/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/160224.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 24, 2016, Vol. 17, No. 038 Headlines G E R M A N Y AENOVA: Moody's Lowers CFR to Caa1, Outlook Stable FLIGHT DESIGN: Applies for Receivership Due to Liquidity Crunch THYSSENKRUPP AG: Moody's Lowers CFR to Ba2, Outlook Stable G R E E C E GREECE: Creditors to Return to Athens for Bailout Review Talks I R E L A N D HUGUENOT XMI: Civil Court Appoints Interim Examiner PETROCELTIC: Lenders Extend Debt Waiver Until March 4 K A Z A K H S T A N CAPITAL BANK: S&P Affirms 'B-' Counterparty Credit Rating CELF LOAN IV: S&P Affirms 'BB+' Rating on Class D Notes L U X E M B O U R G INTELSAT SA: S&P Puts 'B' CCR on CreditWatch Negative MALLINCKRODT INT'L: Moody's Affirms Ba3 CFR, Outlook Stable N E T H E R L A N D S QUEEN STREET CLO I: Moody's Raises Rating on Class E Notes to Ba1 WOOD STREET VI: S&P Raises Rating on Class E Notes to BB+ ZIGGO GROUP: S&P Affirms 'BB-' CCR, Outlook Stable R U S S I A AGROINCOMBANK PJSC: Liabilities Exceed Assets, Probe Shows BANK GOROD: Liabilities Exceed Assets, Inspection Reveals S P A I N CAIXABANK RMBS 1: Moody's Assigns Caa3 Rating to Class B Notes MADRID RMBS 1: Fitch Affirms 'CCsf' Rating on Class E Notes S W E D E N SSAB AB: S&P Lowers Long-Term Corporate Credit Rating to 'B+' U N I T E D K I N G D O M DRAX: Chief Executive Mulls Closure of Half of Power Station * Fitch Says Brexit to Bring Significant Long-Term Risks ********* ============= G E R M A N Y ============= AENOVA: Moody's Lowers CFR to Caa1, Outlook Stable -------------------------------------------------- Moody's Investors Service has downgraded German CDMO Apollo 5 GmbH's (the parent company of Aenova) corporate family rating (CFR) to Caa1 from B3, and probability default rating to Caa1-PD from B3-PD. The outlook on all the ratings is stable. "Aenova's downgrade reflects deterioration in its credit metrics, as a result of weaker than estimated 2015 operating performance, and its 2015 negative free cash flow generation before one-off exceptional proceeds, owing to significant expenditure from its restructuring program and interest costs. Due to the high level of debt in the capital structure, any improvements in these metrics will take several years and remain contingent to the achievement of the company's operational improvement plan", says Donatella Maso, a Moody's Vice President -- Senior Analyst. Concurrently, Moody's has downgraded the ratings of the EUR500 million equivalent first lien term loan due 2020 to B3 from B2, the rating of the EUR50 million revolving credit facility due 2020 to B3 from B2, and the rating of its EUR139 million second lien term loan due 2021 to Caa3 from Caa2, all borrowed by Aenova Holding GmbH and its subsidiaries. RATINGS RATIONALE The rating action primarily reflects the fact that Aenova's reported preliminary operating performance for 2015 was weaker than both the company's 2015 budget and Moody's estimated when it assigned the company's first public rating in 2014. As a result, Aenova's credit metrics, particularly its leverage ratio, have weakened since 2014, and free cash flow generation, excluding EUR59 million of one-off exceptional proceeds from the sale of Munich plant and its subsidiary Temmler's own portfolio, continued to be negative owing to high interest expenses from increased drawn debt, approximately EUR29 million of cash restructuring costs and capital expenditures (capex). The downgrade also reflects the execution risk associated with the new management team's operational improvement plan. Based on preliminary results, the company reported an increase in pro forma revenues of less than 3% for full-year 2015. However, EBITDA before exceptional items decreased to EUR91 million or EUR72 million (including the loss making Miami site) compared to the company's budget of EUR116 million. This was primarily driven by increased personnel costs, and delays in achieving planned cost savings and synergies through the integration of Haupt Pharma (Haupt). As a result, Aenova did not meet Moody's guidance for a stable outlook, which included deleveraging to a debt/EBITDA ratio below 6.5x by FYE 2015. Conversely, Aenova's Moody's-adjusted leverage increased to 8.0x in FYE 2015 excluding drawn factoring facilities, or 8.6x including factoring, from 7.3x in FYE 2014 (excluding factoring). Despite generally positive industry trends, new client acquisitions and product launches, future growth and deleveraging are contingent primarily on the achievement of 2018 roadmap set by the new management including EUR18.6 million of operational efficiencies. Implementation of the operational improvement plan, which started in Q3/Q4 2015 with the sale of loss making Miami soft-gel plan and several redundancies, carries moderate execution risk and Moody's expects it will deliver positive effects on credit metrics only from FYE 2017 onwards. In the meantime, the company will continue to operate with high risky financial profile. While most of the costs have already been incurred, Moody's expects that Aenova's free cash flow generation likely to turn positive in 2017 owing to the amount of debt in the capital structure and capex. Aenova's Caa1 CFR also less favorably reflects (1) the company's geographic concentration in Europe, particularly in Germany; (2) the fragmented and competitive nature of the CDMO industry, resulting in pricing pressure, particularly in the tablets business, which remains Aenova's main segment accounting for 41% of pro forma revenues in FYE 2015; and (3) ongoing consolidation trends among Aenova's customers in the pharmaceutical industry, which could potentially lead to pharmaceutical companies rationalizing their portfolio of suppliers or in-sourcing the manufacturing of certain products should they have spare capacity. These negatives are counterbalanced by (1) Aenova's leading market positions, particularly in Europe, owing to the company's enhanced scale following the Temmler and Haupt acquisitions in 2013 and its broad product portfolio; (2) a moderate customer concentration, with its largest customer to represent approximately 10% of the company's 2015 pro-forma sales, and the top 10 accounting for 44%; (3) good long-term growth prospects in the CDMO industry, owing to the general outsourcing trend combined with positive underlying growth at the consumer level; and (4) high barriers to entry in certain segments such as soft- gel capsules and sterile products, owing to the more complex technology used. Aenova's liquidity profile is adequate for its near-term requirements, although its cash flow generation remains weak. The company has EUR28 million in cash balances at the end of 2015, EUR15 million available under its EUR50 million committed revolving credit facility, EUR74 million of factoring lines (most of them drawn) and no amortizing debt. The loan term facilities are not subject to any maintenance covenants, except for a springing net leverage covenant on the revolving credit facility, which will only be tested when drawings exceed 35% of the total commitment amount and where the headroom is expected to remain satisfactory. RATIONALE FOR THE STABLE OUTLOOK The stable outlook reflects Moody's expectation that Aenova's operating performance and credit metrics will improve from current level and free cash flow will turn positive in FYE 2017 as result of the operational improvement plan. The stable outlook assumes that industry conditions will not deteriorate and that the company will pursue an organic growth strategy and make no material debt-funded acquisitions or dividend distribution. WHAT COULD CHANGE THE RATING UP/DOWN Positive rating pressure could arise if Aenova achieves the targeted growth and operational efficiencies, resulting in its Moody's-adjusted debt/EBITDA ratio falling sustainably below 6.5x (including drawn factoring facilities), its EBITA/interest expense ratio increasing above 1.0x, while generating positive free cash flow. Moody's could downgrade the ratings if the company is unable to deleverage as expected from the existing level. In addition, any weakness in Aenova's liquidity, such as persistent negative free cash flow beyond FYE 2017, would also exert downward pressure on the rating. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Business and Consumer Service Industry published in December 2014. Headquartered in Starnberg, Germany, Aenova is a leading contract development and manufacturing organisation (CDMO) providing outsourcing services for the pharmaceutical and the healthcare industry, along with developing its own products. The company offers a broad range of products such as tablets, hard and soft gel capsules, liquids, sterile liquids and high containment formulations. It operates primarily through 18 production sites in Europe and the USA, and employs approximately 4,400 people. For the year ended Dec. 31, 2015, the company generated revenues of EUR727 million pro forma for the disposal of the Miami site. FLIGHT DESIGN: Applies for Receivership Due to Liquidity Crunch --------------------------------------------------------------- Mary Grady at AVweb reports that Flight Design GmbH, based in Germany, said in a news release it has applied for "a planned receivership which allows for reorganization of the company." According to AVweb, the filing will enable the company to deal with a "liquidity crunch". The crunch is driven mainly by one international customer that "has not settled a bill of over seven digit Euros," the company, as cited by AVweb, said. An attorney appointed by the court, Knut Rebholz, said the most urgent task is to start negotiations to fund continuing operations, AVweb relates. Flight Design GmbH employs about 20 workers in Germany and about 100 at its production plant in Ukraine. The company was founded in 1988 and has delivered about 1,500 aircraft, according to AVweb. THYSSENKRUPP AG: Moody's Lowers CFR to Ba2, Outlook Stable ---------------------------------------------------------- Moody's Investors Service has downgraded Germany's largest steelmaker thyssenkrupp AG's corporate family rating and probability of default rating to Ba2 and Ba2-PD from Ba1 and Ba1- PD, respectively. Concurrently, the rating agency downgraded to Ba2 the rated debt (including provisional ratings) of thyssenkrupp AG and thyssenkrupp Finance Nederland B.V. The outlook on all ratings is stable. "The downgrade of thyssenkrupp's CFR and instrument ratings to Ba2 reflects Moody's view that thyssenkrupp's 2016 profitability will be weaker than initially expected with neutral to low negative cash flow generation and no deleveraging" says Hubert Allemani, a Moody's Vice President -- Senior Analyst and lead analyst for thyssenkrupp. The stable outlook mainly reflects Moody's view that benefits from thyssenkrupp's cost reduction programme 'impact', growth from the capital goods businesses and expected improvement of the steel pricing environment in Europe in the second half of 2016 will offset somewhat profitability pressures from the current harsh steel market environment. RATINGS RATIONALE The downgrade primarily reflects the fact that (1) profitability improvements by thyssenkrupp over the last two years have been insufficient to maintain a Ba1 rating and (2) low steel prices in Europe and the recession in Brazil will pressure profitability in 2016 such that the company will be unable to improve its cash generation this year. Under those circumstances, thyssenkrupp's leverage will remain high with few short-term prospects for a recovery to levels commensurate with the previous Ba1 rating category. Moody's anticipates that thyssenkrupp will face continuous difficulties in its steel operations as a result of the low price environment in Europe, depressed demand in Brazil and limited export opportunities. This is despite the good level of growth achieved in the capital goods business, which will continue to drive the group's profitability and cash generation. Moody's also expects that thyssenkrupp's steel margins in Europe will come under pressure in H1 FYE Sept 2016 owing to the accelerated decline in prices seen in Europe in late 2015, which the rating agency expects to continue until mid-2016 before improving. thyssenkrupp's Ba2 rating is also constrained by (1) a Moody's adjusted gross leverage of 5.1x for the 12-month period through 31 December 2015, which is high for the current rating and which Moody's does not expect to decrease this year; (2) the company's Brazilian slab producing plant, which will require management focus to make it EBIT positive and cash neutral; and (3) the company's ownership of the Italian stainless steel plant of Acciai Speciali Terni (AST), which is undergoing a restructuring programme to further improve its low profitability. However, the Ba2 rating is supported by growing steel end markets in Europe, particularly automotive, which is a core sector for thyssenkrupp, with higher volumes leading to adequate utilization rates and cost absorption. The trading environment for thyssenkrupp remains supportive also in the capital goods business, which continues to report growth in revenues, with strong order book and order backlog. Also supporting the current rating are (1) thyssenkrupp's strong business profile, with a well-positioned worldwide business and diversified revenue streams into capital goods; (2) its sustainable profitability improvements, supported by the gains from the efficiency and restructuring program "impact"; (3) the company's consistently high level of cash on the balance sheet leading to a net leverage of 3.8x as of Dec. 31, 2015, and solid liquidity profile mitigating the low equity position; and (4) low reported financial debt level of EUR8.0 billion at the end of December 2015. LIQUIDITY thyssenkrupp's liquidity is good and expected to remain solid over the next year. The company has EUR1.6 billion of debt maturing in FY2015-16, which Moody's expect can be met without putting excessive pressure on the company's cash flow. At Dec. 31, 2015, thyssenkrupp's available liquidity amounted to EUR7.4 billion. This amount comprises EUR3.7 billion cash and cash equivalents, and EUR3.8 billion undrawn committed credit lines (which includes a EUR2 billion committed revolving credit facility maturing in 2018). RATIONALE FOR STABLE OUTLOOK The decision to stabilize the outlook takes into account the growing steel demand in Europe driven by the automotive, capital goods and construction sectors; the company's strong order book in its capital good businesses; solid liquidity profile as evidenced by the large amount of cash held at thyssenkrupp AG level and continued operational improvements. In addition, Moody's believes that thyssenkrupp will benefit from improvements in the European pricing environment following (1) the recent announcement made by the European Commission to impose provisional anti-dumping tariffs on cold-rolled coils (CRC) imported from China and Russia, as well as (2) the decision to open an investigation into imports of hot-rolled coils and heavy plates. CRC represents approximately two thirds of thyssenkrupp's steel shipments. WHAT COULD CHANGE THE RATING UP/DOWN The Ba2 rating could be upgraded if (1) there is an appreciable improvement in the market environment for the company's main steel products and services with Moody's adjusted EBIT margin reaching and staying above 5%; (2) liquidity remains strong and thyssenkrupp is able to maintain its considerable cash cushion; (3) adjusted gross debt/EBITDA decreases towards 4x and (4) CFO - dividend is trending towards 15%. Moody's could downgrade the ratings if it anticipates that (1) thyssenkrupp's leverage, as measured by Moody's adjusted gross debt/EBITDA, is greater than 5.5x on a sustained basis; (2) CFO - dividend is less than 10% on a consistent basis, and (3) Moody's adjusted EBIT to interest is less than 2x . Moody's also gives weight to net leverage in its calculations considering thyssenkrupp's sizeable unencumbered cash balances and the expectation that thyssenkrupp could use this cash to pay down debt if necessary. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Global Steel Industry published in October 2012. thyssenkrupp is a diversified industrial conglomerate operating in around 80 countries and Germany's largest steelmaker. In the fiscal year ended Sept. 30, 2015, thyssenkrupp generated sales from continuing operations of approximately EUR42.8 billion and EBITDA of EUR2.8 billion. List of Affected Ratings Downgrades: Issuer: thyssenkrupp AG Probability of Default Rating, Downgraded to Ba2-PD from Ba1-PD Corporate Family Rating, Downgraded to Ba2 from Ba1 Senior Unsecured Medium-Term Note Program, Downgraded to (P)Ba2 from (P)Ba1 Senior Unsecured Regular Bond/Debenture, Downgraded to Ba2 from Ba1 Issuer: thyssenkrupp Finance Nederland B.V. Senior Unsecured Regular Bond/Debenture, Downgraded to Ba2 from Ba1 Outlook Actions: Issuer: thyssenkrupp AG Outlook, Changed To Stable From Negative Issuer: thyssenkrupp Finance Nederland B.V. Outlook, Changed To Stable From Negative =========== G R E E C E =========== GREECE: Creditors to Return to Athens for Bailout Review Talks -------------------------------------------------------------- Capital.gr reports that European Commission spokeswoman Annika Breidthardt said the technical staff of Greece's creditors will return to Athens this week to resume the negotiations with the Greek government over the pending issues of the first review. The technical staff will reportedly focus on fiscal issues seeking to finalize the 2015 fiscal performance and to find common ground with the government on a baseline scenario for the fiscal gap in 2016, Capital.gr relays, citing AMNA. According to Capital.gr, creditors' mission heads will arrive in Athens at a later stage assuming there has been progress in the deliberations. ============= I R E L A N D ============= HUGUENOT XMI: Civil Court Appoints Interim Examiner -------------------------------------------------- The Irish Times reports that the Circuit Civil Court was told on Feb. 22 Huguenot Xmi Limited is unable to pay its debts. According to The Irish Times, Barrister Ross Gorman told Judge Sinead Ni Chulachain that the company, through its two Cork-based directors, Daniel Noel Coughlan and Dan Byrne, was seeking court protection from its creditors while a financial rescue plan was sought. Mr. Gorman, who appeared with solicitors Fanning Kelly for the company, said the directors were asking the court to put the company in examinership as it was insolvent, The Irish Times relates. The judge granted the request and appointed Joseph Walsh -- joseph.walsh@hughesblake.ie -- chartered accountant with Hughes Blake, interim examiner to draw up a survival plan to save the firm and the jobs of its 14 employees, The Irish Times discloses. Huguenot Xmi Limited is a multiskill creative marketing agency. PETROCELTIC: Lenders Extend Debt Waiver Until March 4 ----------------------------------------------------- Pamela Newenham at The Irish Times reports that Petroceltic, which owes more than US$200 million (EUR179 million), has been given a two-week reprieve from its lenders. According to The Irish Times, in a statement to the Irish Stock Exchange on Feb. 22, the company said it had received a further waiver of repayments under its senior bank facility until March 4. Petroceltic is a Dublin-based oil and gas explorer. =================== K A Z A K H S T A N =================== CAPITAL BANK: S&P Affirms 'B-' Counterparty Credit Rating --------------------------------------------------------- Standard & Poor's Ratings Services affirmed its 'B-' long-term and 'C' short-term counterparty credit ratings on Capital Bank Kazakhstan JSC (CBK). The outlook is stable. At the same time, S&P affirmed its 'kzB+' Kazakhstan national scale rating on the bank. The affirmation reflects S&P's expectation that CBK will receive capital injections this year. As a result, S&P expects that its risk-adjusted capital (RAC) ratio for the bank will remain above 10% in 2016. S&P believes this higher-than-average capital level provides an important additional cushion to absorb an expected rise in credit costs and lower profitability. Low oil prices and the ensuing weak economic growth have eroded the operating environment for all Kazakhstan-based banks in 2016. Since August 2015, there has been an approximate 50% depreciation of the tenge against the U.S. dollar, which poses a significant risk to banks' credit costs, liquidity, and capital, due to high dollarization in the banking sector. S&P expects the weakening environment, alongside CBK's rapid credit growth over the past three years, large loan concentrations, and high foreign currency lending, will cause credit costs to rise to over 3% of total loans in 2016. As a result, S&P expects profitability will deteriorate this year, with the return on assets (core earnings/adjusted assets) reducing to less than 0.2%. Consequently, S&P views the shareholder capital injections in 2016 (Kazakhstani tenge 4.4 billion of which came in January and a further equity inflow is expected by approximately midyear) and absence of dividend distributions as timely, and necessary to keep CBK's RAC ratio above the 10% mark. In S&P's view, CBK's high reliance on short-term interbank funding, which constituted about 30% of its funding base on Dec. 31, 2015, is one of the key risks. S&P thinks that short- term wholesale funding is vulnerable to systemic shocks, due to tight liquidity in tenge, and therefore could represent an increasingly unreliable source of funds. The stable outlook reflects the balance between CBK's robust capitalization and the expected increase in credit costs and weaker profitability. S&P could lower the ratings on the bank if the planned capital injections did not materialize, or if weak profitability and asset growth led to a rapid erosion of CBK's capital. S&P could also lower the ratings if it saw a substantial increase in credit costs or nonperforming loans (overdue for more than 90 days and restructured loans) above the system average. Moreover, if the bank's exposure to the interbank market increased or its sources of funds appeared to be drying up, affecting the liquidity, this could lead to a downgrade. Although unlikely, S&P could take a positive rating action if CBK decreased its dependence on short-term wholesale funding, in line with domestic peers, and kept diversifying its loan portfolio and funding base. Maintenance of a RAC ratio sustainably above 10% and adequate liquidity would support a positive rating action. CELF LOAN IV: S&P Affirms 'BB+' Rating on Class D Notes ------------------------------------------------------- Standard & Poor's Ratings Services raised its credit ratings on CELF Loan Partners IV PLC's class A-1, A-2a, A-2b, B, C, and E notes. At the same time, S&P has affirmed its 'BB+ (sf)' rating on the class D notes. The rating actions follow S&P's assessment of the transaction's performance using data from the Dec. 28, 2015 trustee report. CELF Loan Partners IV's senior notes have been amortizing since the end of its reinvestment period in May 2014. Since S&P's June 30, 2014 review, the aggregate collateral balance has decreased by approximately 34.0% to EUR350.29 million from EUR528.58 million. "We subjected the capital structure to a cash flow analysis to determine the break-even default rate (BDR) for each rated class at each rating level. The BDR represents our estimate of the maximum level of gross defaults, based on our stress assumptions, that a tranche can withstand and still fully repay the noteholders. In our analysis, we used the portfolio balance that we consider to be performing (EUR345,761,615), the current weighted-average spread (3.84%), the principal cash balance (EUR4,532,210), and the weighted-average recovery rates calculated in line with our corporate collateralized debt obligations (CDOs) criteria. We applied various cash flow stresses, using our standard default patterns, in conjunction with different interest rate and currency stress scenarios," S&P said. The available credit enhancement has increased for all of the rated notes due to the transaction's structural deleveraging post its re-investment period. The class A-2a and A-2b notes are pari passu with the class A-1 notes. However, the class A-2a notes pay interest and principal before the class A-2b notes. As a result, the class A-2a notes will redeem before the class A-1 and A-2b notes. This payment priority is reflected in the higher rating that S&P has assigned to the class A-2a notes, compared with the class A-1 and A-2b notes. The class A-1 and A-2a notes have amortized by EUR174.70 million since S&P's previous review and currently have note factors of 51.5% and 34.7%, respectively. The increased credit enhancement is the main rating driver for the upgrades. The weighted-average spread earned on the assets has decreased to 384 basis points (bps) from 403 bps since S&P's previous review. At the same time, the number of distinct obligors in the portfolio has reduced to 79 from 121 over the same period due to asset repayments. The top 10 largest obligors account for 28.64% of the portfolio. The proportion of assets rated in the 'CCC' category ('CCC+', 'CCC', or 'CCC-') and assets that S&P considers to be defaulted (assets rated 'CC', 'C', 'SD' [selective default], and 'D') has decreased since S&P's previous review. The portfolio's credit quality has remained stable, with an average rating of 'B', while its weighted-average life has reduced to 4.91 years from 5.16 years over the same period. The par coverage tests comply with the documented required triggers. The portfolio contains non-euro-denominated assets, which make up 26.7% of the performing portfolio. The class A-1 variable funding notes, which were drawn in euros, U.S. dollars, and British pound sterling to fund these notes, create a natural hedge. Any foreign exchange mismatches that could result from defaults in the portfolio or from coverage test failure are hedged by a euro-denominated currency option. In S&P's opinion, the downgrade provisions in the currency option agreement do not fully comply with S&P's current counterparty criteria. In S&P's cash flow analysis, for ratings above the issuer credit rating (ICR) plus one notch on the options counterparty, Goldman Sachs International, S&P has therefore considered scenarios where such counterparty does not perform, and where, as a result, the transaction may be exposed to greater currency risk. The increased available credit enhancement for all of the rated classes of notes has resulted in each class, except for the class D notes, achieving higher ratings in S&P's cash flow analysis. S&P's cash flow analysis indicates that these classes of notes are able to sustain defaults at higher rating levels than those currently assigned. S&P has therefore raised its ratings on the class A-1, A-2a, A-2b, B, C, and E notes. At the same time, S&P has affirmed its 'BB+ (sf)' rating on the class D notes as the available credit enhancement is commensurate with the currently assigned rating. CELF Loan Partners IV is a cash flow collateralized loan obligation (CLO) transaction that securitizes loans granted to primarily speculative-grade corporate firms. The transaction closed in May 2007 and entered the end of its reinvestment period in May 2014. CELF Advisors LLP manages the transaction. RATINGS LIST Class Rating To From CELF Loan Partners IV PLC EUR600 Million Secured Floating-Rate Notes Ratings Raised A-1 AA+ (sf) A+ (sf) A-2a AAA (sf) AA+ (sf) A-2b AA+ (sf) A+ (sf) B AA (sf) A+ (sf) C A+ (sf) BBB+ (sf) E B+ (sf) CCC+ (sf) Rating Affirmed D BB+ (sf) =================== L U X E M B O U R G =================== INTELSAT SA: S&P Puts 'B' CCR on CreditWatch Negative ----------------------------------------------------- Standard & Poor's Ratings Services said that it placed its ratings on Luxembourg-based Intelsat S.A. and all of its subsidiaries, including the 'B' corporate credit rating, on CreditWatch with negative implications. The CreditWatch placement follows the company's announcement that it expects revenue to decline 6.5%-9% in 2016, which is well above S&P's original base-case forecast for a 3% revenue decline. As such, S&P expects adjusted debt to EBITDA will increase to about 9x in 2016 from about 8.1x in 2015, and that free operating cash flow will be negative this year due to lower than expected revenue and EBITDA performance. The underperformance is led by a 15%-17% decline in network services revenues. While S&P had previously anticipated 2016 would be the trough year for Intelsat, the steeper than expected revenue decline highlights the continued pricing pressure Intelsat is facing in network services across various regions as contracts renew, outside of the ongoing roll-off of its legacy point-to-point and channel services. In S&P's view, this places increased uncertainty as to the timing and extent of the anticipated revenue rebound and leverage improvement in 2017 and beyond as a result of the Epic satellite platform. In addition to 2016 guidance, the company announced that it hired Guggenheim Securities, LLC to advise the company on financing and balance sheet initiatives. The company has $500 million ($475 million outstanding) of 6.75% senior notes at Luxembourg due in June 2018. In the third quarter of 2015, the company put a $360 million intercompany loan ($347 million outstanding at Dec. 31, 2015) in place from a subsidiary of Intelsat Luxembourg to Intelsat Jackson, which is pre-payable at any time and can be used to repay a portion of the 6.75% senior notes without triggering the 6x restricted payment test at Jackson. S&P expects that leverage will likely remain above 6x through Jackson over the next several years, which would limit the company from making cash distributions from Jackson up to Luxembourg absent the use of permitted investment baskets. In resolving the CreditWatch listing, S&P will review the company's strategy regarding its capital structure and financing initiatives. Based on S&P's view of the company's adequate liquidity and lack of near-term debt maturities, S&P currently believes that ratings downside will be limited to one notch on the corporate credit rating. A multiple notch downgrade could result if S&P concludes the capital structure is unsustainable absent a subpar exchange. MALLINCKRODT INT'L: Moody's Affirms Ba3 CFR, Outlook Stable ----------------------------------------------------------- Moody's Investors Service raised the Speculative Grade Liquidity rating of Mallinckrodt International Finance S.A. to SGL-2 (signifying good liquidity) from SGL-3 (adequate). All other ratings, including the Ba3 Corporate Family Rating and Ba3-PD Probability of Default Rating were affirmed. The rating outlook is stable. The improvement in the liquidity rating reflects an increase in cash to over $500 million at Dec. 25, 2015, following strong internal cash generation and the receipt of proceeds from the divestiture of the CMDS business. While cash will be deployed for acquisitions and share repurchases Moody's anticipates that strong free cash flow of around $1 billion over the next 12 months will quickly replenish liquidity. Ratings Raised: Speculative Grade Liquidity Rating, to SGL-2 from SGL-3 Ratings Affirmed: Corporate Family Rating at Ba3 Probability of Default Rating at Ba3-PD Senior Secured Bank Credit Facility at Ba1(LGD2) Senior Unsecured Notes (with subsidiary guarantees) at B1 (LGD4) Senior Unsecured Notes (without subsidiary guarantees) at B2 (LGD6) The rating outlook is stable RATINGS RATIONALE Mallinckrodt's Ba3 Corporate Family Rating is supported by the company's significant scale and Moody's expectation for relatively moderate financial leverage of around 4.0x debt/EBITDA. The rating is also supported by Moody's expectation for strong cash flow, creating the potential for rapid deleveraging. However, Moody's anticipates that cash flow will be deployed more towards the acquisition of cash-generating assets rather than debt repayment. The rating is constrained by the potential for operating volatility caused by Mallinckrodt's high-risk nuclear products business and its concentration of profits in H.P. Acthar Gel and controlled substances, both of which also carry exogenous risks. In addition, the ratings are constrained by Mallinckrodt's aggressive appetite for acquisitions that will likely lead to increased leverage from time to time, and risks inherent in a rapidly evolving business strategy. The stable outlook reflects Moody's view that Mallinckrodt will generally maintain adjusted debt to EBITDA around 4.0x over the next 12-18 months. Moody's could upgrade the ratings if the company sustains good organic growth and strong predictable free cash flow while maintaining debt/EBITDA below 3.0x. An upgrade could also be supported by improved revenue diversity. Conversely, if Moody's expects Mallinckrodt to sustain debt/EBITDA materially above 4.0 times the ratings could be downgraded. This scenario could arise if Mallinckrodt faces an unexpected decline in one of its key products or if the company pursues additional large, debt-funded acquisitions. The principal methodology used in these ratings was Global Pharmaceutical Industry published in December 2012. Luxembourg-based Mallinckrodt International Finance SA is a subsidiary of Chesterfield, UK-based Mallinckrodt plc. Mallinckrodt is a specialty biopharmaceutical company. Revenues for the 12 months ended Dec. 25, 2015, were approximately $3.5 billion. ===================== N E T H E R L A N D S ===================== QUEEN STREET CLO I: Moody's Raises Rating on Class E Notes to Ba1 ----------------------------------------------------------------- Moody's Investors Service has upgraded the ratings on these notes issued by Queen Street CLO I B.V.: EUR41.3 mil. Class C1 Senior Secured Deferrable Floating Rate Notes due 2023, Upgraded to Aa1 (sf); previously on Sept. 29, 2015, Upgraded to Aa3 (sf) EUR1.2 mil. Class C2 Senior Secured Deferrable Fixed Rate Notes due 2023, Upgraded to Aa1 (sf); previously on Sept 29, 2015, Upgraded to Aa3 (sf) EUR12.95 mil. Class D1 Senior Secured Deferrable Floating Rate Notes due 2023, Upgraded to A3 (sf); previously on Sept. 29, 2015, Affirmed Baa2 (sf) EUR5.8 mil. Class D2 Senior Secured Deferrable Fixed Rate Notes due 2023, Upgraded to A3 (sf); previously on Sept. 29, 2015, Affirmed Baa2 (sf) EUR20 mil. Class E Senior Secured Deferrable Floating Rate Notes due 2023, Upgraded to Ba1 (sf); previously on Sept. 29 2015, Affirmed Ba3 (sf) EUR7 mil. Class X Combination Notes due 2023, Upgraded to Aa1 (sf); previously on Sept. 29, 2015, Upgraded to Aa2 (sf) Moody's also affirmed the ratings on these notes: EUR266 mil. (Current outstanding balance of EUR 28.7 mil.) Class A1 Senior Secured Floating Rate Notes due 2023, Affirmed Aaa (sf); previously on Sep 29, 2015 Affirmed Aaa (sf) EUR66.5 mil. Class A2 Senior Secured Floating Rate Notes due 2023, Affirmed Aaa (sf); previously on Sept. 29, 2015, Affirmed Aaa (sf) EUR38.75 mil. Class B Senior Secured Floating Rate Notes due 2023, Affirmed Aaa (sf); previously on Sept. 29, 2015, Affirmed Aaa (sf) Queen Street CLO I B.V., issued in January 2007, is a collateralized loan obligation (CLO) backed by a portfolio of mostly high-yield senior secured European loans. The portfolio is managed by Ares Management Limited. The transaction's reinvestment period ended in April 2013. RATINGS RATIONALE The rating actions on the notes are primarily a result of the deleveraging of the Class A1 notes following amortization of the underlying portfolio since the last rating action in September 2015. The Class A1 notes have paid down by approximately EUR36.2 million or 13.6% of its initial balance on the last payment date in October 2015. As a result of the deleveraging, over- collateralization has increased. According to the trustee report dated January 2016 the Class A/B, Class C, Class D and Class E OC ratios are reported at 181.6%, 137.9%, 124.7% and 113.1% compared to August 2015 levels, on which the last rating action was based, of 163.3%, 130.7%, 120.1% and 110.5%, respectively. The rating on the combination notes address the repayment of the rated balance on or before the legal final maturity. For the Class X, the rated balance at any time is equal to the principal amount of the combination note on the issue date minus the sum of all payments made from the issue date to such date, of either interest or principal. The rated balance will 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 analyszd the underlying collateral pool as having a performing par and principal proceeds balance of EUR243.7 million, a weighted average default probability of 20.5% (consistent with a WARF of 2742), a weighted average recovery rate upon default of 45.9% for a Aaa liability target rating, a diversity score of 28 and a weighted average spread of 3.41%. 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. 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 lower weighted average recovery rate for the portfolio. Moody's ran a model in which it reduced the weighted average recovery rate by 5%; the model generated outputs were within 2 notches of the base-case results. 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 because of 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) 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. 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. WOOD STREET VI: S&P Raises Rating on Class E Notes to BB+ --------------------------------------------------------- Standard & Poor's Ratings Services raised its credit ratings on Wood Street CLO VI B.V.'s class A1, B, C, D, and E notes. At the same time, S&P has affirmed its rating on the class A2 notes. The rating actions follow S&P's assessment of the transaction's performance using data from the Dec. 29, 2015 trustee report and the application of S&P's relevant criteria. S&P subjected the capital structure to a cash flow analysis to determine the break-even default rate (BDR) for each rated class at each rating level. The BDR represents S&P's estimate of the maximum level of gross defaults, based on S&P's stress assumptions, that a tranche can withstand and still fully repay the noteholders. In S&P's analysis, it used the portfolio balance that it considers to be performing (EUR252,678,831), the current weighted-average spread (3.74%), and the weighted-average recovery rates calculated in line with S&P's corporate collateralized debt obligation (CDO) criteria. S&P applied various cash flow stresses, using its standard default patterns, in conjunction with different interest rate stress scenarios. Since S&P's June 25, 2013 review, the aggregate collateral balance has decreased by 20.98% to EUR252.68 million from EUR319.78 million. S&P has observed that the class A1 notes have amortized by EUR74.87 million since its previous review. In S&P's view, this has increased the available credit enhancement for all of the rated classes of notes. S&P has also observed that the concentration of 'CCC' category ('CCC+', 'CCC', and 'CCC-') rated assets has increased, while the concentration of defaulted assets has decreased since S&P's previous review. S&P has observed that non-euro-denominated assets currently make up 7.82% of the aggregate collateral balance. A cross-currency swap agreement hedges these assets. In S&P's cash flow analysis, it considered scenarios where the hedging counterparty does not perform, and where the transaction is therefore exposed to changes in currency rates. The exposure to obligors based in countries rated below 'A-' is greater than 10% of the aggregate collateral balance (16.1%). Therefore, S&P has also applied additional stresses in accordance with its non-sovereign ratings criteria. Taking into account the results of S&P's credit and cash flow analysis and the application of its current counterparty criteria and its non-sovereign ratings criteria, S&P considers that the available credit enhancement for the class A1 notes is commensurate with a higher rating than the currently assigned rating. S&P has therefore raised its rating on the class A1 notes. The available credit enhancement for class A2 is commensurate with the currently assigned rating and S&P has therefore affirmed its rating on the class A2 notes. Taking into account the results of S&P's credit and cash flow analysis, it considers that the available credit enhancement for class B, C, D, and E notes is commensurate with higher ratings than those currently assigned. S&P has therefore raised its ratings on these classes of the notes. Wood Street CLO VI is a cash flow collateralized loan (CLO) obligation (CLO) transaction that securitizes loans to primarily speculative-grade corporate firms. The transaction closed in August 2007 and is managed by Alcentra Ltd. RATINGS LIST Class Rating To From Wood Street CLO VI B.V. EUR325.8 Million Senior Secured Floating-Rate Notes Ratings Raised A1 AAA (sf) AA+ (sf) B AA+ (sf) A+ (sf) C AA- (sf) BBB+ (sf) D BBB+ (sf) BB+ (sf) E BB+ (sf) B+ (sf) Rating Affirmed A2 AA+ (sf) ZIGGO GROUP: S&P Affirms 'BB-' CCR, Outlook Stable -------------------------------------------------- Standard & Poor's Ratings Services affirmed its 'BB-' long-term corporate credit rating on Netherlands-based Ziggo Group Holding B.V. The outlook is stable. S&P also affirmed its 'BB-' issue rating on Ziggo's senior secured debt. The recovery rating remains unchanged at '3', indicating S&P's expectation of meaningful recovery, in the higher half of the 50%-70% range, in the event of a payment default. Additionally, S&P affirmed the 'B' issue rating on Ziggo's exchanged senior notes. The recovery rating on these notes remains unchanged at '6', indicating S&P's expectation of negligible recovery (0%-10%) in the event of a payment default. The affirmation reflects S&P's view that Ziggo remains a core entity within the LGP group, despite the announced creation of a 50/50-owned JV between LGP and Vodafone Group, merging Ziggo and Vodafone Netherlands. Hence, S&P continues to equalize its ratings on Ziggo with those on its current parent, LGP. S&P views the proposed merger between Ziggo and Vodafone Netherlands as moderately positive to the company's business, making it a stronger competitor to the incumbent KPN B.V. The merged entity would have over 15 million revenue generating units, including over five million Vodafone Netherlands' mobile subscribers, as well as greater opportunities for cross selling and converged quadruple play growth. The JV targets revenue synergies with a net present value of approximately EUR1.0 billion. However, the ratings are constrained by Ziggo's limited geographical diversification and fierce competition in the Dutch market. In S&P's view, there are integration risks that limit the potential for a positive rating action. S&P assumes the JV will generate annual costs and capital expenditure (capex) synergies of EUR280 million by the fifth full year after closing, partly offset by EUR350 million in integration costs. Integration costs will mostly be incurred in the first three years after closing. Vodafone Netherlands' adjusted EBITDA margin of approximately 33% is lower than that of Ziggo at above 50%. However, S&P expects the combined entity to generate above- industry average profitability. The JV will target leverage of 4.5x-5.0x, which corresponds to a Standard & Poor's-adjusted debt-to-EBITDA ratio of above 5x. S&P expects the JV to generate free operating cash flow (FOCF) to debt of 3%-4% in the first two-to-three years of operation. Both ratios are in line with S&P's current expectations for Ziggo. S&P expects the JV to raise additional financing, maintaining the current financial profile, even if EBITDA grows. S&P assumes that the proceeds from the financing and FOCF will be distributed to the owners. Because of Ziggo's strong operational, financial, and strategic links with the LGP group -- which has a core long-term strategy to build quadruple play capabilities in the European markets -- S&P equalizes its ratings on Ziggo with the ratings on LGP. If the JV closes in line with the announced structure, S&P believes the JV is likely to receive support from both LGP and Vodafone should it face financial difficulty. S&P also views the combined ownership as unlikely to decrease in the near term given restrictions on initiating an IPO for the JV until after the third anniversary of closing. There are also restrictions on other transfers of interests in the JV until the fourth anniversary of closing and a first right of refusal to either parent in the event of sales to a third party after the fifth anniversary. The stable outlook reflects S&P's view that Ziggo's stabilizing performance and SACP continue to be supported by LGP. The modestly stronger SACP of the proposed JV would also benefit from the two owners, LGP and Vodafone. S&P could revise down Ziggo or the JV's SACP if operating performance deteriorated materially from current levels. This could happen if the Dutch market becomes even more competitive, and Ziggo or Vodafone Netherlands continue to lose customers. S&P is unlikely to lower the ratings on Ziggo given S&P's view of parent support, however, S&P could downgrade Ziggo if S&P downgraded LGP. Over the long term, S&P could lower the ratings on Ziggo if the combined parent ownership were to decline, making support less likely, or if S&P assess the ratings more on a stand-alone basis. The likelihood of revising up S&P's assessment of Ziggo or JV's SACP is currently unlikely, owing to strong market competition and anticipated highly leveraged capital structure. S&P could raise the ratings on Ziggo if S&P was to upgrade LGP. In the long term, S&P could raise the ratings on Ziggo if S&P expected stronger support than it currently assume from the two owners of the JV. =========== R U S S I A =========== AGROINCOMBANK PJSC: Liabilities Exceed Assets, Probe Shows ---------------------------------------------------------- During the inspection of financial standing of the credit institution, the provisional administration of PJSC AGROINCOMBANK appointed by Bank of Russia Order No. OD-2986, dated November 2, 2015, due to the revocation of its banking license, revealed operations of the bank's former management bearing evidence of bank assets' diversion by replacing high-quality liquid securities (federal government bonds) by illiquid promissory notes of companies with dubious solvency in the amount, exceeding 75% of the bank's total assets. Furthermore, the originals of the documents with regard to the above transactions to sell the OFZs and buy the promissory notes are unavailable with the bank. Besides, the cash audit findings established the lack of funds in the amount of more than 19.6 million rubles, US$185.5 thousand, and 18.6 thousand euros. According to the bank cashiers, the money was withdrawn by unidentified individuals as ordered by the bank's management on the date of the revocation of the license. According to the estimate by the provisional administration, the assets of PJSC AGROINCOMBANK do not exceed 92.2 million rubles, whereas the bank's liabilities to its creditors amount to 915 million rubles. On December 25, 2015, the Court of Arbitration of the Astrakhan Region took a decision to recognize PJSC AGROINCOMBANK insolvent (bankrupt) and initiate bankruptcy proceedings with the state corporation Deposit Insurance Agency appointed as a receiver. The Bank of Russia submitted the information on the financial transactions bearing the evidence of the criminal offence conducted by the former management and owners of PJSC AGROINCOMBANK to the Prosecutor General's Office of the Russian Federation, the Ministry of Internal Affairs of the Russian Federation and the Investigative Committee of the Russian Federation for consideration and procedural decision making. BANK GOROD: Liabilities Exceed Assets, Inspection Reveals --------------------------------------------------------- During the inspection of financial standing of the credit institution, the provisional administration of BANK GOROD JSC appointed by Bank of Russia Order No. OD-3183, dated November 16, 2015, due to the revocation of its banking license, revealed operations bearing evidence of bank assets' diversion, which operations had been conducted by the bank's former management prior to the revocation of the banking license and emergence of solvency problems. Specifically, the assets were diverted by replacing the bank's credit portfolio in the amount of 10.5 billion rubles by receivables from the company with dubious solvency, by the disposal of the bank's immovable property in the amount of over 470 million rubles, and also by the transfer of funds in the amount of 760 million rubles to top up the broker's account followed by their transfer to a non-resident bank. According to the estimate by the provisional administration, the assets of BANK GOROD JSC do not exceed 1.9 billion rubles, whereas the bank's liabilities to its creditors amount to 13.2 billion rubles. Under the circumstances, the Bank of Russia applied to the Court of Arbitration of the city of Moscow to recognize the bank as insolvent (bankrupt). The Bank of Russia submitted the information on financial transactions bearing the evidence of the criminal offence conducted by the former management and owners of BANK GOROD JSC to the Prosecutor General's Office of the Russian Federation, the Ministry of Internal Affairs of the Russian Federation and the Investigative Committee of the Russian Federation for consideration and procedural decision making. ========= S P A I N ========= CAIXABANK RMBS 1: Moody's Assigns Caa3 Rating to Class B Notes -------------------------------------------------------------- Moody's Investors Service has assigned provisional ratings to CAIXABANK RMBS 1, FT's class A and B notes: Issuer: CAIXABANK RMBS 1, FT EUR12,851 mil. Class A Notes due March 2063, Assigned (P)A2 (sf) EUR1,349 mil. Class B Notes due March 2063, Assigned (P)Caa3 (sf) CAIXABANK RMBS 1, FT is a static cash securitization of first- line prime mortgage loans extended to obligors located in Spain. Of the portfolio, [75.97%] consists of flexible mortgages and [24.03%] standard mortgage loans secured on Spanish residential properties. The provisional ratings address the expected loss posed to investors by legal final maturity. In Moody's opinion, the structure allows for the timely payment of interest and the ultimate payment of principal for the class A notes and the ultimate payment of principal for the class B notes by legal final maturity. Moody's provisional ratings only address the credit risks associated with the transaction. Other non-credit risks have not been addressed, but may have a significant effect on yield to investors. Moody's issues provisional ratings in advance of the final sale of securities, but these ratings only represent Moody's preliminary credit opinion. Upon a conclusive review of the transaction and associated documentation, Moody's will endeavor to assign definitive ratings to the notes. A definitive rating may differ from a provisional rating. Moody's will disseminate the assignment of any definitive ratings through its Client Service Desk. Moody's will monitor this transaction on an ongoing basis. RATINGS RATIONALE CAIXABANK RMBS 1, FT is a securitization of loans that CaixaBank, S.A. (Baa2/P-2/ Baa1(cr)/P-2(cr)) granted to Spanish individuals. CaixaBank, S.A. is acting as the servicer of the loans, while GestiCaixa, S.G.F.T., S.A. is the management company. The provisional ratings take into account the credit quality of the underlying mortgage loan pool, from which Moody's determined the Moody's Individual Loan Analysis Credit Enhancement ("MILAN CE") assumption and the portfolio's expected loss. The key drivers for the portfolio's expected loss of [4.5%] are (i) benchmarking with comparable transactions in the Spanish market through the analysis data in CaixaBank, S.A.'s book; (ii) very good track record of previous Residential Mortgage-Backed Securities ("RMBS") originated by CaixaBank, S.A (the Foncaixa Hipotecarios series); and (iii) Moody's outlook on Spanish RMBS in combination with the seller's historic recovery data. The transaction's [15.8%] MILAN CE number is in line other Spanish RMBS transactions. The MILAN CE's key drivers are (i) the current weighted-average loan-to-value ("LTV") ratio of [66.4%] (calculated taking into account the original appraisal value when the loan was granted), which is lower than the average for Spanish RMBS transactions; (ii) the well-seasoned portfolio, which has a weighted-average seasoning of [7.5] years; (iii) the fact that only [3.87%] of the borrowers in the pool are not Spanish nationals; (iv) the absence of broker-originated loans in the pool; and (v) the absence of restructured, renegotiated, refinancing or debt consolidation loans in the pool. However, [75.97%] of the pool consists of flexible mortgage loans, which are structured like a line of credit. Under these flexible mortgage loans, borrowers can make additional drawdowns up to a certain LTV ratio limit, for an amount equal to the amortized principal. As a result, flexible mortgages lead to a higher expected default frequency and more severe losses than for traditional mortgage loans. Additionally, [11.72%] of the borrowers have the option to avail of payment holiday periods, where principal is not paid, and [39.27%] of the pool can avail of principal and interest grace periods. Moody's considers that the deal has the following credit strengths: (i) the full subordination of the class B notes' interest and principal to the class A notes; (ii) the notes' sequential amortization; and (iii) a fully funded reserve upfront equal to [4.0%] of the notes, which covers potential shortfalls in the class A notes' interest and principal during transaction's life (and subsequently of the class B notes, once the class A notes have fully amortized). The portfolio mainly contains floating-rate loans linked to 12- month Euribor [91.5%], or "Indice de Referencia de Prestamos Hipotecarios conjunto de entidades de credito" ("IRPH"), whereas the notes are linked to three-month Euribor and reset every quarter on the determination dates. This leads to an interest- rate mismatch in the transaction. Of the provisional pool, [8.5%] comprises fixed-rate loans. Therefore, there is a potential fixed-to-floating-rate risk, whereby the Euribor rate on the notes increases, while the interest rates on the loans remain constant until the reset date. There is no interest-rate swap in place to cover interest-rate risk. Moody's takes into account the potential interest rate exposure as part of its cash flow analysis when determining the notes' provisional ratings. FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS: Factors that may lead to an upgrade of the ratings include a significantly better-than-expected performance of the pool, combined with an increase in the notes' credit enhancement. Factors that may cause a downgrade of the ratings include significantly different loss assumptions compared with our expectations at closing due to either (i) a change in economic conditions from our central forecast scenario; or (ii) idiosyncratic performance factors that would lead to rating actions; or (iii) a change in Spain's sovereign risk, which may also result in subsequent rating actions on the notes. Stress Scenarios: Moody's Parameter Sensitivities provide a quantitative/model- indicated calculation of the number of rating notches that a Moody's structured finance security may vary if certain input parameters used in the initial rating process differed. The analysis assumes that the deal has not aged and is not intended to measure how the rating of the security might migrate over time, but rather how the initial rating of the security might have differed if key rating input parameters were varied. Parameter Sensitivities for typical EMEA RMBS transaction are calculated by stressing key variable inputs in Moody's primary rating model. At the time the provisional ratings were assigned, the model output indicated that the class A notes would have achieved an A2 if the expected loss was as high as 4.5%, if the MILAN CE was 15.8%, and all other factors were constant. The model output further indicated that the class A notes would not have been assigned an A2 rating with a MILAN CE of 19%, and an expected loss of 4.5%. The principal methodology used in these ratings was "Moody's Approach to Rating RMBS Using the MILAN Framework," published in January 2015. The analysis undertaken by Moody's at the initial assignment of ratings for RMBS securities may focus on aspects that become less relevant or typically remain unchanged during the surveillance stage. MADRID RMBS 1: Fitch Affirms 'CCsf' Rating on Class E Notes ----------------------------------------------------------- Fitch Ratings has affirmed three Madrid RMBS FTA transactions and revised the Outlooks on 10 tranches to Stable from Negative. The Spanish RMBS series comprises loans serviced by Bankia S.A. (BB+/Positive/B). KEY RATING DRIVERS Stable Credit Enhancement The structural credit enhancement (CE) across all notes has remained stable since Fitch's last annual review in February 2015. This reflects that the notes are amortizing sequentially and the balance of principal deficiency ledgers (PDL) is in most cases declining. Fitch considers the existing and projected CE sufficient to support the ratings, as reflected in the affirmations and revision of the Outlook to Stable from Negative on 10 tranches. Stable Arrears Performance The affirmations also reflect Fitch's expectation of stable asset performance, supported by the decreasing trend of arrears over the past 12 months in most transactions. As of December 2015, three-months plus arrears (excluding defaults) ranged from 0.32% (Madrid RMBS I) to 0.48% (Madrid RMBS II) of the current pool balances down from 0.8% (Madrid RMBS III) and 0.64% (Madrid RMBS II) as of December 2014. These levels remain below the Fitch Spanish Prime index of 1.0%. Cumulative gross defaults (defined as loans in arrears for more than six months) are high but show signs of flattening, ranging between 18.8% (Madrid RMBS I) and 21.9% (Madrid RMBS III) of the initial portfolio balance. These levels are above the average 5.2% for other prime Spanish RMBS and the 15.8% of other Spanish non-conforming RMBS. The lower pace of new entries into default has allowed the PDL to decrease to EUR14.2m in Madrid RMBS II (from EUR 16.3m as of October 2014) and remain broadly stable in Madrid RMBS I and III. Re-performing Assets Fitch performed a loan by loan analysis on defaulted assets and identified instances where loans had gone back to performing. For example, EUR6.4 million (Madrid RMBS II) and EUR19.6 million (Madrid RMBS III) of cumulative defaulted balance have returned to being current on their payment obligations or are in arrears of under six months. Fitch has adjusted the PDL balances downwards to recognize the re-performance of prior defaults. The default definition of Madrid RMBS transactions is shorter than the standard 12 to 18 months typically seen in other Spanish RMBS. Foreclosure Frequency Adjustment Fitch has reduced the magnitude of the foreclosure frequency adjustment to foreign borrowers, self-employed borrowers and borrowers with original mortgage tenor longer than 30 years to 150%, 20% and 5% (from 200%, 60% and 20%). While Fitch believes loans granted to these borrowers are typically exposed to greater performance volatility than traditional loans, the payment history track record suggests these assets have demonstrated resilience in periods of economic crisis. Fitch also applied no additional foreclosure frequency adjustment to the proportion of loans concentrated in the Madrid region given the economic diversity and importance of the region. These calibrations are due to the comparable performance of foreign borrowers versus Spanish borrowers, self-employed borrowers versus full-time employed borrowers and borrowers with mortgage tenors higher than 30 years versus borrowers with mortgages under 30 years, which has been possible via the loan- by-loan data sets provided by the European Data Warehouse. RATING SENSITIVITIES A worsening of the Spanish macroeconomic environment, especially employment conditions, or an abrupt shift of interest rates could jeopardize the underlying borrowers' affordability. Additionally, larger recovery rates on defaulted loans and faster recovery periods could support improvements to existing ratings, all else being equal. 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 pools and the transactions. 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 pools ahead of the transactions' initial closing. The subsequent performance of the transactions 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. The rating actions are as follows: Madrid RMBS 1, FTA Class A2 (ES0359091016) affirmed at 'BBB-sf'; Outlook revised to Stable from Negative Class B (ES0359091024) affirmed at 'BB-sf'; Outlook revised to Stable from Negative Class C (ES0359091032) affirmed at 'B-sf'; Outlook revised to Stable from Negative Class D (ES0359091040) affirmed at 'CCCsf'; Recovery Estimate 0% Class E (ES0359091057) affirmed at 'CCsf'; Recovery Estimate 0% Madrid RMBS II, FTA Class A2 (ES0359092014) affirmed at 'BBB-sf'; Outlook revised to Stable from Negative Class A3 (ES0359092022) affirmed at 'BBB-sf'; Outlook revised to Stable from Negative Class B (ES0359092030) affirmed at 'BB-sf'; Outlook revised to Stable from Negative Class C (ES0359092048) affirmed at 'B-sf'; Outlook revised to Stable from Negative Class D (ES0359092055) affirmed at 'CCCsf'; Recovery Estimate 0% Class E (ES0359092063) affirmed at 'CCsf'; Recovery Estimate 0% Madrid RMBS III, FTA Class A2 (ES0359093012) affirmed at 'BB-sf'; Outlook revised to Stable from Negative Class A3 (ES0359093020) affirmed at 'BB-sf'; Outlook revised to Stable from Negative Class B (ES0359093038) affirmed at 'B+sf'; Outlook revised to Stable from Negative Class C (ES0359093046) affirmed at 'CCCsf'; Recovery Estimate 0% Class D (ES0359093053) affirmed at 'CCsf'; Recovery Estimate 0% Class E (ES0359093061) affirmed at 'Csf'; Recovery Estimate 0% =========== S W E D E N =========== SSAB AB: S&P Lowers Long-Term Corporate Credit Rating to 'B+' ------------------------------------------------------------- Standard & Poor's Ratings Services lowered its long-term corporate credit rating on Swedish steelmaker SSAB AB to 'B+' from 'BB-'. At the same time, S&P affirmed the 'B' short-term rating on the company. The ratings remain on CreditWatch with negative implications, where S&P placed them on Dec. 21, 2015. At the same time, S&P lowered its issue ratings on SSAB's senior unsecured debt to 'B+' from 'BB-'. The issue ratings also remain on CreditWatch negative. The recovery rating on this debt is unchanged at '3', indicating S&P's expectation of meaningful recovery in the lower half of the 50%-70% range in the event of a payment default. The downgrade follows SSAB's weaker-than-expected 2015 reported earnings. It also reflects a lowering of S&P's expectations for SSAB's earnings in 2016 because Chinese, Russian, and Korean exports to Europe and the U.S. are dragging down European and U.S. steel prices and buyers have adopted a wait-and-see approach. The prolonged downturn in the global steel markets has prevented SSAB from meeting the threshold for S&P's 'BB-' rating of funds from operations (FFO) to debt of about 15% (compared with an actual figure of about 10.5% for 2015). S&P anticipates marginal improvement in 2016 compared with 2015, based on its view that synergies from the merger with Finnish steelmaker Rautaruukki Oyj (Ruukki) and other cost efficiency measures should compensate for the impact of weaker market conditions. It remains to be seen how effective import tariffs are in protecting European and U.S. markets from the threat of cheap imports. S&P continues to view favorably SSAB's 30% net debt-to-equity target, which is significantly lower than the current 52%. The company has generated positive discretionary cash flow over the past three years, accomplishing this in 2015 through positive working capital movements and not paying a dividend to shareholders. Shareholders have been supportive of lower dividend payments in times of weak cash generation. SSAB operates in the highly cyclical steel industry, with end markets such as heavy transportation, construction, machinery, and mining. Volumes typically move in line with GDP over the long term, and can be volatile in the short term, as was evidenced in the last quarter of 2015. SSAB's key strength is in its strong market position in special- grade steel products. For example, it has a global market share of about 40% in quenched and tempered steels, along with about 5% in some advanced high strength steels, and 20%-25% market share in heavy plates in the North and South America, according to company estimates. Following the merger with Ruukki, it also commands a 40%-50% share in the flat carbon steels and tubes market in the Nordic region. In S&P's opinion, key challenges for SSAB are the risk of new specialty grade steel capacity from competitors and the pace of take-up of special-grade steel products by equipment manufacturers. In S&P's base case for SSAB, S&P assumes: -- A marginal year-on-year improvement in EBITDA to about Swedish krona (SEK) 3.7 billion-SEK4.0 billion, with unlocked synergies in line with the company's public guidance offsetting the negative impact of the weak market conditions. -- Capital expenditures (capex) of SEK1.5 billion-SEK2.0 billion per year in 2016 and 2017. -- No dividend payments in 2016 or 2017. Based on these assumptions, S&P arrives at these credit measures: -- FFO to debt of 10%-15%. -- Debt to EBITDA of 5x-6x. -- Positive discretionary cash flow. The CreditWatch reflects the possibility of a further downgrade of SSAB in the coming three to six months, unless market conditions and SSAB's earnings improve, such that it reduces its Standard & Poor's-adjusted ratio of debt to EBITDA to about 5x. Weakening in SSAB's current strong liquidity could also trigger a downgrade. S&P could consider affirming the ratings on SSAB if S&P sees a sustained improvement in its operating margin and adjusted debt to EBITDA falls to about 5x. S&P could lower its ratings on SSAB if adjusted debt to EBITDA remains at above 5x. This could occur if market conditions do not improve significantly, resulting in persistent stable or negative discretionary cash flow. Moreover, S&P could remove the one-notch uplift it currently factors into the ratings on SSAB if its currently strong liquidity weakened, potentially prompting a downgrade. =========================== U N I T E D K I N G D O M =========================== DRAX: Chief Executive Mulls Closure of Half of Power Station ------------------------------------------------------------ Emily Gosden at The Telegraph reports that half of Drax, Britain's biggest power station, could be shut down or mothballed because it is struggling to make money. According The Telegraph, the company had launched a strategic review of the three coal-fired units at its Yorkshire power plant and was considering all options including closure. Dorothy Thompson, Drax's chief executive, said the review had been triggered by commodity markets, with the coal units "struggling to make money" from current low power prices, and by the Government's proposal to end UK coal generation by 2025, The Telegraph relates. * Fitch Says Brexit to Bring Significant Long-Term Risks -------------------------------------------------------- Lengthy negotiations and uncertainty over UK firms' future access to EU markets following a vote to leave in the upcoming referendum on EU membership (Brexit) would weigh on confidence and delay investment decisions. This would have a short-term economic cost, although the precise impact would be highly uncertain, Fitch Ratings says. Prime Minster David Cameron has announced that an In-Out referendum on the UK's membership of the European Union will be held on 23 June. Polls suggest a Remain vote is marginally more likely, and the Prime Minister's endorsement should boost the campaign. But a Leave vote that triggers the UK's withdrawal from the EU is a real possibility, although it is not our base case. Fitch believes that in the event of a Leave vote, the authorities on both sides would try to avoid disrupting the deep economic and financial integration between the UK and EU by establishing a clear new relationship, including a trade agreement that preserves UK attractiveness for investment. Some tightening of the freedom of EU citizens' to work in the UK would be likely. Avoiding large-scale, permanent disruption to trade relations, including services, could limit the long-term economic cost to the UK, with Brexit only moderately negative for the UK. But there would be significant risks, especially if the remaining EU members attempted to impose punitive conditions on the UK to deter other countries from leaving, or the UK sought very tough restrictions on EU citizens coming to work in the UK. Fitch has published a report outlining our base-case expectations for Brexit, and how it might affect UK corporates, banks, insurers, and RMBS and covered bond transactions. ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than US$3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/booksto order any title today. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Europe is a daily newsletter co- published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA. Valerie U. Pascual, Marites O. Claro, Rousel Elaine T. Fernandez, Joy A. Agravante, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 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. * * * End of Transmission * * *