/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/160309.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, March 9, 2016, Vol. 17, No. 048 Headlines A U S T R I A HETA ASSET: Creditor Lock-Up May Violate Competition Law SLAV HANDEL: Files for Insolvency in Vienna Court I R E L A N D PETROCELTIC INT'L: Applies for Suspension of Share Trading I T A L Y ASTALDI SPA: Fitch Affirms 'B+' Long-Term IDR, Outlook Stable CLARIS FINANCE 2006: S&P Lowers Rating on Class B Notes to B K A Z A K H S T A N * KAZAKHSTAN: Uses Retirement Savings to Prop Up Banks L I T H U A N I A BITE UAB: S&P Affirms 'B' CCR Then Withdraws Rating P O R T U G A L PORTUCEL SA: Moody's Raises CFR to Ba2, Outlook Stable R O M A N I A ASTRA ASIGURARI: Dan Adamescu Put Under Probe Over Bankruptcy R U S S I A AEROFLOT-RUSSIAN AIRLINES: Fitch Affirms 'B+' LT For. Curr. IDR S L O V E N I A T-2: Back Into Bankruptcy After Creditors Win Appeal S P A I N AYT CGH CCM I: Fitch Affirms 'CCsf' Rating on Class D Notes CAJAMAR EMPRESAS 5: Fitch Hikes Class B Notes Rating to 'BBsf' FTPYME TDA CAM 2: Fitch Hikes Class 3SA Notes Rating to 'Bsf' U N I T E D K I N G D O M AUSTINS: In Liquidation, 53 Jobs Affected BEALES DEP'T: Plans to Enter Into CVA, March 24 Meeting Set BRITISH HOME: Seeks to Offload GBP571MM Pension Deficit ICBC STANDARD: Moody's Affirms Ba1 Subordinated Debt Rating JOHNSTON PRESS: Moody's Lowers CFR to Caa1, Outlook Stable VEDANTA RESOURCES: Moody's Lowers CFR to B2, Outlook Negative ********* ============= A U S T R I A ============= HETA ASSET: Creditor Lock-Up May Violate Competition Law -------------------------------------------------------- Alexander Weber at Bloomberg News reports that Austrian Finance Minister Hans Joerg Schelling told "hard-line" creditors of bad bank Heta Asset Resolution AG they may violate competition law if they continue to prevent other creditors from accepting a discounted tender offer for EUR10.8 billion (US$11.9 billion) of Heta's debt. Mr. Schelling said he received feedback from creditors willing to accept the province of Carinthia's offer for Heta's debt after the federal government topped it up with a premium last week, Bloomberg relates. He said there wouldn't be another offer improvement and he would be "out of the picture" after the offer deadline expires March 11, Bloomberg relays. "There are some hard-liners who're digging in their heels, while others want to do it," Mr. Schelling, as cited by Bloomberg, said. "This lock-up procedure is questionable in terms of competition rules." Carinthia is offering Heta creditors 75% of face value for senior debt, and 30% for junior debt to neutralize guarantees it gave for the bank, Bloomberg discloses. Mr. Schelling last week sweetened the offer with an 18-year zero-coupon bond priced below market rates, Bloomberg recounts. According to Bloomberg, creditors representing more than EUR5 billion of the debt, including Commerzbank AG, Pacific Investment Management Co. and Dexia SA's German unit, have teamed up to reject the offer. Mr. Schelling said he's ready to meet representatives for the creditor groups for more talks in order to persuade opponents of the deal, Bloomberg relates. Creditors have until Friday, March 11, to tender their holdings, Bloomberg notes. If the offer fails, action will shift back to the FMA supervisor, which is in charge of Heta's wind-down under Austria's bank resolution law, Bloomberg states. Mr. Schelling said it has until the end of May to impose a haircut on Heta's debt, which may lead to bigger losses for creditors, Bloomberg relays. Heta Asset Resolution AG is a wind-down company owned by the Republic of Austria. Its statutory task is to dispose of the non- performing portion of Hypo Alpe Adria, nationalized in 2009, as effectively as possible while preserving value. SLAV HANDEL: Files for Insolvency in Vienna Court ------------------------------------------------- Boris Groendahl at Bloomberg News reports that creditor association KSV1870 said in e-mailed statement Slav Handel, Vertretung und Beteiligung AG has filed for insolvency at Vienna's Commercial Court. According to Bloomberg, the company has EUR111 million in liabilities. Slav Handel, Vertretung Und Beteiligung AG, through its subsidiaries, manufactures and sells electricity generated by wind turbines. ============= I R E L A N D ============= PETROCELTIC INT'L: Applies for Suspension of Share Trading ---------------------------------------------------------- Charlie Taylor at The Irish Times reports that Petroceltic on March 7 applied for its shares to be temporarily suspended from trading in Dublin and London until the wrangling over its future is resolved. According to The Irish Times, the move follows a petition to appoint an examiner to Petroceltic by dissident shareholder Worldview, which has a 29% stake in the explorer. Worldview on March 4 brought the High Court petition aimed at securing court protection for Petroceltic, which owes about US$230 million to its banks and is currently unable to make its repayments, The Irish Times relates. The matter has been adjourned until April 4, The Irish Times discloses. While the court did not appoint an interim examiner pending the hearing of the petition, it did grant the full protection of the examinership process to Petroceltic, The Irish Times notes. Petroceltic International is a Dublin-based oil and gas explorer. ========= I T A L Y ========= ASTALDI SPA: Fitch Affirms 'B+' Long-Term IDR, Outlook Stable ------------------------------------------------------------- Fitch Ratings has affirmed Italian construction company Astaldi S.p.A.'s Long-term Issuer Default (IDR) and senior unsecured ratings at 'B+'/Recovery Rating 4' (RR4). The Outlook is Stable. The rating reflects Astaldi's positive operating performance and a robust backlog providing revenue visibility for around three years, but also the company's lack of deleveraging progress, following no material disposals in the past year and given growing investments into concessions to over EUR150 million. KEY RATING DRIVERS High Margin Constructor Astaldi has a solid track record in delivering complex works. Leading technical skills allow the company to bid for highly profitable jobs, positioning Astaldi among the few companies in the sector with double-digit EBITDA margin. On the other hand, the profitability of some projects could be offset by an increase in execution risk and more volatile working capital dynamics, especially in higher-risk markets. Fitch highlights that in Venezuela the outstanding amount of payables to be collected is still around EUR280m (as of end-September 2015). Project Concentration With the top 10 projects accounting for around 60% of the construction backlog, Astaldi's concentration risk is one of the highest among peers. However, all its main projects are on time for delivery with the largest ones in an advanced stage of completion. Also, healthy order inflows in 2015 of more than EUR6 billion should partially mitigate this risk. Maturing Concessions Reduce Equity Needs Many projects in the company's portfolio are now entering a more mature phase. Fitch expects for the coming years lower equity injections into concessions, as Astaldi has made the bulk of its investments in the last few years. In the absence of material cash-in from its asset recycling strategy, any large investment could be detrimental for the rating. Asset Disposal Plan Delayed In late 2014, the company unveiled a divestment plan for its concessions portfolio in its effort to deleverage rapidly. The plan was to sell off the concession through a special purpose vehicle, or by disposing each investment in a one-to-one transaction. In the past year no major transactions have occurred though, and the expected deleveraging has slowed. Today's negotiations with Abertis are in an advanced stage for the sale of Astaldi's most liquid asset (A4 motorway, valued around EUR120m) with exclusivity granted until the end of March. Healthy Liquidity Liquidity amounted to around EUR780 million at end-3Q15, comprising EUR464 million in reported cash and EUR320 million in undrawn committed credit facilities expiring in 2019. This provides ample headroom to cover working capital swings during the year and EUR100 million in short-term debt maturing over the next 12 months. KEY ASSUMPTIONS Fitch's key assumptions within the rating case for Astaldi include: -- Projects profitability aligned with historical trends -- Stable dividends pay-out -- Limited equity injections into maturing projects -- No material assets disposal over the next four years RATING SENSITIVITIES Positive: Developments that may, individually or collectively, lead to positive rating actions: -- Evidence of successful implementation of asset rotation strategy leading to gross recourse debt reduction -- Material improvement in working capital dynamics -- Fitch-adjusted net leverage, including factoring, below 3.5x on a sustained basis -- Improved geographic mix with an increased exposure towards lower-risk markets, construction contracts with advanced payments and reduced order backlog concentration Negative: Developments that may, individually or collectively, lead to negative rating actions: -- Evidence of material losses on construction projects -- Fitch-adjusted net leverage, including factoring, above 4.5x on a sustained basis -- Worsening of working capital position CLARIS FINANCE 2006: S&P Lowers Rating on Class B Notes to B ------------------------------------------------------------ Standard & Poor's Ratings Services lowered to 'B (sf)' from 'B+ (sf)' its credit rating on Claris Finance 2006 S.r.l.'s class B notes. S&P's ratings on the class A1 and A2 notes remain unaffected by the rating action. On March 1, 2016, S&P lowered to 'B' from 'B+' its long-term issuer credit rating (ICR) on Veneto Banca SCPA, the liquidity guarantee provider in Claris Finance 2006. According to the transaction documents, the liquidity guarantee covers the timely payment of interest and the ultimate payment of principal. Under S&P's current counterparty criteria, its rating on the class B notes is weak-linked to its long-term ICR on Veneto Banca. Therefore, as any change to S&P's long-term ICR on Veneto Banca would result in an equivalent change to S&P's rating on Claris Finance 2006's class B notes, S&P has lowered to 'B (sf)' from 'B+ (sf)' its rating on the class B notes. S&P's ratings on the class A1 and A2 notes are unaffected by the rating action because these ratings are delinked from S&P's long- term ICR on the liquidity guarantee provider. Claris Finance 2006 is an Italian residential mortgage-backed securities (RMBS) transaction, backed by a pool of mortgage loans secured over residential and commercial properties in Italy. The transaction closed in July 2006 and its revolving period ended in March 2010. =================== K A Z A K H S T A N =================== * KAZAKHSTAN: Uses Retirement Savings to Prop Up Banks ------------------------------------------------------ Nariman Gizitdinov and Lyubov Pronina at Bloomberg News report that when Kazakhstan's biggest lender, Kazkommertsbank JSC, had its credit downgraded closer to levels that ratings firms reserve for borrowers in default, state managers of US$17 billion of retirement savings were undeterred. Rather than scale back investments in bank bonds and deposits, already at 34%, the government cleared the way for KZT200 billion (US$576 million) more to be put into Kazakh lenders, Bloomberg relates. According to Bloomberg, others question the investment case for speculative-grade banks that enjoy ties to political elite in the largest oil producer among former Soviet satellites. "They are suffering badly from losing income from oil, and because it's a small circle of people, they do whatever they want," Bloomberg quotes Anders Aslund, senior fellow at the Atlantic Council in Washington, who served as an economic adviser to the Russian government from 1991 to 1994, as saying. "Kazakhstan has big reserves. I think that it's just the beginning, and they will tap into the funds more and more as oil price stays at the same level." ================= L I T H U A N I A ================= BITE UAB: S&P Affirms 'B' CCR Then Withdraws Rating --------------------------------------------------- Standard & Poor's Ratings Services affirmed its 'B' long-term corporate credit ratings on Lithuania-based mobile telecommunications operator UAB Bite Lietuva and its 100%-owner Bite Finance International B.V. S&P subsequently withdrew the ratings at the issuer's request. At the time of withdrawal, the outlook was positive. S&P also withdrew its 'B' issue rating on the EUR200 million senior secured notes issued by Bite Finance, which have been redeemed. The rating affirmation reflects S&P's view that there will be no change in the business or financial risk profile after the acquisition of Bite by Providence from Mid-Europa in early 2016. S&P's business risk assessment remains supported by Bite's stable market share and growing mobile data revenues, and S&P's expectation of a supportive economic environment in Lithuania and Latvia. S&P's assessment of Bite's business risk profile remains constrained by intense competition from the local subsidiaries of two large Nordic operators, TeliaSonera AB and Tele2 AB. S&P's assessment of Bite's financial risk profile reflects S&P's view of the company's limited but improving free operating cash flow (FOCF) generation. S&P also forecasts that the company's adjusted debt to EBITDA will be below 4.0x over the next two years. S&P applies a one-notch negative adjustment, based on its comparable ratings analysis. This takes into account continuing operating pressures, volatile economies, and the company's modest scale. The ratings withdrawal follows the acquisition of Bite by Providence on Feb. 15, 2016, and subsequent redemption in full on March 1, 2016, of the EUR200 million senior secured notes and EUR30 million revolving credit facility on change of control. =============== P O R T U G A L =============== PORTUCEL SA: Moody's Raises CFR to Ba2, Outlook Stable ------------------------------------------------------ Moody's Investors Service has upgraded the Corporate Family Rating of Portucel S.A. to Ba2 from Ba3 and the Probability of Default Rating to Ba2-PD from Ba3-PD. Concurrently, the instrument ratings of the senior unsecured notes issued by Portucel were upgraded to Ba2 (LGD4) from Ba3 (LGD4). The outlook is stable. "We have upgraded the CFR because of the Portucel's track record of consistently strong performance through periods of price volatility and structural demand decline in uncoated fine paper while maintaining a conservative financial profile throughout", says Matthias Volkmer, a Moody's Senior Analyst and lead analyst for Portucel. "Importantly, we understand that following rising dividend demands in recent years, majority shareholder Semapa intends to substantially decrease its dividend requirements in support of Portucel's new strategic and capital-intensive projects in tissue, pellets and forestry, which will help to gradually diversify the business profile in the coming years", Volkmer added. RATINGS RATIONALE The Ba2 CFR balances Portucel's solid business profile, healthy capital structure and strong free cash generation ability on a stand-alone basis. However, during 2015 Portucel made substantial dividend payments in amount of EUR440 million, which was credit negative, but helped majority shareholder Semapa (who reduced its equity stake in Portucel to 64.8% from 75.9% in 2015) reduce the holding's net debt by -27% to EUR673 million in 2015 down from EUR918 million in 2014. Moody's understands that the investment holding endeavors to further de-leverage over the next few years while reducing required dividend payments from Portucel to a more sustainable level. Notwithstanding, in its analysis of Portucel's financial strength, Moody's continues to consider the net debt position owed by Semapa Holding, that would lead to a leverage ratio of app. 3.6x (down from 5.3x as per FY 2014). More fundamentally, the rating is supported by (i) Portucel's well-invested and cost efficient asset base (ii) its full integration into pulp and energy; (iii) a long-standing track record of stable and - despite structural weakening since 2010 - comparatively high profitability with adjusted EBITDA margins consistently above 20% historically, which is evidence of the efficiency of Portucel's asset base given the difficult market conditions for paper producers in Europe; (iv) the positive prospects of Portucel's diversification strategy into tissue and pellets. On a more negative note, the rating is constrained by (i) the inherent volatility of the industry with paper demand having proven to be highly cyclical and closely linked to overall macroeconomic conditions as well as the overall declining paper markets in Europe, (ii) the fairly small scale as indicated by sales of EUR 1.6 billion during 2015 as well as limited geographic diversification with operations predominantly based in Portugal yet with over 40% of sales generated outside Western Europe ; (iii) the highly focused product portfolio with uncoated fine paper production generating over 75% of group sales, and (iv) expected marginal FCF generation driven by growth capital expenditures going forward in combination with gradually reducing dividend payments as Semapa deleverages over time. OUTLOOK The stable outlook reflects Moody's expectation that Portucel will maintain solid credit protection measures for its rating as indicated by debt/EBITDA (as defined by Moody's) remaining below 2.5x times (1.9x per December 2015) excluding the holding debt at Semapa. The stable outlook also takes into account the high likelihood of a moderate deterioration in leverage metrics in the next two years, driven by Portucel's investment program in combination with continued dividend pay outs as well as some expected pressure on profit margins. LIQUIDITY Portucel's operations have been very cash generative yet following dividend payments in an amount of 440million during 2015, Portucel's previously sizeable cash position diminished to EUR73 mil. as per end of December 2015 (down from EUR499 million as per end of December 2014). Notwithstanding, we regard Portucel's liquidity profile as good with primary funding sources with expected funds from operations of around EUR300million for 2016, a cash position of EUR 73 million as of December 2015 and access to approximately EUR 125 million currently unused commercial paper programs, due in 2020. Various of Portucel's facility agreements contain conditionality language, including financial covenants, under which Portucel currently has solid headroom. Cash uses during 2016 largely relate to ongoing high capex due to sizeable growth investments and reduced but still substantial dividend payments, seasonal swings as well as structural build up in working capital. WHAT COULD CHANGE THE RATING UP Less likely in the intermediate term but following further evidence of Semapa's deleveraging and thus less reliance on Portucel's cash generation ability, a higher rating would require Portucel maintaining its financial profile while improving its portfolio diversification including successful execution of its pursued strategic projects as well as maintaining a diversified long-term funding profile with continued access to international capital markets. WHAT COULD CHANGE THE RATING DOWN Downward rating pressure could result from a deterioration in earnings and cash flow including a more permanent increase in leverage to above 2.5x debt/EBITDA and a declining EBITDA margin towards the mid-teens. Moreover, a financial policy favoring shareholders over creditors including high shareholder returns, large debt funded acquisitions or investments and failure to return to a debt/ EBITDA ratio to 2.5x or below, could lead to a negative rating action. The principal methodology used in these ratings was Global Paper and Forest Products Industry published in October 2013. Portucel, S.A. (to be renamed in April, following the recent rebranding of Portucel Soporcel Group into THE NAVIGATOR COMPANY), based in Lisbon (Portugal), is a leading producer of premium and branded office paper, market pulp as well as operations in energy and tissue with revenues generated in 2015 of EUR1.6 billion. The group employs more than 2,400 employees at two integrated paper mills, a pulp mill and its recently acquired tissue operations in Portugal, its pellet mill project in South Carolina (USA) and its forestry project in Mozambique. Portucel is listed on the Lisbon stock exchange and its market capitalization as of December 2015 amounted to EUR 2.76 billion. Majority shareholder Semapa, an investment holding company, is holding 64.8% of shares. ============= R O M A N I A ============= ASTRA ASIGURARI: Dan Adamescu Put Under Probe Over Bankruptcy ------------------------------------------------------------- Romania Insider reports that Romanian businessman Dan Adamescu, one of Romania's richest, is under investigation for the way he managed his insurance company, Astra Asigurari, which went bankrupt last year. The prosecutors consider Mr. Adamescu responsible for the EUR180 million damages taken by Astra, Romania Insider says. According to Romania Insider, he has to pay a RON40 million (almost EUR9 million) bail in ten days to stay out of jail during the investigation. Romania's National Anticorruption Directorate questioned Dan Adamescu for several hours on Monday, March 7, and informed him of the new charges, Romania Insider relates. The Bucharest Court of Appeal sentenced Adamescu to 4 years and 4 months in jail in February 2015, Romania Insider discloses. The decision is not final, Romania Insider notes. On March 7, 2016, the prosecutors officially charged Mr. Adamescu with abuse of office, money laundering, and complicity to abuse of office by public officials, Romania Insider relays. The prosecutors said between 2011 and 2013, Mr. Adamescu made several bad decisions for Astra Asigurari, using the company's cash reserves for other purposes than its legal activity, Romania Insider relates. He also covered his actions by issuing distorted reports that prevented the insurance sector's regulator to properly assess and supervise Astra's activity and to protect the company's clients, Romania Insider discloses. Due to his actions, Astra went under special administration in early 2014 and was declared bankrupt in 2015. The company took a RON 795 million (EUR 180 million) damage, Romania Insider recounts, citing DNA. Astra Asigurari is a Romanian insurance company. =========== R U S S I A =========== AEROFLOT-RUSSIAN AIRLINES: Fitch Affirms 'B+' LT For. Curr. IDR --------------------------------------------------------------- Fitch Ratings has affirmed Public Joint Stock Company Aeroflot- Russian Airlines' Long-term foreign currency Issuer Default Rating (IDR) at 'B+' and removed it from Rating Watch Negative (RWN). The Outlook is Stable. The rating affirmation and removal of RWN reflect the improvement of Aeroflot's credit metrics in 2015, which Fitch expects to be sustained over 2016-2019. The rating action also reflects Fitch's forecast of positive free cash flow (FCF) generation over 2016- 2019 and Aeroflot's limited involvement in Transaero as opposed to the previously planned but subsequently cancelled acquisition. The Stable Outlook incorporates the balance of risks between financial and Russian air travel market pressures and the company's fairly strong business profile and adaptability to challenging market conditions. Aeroflot's business profile is supported by the company's fairly diversified route network, favorable hub position, competitive cost structure and its strong market position on the domestic market. The 'B+' rating incorporates a single-notch uplift for state support. KEY RATING DRIVERS Financials Drive RWN Removal Aeroflot demonstrated significant improvement in its financial performance in 2015, supported by lower oil prices, a rise in passenger traffic, especially on domestic routes, a material increase in yields in rouble terms and a reorganization of the charter business. Funds from operations (FFO) adjusted gross leverage dropped to 5.7x in 2015 from 7.5x in 2014 and FFO fixed change cover increased to 2x in 2015 from 1.8x in 2014. Fitch expects the positive momentum to continue over 2016-2019, due to expected low oil prices, heathy growth in passenger traffic on the new routes obtained from Transaero and yield recovery, albeit at a more measured pace than in 2015. Fitch forecast FFO adjusted gross leverage to slightly exceed 6x in 2016-2017 before falling below this level by 2018, remaining within Fitch's negative rating guideline, and FFO adjusted net leverage of around 5.5x on average over 2016-2019. We expect FFO fixed charge cover to remain above 1.5x over 2016-2019. We forecast FCF to remain positive over 2016-2019. Limited Involvement in Transaero Following the cancellation of Aeroflot's acquisition of Transaero at end-2015, we assess the financial impact of Aeroflot's involvement in Transaero's operations in 2015 to be manageable and expect it to be largely neutral in the short-to medium-term. Aeroflot spent RUB17 billion over September-December 2015 for transportation of Transaero's passengers both on its own and Transaero's flights. After Transaero's bankruptcy at end-2015, Aeroflot obtained slots for 56 routes out of 141 international routes previously serviced by Transaero, including new routes to European and Asian markets and Kazakhstan. This should strengthen Aeroflot's market position on international destinations. Its market share increased to 37% in 2015 from 31% in 2014. As Transaero's slots will require additional aircraft capacity and workforce, Aeroflot plans to take up to 34 aircraft from Transaero, comprising 15 new planes from the order book and 19 planes previously operated by Transaero. In addition, Aeroflot considers employing around 6,000 of Transaero's employees. The routes from Transaero will be operated by both Aeroflot and its subsidiary JSC Rossiya Airlines and most of the staff will be employed by Rossiya Airlines. Yields Remain under Pressure As Fitch expected, yields in dollar terms fell 25% yoy in 2015, reflecting the full effect of the rouble depreciation. The largest decline was on the domestic and European destinations while Asian and Middle Eastern routes fared better. Fitch expects the yields in dollar terms to remain under pressure in 2016-2017 due to a weak Russian economy, falling fuel surcharge due to low oil prices, an increasing share of domestic traffic and expected further rouble depreciation in 2016. Fitch forecast a gradual recovery from 2018. High FX Exposure Almost all of Aeroflot's debt (90% at end-2015) is denominated in USD, as a large portion of its debt (71% at end-2015) represents finance leases for aircraft purchases. In contrast only 38.5% of its revenue in 2015 was earned in USD or EUR. While an additional 32% of revenue was linked to EUR, ticket prices were set in RUB and their increase remained significantly short of mitigating the impact of the rouble deprecation. In addition, over 50% of operating costs are denominated in USD or EUR, further contributing to the currency mismatch and, consequently, weaker financials. Strong Passenger Traffic Growth We expect Aeroflot to deliver a healthy revenue-passenger- kilometers (RPK) growth over 2016-2019 supported by the new slots obtained from Transaero and organic capacity expansion. As a result, we forecast growth across all destinations, especially on the domestic, Asian and European routes. RPK increased 8.4% yoy in 2015. Although Aeroflot's international RPK fell 3.9% yoy, it was much lower than the 17% decline for the Russian market (based on passenger numbers). Growth on domestic routes was strong with an RPK increase of 27.8% yoy. Diversified Network and Well-Developed Hub Aeroflot's business profile is commensurate with the 'BB' rating category, due to a fairly diversified route network, high frequency of international flights, a favorable hub position and the company's position as Russia's largest airline and flagship carrier and a medium-sized airline among European peers. The implementation of a multi-brand strategy within Aeroflot Group in co-operation with regional subsidiaries provides the group with greater operational flexibility without diluting Aeroflot's brand and enables the group to target multiple customer and geographic segments, adapt more quickly to customer demands and utilize feeder traffic from regional airline subsidiaries. Rating Uplift for State Support Aeroflot's rating of 'B+' continues to incorporate a single-notch uplift to its standalone 'B' rating for state support. Fitch considers the strategic, operational and, to a lesser extent, legal ties between Aeroflot and its parent, the Russian Federation (51.2% direct ownership and 8.4% indirect ownership) as fairly strong under the agency's parent and subsidiary rating linkage methodology. There are no formal legal ties, such as guarantees or cross default provisions, but Aeroflot remains on the list of Russia's strategic enterprises. Its operational and financial strategies are overseen by the government and it is viewed as a means of promoting and developing Russia's aviation market. To date, there has been little evidence of tangible financial support, except for royalties. A reduction of the state's stake to below 50% coupled with evidence of diminishing state support, may lead to the withdrawal of the one-notch uplift for state support. Although the government has resumed discussions of Aeroflot's privatization, this is unlikely to lead to state ownership falling below 50% in the short term due to a change-of-control clause in the company's debt documentation. KEY ASSUMPTIONS Fitch's key assumptions within its rating case for the issuer include: -- Russian GDP decline of 2.5% in 2016 and growth of 1.2% in 2017 -- Capex in line with the company's forecast -- RPK growth of 9% CAGR over 2015-2019 -- Decline of yields in dollar terms in 2016-2017 and a slow recovery from 2018 RATING SENSITIVITIES Positive: Future developments that may, individually or collectively, lead to positive rating action include: -- Evidence of stronger state support. -- Improvement of the financial profile (eg FFO adjusted gross leverage below 5.0x and FFO fixed charge cover above 1.5x on a sustained basis) due to yield recovery, successful integration of the received slots, personnel and fleet assets, moderation of investments in the fleet and/or a drop in fuel prices. Negative: Future developments that may, individually or collectively, lead to negative rating action include: -- Further material deterioration of the credit metrics (eg FFO adjusted gross leverage well above 6.0x and FFO fixed charge cover below 1.25x on a sustained basis) due to further rouble depreciation, a protracted downturn in the Russian economy, drop in yields or overly ambitious fleet expansion. -- Weakening of state support. LIQUIDITY AND DEBT STRUCTURE Adequate Liquidity Fitch views Aeroflot's liquidity as adequate. Its cash of RUB36.6 billion and available credit lines of RUB37 billion were sufficient to cover short-term debt obligations of RUB73.6 billion at end-2015. The company's debt repayment schedule is generally well-balanced, except for a spike in 2016. The company has RUB5 billion domestic bonds falling due in 2016. Fitch expects Aeroflot to generate positive FCF over 2016-2019 despite sizeable capex (including finance leases). Eighteen per cent of Aeroflot's cash position at end-2015 was held in USD and EUR and most of the cash was held at Sberbank (BBB-/Negative). Senior Unsecured Rating Although the company's prior-ranking debt is above Fitch's threshold of 2x-2.5x of EBITDA, our recovery analysis resulting in a Recovery Rating of 'RR4' supports the senior unsecured rating at the same level as Long-term IDR. FULL LIST OF RATING ACTIONS Long-term foreign and local currency IDR: affirmed at 'B+', off RWN; Outlook Stable National Long-term rating: affirmed at 'A-(rus)', off RWN; Outlook Stable Short-term foreign and local currency IDR: affirmed at 'B' National Short-term rating: affirmed at 'F2(rus)', off RWN Foreign and local currency senior unsecured ratings: affirmed at 'B+/RR4', off RWN National senior unsecured rating: affirmed at 'A-(rus)', off RWN =============== S L O V E N I A =============== T-2: Back Into Bankruptcy After Creditors Win Appeal ---------------------------------------------------- TeleGeography reports that T-2 has been forced back into bankruptcy after creditors won an appeal against an earlier ruling which had allowed the telco to exit receivership. The High Court in Ljubljana upheld the appeal by DUTB, Banka Celje and TCK, criticizing T-2 for failing to follow its restructuring plan, TeleGeography relays, citing a report from Finance.si. T-2 is a Slovenian alternative mobile, fixed line and broadband provider. ========= S P A I N ========= AYT CGH CCM I: Fitch Affirms 'CCsf' Rating on Class D Notes ----------------------------------------------------------- Fitch Ratings has affirmed 17 tranches and upgraded one tranche of five AyT RMBS transactions. The Outlook on one tranche has been revised to Stable from Negative. The transactions are part of a series of RMBS transactions that are serviced by Kutxabank, S.A. (Kutxabank; BBB/Positive/F3) for AyT Hipotecario BBK I and AyT Hipotecario BBK II, Banco de Castilla La Mancha S.A. (BB/Stable/B) for AyT CGH CCM I; Abanca Corporacion Bancaria, S.A. (BB+/Stable/B) for AyT CGH Caixa Galicia II and Liberbank, S.A. (BB/Stable/B) for AyT CGH Caja Cantabria I. KEY RATING DRIVERS Stable Credit Enhancement (CE) The notes in AyT CGH CCM I, AyT Caja Cantabria I and AyT Hipotecario BBKI and BBKII are currently paying sequentially. As delinquencies are above the trigger levels a switch to pro-rata is not expected in the near future. Fitch considers the existing and projected CE sufficient to support the ratings, as reflected in the affirmations and the revision of the Outlook on one tranche to Stable from Negative. AyT CGH Caixa Galicia II may change to pro-rata amortisation in the next 12 to 18 months as the reserve fund is close to its target level and arrears are decreasing and could soon fall below the 1.25% trigger level. Given the high level of CE available to the senior notes Fitch considers the notes can now sustain higher rating stresses, as reflected in the upgrade. Stable Arrears Performance With the exception of AyT CGH CCM 1, as of the latest reporting periods three-months plus arrears (excluding defaults) as a percentage of the current pool balance are decreasing and range from 0.5% (BBK II as of October 2015) to 2.2% (Caixa Galicia II as of October 2015) compared with 0.8% (BBK I as of October 2015) to 2.3% (Caja Cantabria I as of September 2015). These numbers remain comparable with Fitch's prime index of three-months plus arrears (excluding defaults) of 1.1%. AyT CGH CCM 1 has seen increasing arrears over the past 12 months from 1.6% (November 2014) to 3.0% (November 2015). Fitch notes this may lead to further defaults and increasing pressure in the reserve fund and has revised down the Recovery Estimates on the class C and D notes. With the exception of AyT CGH CCM I, cumulative defaults, defined as mortgages in arrears by more than 18 months, are currently below the average for the sector of 5.3%. Fitch believes that this difference can be attributed to the high proportion of self- employed borrowers at origination on AyT CGH CCM I. Reserve Fund Draws AyT Hipotecario BBK I and BBK II are the only transactions to feature a fully funded reserve fund. AyT CGH Caixa Galicia II is close to its target at 99%. The reserve fund for AyT CGH CCM I was almost fully depleted on May 2011, but a steady default pace and high levels of excess spread has allowed continued replenishments since then. As of end-November 2015, the reserve stood at 63% of its target amount, up from 35% in November 2014. Given the stable performance of AyT Galicia II, Fitch believes further replenishments will take place on the next payment dates. In contrast, given the increasing arrears on AyT CGH CCM I Fitch cannot rule out that replenishments to the reserve fund will stop in future. As of September 2015, AyT Caja Cantabria I's reserve fund is down to 45.4% from 67.8% 12 months ago. Given the increasing trend in defaults, Fitch believes further draws will take place on the next payment dates. Payment Interruption Risk AyT CGH CCM I and AyT Caja Cantabria I have a dynamic cash reserve sized to cover six months of interest on tranche A and senior fees. However, while Fitch considers this cash reserve plus the below target reserve fund balance sufficient to mitigate payment interruption risk, Fitch notes that if further draws continue to take place this liquidity may be insufficient, which could lead to negative rating action. In contrast, AyT CGH Caixa Galicia II and both BBK deals have sufficient liquidity to cover payments due to relevant counterparties, in case of default of the servicer and the collection account bank. Commingling Exposure Fitch believes the transactions have commingling loss exposure as there is no certainty regarding the timely cessation of further payments into the commingled accounts and in the case of AyT CGH Caixa Galicia II due to the concentration of payments on one day of the month. The agency has captured this additional stress in its analysis and found the current CE is sufficient to mitigate the risk. Maturity Extensions Based on information provided by the servicers, Fitch found that some borrowers in all transactions have been offered maturity extensions to their loans. Fitch considers this signals a weaker borrower profile and has increased the foreclosure frequency for these loans. The agency found the current CE is sufficient to mitigate the risk. RATING SENSITIVITIES A worsening of the Spanish macroeconomic environment, especially employment conditions, or an abrupt shift of interest rates could jeopardise the underlying borrowers' affordability. The ratings are also sensitive to changes to Spain's Country Ceiling (AA+) and, consequently, changes to the highest achievable rating of Spanish structured finance notes (AA+sf). 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: AyT CGH Caixa Galicia II: Class A notes (ISIN ES0312273404): upgraded to 'AA+sf' from 'AA- sf'; Outlook Stable Class B notes (ISIN ES0312273412): affirmed at 'Asf'; Outlook Stable Class C notes (ISIN ES0312273420): affirmed at 'BB-sf'; Outlook Stable Class D notes (ISIN ES0312273438): affirmed at 'Bsf'; Outlook Stable AyT CGH CCM I: Class A notes (ISIN ES0312273248): affirmed at 'A-sf'; Outlook Stable Class B notes (ISIN ES0312273255): affirmed at 'BBsf'; Outlook Stable Class C notes (ISIN ES0312273263): affirmed at 'CCCsf'; Recovery Estimate (RE) revised to 80% from 95% Class D notes (ISIN ES0312273271): affirmed at 'CCsf'; RE revised to0% from 5% AyT Hipotecario BBK I: Class A notes (ISIN ES0312364005): affirmed at 'AA+sf'; Outlook Stable Class B notes (ISIN ES0312364013): affirmed at 'Asf'; Outlook Stable Class C notes (ISIN ES0312364021): affirmed at 'BBsf'; Outlook Stable AyT Hipotecario BBK II: Class A notes (ISIN ES0312251004): affirmed at 'AA+sf'; Outlook Stable Class B notes (ISIN ES0312251012): affirmed at 'Asf'; Outlook Stable Class C notes (ISIN ES0312251020): affirmed at 'BBsf'; Outlook Stable AyT CGH Caja Cantabria I Class A notes (ISIN ES0312273446): affirmed at 'A+sf'; Outlook Stable Class B notes (ISIN ES0312273453): affirmed at 'BBB+sf'; Outlook Stable Class C notes (ISIN ES0312273461): affirmed at 'Bsf'; Outlook revised to Stable from Negative Class D notes (ISIN ES0312273479): affirmed at 'CCCsf'; Recovery Estimate revised to 80% from 85% CAJAMAR EMPRESAS 5: Fitch Hikes Class B Notes Rating to 'BBsf' -------------------------------------------------------------- Fitch Ratings has upgraded IM Cajamar Empresas 5, FTA's class B notes and affirmed the class A1 and A2 notes, as follows: EUR27.9 million class A1: affirmed at 'A+sf'; Outlook Stable EUR148.3 million class A2: affirmed at 'A+sf'; Outlook Stable EUR135.0 million class B: upgraded to 'BBsf' from 'Bsf'; Outlook Stable IM Cajamar Empresas 5 is a granular cash flow securitization of a static portfolio of secured and unsecured loans granted to Spanish small- and medium-sized enterprises by Cajamar Caja Rural and Caja Rural del Mediteraneo (both now part of Cajamar Caja Rural, Sociedad Cooperative). KEY RATING DRIVERS Delinquencies Higher but Still Moderate Arrears have risen slightly over the last 12 months but remain at moderate levels. The share of loans more than 90 days past due currently stands at 2.2%, up from 0.9% 12 months ago. Fitch has determined an annual average transaction benchmark probability of default of 3.6%. Continued Deleveraging The pari-passu class A1 and A2 notes received EUR114.8m of principal proceeds over the last 12 months. The deleveraging of the transaction has led to a significant increase in credit enhancement for all rated notes, which is reflected in the upgrade of the class B notes. Counterparty Risk Rating Cap The class A1 and A2 notes' rating is capped at 'A+sf' due to the treasury account bank rating triggers in the transaction documentation. These triggers are set at a minimum rating requirement of 'BBB+'/'F2' for the account bank Banco Santander (A-/Stable/F2). Reserve Fund Release The transaction features a non-amortizing EUR114.8 million reserve fund used exclusively to cover any interest shortfalls on the most senior class of notes during the life of the transaction. Any remaining balance can be used to amortize the notes on the last payment date. Fitch expects the last payment date to occur when the balance of the reserve fund, together with the available proceeds from the portfolio, is sufficient to repay the class B notes. RATING SENSITIVITIES A 25% increase in the obligor default probability would lead to a downgrade of up to two notches for the notes. A 25% reduction in expected recovery rates would to a downgrade of up to one notch for the notes. 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. 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 transaction closing, Fitch conducted a review of a small targeted sample of Cajamar'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. FTPYME TDA CAM 2: Fitch Hikes Class 3SA Notes Rating to 'Bsf' ------------------------------------------------------------- Fitch Ratings has upgraded FTPYME TDA CAM 2, FTA's class 3SA notes and affirmed the class 2SA notes, as follows: EUR15.9 million Class 2SA: affirmed at 'A+sf'; Outlook Stable EUR7.7 million Class 3SA: upgraded to 'Bsf' from 'CCCsf'; Outlook Stable FTPYME TDA CAM 2, F.T.A. is a granular cash flow securitization of a static portfolio of secured and unsecured loans granted to Spanish small- and medium-sized enterprises by Caja de Ahorros del Mediterraneo (now part of Banco de Sabadell). KEY RATING DRIVERS Low, Stable Delinquencies Arrears have remained at low levels over the last 12 months. The share of loans more than 90 days past due currently stands at 0.3% of the portfolio, little changed from 0.2% in January 2015. The minimal arrears, along with steady recovery proceeds, have allowed excess spread to replenish the reserve fund (RF), which now stands at EUR3.2 million compared with EUR1.8 million 12 months ago. Fitch has determined an annual average transaction benchmark probability of default of 4.5%. Continued Deleveraging The class 2SA notes received EUR10.8 million of principal proceeds since January 2015. The deleveraging of the transaction has led to a significant increase in credit enhancement the class 2SA and 3SA notes. The upgrade of the class 3SA notes is driven by the credit enhancement of the notes more than doubling. Liquidity Risks Fitch considers that the current RF balance adequately mitigates payment interruption risk due to a default of servicer Banco de Sabadell. However, given rising levels of obligor concentration in the portfolio, adverse performance of few large obligors may deplete the RF and prevent the timely payment of interest on the class 2SA notes. These liquidity risks currently prevent an upgrade of the class 2SA notes. The largest obligor represents 3.9% of the performing portfolio, up from 2.8% one year ago. RATING SENSITIVITIES A 25% increase in the obligor default probability or a 25% reduction in expected recovery rates have no rating impact on the notes. 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 did not undertake a review of the information provided about the underlying asset pools 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. =========================== U N I T E D K I N G D O M =========================== AUSTINS: In Liquidation, 53 Jobs Affected ----------------------------------------- BBC News reports that one of Europe's oldest department stores, Austins, in the centre of Londonderry, has gone into liquidation. About 53 workers were told at a meeting on March 8 that they had lost their jobs, BBC discloses. According to BBC, workers are due to meet the liquidators during the week to organize redundancy payments. In November 2014, the building was sold to the City Hotel Group, BBC recounts. The receiver then sold the trading side of the business, BBC relays. Austins was established in Derry in 1830 by Thomas Austin. BEALES DEP'T: Plans to Enter Into CVA, March 24 Meeting Set ----------------------------------------------------------- Western Gazette reports that the Beales Department Store group will ask landlords of loss-making stores to reduce rent or take premises back. The department store chain announced its plans to enter into a Company Voluntary Arrangement (CVA) on March 7, Western Gazette relates. In Beales' case, the proposal only affects the landlords of stores that are, or are likely to be, loss-making and Beales will invite the landlords of those premises to "restructure" their leases, Western Gazette discloses. According to Western Gazette, the business has said that the decision has been made to ensure its "long term viability". The company added that its relationship with suppliers and concessionaires will not be affected, Western Gazette notes. Panther Securities plc, the landlord of twelve Beales stores, has agreed to support the CVA proposals, Western Gazette relays. The buying group Associated Independent Stores, Beales' largest supplier, has also agreed to support them, Western Gazette states. Meetings of shareholders and stakeholders will be called on Thursday, March 24, to approve the proposals, Western Gazette says. Beales is based in Yeovil. BRITISH HOME: Seeks to Offload GBP571MM Pension Deficit ------------------------------------------------------- Mark Vandevelde, Josephine Cumbo and Judith Evans at The Financial Times report that British Home Stores, the department store chain sold by Sir Philip Green for GBP1, is seeking to offload a pension deficit worth GBP571 million, about 10% larger than it was three years ago. The cost of paying an insurance company to assume obligations for future and current pensioners has increased by about GBP57 million since 2012, according to a proposal sent to BHS creditors seen by the FT. BHS has demanded a rescue deal from landlords that would cut its rent payment on some stores by as much as three-quarters and give it a right to walk away from the least profitable branches, the FT relates. It is also in talks to offload its pension liabilities to a government-backed rescue fund, to which Sir Philip has reportedly offered to contribute GBP80 million, the FT discloses. According to the FT, the difference between assets and liabilities recorded on the pension fund's balance sheet was GBP233 million in 2012. But on a "buyout" basis, which covers the overheads and profits that an insurance company would seek to recoup, the liabilities were estimated to exceed the fund's assets by GBP514 million at the last valuation in 2012, the FT notes. As part of that valuation, BHS's pension scheme trustees and the company agreed to a scheduled plan for contribution payments to plug the deficit; the company was to pay about GBP9.5 million a year into the pension from 2013 until 2036 -- or for 23 years, the FT recounts. BHS executives believe that the removal of the pension liabilities, as well as deep cuts to the retailer's rent bill, are essential for the company to survive, the FT says. British Home Stores is a British department store chain. ICBC STANDARD: Moody's Affirms Ba1 Subordinated Debt Rating ----------------------------------------------------------- Moody's Investors Service affirmed the long-term deposit and issuer ratings of ICBC Standard Bank Plc (ICBC SB) at Baa3 and the subordinated debt rating at Ba1 and changed the outlook on the ratings to negative from stable. The action follows the change of outlook on the bank's parent, Industrial & Commercial Bank of China Ltd (ICBC, A1 Negative, baa2), deposit rating to negative from stable. The negative outlook reflects Moody's expectation that ICBC SB's long-term deposit and issuer ratings could move down in line with the deposit rating of its parent. RATINGS RATIONALE AFFIRMATION OF RATINGS Moody's affirmation of ICBC SB's long-term deposit and issuer ratings at Baa3 and subordinated debt rating at Ba1 reflects the high level of support from its Chinese parent. This support expectation reflects the completion of ICBC's acquisition of a 60% stake in ICBC SB from Standard Bank Group (SBG, Baa3, Negative) in February 2015 and ICBC's strong statement of support and ultimate rebranding of the business to ICBC Standard Bank Plc. The ratings incorporate ongoing support from ICBC in terms of liquidity, capital and the agency's expectation of an increasingly shared client base as ICBC channels the global markets trading needs of its Chinese multinational client base, as well as that of its global subsidiaries, through ICBC SB. Under most circumstances, Moody's believes that ICBC would be highly likely to provide support to ICBC SB. RATIONALE FOR THE NEGATIVE OUTLOOK The negative outlook on ICBC SB's ratings is aligned with the outlook on ICBC's rating and reflects Moody's expectation that ICBC SB's ratings could move down in line with the long-term deposit rating of its parent. WHAT COULD CHANGE THE RATINGS UP / DOWN Developments that could potentially move the ratings upwards include: (i) realization of increased trading activity, which leads to improvements in the amount and stability of earnings and of organic capital generation; (ii) a more stable, self-funded business; and (iii) further integration with the parent. Potential developments that could lead to a downgrade include: (i) an increase in risk appetite such that the trading business generates undue losses; (ii) limited success in achieving a level of global markets trading activity in line with ICBC SB's cost base; and (iii) a downgrade or reduced support from the parent, ICBC. While Moody's expects costs associated with the firm's history of restructuring and transaction related losses to decline, the cost base is expected to increase as ICBC SB re- establishes the necessary infrastructure, control functions and processes to enable it to operate on a standalone basis from SBG, its previous parent. LIST OF AFFECTED RATINGS Outlook Actions: Issuer: ICBC Standard Bank Plc Outlook, Changed To Negative From Stable Affirmations: Issuer: ICBC Standard Bank Plc Issuer Rating, Affirmed Baa3, outlook changed to Negative from Stable Short Term Deposit Rating, Affirmed P-3 Senior Unsecured Medium-Term Note Program, Affirmed (P)Baa3 Subordinate Regular Bond/Debenture, Affirmed Ba1, outlook changed to Negative from Stable Long Term Deposit Rating, Affirmed Baa3, outlook changed to Negative from Stable PRINCIPAL METHODOLOGIES The methodologies used in these ratings were Banks published in January 2016, and Global Securities Industry published in May 2013. JOHNSTON PRESS: Moody's Lowers CFR to Caa1, Outlook Stable ---------------------------------------------------------- Moody's Investors Service has downgraded the ratings of UK local and regional media company Johnston Press plc, including its Corporate Family Rating to Caa1 from B3, its Probability of Default Rating to Caa1-PD from B3-PD, and the rating of the GBP225 million senior secured notes issued by its subsidiary, Johnston Press Bond Plc to Caa1 from B3. The outlook on all ratings is stable. "The downgrade of Johnston Press' ratings to Caa1 reflects the ongoing structural shift in the industry toward digital formats which is causing a persistent erosion of the company's print based revenues. The company has made some progress in expanding its digital formats and has implemented cost actions to accommodate the ongoing top line pressures. Nevertheless, Moody's expects that the industry trends will put ongoing negative pressure on the company's operating performance", says Gunjan Dixit, a Moody's Vice President and lead analyst for Johnston Press. "The acquisition of UK national daily newspaper "i" will benefit the company's operations as it brings a growing subscriber base and is free cash flow generative. However, the acquisition will absorb GBP22 million of cash resources in 2016 and GBP2 million in 2017. While Johnston Press has committed to sell certain non-core print assets to help restore its liquidity, it could be difficult for the company to execute asset sales at attractive prices in the tough operating environment," adds Ms. Dixit. RATINGS RATIONALE The rating action reflects the accelerating decline in Johnston Press' revenues, which the company has forecasted to decline by 7% in 2015, after a 4.4% decline in 2014 according to its January 2016 trading update. The steeper decline is driven by a sharp fall in print revenues of 12% (compared to 9% in 2014) and slower growth in digital revenues of 12% (compared to 20% in 2014). Yet at only 13% of the overall group revenues, Digital is still a moderate contributor to the overall group. Given the continued pressures on print revenues against the backdrop of a deteriorating industry environment, the rating agency expects that Johnston Press' revenues will continue to decline over at least the next 2-3 years, not considering the effect. Nevertheless, management has up to now been efficient at protecting the company's EBITDA margins after undergoing significant restructurings from 2011 onwards. Moody's expects that Johnston Press will report a flat underlying EBITDA margin for 2015 of around 23%. However, in light of the ongoing top line pressures, margin protection based on cost savings will become difficult to achieve on a sustained basis. The company's 2015 operational under-performance has led to a significant erosion of the company's share price. Consequently, the equity cushion in the company's enterprise value is limited to GBP47 million as of March 1, 2016. Moody's expects that Johnston Press' gross debt/EBITDA ratio (as adjusted by Moody's) will be approximately 4.4x at end-2015. This remains high for a business suffering from sustained structural pressures, notwithstanding some improvement in the ratio from a re-evaluation of Johnston Press' IFRS19 pension deficit. Moody's expects the company's reported net leverage to stand at around 3.2x at end-2015. In the absence of asset sales, the rating agency does not expect Johnston Press to de-lever in 2016. Consequently the financial leverage maintenance covenant headroom stipulated under its available GBP25 million revolving credit facility (currently undrawn) could also reduce (compared to a 15% headroom at the 2015 year-end). On Feb. 12, 2016, Johnston Press announced that it had reached an agreement to acquire the "i" newspaper from the Independent Print Limited (unrated; a UK based publishing business) for a total consideration of GBP24 million. The acquisition, which is expected to close in April 2016, falls in line with the company's strategy. However, in order to fund the acquisition, Johnston Press will be using a significant portion of its available cash resources (approximately GBP24 million). While Moody's acknowledges that the company plans to sell certain non-core assets to restore is liquidity, the rating agency believes that conducting asset sales at attractive prices will prove challenging given the structural pressures affecting the print publishing sector. More positively, Moody's expects that the acquisition will help Johnston Press in improving its audience reach, gain share of the national advertising market while contributing to overall revenues and EBITDA. i's circulation revenues are growing strongly (+24% in 2015) and the acquisition is likely to offer some potential for growing digital revenues. The acquisition will also provide some scope for cost savings and revenue synergies. RATIONALE FOR THE STABLE OUTLOOK The stable ratings outlook recognizes (1) the positive free cash flow generation expected for 2015 and 2016, helped by lower restructuring cash outflows and interest payment obligations compared to 2014; (2) the reduction in the company's pension deficit by some GBP53 million under IAS 19 from GBP90 million in H1 2015; (3) the company's comfortable liquidity position, with an undrawn revolving credit facility of GBP25 million; and (4) management's past track record of generating cost efficiencies. WHAT COULD MOVE THE RATING DOWN/UP Downward pressure could be exerted on the company's ratings if (1) the sustained weakness in operating performance were to become more pronounced; (2) free cash flow generation were to turn negative and/ or (3) the company's liquidity position deteriorates markedly. Moody's does not anticipate any catalysts for an upgrade in the near term, although upward pressure could be exerted on the ratings once Johnston Press (1) is able to return back to steady revenue and EBITDA growth; (2) sustains positive free cash flow (as calculated by Moody's) generation on an ongoing basis; and (3) maintains its gross debt to/EBITDA ratio (as adjusted by Moody's) at below 4.5x on a sustained basis. The principal methodology used in these ratings was Global Publishing Industry published in December 2011. Johnston Press plc is a leading UK multimedia company that publishes 13 paid-for daily newspapers, including The Scotsman, The Yorkshire Post and The News (Portsmouth), 154 paid for weeklies, 37 free newspapers and a number of lifestyle magazines. VEDANTA RESOURCES: Moody's Lowers CFR to B2, Outlook Negative ------------------------------------------------------------- Moody's Investors Service has downgraded Vedanta Resources plc's corporate family rating B2 from Ba2. Moody's has also downgraded the company's senior unsecured rating to Caa1 from B1. The outlook on all ratings is negative. RATINGS RATIONALE "The downgrade of Vedanta's ratings is driven by the low commodity price environment that will keep earnings improvement distant, and a slower correction in leverage metrics than initially anticipated," says Kaustubh Chaubal, a Moody's Vice President and Senior Analyst. The rating actions also incorporate the refinancing risk that the company faces, in particular, in relation to its debt maturities during the financial year ending March 2017 (FY2017). The rating actions reflect Moody's view that there has been a fundamental downward shift in the mining sector, with the downturn being deeper and the recovery longer than Moody's had previously expected, resulting in increased credit risk and weaker credit metrics for Vedanta, as well as the global mining sector. Consequently, ratings need to be recalibrated to reflect the companies' expected performance over a more protracted challenging operating environment. Slowing economic growth rates in China materially impact the demand for base metals and prices globally. Even as the Government of India's (Baa3 positive) move to raise duties on imports of aluminum and zinc will raise selling prices in India, the impact will be modest. At the same time, the reduction in taxes on the production of oil to 20% ad valorem ($6-$7 per barrel at current prices) from INR4,500 per tonne ($9/barrel) will lower the cash cost of production by some $2-$3/barrel. However, the decline in oil prices has been so sharp that the reduction in taxes on production will have a muted impact on Vedanta's earnings. Vedanta's B2 CFR also reflects refinancing risks associated with its $2.67 billion debt maturities in FY2017. The company's FY 2017 maturities include $1.9 billion due in the April -- July 2016 period and the balance $0.77 billion due in the remainder of the year. While the company has so far secured financing for a part of these debt maturities, the absence of a completely executed refinancing plan keeps near term liquidity risk imminent. Moody's recognizes that on a consolidated basis Vedanta has large cash balances of $8.9 billion although almost 90% of which is held at its two listed subsidiaries Hindustan Zinc Ltd (unrated) and Cairn India Ltd. (unrated). Furthermore, Vedanta's weak operating performance will result in a potential breach of some of its covenants in March 2016, requiring it to request that its lenders provide waivers and relaxations. While the company has confirmed that it has received lender approvals for waivers for the next covenant testing date on March 31, 2016, and relaxations for the periods beyond that date, the timely receipt of confirmations from its balance lenders is critical. The CFR also reflects Vedanta's exposure to volatile commodity prices, which has led to a sharp decline in its earnings and a deterioration in its financial profile. The CFR incorporates Moody's expectation that the weak commodity price environment will persist and delay any meaningful improvement in Vedanta's credit metrics, at least over the next 12 months. Absent any improvement in commodity prices beyond Moody's expectations, equity issuance -- which management has ruled out -- an improvement in leverage will remain contingent on the company's ability to continue to reduce costs and ramp up production. Moody's estimates that Vedanta's leverage will be around 5.7x at March 2016, up from 4.3x at March 2015, and Moody's estimate of 5.2x at Dec. 31, 2015. Looking ahead, Moody's expects production ramp ups, especially in aluminum in India and copper in Zambia, and the company's cost reduction initiatives to drive leverage correction towards 5.0x by March 2017, while remaining free cash flow positive. The negative outlook is based on Moody's view that commodity prices will remain pressured by weakening global macroeconomic growth, especially in China, and despite Vedanta's low cash cost position, this will continue to pressure earnings and slower the pace of leverage correction. The negative outlook also incorporates the refinancing risk with respect to the group's FY2017 maturities and rising covenant pressure. What Could Change the Rating -- Up A ratings upgrade is unlikely over the next 12-18 months, given that the ratings outlook is negative. The ratings outlook could return to stable if commodity prices recover, or if the company's profits recover close to previous high levels through cost saving initiatives. Metrics that could lead to a change in outlook to stable include adjusted leverage below 4.5x, EBIT/interest above 2.0x, and cash flow from operations (CFO) less dividends/adjusted debt above 12.5%, all on a sustained basis, while generating positive free cash flow. The timely completion of the merger of Vedanta Ltd. with CIL followed by a substantial debt repayment would also be key for a revision in the outlook to stable. What Could Change the Rating - Down Failure to complete the refinancing of its FY2017 maturities on a timely basis or a delay in obtaining covenant waivers or relaxations from its lenders would result in further downgrades. Fundamentally Moody's could consider downgrading the ratings if: (1) weak commodity prices persist, such that Vedanta's consolidated adjusted 12-month EBITDA drops below $3.5 billion, despite its efforts to ramp up shipments; (2) the company is unable to sustain and improve its cost- reduction initiatives, such that profitability weakens, with consolidated EBIT margins falling below 10% on a sustained basis; and/or (3) its financial metrics fail to improve from their current weak levels. Credit metrics indicative of a downgrade include adjusted debt/EBITDA in excess of 5.0x-5.5x, EBIT/interest coverage below 1.5x, or cash flow from operations less dividends/adjusted debt below 12.5%. An adverse ruling with respect to Cairn India Ltd's (CIL) disputed $3.2 billion tax liability would also exert negative pressure on the ratings. CIL is an independent oil exploration and production company in India, which is 59.9%-owned by Vedanta's subsidiary, Vedanta Ltd (unrated). The principal methodology used in these ratings was Global Mining Industry published in August 2014. Headquartered in London, Vedanta Resources plc is a diversified resources company with interests mainly in India. Its core operations are held by Vedanta Ltd, a 62.9%-owned subsidiary which produces zinc, lead, silver, aluminum, iron ore and power. In December 2011, Vedanta acquired control of Cairn India Ltd (CIL), an independent oil exploration and production company in India. CIL is a 59.9%-owned subsidiary of Vedanta Ltd. On June 14, 2015, Vedanta Ltd announced the proposed merger of Vedanta Ltd and CIL, in a cashless all stock transaction, subject to approvals. If the merger goes ahead as announced, Vedanta's shareholding in Vedanta Ltd will fall to 50.1%. Listed on the London Stock Exchange, Vedanta is 69.8% owned by Volcan Investments Ltd. For the year ended March 31, 2015, Vedanta reported revenues of $12.9 billion and EBITDA of $3.7 billion. ********* 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 * * *