Risk Despite Rescue Deal
--------------------------------------------------------------
Brechin Advertiser reports that a number of Scottish branches of
Brantano remain at risk of closure, despite a rescue deal being
agreed.
The deal -- which saw investment company Alteri buy 81 shops and
59 small concessions -- will see almost 1400 jobs saved, Brechin
Advertiser says.
However, it does not extend to a further 58 stores, including
those in Glenrothes, Lanark, Linlithgow, Coatbridge, Partick,
Aberdeen, Clydebank, Ayr, Wishaw, Dumfries, Irvine and Kilmarnock,
meaning that 600 people still risk losing their jobs, Brechin
Advertiser notes.
Administrators PricewaterhouseCoopers have been running the
remaining Brantano stores while a buyer was sought and had said
that redundancies would be "inevitable" if a buyer was not found,
Brechin Advertiser relates.
In the end, it was Alteri -- the firm which owned Brantano and
which originally put it into administration -- whose offer was,
according to Robert Moran -- robert.j.moran@uk.pwc.com -- of PwC,
the "best outcome for creditors and employees", Brechin Advertiser
relays.
Brantano is a shoe retailer.
GEMGARTO 2015-1: Fitch Affirms 'BB-sf' Rating on Class X1 Debt
--------------------------------------------------------------
Fitch Ratings has affirmed Gemgarto 2015-1 and removed the class B
to X1 notes from Rating Watch Positive.
The transaction is a securitization of near-prime mortgages,
originated by Kensington Mortgage Company (KMC; RSS2+) and
serviced by Homeloan Management Ltd (HML; RPS1-/RSS2+).
The affirmation and removal from RWP follow a review of the
structure and reflect current credit enhancement (CE) and
performance to date.
KEY RATING DRIVERS
Near-Prime Origination
KMC extends loans to borrowers with one-off adverse credit events
and has underwriting criteria that are relatively stricter than
the broader non-conforming market. Therefore, while the non-
conforming criteria applies, Fitch has taken into account the
originator's relatively tighter underwriting standards by applying
a beneficial underwriting adjustment to the foreclosure frequency.
Payment Interruption Risk Mitigated
Fitch has tested the ability of the structure to withstand the
loss of the servicer. The agency acknowledges that Acenden (RPS2+)
will likely take over servicing the loans from HML in the next 12
months. The strong business relationship between Acenden and KMC,
which are owned by the same partnership, greatly mitigates the
risk of an interruption of notes' payments as a back-up servicer
is already in place for all practical purposes. Nevertheless, the
agency tested the support offered by the liquidity reserve over
two interest payment dates. The liquidity available to the
structure is deemed sufficient to guarantee timely payments of
senior expenses and interest due on the class A and B notes, under
a stressed interest rate environment.
Commingling Risk
The collection account bank, Barclays Bank plc (A/Stable/F1), must
be replaced if its rating falls below 'BBB+'/'F2'. According to
Fitch's criteria, the replacement language at 'BBB+'/'F2',
combined with a concentration of borrowers' payments at the start
of the month, results in a material risk of commingling for
structured finance notes rated above the 'Asf' category. The
agency assumed a commingling loss equal to one month of interest
and principal collections and reduced the credit enhancement (CE)
available to the class A and B notes. The structure was resilient
to the reduction in CE and the stress did not have a material
impact on the rating outcome.
In sizing the commingling risk, Fitch assumed a prepayment rate at
a more conservative level of 20% (in line with UK transactions
originated since 2012), rather than the high level (between 30-
40%) currently observed in the transaction as borrowers refinance
at the end of their fixed rate period.
Increasing CE on Mezzanine Tranches
The portion of the reserve fund providing credit support is
currently minimal as the majority of the fund is dedicated towards
liquidity coverage for the class A and B notes. However, as the
class A and B notes amortize, part of the excess liquidity reserve
will be transferred to the non-liquidity reserve fund that
provides protection against credit losses. Consequently, Fitch
expects the mezzanine tranche's CE to increase from its current
low level as the senior notes amortize.
Excess Spread and Basis Risk
Payments on the class X1 notes are made solely through excess
spread receipts. There is basis risk arising from the delay
between LIBOR reset on the loans and on the notes. The excess
spread has been adjusted to reflect this risk and was found to
have no impact on the ratings.
RATING SENSITIVITIES
Asset performance, particularly with a large portion of loans
reverting to floating rate, is exposed to interest rate risk
(given that rates are currently at historical lows).
Adverse macroeconomic conditions may have a negative impact on
asset performance and lead to negative rating action.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation
to this rating action.
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.
Prior to the transaction closing, Fitch reviewed the results of a
third party assessment conducted on the asset portfolio
information, which indicated no adverse findings material to the
rating analysis.
Prior to the transactions closing, Fitch conducted a review of a
small targeted sample of Kensington's origination files and found
the information contained in the reviewed files to be adequately
consistent with the originator's policies and practices and the
other information provided to the agency about the asset
portfolio.
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.
The rating actions are as follows:
Class A (ISIN XS1236650666) affirmed at 'AAAsf'; Outlook Stable
Class B (ISIN XS1236651714) affirmed at 'AAsf'; Outlook Stable;
off Rating Watch Positive (RWP)
Class C (ISIN XS1236652282) affirmed at 'Asf'; Outlook Stable;
off RWP
Class D (ISIN XS1236652522) affirmed at 'BBBsf'; Outlook Stable;
off RWP
Class X1 (ISIN XS1236657240) affirmed at 'BB-sf'; Outlook
Stable; off RWP
MELTON RENEWABLE: Moody's Lowers CFR to Ba3, Outlook Negative
-------------------------------------------------------------
Moody's Investors Service has downgraded to Ba3 from Ba2 the
corporate family rating of Melton Renewable Energy UK PLC.
Concurrently, Moody's has downgraded Melton's probability of
default rating (PDR) to Ba2-PD from Ba1-PD. Finally, Moody's has
downgraded to Ba3 from Ba2 the rating on Melton's GBP171 million
of outstanding senior secured notes due 2020. The LGD assessment
for the notes is unchanged at LGD 5. The outlook remains negative
on all ratings.
RATINGS RATIONALE
The ratings downgrade follows a review by the rating agency of
Melton's exposure to a weakening power price environment and
reflects Moody's expectation that Melton's metrics will weaken
significantly from current levels over the 2016/17 to 2018/19
period.
Power prices in the UK have declined by 9.1% in the last three
months, reflecting a decline in commodity prices, notably gas and
CO2 prices which dropped 15.3% and 33.4% respectively. Current
one-year forward baseload prices of around GBP35/MWh are below
Moody's estimates published in June 2015 of GBP42-46/MWh.
Market exposed power generation accounted for 41% of Melton's
revenue in FY2015. Its generation fleet is mainly fixed cost in
nature; biomass accounts for around 64% of installed capacity and
landfill gas 36% (both at 30 September 2015), making it
particularly exposed to movements in wholesale power prices. The
fall in power prices, in the context of the fixed cost generation,
accentuates the permanent loss, since August 2015, of additional
revenue from the sale of levy exemption certificates, which
provided over GBP4/MWh of output in recent years. Furthermore, as
Melton's fixed electricity prices roll off, partially from April
1, 2016, when landfill gas electricity prices are reset and
completely from 1 October 2016 when biomass electricity prices are
also reset, lower prices are expected to result in a significant
reduction in its operating cash flows.
However, operating cash flows and the Ba3 CFR will continue to be
supported by (1) the relatively stable and predictable nature of
the group's principal renewable energy support mechanism,
controlled by the UK Government and under which all of the group's
assets operate, that accounts for around half of the company's
revenues; and (2) Melton's low marginal cost generating fleet,
which provides consistent load factors.
Since October 2015, Melton has been owned by funds managed by
Octopus Investments (Octopus, not rated). To-date, there has been
limited visibility on the new owner's financial policy and their
willingness to defend credit quality, which will be impacted by
deleveraging, dividends and capex intentions. Delayed
deleveraging by the company in the light of the reduction in
earnings could result in higher refinancing risk at the maturity
of the senior security.
RATIONALE FOR THE NEGATIVE OUTLOOK
The decision to maintain the negative outlook reflects (1) the
continuing weak power price environment and the associated risk,
once the fixed electricity prices have completely rolled-off, of
credit metrics trending below the rating agency's guidance for the
current rating level, and (2) the lack of clarity regarding future
financial policy accentuating this risk. The outlook could
stabilize if it appeared likely that the company would meet the
current rating guidance, funds from operations comfortably in the
double digits in percentage terms, in FY2017 and thereafter.
Moody's considers this scenario would require a conjunction of
factors to be met (1) wholesale power prices recovering
appreciably from current levels; (2) shareholders maintaining a
conservative distribution policy and using cash for debt
repayment; (3) no significant capex growth; and (4) continued good
operational performance.
WHAT COULD CHANGE THE RATING UP/DOWN
As the outlook is negative, Moody's does not foresee upward rating
pressure arising in the next two years.
Conversely, downward rating pressure could arise if the group
failed to meet the current ratio guidance in FY2017 and
thereafter. This could result from (1) a material deterioration
in the operational performance and/or technical availability of
the generation portfolio or the landfill gas yield; (2) average
wholesale power prices not recovering appreciably above current
levels (GBP35/MWh) for the rest of the decade; (3) a more
aggressive financial policy in respect of dividend distributions,
using cash for debt repayments, and growth capex; or (4) a further
change to the renewable energy support mechanism in the UK, which
had a material impact on the value of the support received.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Unregulated
Utilities and Unregulated Power Companies published in October
2014.
Melton Renewable Energy UK PLC, based near Woodbridge, UK, is a
holding company of two renewable electricity generation
businesses, Energy Power Resources Limited (EPRL) and CLP
Envirogas (CLP), which generate electricity from biomass and
landfill gas. As at Sept. 30, 2015, the group had approximately
174 megawatts (MW) of generation capacity. The biomass accounts
for 111MW (64%) while the landfill gas business accounts for 63MW
(34%).
PARAGON OFFSHORE: Case Summary & 30 Largest Unsecured Creditors
---------------------------------------------------------------
Debtor affiliates filing separate Chapter 11 bankruptcy petitions:
Debtor Case No.
------ --------
Paragon Offshore Drilling LLC 16-10385
aka Noble Drilling Corporation
3151 Briarpark Drive, Suite 700
Houston, TX 77042
Paragon Offshore plc 16-10386
Paragon Drilling Services 7 LLC 16-10387
Paragon Offshore Finance Company 16-10388
Paragon Offshore Leasing (Switzerland) GmbH 16-10389
Paragon Offshore do Brasil Ltda. 16-10390
Paragon International Finance Company 16-10391
Paragon Asset (ME) Ltd. 16-10392
Paragon Offshore Holdings US Inc. 16-10393
Paragon Asset (UK) Ltd. 16-10394
Paragon FDR Holdings Ltd. 16-10395
Paragon Offshore International Ltd. 16-10396
Paragon Offshore (North Sea) Ltd. 16-10397
Paragon Duchess, Ltd. 16-10398
Paragon (Middle East) Limited 16-10399
Paragon Offshore (Luxembourg) S. r.l. 16-10400
Paragon Holding NCS 2 S.a.r.l. 16-10401
Paragon Leonard Jones LLC 16-10402
PGN Offshore Drilling (Malaysia) Sdn. Bhd. 16-10403
Paragon Offshore (Nederland) B.V. 16-10404
Paragon Offshore Contracting GmbH 16-10405
Paragon Offshore (Labuan) Pte. Ltd. 16-10406
Paragon Holding SCS 2 Ltd. 16-10407
Paragon Asset Company Ltd. 16-10408
Paragon Holding SCS 1 Ltd. 16-10409
Paragon Offshore Leasing (Luxembourg) S.a r.l. 16-10410
Type of Business: Drilling Rig Operator
Chapter 11 Petition Date: February 14, 2016
Court: United States Bankruptcy Court
District of Delaware (Delaware)
Judge: Hon. Christopher S. Sontchi
Debtors' Gary T. Holtzer, Esq.
General Stephen A. Youngman, Esq.
Counsel: WEIL, GOTSHAL & MANGES LLP
767 Fifth Avenue
New York, NY 10153
Tel: (212) 310-8000
Fax: (212) 310-8007
Email: gary.holtzer@weil.com
stephen.youngman@weil.com
Debtors' Local Mark D. Collins, Esq.
Counsel: Amanda R. Steele, Esq.
RICHARDS, LAYTON & FINGER, P.A.
One Rodney Square
920 North King Street
Wilmington, DE 19801
Tel: 302 651-7700
Fax: 302-651-7701
Email: collins@RLF.com
Debtors' LAZARD FRERES & CO. LLC
Financial
Advisor:
Debtors' ALIXPARTNERS, LLP
Restructuring
Advisor:
Debtors' KURTZMAN CARSON CONSULTANTS
Claims and
Noticing
Agent:
Estimated Assets: $1 billion to $10 billion
Estimated Debts: $1 billion to $10 billion
The petition was signed by Randall D. Stilley, authorized
representative.
List of Paragon Offshore Drilling's 30 Largest Unsecured
Creditors:
Entity Nature of Claim Claim Amount
------ --------------- --------------
Deutsche Bank Trust Bond Debt $1,012,035,280
Company Americas, AS
Trustee, Under Senior Notes
Indenture Dated July 18, 2014
60 Wall Street, 16th Floor
Mail Stop: NYC60-1630
New York, NY 10005
Attn: Corporates Team Deal
Manager - Paragon
Offshore PLC
National Oilwell Varco, Inc. Trade Debt $3,775,369
7909 Parkwood Circle Drive
Houston, TX 77036-6565
Keppel Verolme BV Trade Debt $1,600,275
PO Box 1001
Rozenburg 12 3180 AA
Netherlands
Advanced Joining Trade Debt $455,000
Technologies, Inc.
945 Buker Hill Road, Ste 500
Houston, TX 77024
Now, Inc. (DBA DNow LLP) Trade Debt $441,908
7402 North Eldridge Parkway
Houston, TX 77041
GE Power Conversion Do Brasil LTDA Trade Debt $336,566
AV. Alvarez Cabral 1345
MG 30170-001
Brazil
Cameron France SAS Trade Debt $329,280
Plaine St Pierre - CS620
Beziers Cedex 75 34535
France
Bentec GMBH Trade Debt $306,591
Deilmannstr 1
Bad Bentheim 11 48443
Germany
AllRig, Inc. Trade Debt $280,746
1644 Coteau Road
Houma, LA 70364
Chantier Naval Et Industriel Trade Debt $269,515
Du Cameroun SA
Zone Amont Doula
Doula 2389
Cameroon
Rignet, Inc. Trade Debt $225,019
International SOS Professional $224,184
Services
Control Union Testing and Trade Debt $213,982
Inspections BV
Dynamic Drilling & Services Trade Debt $207,840
PVT Ltd.
Gecko ME Trade Debt $206,956
Baker Manufacturing Company Trade Debt $189,393
Mammoet Nederland BV Trade Debt $183,648
Offshore Accomodation Contractors Trade Debt $173,660
Hydril USA Distribution LLC Trade Debt $162,467
De Nora Water Technologies Trade Debt $162,412
Teco Solutions AS Trade Debt $160,316
Crowner's Services BV Trade Debt $154,797
Spinneys ABU Dhabi LLC Trade Debt $147,485
Electro-Flow Controls Ltd. Trade Debt $140,450
Dunlop Oil & Marine Ltd. Trade Debt $134,515
Thrustmasters of Texas, Inc. Trade Debt $129,431
Deloitte Touche Tohmatsu Tax Trade Debt $127,762
Pon Power BV Trade Debt $113,606
Neptunus Power Plant Trade Debt $103,914
Highland Rope Access Inspection Ltd Trade Debt $90,769
PARAGON OFFSHORE: Files in the U.S. to Cut $1.1-Bil. Debt
---------------------------------------------------------
Paragon Offshore plc and 25 of its subsidiaries filed with the
U.S. Bankruptcy Court for the District of Delaware separate
Chapter 11 bankruptcy petitions on Feb. 14, 2016, with an
accompanying joint Chapter 11 plan of reorganization.
The Debtors reported total assets of $2.47 billion and total debts
of $2.96 billion as of Sept. 30, 2015. The financial
restructuring is expected to reduce Paragon's debt by more than $1
billion and allow existing equity holders to retain 65% equity in
the reorganized Debtors. The consensual restructuring is also
intended to eliminate the potential risk of costly multi-party
litigation.
Certain creditors holding approximately 95.62% of the Debtors'
Revolving Credit Agreement Claims and approximately 76.88% of the
Debtors' Senior Notes Claims entered into a plan support
agreement.
Under the terms of the Plan Support Agreement, the Consenting
Creditors agreed to a deleveraging transaction that would
restructure the existing debt obligations of the Debtors in
chapter 11 through the Plan.
The rights of holders of General Unsecured Claims will be left
unaltered by the Plan, and the Debtors will continue to pay or
dispute each General Unsecured Claim in the ordinary course of
business.
Paragon Offshore plc also entered into a binding term sheet with
Noble Corporation plc, the Debtors' former parent, with respect to
a definitive settlement agreement, under which Noble will provide
direct bonding to satisfy requirements necessary to challenge
certain tax assessments in Mexico relating to the Debtors'
business. In connection with Paragon's spin-off on
Aug. 1, 2014, Paragon gave Noble promissory notes totaling
approximately $1.7 billion. As part of the Spin-Off, Paragon
borrowed $650 million under the Secured Term Loan and issued
approximately $1.03 billion under the Senior Notes Indenture.
Proceeds of these borrowings were transferred to Noble in
satisfaction of the promissory notes.
James A. Mesterharm, managing director of AlixPartners, LLP, the
Debtors' restructuring advisor, said that due to the amount of
debt Paragon incurred in connection with the Spin-Off and the
nature of the assets acquired, Paragon could not absorb the
ongoing and precipitous decline in oil and gas prices and the
corresponding decline in demand for their services.
"Although Paragon does not face any maturities on material secured
debt until 2019, the severity and duration of the market downturn
has increased the risk that existing customer contracts, some of
which are due to expire in the near term, will not be renewed or
will be renewed at materially reduced prices," Mr. Mesterharm
maintained.
The Debtors are also dealing with the termination of longer-term
contracts, including contracts with Pemex and Petrobras.
Concurrently with the filing of the petitions, the Debtors filed
first day motion seeking authority to, among other things, use
existing cash management system, prohibit utility providers from
discontinuing services, pay employee compensation, pay general
unsecured creditors that provide goods or services (many of which
are located in jurisdictions outside the United States), and use
cash collateral. These motions will ensure that the company's
vendors, as well as employees, will continue to be paid. Paragon
expects to maintain sufficient liquidity throughout the
restructuring process to maintain its business operations.
Randall D. Stilley, President and Chief Executive Officer of
Paragon, said, "Paragon has acted proactively to strengthen the
company's balance sheet in this challenging environment. We look
forward to moving as quickly as possible through this process
while maintaining our focus on delivering safe, reliable, and
efficient operations as the industry's High-Quality, Low-Cost
drilling contractor. We are confident that Paragon will emerge as
an even stronger company, better positioned for long-term growth
and success."
About Paragon Offshore
Paragon Offshore plc -- http://www.paragonoffshore.com/--
is a global provider of offshore drilling rigs. Paragon's
operated fleet includes 34 jackups, including two high
specification heavy duty/harsh environment jackups, and six
floaters (four drillships and two semisubmersibles). Paragon's
primary business is contracting its rigs, related equipment and
work crews to conduct oil and gas drilling and workover operations
for its exploration and production customers on a dayrate basis
around the world. Paragon's principal executive offices are
located in Houston, Texas. Paragon is a public limited company
registered in England and Wales and its ordinary shares have been
trading on the over-the-counter markets under the trading symbol
"PGNPF" since December 18, 2015.
Paragon Offshore Plc, et al., filed separate Chapter 11 bankruptcy
petitions (Bankr. D. Del. Case Nos. 16-10385 to 16-10410) on Feb.
14, 2016, after reaching a deal with lenders on a
reorganization plan that would eliminate $1.1 billion in debt.
The petitions were signed by Randall D. Stilley as authorized
representative. Judge Christopher S. Sontchi is assigned to the
cases.
The Debtors have engaged Weil, Gotshal & Manges LLP as general
counsel, Richards, Layton & Finger, P.A. as local counsel, Lazard
Freres & Co. LLC as financial advisor, Alixpartners, LLP as
restructuring advisor, and Kurtzman Carson Consultants as claims
and noticing agent.
Judge Christopher S. Sontchi is assigned to the cases.
PARAGON OFFSHORE: Files Proposed Reorganization Plan
----------------------------------------------------
Paragon Offshore plc, et al., filed with their Chapter 11
bankruptcy petitions a proposed reorganization plan that lets
holders of $1.02 billion in senior notes recover up to 72.6%,
returns 100% cents on the dollar to general unsecured creditors,
and lets existing shareholders retain 65% of the company.
Holders of approximately 95.62% in outstanding principal amount of
the revolving credit agreement claims entitled to vote on the Plan
(the "Consenting Revolver Lenders") and holders of 76.88% in
outstanding principal amount of the senior notes claims entitled
to vote on the Plan have already agreed to vote in favor of the
Plan.
The restructuring will leave the Debtors' business intact under
Paragon Offshore plc and substantially de-lever it, providing for
the reduction of $1.1 billion of the Debtors' existing debt and
$60 million of the Debtors' annual cash interest expense upon the
completion of the Restructuring. This deleveraging will enhance
the Debtors' long-term growth prospects and competitive position
and allow the Debtors to emerge from their chapter 11 cases (the
"Chapter 11 cases") as reorganized entities better positioned to
withstand a depressed market for offshore contract drilling.
In accordance with the Plan Support Agreement, the Debtors are
obligated to proceed with the implementation of the Plan through
the Chapter 11 Cases. Among the milestones contained in the Plan
Support Agreement are the requirement that the Bankruptcy Court
enter the order approving the Disclosure Statement and the
solicitation procedures within 75 days after the Petition Date,
enter an order confirming the Plan within 185 days after the
Petition Date, and that the Plan must be consummated no later than
230 days after the Petition Date. Achieving the various
milestones under the Plan Support Agreement is crucial to
reorganizing the Debtors successfully.
Prepetition Capital Structure
The Debtors' significant prepetition indebtedness includes secured
financing obligations in the amount of approximately
$1,440,650,651 and unsecured financing obligations in the amount
of approximately $983,582,000.
Paragon Offshore plc and Paragon International Finance Company are
borrowers and each of the other Debtors are guarantors under a
Senior Secured Revolving Credit Agreement, dated as of June 17,
2014, with the lenders and issuing banks party thereto from time
to time (the "Secured Revolver Lenders"), JPMorgan Chase Bank,
N.A., as administrative agent (the "Secured Revolver Agent"). The
Secured Revolving Credit Agreement provides for revolving credit
commitments, including letter of credit commitments and swingline
commitments, in an aggregate principal amount of $800 million.
The Secured Revolving Credit Agreement matures in July 2019. As
of the Petition Date, the aggregate principal amount outstanding
under the Secured Revolving Credit Agreement is approximately
$708.5 million in unpaid principal, plus any applicable interest,
fees, and other expenses, in addition to approximately $87.4
million of letters of credit.
Debtor Paragon Offshore Finance Company, as borrower, and Paragon
Parent, along with each of the other Debtors, as guarantors, are
parties to that certain Senior Secured Term Loan Agreement, dated
as of July 18, 2014, with the lenders party thereto (the "Secured
Term Loan Lenders"), and JPMorgan Chase Bank, N.A., as
administrative agent (the "Secured Term Loan Agent"). The Secured
Term Loan Agreement provides for a term loan in an aggregate
principal amount of up to $645 million (the "Secured Term Loan").
The Secured Term Loan Agreement matures in July 2021.
As of the Petition Date, the aggregate principal amount
outstanding under the Secured Term Loan Agreement is approximately
$642 million in unpaid principal, plus any applicable interest,
fees, and other expenses.
Paragon Offshore plc is also an issuer under an Indenture, dated
as of July 18, 2014, with each of the other Debtors as named
guarantors therein, and Deutsche Bank Trust Company Americas, as
indenture trustee (as amended, modified, or supplemented from
time to time, the "Senior Notes Indenture"), pursuant to which
Paragon Parent issued 6.75% Senior Notes due 2022 in the aggregate
principal amount of $500,000,000 (the "6.75% Senior Notes") and
7.25% Senior Notes due 2024 in the aggregate principal amount of
$580,000,000 (the "7.25% Senior Notes"). As of the Petition Date,
the aggregate amount outstanding under the 6.75% Senior Notes is
approximately $456.5 million, plus any applicable interest, fees,
and other expenses, and the aggregate amount outstanding under
the 7.25% Senior Notes is approximately $527 million, plus any
applicable interest, fees, and other expenses.
On Aug. 1, 2014, Noble Corporation plc ("Noble") completed a
spin-off of Paragon by: (i) transferring to Paragon Parent the
assets and liabilities constituting most of Noble's standard
specification drilling business and (ii) making a pro rata
distribution to Noble's shareholders of all of Paragon Parent's
issued and outstanding ordinary shares (the "Spin-Off"). In
connection with the Spin-Off, Paragon gave Noble promissory notes
totaling approximately $1.7 billion. As part of the Spin-Off,
Paragon borrowed $650 million under the Secured Term Loan and
issued approximately $1.03 billion under the Senior Notes
Indenture. Proceeds of these borrowings were transferred to Noble
in satisfaction of the promissory notes. The rigs transferred to
Paragon through the Spin-Off had an average age of 35 years.
The Debtors estimate that, as of the Petition Date, they owe a
total of approximately $41.5 million on account of undisputed
trade claims.
Terms of the Plan
Under the Plan, holders of priority non-tax claims in Class 1 and
Other Secured Claims in Class 2 are unimpaired. Recovery is 100%.
Class 3, the Revolving Credit Agreement Claims, will be Allowed as
Secured Claims with respect to funded loans and the face amount of
undrawn letters of credit in an aggregate principal amount of not
less than $795,600,000 plus any unpaid accrued interest, letter of
credit fees, other fees, and unpaid reasonable fees and expenses
as of the Effective Date. On the Effective Date, each holder of
an Allowed Revolving Credit Agreement Claim will receive, in full
satisfaction of and in exchange for such Allowed Secured Claim,
its Pro Rata share of: (i) any accrued and unpaid interest from
the Petition Date through the Effective Date as set forth in the
Adequate Protection Order to the extent not previously paid
pursuant to the Adequate Protection Order; (ii) $165,000,000 in
Cash and a corresponding permanent commitment reduction; and (iii)
the remaining outstanding loans under the Revolving Credit
Agreement converted to a term loan. Recovery is 100%.
The legal, equitable, and contractual rights of Class 4, the
holders of Allowed Secured Term Loan Claims, are unaltered by the
Plan and such claims will be allowed in an amount of $644,950,651.
Recovery is 100%.
The Senior Notes Claims will be allowed in the amount of
$1,020,555,682. On the Effective Date, or as soon as practicable
thereafter, each holder in Class 5, the Allowed Senior Notes
Claims, will receive, in full satisfaction of and in exchange for
its Allowed Claim, its Pro Rata share of: (i) that number of
Parent Ordinary Shares which will in the aggregate comprise 35% of
the total outstanding ordinary shares of Reorganized Paragon as of
the Effective Date without regard to the Management Incentive Plan
Securities; (ii) the right to receive the 2016 Deferred Cash
Payment and the 2017 Deferred Cash Payment in accordance with the
terms of the Plan; and (iii) $345,000,000 in Cash. Recovery is
57.1% to 72.6%.
The rights of holders of General Unsecured Claims (Class 6) will
be left unaltered by the Plan, and the Debtors will continue to
pay or dispute each General Unsecured Claim in the ordinary course
of business.
On the Effective Date, the holders of Parent Interests (Class 8)
will retain their Parent Interests, subject to dilution on account
of the Parent Ordinary Shares to be issued in accordance with the
Plan. After the issuance of the Parent Ordinary Shares, the
Parent Interests will comprise in the aggregate 65% of the total
outstanding ordinary shares of Reorganized Paragon without regard
to the Management Incentive Plan Securities. Recovery is 100%.
Holders of Claims and Interests in Classes 1, 2, 4, 6, 7, 8, and 9
are conclusively deemed to have accepted the Plan pursuant to
Section 1126(f) of the Bankruptcy Code. Only holders of Allowed
Claims in Classes 3 and 5 are entitled to vote to accept or reject
the Plan.
Intercompany Interests held by Paragon Parent or a direct or
indirect subsidiary of Paragon Parent (Class 9) will be unaffected
by the Plan and continue in place following the Effective Date.
* * *
Copies of the affidavits in support of the Ch. 11 petitions and
the first day motions are available for free at:
http://bankrupt.com/misc/Paragon_17_AL_1st_D_Affidavit.pdf
http://bankrupt.com/misc/Paragon_18_JM_1st_D_Affidavit.pdf
Copies of the Plan and Disclosure Statement are available for free
at:
http://bankrupt.com/misc/Paragon_11_Ch11_Plan.pdf
http://bankrupt.com/misc/Paragon_12_Disc_Statement.pdf
Counsel to the Debtors:
WEIL, GOTSHAL & MANGES LLP
767 Fifth Avenue
New York, New York 10153
Attn: Gary T. Holtzer
Stephen A. Youngman
Telephone: (212) 310-8000
E-mail: gary.holtzer@weil.com
stephen.youngman@weil.com
Co-Counsel to the Debtors:
RICHARDS, LAYTON & FINGER, P.A.
One Rodney Square
920 North King Street
Wilmington, Delaware 19801
Attn: Mark D. Collins
Amanda R. Steele
Telephone: (302) 651-7700
E-mail: collins@rlf.com
steele@rlf.com
Counsel to the Ad Hoc Committee of Senior Noteholders
PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP
1285 Avenue of the Americas
New York, NY 10019
Attn: Andrew N. Rosenberg
Elizabeth R. McColm
Telephone: (212) 373-3000
E-mail: arosenberg@paulweiss.com
emccolm@paulweiss.com
Counsel to the Revolving Credit Facility Agent:
SIMPSON THACHER & BARTLETT LLP
425 Lexington Avenue
New York, NY 10017
Attn: Sandeep Qusba, Esq.
Kathrine A. McLendon, Esq.
Telephone: (212) 455-2000
E-mail: squsba@stblaw.com
kmclendon@stblaw.com
About Paragon Offshore
Paragon Offshore plc -- http://www.paragonoffshore.com/--
is a global provider of offshore drilling rigs. Paragon's
operated fleet includes 34 jackups, including two high
specification heavy duty/harsh environment jackups, and six
floaters (four drillships and two semisubmersibles). Paragon's
primary business is contracting its rigs, related equipment and
work crews to conduct oil and gas drilling and workover operations
for its exploration and production customers on a dayrate basis
around the world. Paragon's principal executive offices are
located in Houston, Texas. Paragon is a public limited company
registered in England and Wales and its ordinary shares have been
trading on the over-the-counter markets under the trading symbol
"PGNPF" since December 18, 2015.
Paragon Offshore Plc, et al., filed separate Chapter 11 bankruptcy
petitions (Bankr. D. Del. Case Nos. 16-10385 to 16-10410) on Feb.
14, 2016, after reaching a deal with lenders on a
reorganization plan that would eliminate $1.1 billion in debt.
The petitions were signed by Randall D. Stilley as authorized
representative. Judge Christopher S. Sontchi is assigned to the
case.
The Debtors reported total assets of $2.47 billion and total debts
of $2.96 billion as of Sept. 30, 2015.
The Debtors have engaged Weil, Gotshal & Manges LLP as general
counsel, Richards, Layton & Finger, P.A. as local counsel, Lazard
Freres & Co. LLC as financial advisor, Alixpartners, LLP as
restructuring advisor, and Kurtzman Carson Consultants as claims
and noticing agent.
Judge Christopher S. Sontchi is assigned to the cases.
PARAGON OFFSHORE: Seeks Joint Administration of Cases
-----------------------------------------------------
Paragon Offshore Plc and 25 of its affiliates ask the Bankruptcy
Court to enter an order directing the consolidation of their
Chapter 11 cases for procedural purposes only.
The Debtors anticipate that there are more than 10,000 creditors
and other parties-in-interest that are involved in their cases.
They maintained that joint administration will allow for the
efficient and convenient administration of their interrelated
Chapter 11 cases.
"Joint administration of these cases will save the Debtors and
their estates substantial time and expense because it will remove
the need to prepare, replicate, file, and serve duplicative
notices, applications, and orders," said Mark D. Collins, Esq., at
Richards, Layton & Finger, P.A., counsel for the Debtors.
"Further, joint administration will relieve the Court of entering
duplicative orders and maintaining duplicative files and dockets,"
he added.
About Paragon Offshore
Paragon Offshore plc -- http://www.paragonoffshore.com/--
is a global provider of offshore drilling rigs. Paragon's
operated fleet includes 34 jackups, including two high
specification heavy duty/harsh environment jackups, and six
floaters (four drillships and two semisubmersibles). Paragon's
primary business is contracting its rigs, related equipment and
work crews to conduct oil and gas drilling and workover operations
for its exploration and production customers on a dayrate basis
around the world.
Paragon's principal executive offices are located in Houston,
Texas. Paragon is a public limited company registered in England
and Wales and its ordinary shares have been trading on the
over-the-counter markets under the trading symbol "PGNPF" since
December 18, 2015.
Paragon Offshore Plc, et al., filed separate Chapter 11 bankruptcy
petitions (Bankr. D. Del. Case Nos. 16-10385 to 16-10410) on Feb.
14, 2016, after reaching a deal with lenders on a
reorganization plan that would eliminate $1.1 billion in debt.
The petitions were signed by Randall D. Stilley as authorized
representative. Judge Christopher S. Sontchi is assigned to the
cases.
The Debtors reported total assets of $2.47 billion and total debts
of $2.96 billion as of Sept. 30, 2015.
The Debtors have engaged Weil, Gotshal & Manges LLP as general
counsel, Richards, Layton & Finger, P.A. as local counsel, Lazard
Freres & Co. LLC as financial advisor, Alixpartners, LLP as
restructuring advisor, and Kurtzman Carson Consultants as claims
and noticing agent.
PARAGON OFFSHORE: Targeting June 10 Confirmation of Plan
--------------------------------------------------------
Paragon Offshore plc, et al., have sought bankruptcy protection in
the United States with a proposed reorganization plan that will
leave the Debtors' business intact and substantially de-lever it,
providing for the reduction of $1.1 billion of the Debtors'
existing debt and $60 million of the Debtors' annual cash interest
expense upon the completion of the restructuring.
The Debtors have filed with the U.S. Bankruptcy Court for the
District of Delaware a motion seeking approval of (i) the
Disclosure Statement explaining the Chapter 11 Plan, and the (ii)
proposed solicitation procedures. The Debtors intend to seek
confirmation of the Plan based on this timeline:
Event Date/Deadline
---- -------------
Disclosure Statement Objection Deadline March 21, 2016
Deadline to Reply to Disclosure Statement March 24, 2016
Disclosure Statement Hearing March 30, 2016
Record Voting Date March 30, 2016
Solicitation Date April 6, 2016
Plan Supplement Filing Deadline May 10, 2016
Voting Deadline May 20, 2016
Voting Certification Deadline May 27, 2016
Plan Confirmation Objection Deadline May 20, 2016
Deadline to File Confirmation Brief June 7, 2016
Deadline to Reply to Plan Objection June 7, 2016
Confirmation Hearing June 10, 2016
Paragon negotiated terms of its restructuring with key
constituencies prepetition. On Feb. 12, 2016, Paragon Offshore
entered into a plan support agreement with respect to the terms of
a chapter 11 plan of reorganization with holders representing an
aggregate of 77% of the outstanding $457 million of the Company's
6.75% senior unsecured notes maturing July 2022 and the
outstanding $527 million of the Company's 7.25% senior unsecured
notes maturing August 2024 (together, the "Noteholders") together
with lenders representing an aggregate of 95.62% of the
outstanding debt (including letters of credit) under the Company's
Senior Secured Revolving Credit Agreement (the "Revolving Credit
Agreement").
Only holders of the Revolving Credit Agreement Claims (Class 3);
and holders of the Senior Notes Claims (Class 5) are entitled to
vote on the Plan. Holders of Class 3 claims are slated to have a
100% recovery although they are still impaired under the Plan.
Holders of Senior Notes Claims are slated to have a 57.1% to 72.6%
recovery. Other classes of claims, including general unsecured
claims, are unimpaired and will recover 100 cents on the dollar
under the Plan.
A copy of the Plan Support Agreement is available for free at:
http://goo.gl/wRbO8g
About Paragon Offshore
Paragon Offshore plc -- http://www.paragonoffshore.com/--
is a global provider of offshore drilling rigs. Paragon's
operated fleet includes 34 jackups, including two high
specification heavy duty/harsh environment jackups, and six
floaters (four drillships and two semisubmersibles). Paragon's
primary business is contracting its rigs, related equipment and
work crews to conduct oil and gas drilling and workover operations
for its exploration and production customers on a dayrate basis
around the world. Paragon's principal executive offices are
located in Houston, Texas. Paragon is a public limited company
registered in England and Wales and its ordinary shares have been
trading on the over-the-counter markets under the trading symbol
"PGNPF" since December 18, 2015.
Paragon Offshore Plc, et al., filed separate Chapter 11 bankruptcy
petitions (Bankr. D. Del. Case Nos. 16-10385 to
16-10410) on Feb. 14, 2016, after reaching a deal with lenders on
a reorganization plan that would eliminate $1.1 billion in debt.
The petitions were signed by Randall D. Stilley as authorized
representative. Judge Christopher S. Sontchi is assigned to the
cases.
The Debtors reported total assets of $2.47 billion and total debts
of $2.96 billion as of Sept. 30, 2015.
The Debtors have engaged Weil, Gotshal & Manges LLP as general
counsel, Richards, Layton & Finger, P.A. as local counsel, Lazard
Freres & Co. LLC as financial advisor, Alixpartners, LLP as
restructuring advisor, and Kurtzman Carson Consultants as claims
and noticing agent.
PARAGON OFFSHORE: Wants to Use Secured Parties' Cash Collateral
------------------------------------------------------------
Paragon Offshore plc and its affiliated debtors request authority
from the Bankruptcy Court to use cash collateral of JPMorgan Chase
Bank, N.A. and Cortland Capital Market Services LLC, to fund their
payments to vendors and employees and to satisfy the other
ordinary costs of operation, including rent, taxes, and insurance.
JPMorgan serves as the administrative agent for the revolver
lenders and collateral agent for the revolver lenders and term
loan lenders. Cortland Capital Market Services L.L.C. acts as the
proposed successor administrative agent for the term loan lenders.
To protect the Prepetition Secured Parties to the extent of any
aggregate diminution in value of the Prepetition Collateral
resulting from the use of Cash Collateral, the Debtors propose to
provide various forms of adequate protection. The proposed
adequate protection includes a first priority lien on, and
security interest in "Unencumbered Property," which includes
approximately $332 million in a Goldman Sachs Bank Account owned
by Paragon Offshore Group plc.
"Absent authority to use Cash Collateral, even for a limited
period of time, the continued operation of the Debtors' business
would suffer, causing immediate and irreparable harm to the
Debtors, their respective estates, and their creditors," said Mark
D. Collins, Esq., at Richards, Layton & Finger, P.A., counsel for
the Debtors.
About Paragon Offshore
Paragon Offshore plc -- http://www.paragonoffshore.com/--
is a global provider of offshore drilling rigs. Paragon's
operated fleet includes 34 jackups, including two high
specification heavy duty/harsh environment jackups, and six
floaters (four drillships and two semisubmersibles). Paragon's
primary business is contracting its rigs, related equipment and
work crews to conduct oil and gas drilling and workover operations
for its exploration and production customers on a dayrate basis
around the world. Paragon's principal executive offices are
located in Houston, Texas. Paragon is a public limited company
registered in England and Wales and its ordinary shares have been
trading on the over-the-counter markets under the trading symbol
"PGNPF" since December 18, 2015.
Paragon Offshore Plc, et al., filed separate Chapter 11 bankruptcy
petitions (Bankr. D. Del. Case Nos. 16-10385 to 16-10410) on Feb.
14, 2016, after reaching a deal with lenders on a
reorganization plan that would eliminate $1.1 billion in debt.
The petitions were signed by Randall D. Stilley as authorized
representative. Judge Christopher S. Sontchi is assigned to the
cases.
The Debtors reported total assets of $2.47 billion and total debts
of $2.96 billion as of Sept. 30, 2015.
The Debtors have engaged Weil, Gotshal & Manges LLP as general
counsel, Richards, Layton & Finger, P.A. as local counsel, Lazard
Freres & Co. LLC as financial advisor, Alixpartners, LLP as
restructuring advisor, and Kurtzman Carson Consultants as claims
and noticing agent.
PARAGON OFFSHORE: S&P Lowers CCR to 'D' on Ch. 11 Filing Plan
------------------------------------------------------------
Standard & Poor's Ratings Services lowered its corporate credit
and issue-level ratings on offshore drilling company Paragon
Offshore PLC to 'D' from 'CC'.
At the same time, S&P revised its recovery rating on the company's
unsecured debt to '4' from '6', indicating S&P's expectation of
average recovery (30% to 50%, lower end of the range). The
recovery rating on the company's term loan remains '2', indicating
S&P's expectation of substantial recovery (70%-90%, lower end of
the range).
The 'D' ratings reflect Paragon's announcement that it will file
for Chapter 11 under the U.S. Bankruptcy Code, where it will
implement a negotiated settlement with bondholders and lenders.
===============
X X X X X X X X
===============
* Atradius: Insolvencies Continue to Hit Global Markets in 2016
---------------------------------------------------------------
Insolvencies will continue to hit global markets in 2016, exposing
businesses to the risk of non-payment, warns leading trade credit
insurer Atradius.
In its latest Insolvency Forecast, part of a suite of economic
research reports, Atradius publishes predictions for insolvency
levels in 22 key trade markets. While insolvencies are forecast
to fall in 15 markets, the anticipated improvements are expected
to be small. Low oil prices, US monetary normalization and the
uncertain impact of a slowdown in emerging markets will all
contribute to a continuing risk of insolvency.
In line with the solid economic recovery in the Eurozone, the
forecast for the business environment is positive. However, with
only -5% change in aggregate insolvencies, the improvement is
significantly below that seen in 2014, when the economy was much
more fragile. The total number of bankruptcies anticipated for
2016 is also still 67% higher than in 2007 and the level of
business bankruptcies around the periphery of the Eurozone remain
markedly higher than pre-global financial crisis. For example:
Portugal - insolvency level remains 4.4 times higher than in 2007
Italy - 2.8 times higher
Spain - 2.5 times higher
The outlook for the Eurozone continues to be impacted by Greece
where a further 5% increase in business failures is forecast for
2016 following an estimated 10% increase in 2015. Political
uncertainty, low consumption and capital controls continue to
create a very difficult operating environment for the SMEs that
dominate Greece's economy. The continuing debt crisis has driven
national insolvency rates to more than five times the level in
2007.
Across the Atlantic, North America will face pressure from low oil
prices as investment in the relatively expensive American and
Canadian oil stays restrained. Canada is forecast to see no
change in insolvencies and the US is forecast to see a drop of
only 2%.
The low level of commodity prices is expected to weigh on the
outlook for commodity-dependent Australia which looks set to be
the worst performing country in terms of business failures with an
anticipated rise in insolvencies of 6%.
Switzerland, New Zealand, Luxembourg and Norway are predicted to
see no improvement to insolvency levels this year. Meanwhile,
insolvencies in the UK are forecast to improve by only 1% in 2016,
following an improvement of 9% in 2015.
For the second year running, the strongest improvements in
insolvency rates are expected in the Netherlands and Spain.
Insolvencies in the Netherlands are forecast to decrease by 15% in
2016 following an estimated decrease of 25% last year while Spain
is predicted a drop in insolvencies of 10% following a reduction
of 25% in 2015. Meanwhile, Ireland is once again in the top five
countries with insolvencies forecast to fall by 6%, a slowdown
from 10% in 2015.
Jason Curtis, Commercial Director at Atradius, said: "The
challenging external environment combined with low commodity
prices is putting pressure on global markets which is increasing
the risk of insolvencies in spite of strengthening domestic
economies. This is a clear warning shot to businesses which must
stay attuned to the risks of trading even as the economy recovers.
"Despite improvements in insolvency statistics for UK and Ireland
in 2015 and predicted improvements again for 2016, the market
remains challenging with insolvency levels still significantly
higher than pre-recession. There are few businesses able to
absorb the impact of a failed customer and businesses must
continue to protect themselves and have robust credit management
systems in place."
* Moody's Takes Rating Actions on 30 European Utility Groups
------------------------------------------------------------
Moody's Investors Service has taken rating actions on 30 European
unregulated utility and power groups. The rating actions follow
Moody's review of the European utility companies' exposure to a
weakening commodity and power price environment.
Moody's has affirmed the ratings of 19 groups. This primarily
reflects companies' business mix and moderate exposure to
commodity-linked earnings. It also factors in their financial
flexibility, which will likely allow them to absorb the negative
impact of low power prices.
Moody's has placed the ratings of 10 groups on review for
downgrade. This reflects their generally significant exposure to
declining commodity and power prices and/or limited financial
flexibility within their current rating categories to absorb these
pressures in the absence of significant mitigating measures.
Given the diversity of business models and strategic options, the
range of possible outcomes upon conclusion of the review for given
issuers varies from confirmation of ratings to possible multi-
notch downgrades. Moody's expects to conclude the rating reviews
within 90 days.
Moody's has downgraded one issuer, reflecting its high exposure to
lower power prices and its weak financial profile.
For more detailed information, please see the following press
releases:
Rating Affirmations
Moody's affirms A2A's Baa3 ratings; outlook stable
http://is.gd/J1ThL7
Moody's affirms CVA's Baa1 ratings; outlook stable
http://is.gd/UyBLS7
Moody's affirms EDP's Baa3 ratings; outlook stable
http://is.gd/5MJjU9
Moody's affirms EnBW's A3 ratings; negative outlook
http://is.gd/CAR9Pg
Moody's affirms Enel's Baa2 ratings; outlook stable
http://is.gd/XJ8MQx
Moody's affirms Energa's Baa1 ratings; stable outlook
http://is.gd/1ZTCLk
Moody's affirms EVN's A3 rating; stable outlook
http://is.gd/vFBYvD
Moody's affirms EWE's Baa1 rating; stable outlook
http://is.gd/OxpChO
Moody's affirms Fortum's Baa1 ratings; stable outlook
http://is.gd/ANv9pH
Moody's affirms Gas Natural's Baa2 ratings; stable outlook
http://is.gd/5KDZ66
Moody's affirms HEP's Ba2 ratings; stable outlook
http://is.gd/CDxHCq
Moody's affirms Iberdrola's Baa1 ratings; outlook stable
http://is.gd/ok6Q2H
Moody's affirms Iberdrola Finanzas SAU's Baa1 and Aaa.mx ratings
http://is.gd/ftDdey
Moody's affirms Latvenergo's Baa2 ratings; stable outlook
http://is.gd/aNRnjD
Moody's affirms PGE's Baa1 ratings; stable outlook
http://is.gd/3vEygJ
Moody's affirms PGNiG's Baa3 ratings; stable outlook
http://is.gd/wPcnLU
Moody's affirms ratings of SSE plc
http://is.gd/4raPvv
Moody's affirms Statkraft's Baa1 ratings; stable outlook
http://is.gd/eEaoTJ
Moody's affirms Viesgo's B1 ratings; outlook stable
http://is.gd/5W3gMD
Moody's affirms B2 rating of notes issued by Viridian; maintains
stable outlook
http://is.gd/YZFXtz
Review for Downgrade
Moody's places Centrica's Baa1 ratings on review for downgrade
http://is.gd/vhaCCs
Moody's places CEZ's A3 ratings on review for downgrade
http://is.gd/Wr33UI
Moody's places DONG Energy's Baa1 ratings on review for downgrade
http://is.gd/Nva79V
Moody's places EDF's A1/P-1 ratings on review for downgrade
http://is.gd/k8OV8P
Moody's places E.ON's Baa1 ratings on review for downgrade
http://is.gd/rEG6cl
Moody's places Eesti Energia's Baa2/Prime-2 ratings on review for
downgrade
http://is.gd/llzsdy
Moody's places ENGIE's A1 ratings on review for downgrade
http://is.gd/5pwBtG
Moody's places RWE's Baa2/P-2 ratings on review for downgrade
http://is.gd/rCzciQ
Moody's places Vattenfall's A3 ratings on review for downgrade
http://is.gd/XHb4ys
Moody's places Verbund's Baa1 ratings on review for downgrade
http://is.gd/LA9CyZ
Downgrade
Moody's downgrades Melton Renewable Energy UK PLC's CFR to Ba3;
maintains negative outlook
http://is.gd/FqfQwQ
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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.
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S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Europe is a daily newsletter co-
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 2016. 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.
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