/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/160601.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, June 1, 2016, Vol. 17, No. 107 Headlines G E R M A N Y DEUTSCHE FORFAIT: Applies for Share Capital Reduction H U N G A R Y ZSOLNAY: MFB Mulls Liquidation Procedure I R E L A N D PETROCELTIC INT'L: Staff Retain William Fry to Advise on Scheme I T A L Y GIUSSANO: Sale of Properties Scheduled for June 6 VERANO BRIANZA: Sale of Property Scheduled for June 6 L U X E M B O U R G AGEASFINLUX SA: Moody's Affirms Ba3( hyb) Jr. Sub. Debt Rating SES SA: S&P Assigns 'BB+' Rating to Proposed Hybrid Securities XELLA HOLDCO: S&P Affirms 'B+' CCR Then Withdraws Rating S L O V E N I A DRUZBA ZA: June 24 Deadline Set for Binding Offers S P A I N BANCO POPULAR ESPANOL: Fitch Affirms 'BB-' Viability Rating S W E D E N NOBINA AB: S&P Raises CCR to 'BB', Outlook Stable U N I T E D K I N G D O M AUSTIN REED: Majority of Stores to Close, 1,000 Jobs at Risk BHS GROUP: Used Loophole to Cut Annual Pension Deficit Levy PETRA DIAMONDS US: Moody's Confirms B2 Rating on Sr. Sec. Notes SANDS HERITAGE: Low Volume of Visitors Prompts Administration ********* ============= G E R M A N Y ============= DEUTSCHE FORFAIT: Applies for Share Capital Reduction ----------------------------------------------------- In the insolvency proceedings over the assets of DF Deutsche Forfait AG, the company applied for the decrease of the share capital of the company according to the insolvency plan confirmed by the court and in line with the regulations about simplified capital reduction from EUR6,800,000 to EUR680,000 to be registered in the company's commercial register. The entry of the resolution about the decrease of the share capital was entered into the company's commercial register on May 25, 2016. Therefore, the capital decrease is valid. With the capital decrease becoming effective, the partial debt waiver of Creditor Group 1, i.e. the group of the non-secondary insolvency creditors, which do not belong to groups 2 and 3 formed according to the insolvency plan, became effective in the amount of 61.96 % of their claims. In order to cause the partial debt waiver becoming effective, the resolution regarding the decrease of the share capital was applied for registration into the company's commercial register before registering the cash and non-cash capital increase planned in the near future as also resolved upon in the insolvency plan. DF Deutsche Forfait AG is German-based company engaged in the non-recourse purchase and sale of receivables -- the forfeiting business -- as well as the acceptance of risks through purchasing commitments. ============= H U N G A R Y ============= ZSOLNAY: MFB Mulls Liquidation Procedure ---------------------------------------- Budapest Business Journal, citing Hungarian daily Nepszabadsag, reports that not long after Zsolnay's majority owner Bachar Najari aired concerns of a "hostile takeover", Hungarian state- owned Development Bank (MFB) has decided to launch a liquidation procedure against the porcelain maker, if the company fails to comply with the repayment scheduled on a HUF413 million loan which matured in August. According to BBJ, Nepszabadsag reported that the local council of Pecs, which is the minority owner, already set up a company with the name Ledina Keramia to take over the operation of the porcelain manufacturer if it is liquidated. Nepszabadsag added Zsolnay's liabilities have grown to HUF900 million and its headcount has been cut from 220 to 150. ============= I R E L A N D ============= PETROCELTIC INT'L: Staff Retain William Fry to Advise on Scheme --------------------------------------------------------------- Mark Paul at The Irish Times reports that a group of senior staff at Petroceltic International, the exploration company that is on the verge of being bought out of examinership by its biggest shareholder, have retained William Fry to advise them following their rejection of a proposed scheme of arrangement that would cost them more than US$4 million (EUR3.6 million). According to The Irish Times, the staff, including senior executives and management, are due to receive just 5% of monies owed to them under "change of control" clauses in their contracts. The total sum owed is more than US$4.5 million, The Irish Times discloses. Petroceltic is on the verge of being bought by Worldview Capital, a Swiss-Cayman fund that was previously engaged in a bitter dispute with Petroceltic's management, The Irish Times notes. A series of creditors' meetings were held on May 30 at which the examiner, Michael McAteer of Grant Thornton, sought approval for a scheme of arrangement, The Irish Times relates. The scheme was approved by most classes of creditors, including the all-important group of secured lenders that also includes Worldview, The Irish Times relays. However, all employee classes voted against the scheme, potentially setting up a courtroom row over the examinership, The Irish Times recounts. The rejection by employees of the scheme, which will see Worldview take control of the company for a cash injection of US$7.8 million, does not automatically delay a resolution of the examinership, The Irish Times states. However, the High Court has the discretion to take the views of the staff into account when deciding whether or not to approve the scheme, according to The Irish Times. A full hearing is expected to take place next week, at which the senior staff would be entitled to raise an objection, The Irish Times discloses. Up to 30 Petroceltic staff are affected, The Irish Times says. A group of about half of that number have appointed William Fry to engage with the examiner and try to get them a better deal, The Irish Times says. It is understood they have also sought the opinion of a senior counsel, The Irish Times notes. Petroceltic International is a Dublin-based oil and gas explorer. ========= I T A L Y ========= GIUSSANO: Sale of Properties Scheduled for June 6 ------------------------------------------------- Dott. Mario Carlo Novara, the court-appointed receiver of Giussano (MB) Via Superstrada Valassina snc, has put up for sale the following properties: -- 12-month lease of FEG business unit, 25, 123 sq. m. comprised of property and offices for a starting price of EUR500,000 and minimum bid price of EUR500,000; and -- Salvarani business unit for a starting price of EUR3,000,000 and minimum bid price of EUR3,000,000. The sale without auction will be held on June 6, 2016 at 2:40 p.m. The court-appointed receiver can be reached at mariocarlo@studionovara.it Further details are available at www.tribunale.monza.giustizia.it and www.astelegale.net VERANO BRIANZA: Sale of Property Scheduled for June 6 ----------------------------------------------------- Dott. Mario Carlo Novara, the court-appointed receiver of Verano Brianza (MB) Via Superstrada Valassina snc, has put up for sale the company's property housing the salvarani business unit, 17,011 sqm., for a starting price of EUR9,000,000 and minimum bid price of EUR9,000,000. The court-appointed receiver can be reached at mariocarlo@studionovara.it Further details are available at www.tribunale.monza.giustizia.it and www.astelegale.net =================== L U X E M B O U R G =================== AGEASFINLUX SA: Moody's Affirms Ba3( hyb) Jr. Sub. Debt Rating -------------------------------------------------------------- Moody's Investors Service has changed the outlook on Ageas SA/NV to positive and affirmed the Baa3 issuer rating of Ageas SA/NV. RATINGS RATIONALE The change in outlook to positive reflects Moody's view that the recent settlement agreement filed in the Netherlands is a fundamental milestone towards resolving the uncertainty related to the legal risks and the corresponding costs arising from legacy issues in relation to Fortis group (as the issuer was formerly known) for events occurred in 2007 and 2008. The Baa3 long-term issuer rating of Ageas SA/NV reflects the combined financial strength and dividend capacity of the group's operating insurance companies, the subordination of the holding company creditors, and sound liquidity and capital positions at the holding company. Ageas Baa3 rating is four notches below the A2 Insurance Financial Strength Rating of the main operating company, AG Insurance; this additional notch than the standard three notches reflects the risks arising from the above mentioned legacy issues. A possible resolution of these issues is likely to put upward pressure to this rating, hence the positive outlook. Last March, Ageas announced to have agreed with four claimants' organisations on a deal to indemnify eligible shareholders in the amount of EUR1.2 billion. This agreement, which according to the issuer represented an estimated 90% of the shares involved in said litigations, has been subsequently endorsed by other claimants and then submitted for filing with the Amsterdam Court of Appeal on May 23, 2016. Moody's notes that the settlement will not be approved and binding until: (1) the court approves the deal on the grounds of it being reasonable and fair and (2) Ageas chooses not to exercise its termination right which entitles the issuer to end the agreement if more than 5% of shareholders eligible for compensation decide to opt-out. This option protects Ageas against the scenario of interested parties extensively opting- out, which could be accompanied with further legal proceedings and costs. The entire legal proceeding will likely take an estimated 12-18 months and Ageas expects the filed agreement to be eventually approved given the high amount of claimants being represented and endorsing the deal. Moody's is likely to solve the positive outlook only when the legal proceeding has been concluded and Ageas proceeds with the compensation. As a result of the settlement proposal, Ageas estimates a net cash outflow of EUR1.02 billion. This amount is expected to be gradually paid over a period of two to three years from now, depending on the pace at which the legal procedure can be executed. At 1Q 2016, Ageas reported a liquidity position of EUR1.2 bil., which is sufficient to cover the expected cash outflow. Additionally, the company received EUR 1.26 billion from the sale of the group's Hong Kong life insurance business which completed earlier in May 2016. Overall, Moody's anticipates that Ageas liquidity buffer and group solvency will remain sound and able to address future possible liquidity needs, such as the possible repurchase of the non-controlled interest in AG Insurance, at the election of BNP Paribas Fortis, which was valued at EUR1.1 billion at March 31, 2016. As concerns the capitalization of Ageas, the reduction in Solvency II capital ratio by around 20ppts as a result of the expected settlement (180% reported as at 1Q 2016, which already reflects the impact of the expected settlement) will be more than compensated by the sale of the Hong Kong business, which is expected to boost the group Solvency II coverage ratio by 30ppts. Ageas SA/NV is the holding company of the Ageas Group, a composite insurer active in several markets, primarily focused on writing insurance business in Belgium, Continental Europe, United Kingdom, and in Asia via partnerships. As at Dec. 31, 2015, Ageas reported total assets of EUR104.5 bil. (YE 2014: EUR103.6 bil.), total equity of EUR12 bil. (YE 2014: EUR10.9 bil.) and a consolidated net income attributable to shareholders of EUR770.2 million (YE 2014: EUR475.6 million). FINANCING VEHICLES Moody's said that the affirmations of Ageas Hybrid Financing and Ageasfinlux S.A. ratings reflect the guarantees received by these financing vehicles from the Group's holding company and therefore follow the affirmation of Ageas SA/NV rating. The hybrid debt issued by Ageas Hybrid Financing, Hybrone, has been on-lent to AG Insurance, and is therefore economically matched by a loan to this operating entity. Ageas intends to call the Hybrone Securities on June 20, 2016. The FRESH securities, perpetual and mandatory convertible debt, were issued by Ageasfinlux with Ageas SA/NV acting as co-obligor. WHAT COULD CHANGE THE RATINGS UP/DOWN AGEAS SA/NV Upward pressure on the rating may result from (i) a favorable resolution of outstanding legal disputes and/or ii) a material improvement of the financial strength of the operating companies, notably through an upgrade of the A2 IFSR of AG Insurance Conversely, while a downgrade is unlikely given the positive outlook, negative pressure on the rating may be the result of (i) a negative outcome of the settlement agreement filed in the Netherlands and/or of any remaining legal dispute which could, in adverse scenarios, materially affect the financial resources of the holding company and/or (ii) a deterioration of the financial strength of the operating companies, principally evidenced by a downgrade of the A2 IFS rating of AG Insurance. Principal Methodologies The methodologies used in these ratings were Global Life Insurers published in April 2016, and Global Property and Casualty Insurers published in April 2016. RATING LIST These ratings have been affirmed: Ageas SA/NV -- Long term issuer rating at Baa3 Ageas Hybrid Financing -- Backed pref stock debt rating at Ba2 (hyb) Ageasfinlux S.A. -- Backed junior subordinated debt rating at Ba3 (hyb) Outlook action: Outlook on all issuers changed to Positive from Negative SES SA: S&P Assigns 'BB+' Rating to Proposed Hybrid Securities -------------------------------------------------------------- S&P Global Ratings assigned its 'BB+' long-term issue rating to the proposed perpetual subordinated hybrid securities to be issued by Luxembourg-based fixed satellite services operator SES S.A. (BBB/Stable/A-2) and guaranteed by SES Global Americas Holdings G.P. The first call date is set to be at least 5.5 years after issuance. The completion and size of the issue will be subject to market conditions. At this stage, S&P anticipates a ratio of outstanding hybrids to adjusted capitalization to be comfortably below 15%. Upon issuance, S&P will initially classify the proposed hybrids as having minimal equity content, given the early redemption risk in case the pending acquisition of O3b Networks is not completed. Still, if the latter successfully completes, S&P expects to reclassify the proposed hybrids as having intermediate equity content until no later than the first call date. Consequently, in S&P's calculation of SES' credit ratios, S&P will reclassify 50% of the principal outstanding and accrued interest under the proposed hybrids as debt, and 50% of the related payments on these securities as an interest expense, as S&P understands the instrument will be recognized as equity on SES S.A.'s balance sheet. The two-notch difference between S&P's 'BB+' issue rating on the proposed hybrid notes and S&P's 'BBB' corporate credit rating (CCR) on SES S.A. reflects: -- One notch for the proposed notes' subordination because the CCR on SES S.A. is investment grade; and -- An additional notch for the optional deferability of interest. The notching of the proposed securities takes into account S&P's view that there is a relatively low likelihood that SES S.A. will defer interest payments. Should S&P's view change, it may significantly increase the number of downward notches that S&P applies to the issue rating, and more quickly than S&P might take a rating action on the CCR. S&P understands that the interest to be paid on the proposed securities will increase by 25 basis points five years after the first call date, and a further 75 basis points 20 years after the first call date. S&P considers the cumulative 100 basis points as a moderate step-up, which creates an incentive to redeem the instruments at that time. Consequently, in accordance with S&P's criteria, and assuming the acquisition has closed and thereafter S&P classifies the proposed instrument as having intermediate equity content, S&P would no longer recognize the proposed instrument as having intermediate equity content after the first call date at the latest, because the remaining period until its economic maturity would, by then, be less than 20 years. KEY FACTORS IN S&P'S ASSESSMENT OF THE INSTRUMENT'S PERMANENCE Although the proposed securities are perpetual, SES S.A. can redeem them as of the first call date 5.5 years after issuance, and every year thereafter. If this occurs, the company intends to replace the proposed instruments, although it is not obliged to do so. Critically for S&P's assessment of permanence, it believes that any repurchase, irrespective of the size, could jeopardize the equity content of the securities, as it will lead S&P to question management's intentions to maintain and replace such securities. KEY FACTORS IN S&P'S ASSESSMENT OF THE INSTRUMENT'S SUBORDINATION The proposed securities will be deeply subordinated obligations of SES S.A., ranking junior to all unsubordinated or subordinated obligations, and only senior to share capital. KEY FACTORS IN S&P'S ASSESSMENT OF THE INSTRUMENT'S DEFERABILITY In S&P's view, the issuer's option to defer payment of interest on the proposed securities is discretionary, thus it may elect not to pay accrued interest on an interest payment date because it has no obligation to do so. However, any outstanding deferred interest payment would have to be settled in cash if an equity dividend or interest on equal-ranking securities is paid or if common shares or equal-ranking securities are repurchased. That said, this condition remains acceptable under S&P's rating methodology because, once the issuer has settled the deferred amount, it can choose to defer payment on the next interest payment date. The issuer retains the option to defer coupons throughout the instrument's life. The deferred interest on the proposed securities is cash cumulative and compounding. XELLA HOLDCO: S&P Affirms 'B+' CCR Then Withdraws Rating -------------------------------------------------------- S&P Global Ratings affirmed its 'B+' long-term corporate credit rating on Xella group's finance entity Xella Holdco Finance S.A., and subsequently withdrew the rating at the issuer's request. Xella Holdco Finance S.A. previously issued Xella group's EUR200 million payment-in-kind toggle notes that were repaid in June 2015. S&P understands that the rating on this entity is no longer required. At the same time, S&P Global Ratings affirmed its 'B+' long-term corporate credit rating on Xella International S.A. The outlook is stable. Finally, S&P affirmed its 'B+' issue rating and '3' recovery rating on the EUR215 million senior secured term loan G and on the EUR325 million senior secured notes issued by Xella's special-purpose vehicle Xefin Lux S.C.A. This indicates S&P's expectation of meaningful (50%-70%) recovery in the event of a payment default. S&P expects recovery prospects to be in the upper half of the range. Xella International occupies leading positions as Europe's largest autoclaved aerated concrete producer by capacity and the largest producer of calcium silicate by production units. The company's diversification across a variety of product lines and, to a lesser extent, end markets, is a key factor supporting its credit quality. The stable outlook reflects S&P's view of Xella's improving and historically stable profitability, which will continue to support the group's cash flows. The outlook also reflects S&P's forecast that Xella will maintain funds from operations (FFO) interest coverage of above 3x over the next 12 months. Downward rating pressure could arise from increased competition and a sustained decline in construction in Xella's key markets, which together would constrain its cash flow and result in sustained negative FOCF. S&P could consider lowering the rating if it sees a deterioration in Xella's credit metrics, including FFO cash interest coverage falling below 3x. This could result from depressed end markets and pricing pressure or the incurrence of additional cash-interest paying debts to replace existing payment-in-kind (PIK) shareholder loan instruments. Additionally, S&P could downgrade Xella if the group's liquidity deteriorates. S&P believes that ratings upside remains limited in the near term due to Xella's high debt burden including the shareholder loan. =============== S L O V E N I A =============== DRUZBA ZA: June 24 Deadline Set for Binding Offers -------------------------------------------------- Druzba za upravljanje terjatev bank, d.d.. Davcna ulica 1, 1000 Ljubljana, is interested in selling a bundle of its claims, including accrued interest and other accessory rights held against the following Companies: -- DZS zaloznistvo in trgovina, d.d., Dalmatinova 2, 1000 Ljubljana, -- DELO PRODAJA druzba za razsirjanje in prodajo casopisov, d.d., Dunajska cesta 5, 1000 Ljubljana, and -- TERME CATEZ, d.d., Catez ob Savi, Topliska cesta 35, 8250 Brezice; as at May 3, 2016, which amounts to a total of EUR78,995,232.08 (including all accrued interest). The deadline for the submission of binding offers is June 24, 2016. More detailed information is available on the website of the BAMC www.dutb.eu ========= S P A I N ========= BANCO POPULAR ESPANOL: Fitch Affirms 'BB-' Viability Rating ----------------------------------------------------------- Fitch Ratings has affirmed Banco Popular Espanol S.A.'s (Popular) Long-Term Foreign Currency Issuer Default Rating (IDR) and Viability Rating (VR) at 'BB-' and 'bb-', respectively. The Rating Outlook on the bank's Long-Term IDR remains Positive. Fitch's action follows the announcement that Popular will make a EUR2.5 billion capital increase by end-June 2016. KEY RATING DRIVERS IDRS, VR, SENIOR DEBT RATING Fitch said, "Popular's IDRs, VR and senior debt ratings remain constrained by its large stock of problem assets (non-performing loans plus foreclosed assets) and capital tied to unreserved problem assets. Even after the planned capital increase, and taking into account problem asset reductions so far this year, we project that unreserved problem assets will continue to represent well above 100% of Popular's Fitch Core Capital (FCC) for the rest of 2016. The Positive Outlook, however, reflects upside potential for the bank's ratings within the next one to two years, or possibly sooner, from its plans to reduce problem asset stock. Fitch sees potential for the bank to accelerate problem asset disposals once it receives the new capital, as this will assist it in writing down book values to a level that makes sales more attractive." Popular announced plans to issue EUR2.5 billion new shares at 1.25 euros per share to strengthen its balance sheet by offsetting the capital impact from booking about EUR4.7 billion of problem asset impairment charges in 2016, which will result in the bank reporting losses. Popular expects to maintain its fully- loaded CET1 ratio around 10.8% by end-2016 post capital increase and considering the acquisition of the card business of Barclays in Spain. Fitch calculates that the ratio of unreserved problem assets to FCC could improve substantially from a very high 217% level at end-2015. This combined with the bank's more ambitious plan to actively manage down volumes of problem assets (about EUR15 billion by 2018) should provide greater margin of maneuver to absorb unexpected shocks. Popular's problem assets ratio improved to 24.8% at end-2015, from 26.1% at end-2014, despite slight loan deleveraging, but will need to reduce considerably further for ratings to be upgraded. Fitch views the bank's targeted problem assets coverage levels of 50% by end-2016 to be more in line with the sector average. While loan impairment charges (LICs) will erode internal capital generation in 2016, Fitch expects this to be restored in 2017 supported by lower impairment charges on problem assets as pressure to improve coverage levels eases and problem assets reduce. Also, the bank should continue to benefit from its resilient revenue generation capacity on the back of its good SME franchise and cost efficiency. The bank also has further scope to reduce funding costs, particularly on retail deposits, which should help to offset the impact from the removal of interest rate floors in January 2016. Popular's ratings are further supported by its adequate funding and liquidity profile. Funding is primarily based on retail deposits, and liquidity is underpinned by a sizeable stock of unencumbered ECB-eligible assets relative to forthcoming wholesale debt maturities. SUPPORT RATING AND SUPPORT RATING FLOOR The Support Rating (SR) of '5' and Support Rating Floor (SRF) of 'No Floor' of Banco Popular reflect Fitch's belief that senior creditors can no longer rely on receiving full extraordinary support from the sovereign in the event that it becomes non- viable. RATING SENSITIVITIES IDRS, VR AND SENIOR DEBT The Positive Outlook reflects potential rating upside if the bank progresses in substantially reducing problem assets (including foreclosed assets) in 2016 and beyond and achieves its ambitious targets convincingly, which combined with the completion of the capital increase, will help reduce the very high sensitivity of FCC to unreserved problem assets. Conversely, any setback on asset quality improvements or on capital could put ratings under pressure. Similarly, a deterioration of the bank's funding and liquidity profile would put pressure on the ratings. SUPPORT RATING AND SUPPORT RATING FLOOR Any upgrade of the SR and upward revision of the SRF would be contingent on a positive change in the sovereign's propensity to support its banks. While not impossible, this is highly unlikely, in Fitch's view. KEY RATING DRIVERS AND SENSITIVITIES - SUBORDINATED DEBT AND OTHER HYBRID SECURITIES Popular's subordinated (lower Tier 2) debt issues are rated one notch below the bank's VR to reflect the below-average loss severity of this type of debt compared with average recoveries. Popular's preference shares are rated three notches below the bank's VR to reflect the higher loss severity risk of these securities (two notches) compared with average recoveries as well as moderate risk of non-performance relative to its VR (one notch). The ratings of the instruments are primarily sensitive to a change in the bank's VR, which drive the ratings, but also to a change in Fitch's view of non-performance or loss severity risk relative to the bank's viability. Fitch has taken the following rating actions: Popular: Long-Term IDR: affirmed at 'BB-'; Outlook Positive Short-Term IDR: affirmed at 'B' Viability Rating: affirmed at 'bb-' Support Rating: affirmed at '5' Support Rating Floor: affirmed at 'NF' Long-term senior unsecured debt programme: affirmed at 'BB-' Short-term senior unsecured debt programme and commercial paper: affirmed at 'B' Subordinated lower Tier 2 debt: affirmed at 'B+' Preferred Stock: affirmed at 'B-' BPE Financiaciones S.A.: Long-term senior unsecured debt and debt programme (guaranteed by Popular): affirmed at 'BB-' Short-term senior unsecured debt programme (guaranteed by Popular): affirmed at 'B' BPE Preference International Limited: Preference shares: affirmed at 'B-' Popular Capital, S.A. Preference shares: affirmed at 'B-' =========== S W E D E N =========== NOBINA AB: S&P Raises CCR to 'BB', Outlook Stable ------------------------------------------------- S&P Global Ratings raised its long-term corporate credit rating on Swedish bus operator Nobina AB to 'BB' from 'BB-'. The outlook is stable. The upgrade follows Nobina's resilient and improving performance since the company's IPO in June 2015, which has improved its competitive position, in S&P's view. Nobina's margins have steadily improved in the past five years, with the replacement of old weaker-performing contracts with new contracts. S&P thinks that Nobina's stable business model, in combination with a clear and transparent financial policy, will enable it to maintain its current financial risk profile, which S&P assess at significant, and hence a 'BB' rating. Nobina posted an all-time high operating result (adjusted for IPO-related costs) in financial year ended Feb. 29, 2016. This was primarily due to higher volumes and a more favorable contract structure, since some weaker contracts had matured in the previous financial year. Although this was partly offset by higher start-up costs stemming from the high proportion of new contracts in the portfolio, Nobina still posted an EBITDA margin of 16.2%, up from 16.1% in the previous financial year. S&P thinks that the young contract portfolio (3.6 years as of financial year-end 2016) will enable further profitability improvements as the portfolio matures. In line with operational improvements, credit metrics also improved in financial 2016, with funds from operations (FFO) to debt of 21.1% (adjusted for IPO-related costs) compared with 19.5% a year earlier. S&P thinks that this ratio will improve only slightly in the coming year as large improvements will likely be prevented by new contract wins (which will add finance leases) and Nobina's relatively shareholder-friendly dividend policy. However, S&P thinks that Nobina's financial policy of maintaining net debt to EBITDA (according to the company's definition) of 3.0x-4.0x will prevent a deterioration in credit metrics and hence support the current financial risk profile. The stable outlook takes into account S&P's expectations of further improvement in Nobina's operating performance and margins. S&P expects that the company will maintain a careful and selective approach when bidding for new contracts and that costs will be contained under the index clauses in its contracts. S&P further expects that the company will stick to its financial policy of maintaining leverage at 3.0x-4.0x and that dividend payments and any possible acquisitions will fit into this policy. Although unlikely in the coming 12 months, S&P could raise the rating to 'BB+' if S&P considered that Nobina's business risk profile had strengthened. This could result if, for example, Nobina's profitability improved beyond S&P's expectations or if it thought the Nordic public transport markets would become less competitive. S&P thinks that there is limited upside to the rating stemming from Nobina's financial risk profile since any unexpected improvement will likely result in higher shareholder payouts. S&P could lower the rating if Nobina's operating performance were to deteriorate, which could be the case if a large contract were to make losses or if Nobina diverted from its prudent bidding policy and took on less profitable contracts compared with its existing portfolio. S&P could also lower the rating if Nobina's credit metrics weakened significantly such that FFO to debt remained below 20%. This could be the result of deteriorating performance in combination with high capex and dividend payments or potentially a large acquisition, although S&P sees such a scenario as remote at the moment. =========================== U N I T E D K I N G D O M =========================== AUSTIN REED: Majority of Stores to Close, 1,000 Jobs at Risk ------------------------------------------------------------ Ben Marlow at The Telegraph reports that the majority of Austin Reed's stores will close with the loss of nearly 1,000 jobs after administrators to the collapsed menswear chain were only able to find a buyer for its famous brand and stock. According to The Telegraph, sources familiar with the negotiations said Edinburgh Woollen Mill had refused to take the bulk of the shops as part of a deal, meaning administrators will now begin an orderly "wind down" of the chain's estate in the coming days. It is understood Edinburgh Woollen Mill will take just five Austin Reed concessions located at the Boundary Mill outlet villages across the north of England, from Austin Reed's entire estate, The Telegraph relates. The CC womenswear brand will also survive, The Telegraph notes. Administrators at Alix Partners will now begin looking for buyers for close to 100 properties, which will soon be left empty, The Telegraph discloses. Austin Reed's head office will also close, The Telegraph says. The chain, which is best known as a men's tailor, but once counted Elizabeth Taylor among its high-profile customers, collapsed last month, blaming cashflow difficulties, The Telegraph recounts. Austin Reed is a Thirsk-based fashion retailer. BHS GROUP: Used Loophole to Cut Annual Pension Deficit Levy ----------------------------------------------------------- Josephine Cumbo at The Financial Times reports that failed retailer BHS exploited a widely used loophole to nearly halve the annual levy it paid to the pension lifeboat to cover its GBP274 million deficit. Documents published recently showed that the retail chain, while still under Sir Philip Green's ownership, used an intragroup guarantee that the head of the Pension Protection Fund has called "pretty much" worthless to secure a substantial discount on the levy it was required to pay to the PPF in 2011-12, the FT relates. A parliamentary investigation into the collapse of BHS, which fell into administration in April, has revealed how companies deemed to be at risk of falling into insolvency exploited weak checks on the use of guarantees to shift the burden of protecting their pensioners on to other businesses, the FT notes. Details provided by the PPF to the Work and Pensions Committee, and recently published, revealed that the levy for the BHS pension scheme was GBP372,000 in 2010-11, the FT discloses. But in 2011-12, BHS -- whose financial health was weakening -- put forward a guarantee over its deficit, backed by Davenbush, part of the BHS group, the FT relays. That cut BHS's levy to GBP196,000, the FT notes. The levy on the smaller BHS senior management pension scheme was slashed by two-thirds from GBP30,000 to GBP10,000 after a guarantee was provided, the FT recounts. According to the FT, Alan Rubenstein, chief executive of the PPF, told the committee that BHS was one of a number of pension schemes the fund had written to in 2012 over concerns the guarantees put forward to cover deficits were "not justified". "The guarantee for the BHS pension scheme could not meet, in our view, the value of the shortfall that it was being pledged against," the FT quotes Mr. Rubenstein as saying. When asked if the company behind the guarantee for the BHS pension scheme was worthless, and could never "cough up the guarantee", Mr. Rubenstein replied, "yes, pretty much". After the BHS guarantee was not recertified, its subsequent levy bill for the both BHS pension schemes jumped to GBP2.4 million and GBP129,000 respectively, the FT notes. BHS Group is a department store chain. The company employs 10,000 people and has 164 shops. PETRA DIAMONDS US: Moody's Confirms B2 Rating on Sr. Sec. Notes --------------------------------------------------------------- Moody's Investors Service confirmed the corporate family rating (CFR) and probability of default rating (PDR) of predominantly South African diamond producer, Petra Diamonds Limited (Petra), at B1 and B1-PD, respectively. The outlook on all the ratings is stable. This concludes the review for downgrade initiated by Moody's on January 22, 2016, following its review of the global mining sector, whose operating environment has undergone a fundamental shift. "Our decision to confirm Petra's B1 ratings takes into account the company's success in renegotiating its bank facility covenants to increase their cushioning to more easily accommodate additional debt for funding its Cullinan mine mill extension project," said Douglas Rowlings, a Moody's Assistant Vice President. "It also recognizes Petra's ability to significantly reduce leverage in the next 12 months, even with Moody's conservative diamond price assumptions, as it expands into new areas that are planned to produce higher volumes and higher value diamonds at its Cullinan and Finsch mines at a lower cost from new higher grade ore bodies generating increasing EBITDA at higher margins," adds Mr. Rowlings. Concurrently, Moody's confirmed the B2 rating assigned to the US$300 million senior secured notes due May 31, 2020 issued by Petra Diamonds US$ Treasury Plc and guaranteed by Petra and certain of its subsidiaries. The outlook is stable. While diamonds have not experienced the same magnitude of recent price reductions seen in base metals, it is nevertheless a volatile commodity, the price of which is very hard to predict as it is not driven by normal industrial supply and demand factors. Moody's however does recognize the track record of supply intervention to support prices by the diamond industry's two largest producers, De Beers (unrated), a subsidiary of Anglo American plc (Ba3 positive), and ALROSA PJSC (Ba1 negative). Moody's expects Petra's diamond price risk will be mitigated by focusing on cost efficiencies and prudent project development, as well as financial risk reduction (i.e. reducing leverage, increasing interest coverage and bolstering liquidity). RATINGS RATIONALE The confirmation primarily considers the track record of support that Petra's lenders continue to demonstrate with their agreement to renegotiate bank facility covenant levels, as well as sustained improvement in diamond prices over the course of 2016. Petra's lenders waived their 31 December 2015 covenant test last year and on 25 April 2016 they agreed to reset covenants to less restrictive levels running to 31 December 2017. Furthermore, Moody's sees limited execution risk for Petra in terms of delivering undiluted ore from new mining areas at its Cullinan and Finsch mines, and developing its mill extension at the Cullinan mine. This is supported by observed progress to date and an independent technical assessment of the projects plans. Together, these operations are planned to deliver higher volumes and higher value diamonds at lower cost with better recovery rates (especially of larger diamonds), as well as significantly increasing EBITDA and free cashflow generation allowing for accelerated deleveraging. Petra's B1 CFR reflects (1) the strong medium- to long-term fundamental forecasts for the diamond market, in which demand is expected to outstrip supply, supporting long-term diamond prices; (2) its competitive cost positioning with predominantly long- life, well-prospected underground mines producing diamonds at costs on a par with cheaper open-pit mines; and (3) conservative financial policies and a strong financial profile, which will improve as undiluted ore contributes more significantly to the production of high-value diamonds with low execution risks. The ratings are constrained by (1) Petra's scale as a mid-tier diamond producer (revenues of $364 million for the last twelve months ended 31 December 2015) with four mines in South Africa (Baa2 under review for downgrade) including extensive tailings operations in Kimberley (via its 49.9% interest in the Kimberley Mines), one mine in Tanzania (unrated) and exploratory land in Botswana (A2 stable); (2) elevated operational risk as more than 90% of its EBITDA comes from the Cullinan and Finsch mines in South Africa; and (3) a single commodity producer business profile with full exposure to volatility in diamond prices and ZAR/$US exchange rate, noting however the favourable interplay on credit metrics of these two drivers to date. LIQUIDITY Moody's sees Petra's liquidity as being adequate over the next year and able to meet forecast capital expenditures of around US$200 million. At March 31, 2016, Petra had unrestricted cash balances totalling US$26.7 million and undrawn committed bank facility availability of around US$114.2 million. The rating agency recognizes that in spite of covenant levels being repositioned, the next testing period at June 30, 2016, will have limited headroom. The ability to ensure prospective compliance however is supported by (1) operating performance to date with only two months remaining in the test period ensuring greater visibility around the ability to achieve the remaining EBITDA hurdle; (2) cautious optimism for 2016 diamond prices, although Moody's assumes prices of 9% below company guidance which is equivalent to the average dollar per carat prices realised over the first half of Petra's financial year ending 30 June 2016; and (3) mine profiling which together with higher production will see an increasing shift in the mix to undiluted ore being processed which yields a higher EBITDA margin and overall EBITDA generation. Notwithstanding these considerations Petra's consortium of banks have a demonstrated track record of affording Petra flexibility with regards to its covenant tests. Furthermore, the requirement for debt facilities is attributed to an extension of the mill at Petra's Cullinan mine. This is not seen as critical to deleveraging, which is more a factor of undiluted ore contribution as opposed to milling efficiency and recovery improvement. The mill extension will further reduce processing costs and improve recoveries, especially of larger high value stones. Therefore the company, could, if needed, defer the mill extension, although this is not the current intention given that the banking consortium are supportive. The majority of capex associated with Petra's Cullinan mine expansion is denominated in depreciated South African rand with prices locked in, which mitigates against potential overspending. RATIONALE FOR STABLE OUTLOOK The stable outlook reflects Moody's view that Petra will be able to deliver on its capex programme and undiluted mining production areas with debt/EBITDA falling below 2.5x and EBIT/interest expense trending above 4x. The rating agency also expects that Petra, at all times, will maintain a liquidity profile that provides sufficient cash sources against forecasts cash uses. This stable outlook also factors an expectation that the company will remain in compliance with its bank covenants at all times. WHAT COULD CHANGE THE RATING UP/DOWN Downward pressure on the rating could result if it does not become apparent that debt/EBITDA is trending below 2.5x and EBIT/interest expense is trending above 4x. Similar downward pressure could result if Petra were to face (1) long-term challenges in accessing undiluted ore at its Cullinan and Finsch mines; or (2) a deterioration of Petra's liquidity profile. SANDS HERITAGE: Low Volume of Visitors Prompts Administration ------------------------------------------------------------- BBC News reports that the Thanet council leader Chris Wells says failure to attract enough visitors forced Margate's Dreamland amusement park to call in administrators. The park reopened in a blaze of publicity in 2015 after an GBP18 million restoration but operator Sands Heritage went into administration on May 27, BBC relates. Mr. Wells, as cited by BBC, said they had failed to produce the volume of people they had hoped for. According to BBC, administrator Duff and Phelps said it was looking for a new operator. It said Dreamland would remain open and continue to operate as normal, BBC notes. Sands avoided administration in December under a company voluntary arrangement (CVA), which gave it five years to repay nearly GBP3 million of debts, BBC recounts. The council, which is owed GBP50,000, is among the creditors, BBC discloses. It has also invested another GBP900,000 in the site, for which it is the leaseholder, BBC states. ********* 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. 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