/raid1/www/Hosts/bankrupt/TCREUR_Public/160607.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
Tuesday, June 7, 2016, Vol. 17, No. 111
Headlines
A U S T R I A
VOLKSBANK MARCHFELD: Fitch Withdraws 'BB+' Issuer Default Ratings
B U L G A R I A
BULGARIA: S&P Affirms 'BB+/B' Sovereign Credit Ratings
F R A N C E
GROUPAMA SA: Fitch Corrects May 17 Ratings Release
G E R M A N Y
MAPLE BANK: Creditors' Registered Claims Total EUR3.3 Billion
I R E L A N D
AVOCA CLO XVI: Moody's Assigns (P)B2 Rating to Class F Notes
AVOCA CLO XVI: S&P Assigns Prelim. 'B' Rating to Class F Notes
L U X E M B O U R G
CONTOURGLOBAL POWER: Moody's Withdraws B3 Rating on $400MM Notes
GLOBAL CLOSURE: Moody's Withdraws B3 Corporate Family Rating
QGOG CONSTELLATION: Fitch Cuts Issuer Default Ratings to 'B+'
N E T H E R L A N D S
BOYNE VALLEY: Moody's Hikes Class E Notes Rating From Ba2(sf)
JUBILEE CDO I-R: Moody's Affirms B2 Rating on Class E Notes
NIBC BANK: Fitch Affirms 'B+' Rating on Hybrid Tier Securities
SAMVARDHANA MOTHERSON: S&P Assigns 'BB+' Rating to $300MM Notes
P O L A N D
SKOK KUJAWIAK: Declared Bankrupt by Financial Market Regulator
R U S S I A
BANK OF MOSCOW: Moody's Confirms Ba2 Currency Deposit Ratings
BELGOROD REGION: Fitch Affirms 'BB' Issuer Default Ratings
FAR EASTERN BANK: Moody's Cuts LT Deposit Ratings to 'B3'
RUSSIAN REGIONAL: Moody's Confirms Long-Term Ba3 Deposit Ratings
SPECIAL PURPOSE: S&P Assigns 'BBp' Rating to Repack Notes
S P A I N
CATALUNYA BANC: Moody's Upgrades CR Assessments From Ba2(cr)
PYMES BANESTO 2: Fitch Hikes Class B Notes Rating to 'BBsf'
T U R K E Y
ARCELIK AS: Fitch Affirms 'BB+' Long-Term Issuer Default Ratings
BURSA MUNICIPALITY: Fitch Affirms 'BB+' Issuer Default Ratings
TURCAS PETROL: Fitch Affirms Then Withdraws 'B' Long-Term IDRs
* TURKEY: Takes Steps to Address Bankruptcy Suspension Problems
U K R A I N E
KHRESCHATYK BANK: Deposit Fund Starts Liquidation Procedure
KYIV: Fitch Removes Reference to Distressed Debt Exchange
U N I T E D K I N G D O M
ASTON MARTIN: S&P Affirms 'B-' CCR, Outlook Stable
AUBURN SECURITIES 5: Moody's Raises Rating on Cl. E Notes to B1
PEABODY HOLDINGS: Applies for Recognition of Ch.11 Proceedings
SILCOX COACH: In Administration, 40 Jobs Affected
THPA FINANCE: S&P Affirms B+ Ratings on Two Note Classes
*********
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A U S T R I A
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VOLKSBANK MARCHFELD: Fitch Withdraws 'BB+' Issuer Default Ratings
-----------------------------------------------------------------
Fitch Ratings has placed Volksbank Marchfeld e.Gen.'s Long- and
Short-Term Issuer Default Ratings (IDRs) of 'BB+' and 'B',
respectively, on Rating Watch Negative (RWN). The ratings have
subsequently been withdrawn.
KEY RATING DRIVERS
The RWN reflects the bank's decision to leave the mutual support
scheme of the Austrian cooperative banking group Volksbanken-
Verbund (VB-Verbund, BB+/Positive/B). The RWN also reflects the
considerable challenges the bank will face in establishing an
independent franchise and uncertainty on how well its business
model will function without the benefits of VB-Verbund's
operating support.
Volksbank Marchfeld's exit from the mutual support scheme on May
23, 2016 was a result of the bank's disagreement to the latest
amendments to the so-called Verbund contract, which governs the
obligations of VB-Verbund's member banks under the umbrella of
the mutual support scheme.
The rating withdrawal reflects the lack of information available
to assess the bank's creditworthiness on a standalone basis in
light of these uncertainties.
===============
B U L G A R I A
===============
BULGARIA: S&P Affirms 'BB+/B' Sovereign Credit Ratings
------------------------------------------------------
S&P Global Ratings affirmed its 'BB+/B' long- and short-term
foreign and local currency sovereign credit ratings on the
Republic of Bulgaria. The outlook is stable.
RATIONALE
The ratings are constrained by Bulgaria's relatively low income
levels, with GDP per capita estimated at $6,800 in 2016; weak
institutional settings; the authorities' limited policy
flexibility, in light of the country's currency board regime; and
the high proportion of loans and deposits denominated in euros,
which further restricts the effective transmission of monetary
policy.
The ratings are supported by the government's moderate net debt
position, estimated at nearly 20% of 2015 GDP, which affords
Bulgaria fiscal space to respond to external and domestic shocks,
should they arise. S&P notes, however, that this leeway has
reduced somewhat, due to the increase in government debt after
the state provided support to the banking sector in 2014. The
ratings also benefit from Bulgaria's moderately leveraged
external balance sheet, following half a decade of external
deleveraging, led primarily by the financial sector. Yet,
although external debt has reduced substantially, S&P observes
that the deleveraging process has weighed on growth through a
contraction in bank lending, which has also been affected by weak
demand for credit.
In 2015, Bulgaria's economy expanded by 3%, supported by export
growth and an acceleration in the absorption of EU funds. This
was Bulgaria's highest growth rate since 2009, well above the
2010-2014 average of 0.9%. On a per capita basis, real GDP
growth was higher at 3.6%, reflecting in part the 0.6% decline in
Bulgaria's population. S&P continues to believe that the
prospects for 2016-2019 are weaker, however. With the beginning
of a new EU budget cycle, there will be a lag before new public
investment projects financed by EU structural and cohesion funds
can resume momentum. These funds were an important source of
growth financing in 2015 because policymakers have been keen to
absorb the maximum possible amount from the available envelope.
Moreover, the strength of the underlying economic recovery is
still uncertain.
Domestic demand has struggled to gain momentum following the
2008-2009 global financial crisis. Although S&P estimates that
nominal GDP in local currency will be nearly 20% higher than its
2008 peak, domestic demand will only just reach its 2008 level in
2016. In this context, S&P also notes that, in 2015, private
consumption demand increased by only 0.8%, despite relatively
lower political uncertainty and higher disposable incomes,
supported by rising employment and low inflation. Bulgaria's
weak consumption has also contributed to the most marked price
deflation in all of the EU. Bulgaria's deflationary trend has
also been aggravated by domestic cuts in administered prices,
particularly energy prices. In April this year, annual deflation
was 2.5% and core inflation (that is, adjusted for food, energy,
alcohol, and tobacco prices) moved back into negative territory
at -1.2%.
An important reason for Bulgaria's weak recovery is that the
reversal of nonresident financing of the banking, construction,
and property sectors -- which propelled growth in the years
leading up to the crisis -- has not been fully offset by foreign
inflows into other sectors, such as tradeables. As a result,
positive labor market developments have taken a long time to
materialize. S&P notes a recent reduction in the unemployment
rate to 9.4% in 2015 from 11.4% in 2014; however, unemployment
remains substantially above the precrisis low of 5.6%. Bulgaria
is also facing a structural drag from demographic challenges.
Its population has shrunk by nearly 15% over the past two
decades, reflecting an aging society and net emigration.
Since 2007, Bulgaria's current account deficit has narrowed by
about 25% of GDP, primarily on the back of a strong expansion in
real exports. Exports with high import content and moderate
added value from the domestic economy--such as refined petroleum-
-are an important part of total exports. On its own, the
improvement in Bulgaria's current account has been impressive,
but it has not been particularly supportive of the domestic
economy. While wage levels have increased considerably since
Bulgaria joined the EU in 2007, the process of convergence toward
European averages has been only gradual. As of last year, the
total hourly labor costs (mainly wages) in industry,
construction, and services were slightly less than one-sixth of
the EU-28 average. Since 2000, the hourly wage in Bulgaria has
actually declined as a percentage of those in peers such as
Romania and Estonia.
The general government deficit narrowed to 2.1% of GDP in 2015 on
an accrual basis, following revenue outperformance as measures to
widen the tax base and improve collection were implemented. S&P
expects this deficit to gradually reduce to 1.7% of GDP in 2019.
S&P thinks that challenges to budgetary consolidation persist,
particularly from poor growth and low inflation. Political
considerations could also have an important bearing on the fiscal
outturn. The withdrawal of support from one of the parties
backing the minority coalition government could hinder further
consolidation efforts. The electoral calendar could also become
relevant, with presidential elections scheduled for later this
year and parliamentary elections in 2018.
S&P expects that debt will continue to finance the fiscal deficit
through to 2018, with gross general government debt inching up to
almost 32% by the end of 2019. S&P notes that about 80% of total
government debt is denominated in foreign currency, mainly euros.
Contingent liabilities that could materialize include those from
the energy sector, with the highest losses likely to be at
Natsionalna Elektricheska Kompania (NEK), estimated by the
Ministry of Finance at 0.3% of GDP for 2015. S&P notes that the
recent repayment of NEK's outstanding payables to two power
plants has paved the way for a tariff renegotiation that could
potentially trim the company's losses.
Another source of contingent liabilities is the banking sector.
Data from the Bulgarian National Bank (BNB) indicate that,
although nonperforming loans remain high at nearly 15% of total
loans in March 2016, the banking system is well capitalized, with
an average capital adequacy ratio of 23%. The results of the
ongoing asset quality review could, however, expose
vulnerabilities. To this end, the government's 2016 borrowing
plan includes a buffer of Bulgarian lev (BGN) 2 billion (2% of
GDP). As per its charter -- and according to the currency board
regime under which it operates -- the BNB's ability to act as a
lender of last resort is limited. It can provide liquidity
support to the banking system only to the extent that its
reserves exceed its monetary liabilities. Even then, support can
occur only under certain conditions and for short periods,
against liquid collateral.
As of March 31, 2016, the BNB's reserves covered monetary
liabilities by 1.7x.
With the adoption of the EU Banking Resolution and Recovery
Directive into Bulgarian law, the failure of a bank will
necessitate a bail-in of shareholders, creditors, and then a
resolution fund. Only after exhausting these options would
government support be needed.
The banking sector is vulnerable to external factors, given the
large presence of Greek subsidiaries, which together account for
about one-fifth of the sector's assets. The BNB has taken steps
to shore up the liquidity of these subsidiaries, such as
mandating higher deposits with the BNB, increasing the proportion
of liquid assets held, and reducing exposure to parent banks.
Although Bulgaria is not formally a member of the eurozone, a
line of support from the European Central Bank is available to
the BNB regarding any confidence-related losses arising at Greek
bank subsidiaries. Details of this support, such as how it can
be obtained or whether collateral would be needed, have not been
released.
Bulgaria is not part of the EU's Exchange Rate Mechanism II, the
precursor to eurozone entry. Furthermore, policymakers'
commitment to the currency board remains strong, as demonstrated
by their track record of small fiscal surpluses or low deficits,
and moderate general government debt. The currency board was
introduced in 1997 in the wake of a banking crisis amid
hyperinflationary conditions, which were fueled by central bank
financing of budget deficits. The board successfully lowered
price inflation and prevented further episodes of hyperinflation.
However, the regime restricts policy response. Apart from
limiting the BNB's ability to act as a lender of last resort, it
restricts control over money creation. The board also does not
allow the exchange rate to react in response to domestic or
external conditions. Bulgaria's adjustment following the 2008-
2009 global financial crisis appears to have come from labor
shedding, in S&P's view.
OUTLOOK
The stable outlook on Bulgaria reflects the balance between the
economic and budgetary risks that could potentially arise from
the financial sector, against the fiscal space created by still-
low general government debt.
S&P could lower the ratings if the domestic financial system
required further substantial government support, or if outflows
on the financial account resulted in pressures on the balance of
payments.
S&P could consider an upgrade if Bulgaria effectively addressed
governance issues, thereby boosting its growth potential and
attracting higher foreign direct investment to the tradeables
sector; or if the economy expanded faster than S&P anticipates,
such that general government finances consolidate more rapidly.
In accordance with S&P's relevant policies and procedures, the
Rating Committee was composed of analysts that are qualified to
vote in the committee, with sufficient experience to convey the
appropriate level of knowledge and understanding of the
methodology applicable. At the onset of the committee, the chair
confirmed that the information provided to the Rating Committee
by the primary analyst had been distributed in a timely manner
and was sufficient for Committee members to make an informed
decision. After the primary analyst gave opening remarks and
explained the recommendation, the Committee discussed key rating
factors and critical issues in accordance with the relevant
criteria. Qualitative and quantitative risk factors were
considered and discussed, looking at track-record and forecasts.
The committee agreed that the fiscal assessment had improved.
All other key rating factors were unchanged.
The chair ensured every voting member was given the opportunity
to articulate his/her opinion. The chair or designee reviewed
the draft report to ensure consistency with the Committee
decision. The views and the decision of the rating committee are
summarized in the above rationale and outlook. The weighting of
all rating factors is described in the methodology used in this
rating action.
RATINGS LIST
Rating Rating
To From
Bulgaria (Republic of)
Sovereign Credit Rating
Foreign and Local Currency BB+/Stable/B BB+/Stable/B
Transfer & Convertibility Assessment BBB+ BBB+
Senior Unsecured
Foreign and Local Currency BB+ BB+
Short-Term Debt
Foreign and Local Currency B B
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F R A N C E
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GROUPAMA SA: Fitch Corrects May 17 Ratings Release
--------------------------------------------------
Fitch Ratings issued a correction to its May 17, 2016 release.
This rating action commentary replaces the version published on
May 17, 2016 to correct the breakdown of Groupama's investment
assets.
Fitch Ratings has affirmed Groupama S.A.'s (Groupama) and its
core subsidiaries' Insurer Financial Strength (IFS) ratings at
'BBB+'. Groupama's Issuer Default Rating (IDR) has also been
affirmed at 'BBB'. The Outlooks are Stable.
KEY RATING DRIVERS
Fitch said, "The ratings reflect Groupama's maintained good
profitability, 'Strong' risk-adjusted capital position as per our
Prism factor-based capital model (Prism FBM), and improved
financial leverage. Offsetting factors are Groupama's relatively
high risky assets to equity ratio, some structural weaknesses in
the capital structure and a relatively low fixed charge coverage
ratio."
The risky asset to equity ratio improved to 120% at end-2015
while the quality of the bond portfolio has been moderately
improving, with at least 'A-' rated bonds accounting for 62% of
the portfolio at end-2015, while speculative-grade and non-rated
bonds represented around 4% and bonds rated in the 'BBB' category
34%. Fitch views the group's exposure to fixed-income instruments
that have experienced significant volatility in recent years
(such as some European government bonds) to be material but
manageable. At end-2015, Groupama's exposure to government bonds
issued by Italy, Spain, Portugal and Ireland totalled EUR10
billion, unchanged from the year before due to the increase in
market values.
Groupama's net income improved to EUR368m in 2015 from EUR257m in
2014 with the realised capital gains on the sale of a 4.9% stake
in Mediobanca and 5.05% stake in Veolia the key contributor to
this improvement. The net income has also been supported by the
robust, albeit moderately decreasing, life profitability and
investment yield, as well as the moderately positive non-life
underwriting technical result.
Groupama's combined ratio improved to a Fitch-calculated 99.5% in
2015 from 99.9% in 2014 and five-year average of 100.4%.This
improvement was supported by the loss ratio, which benefited from
a decrease in catastrophic and single large claims and stable
level of attritional claims in France, which accounted for 75% of
non-life premiums written in 2015. The combined ratio has been
adversely affected by the weak performance of the international
segment, and in particular motor third party liability
underwriting in Turkey, which resulted in a EUR100 million
reserve strengthening required for the local portfolio of EUR411
million premiums written in 2015. Fitch understands that Groupama
has tightened its underwriting policy in Turkey to cut its
exposure to the underperforming lines.
From a Prism FBM perspective, Groupama scored 'Strong' based on
2014 and 2015 results. Looking at 2016, Fitch expects that the
disposal of the control over Groupama Banque and gradual increase
of the weight of unit-linked products in the life portfolio might
have a further modest positive effect on the insurer's capital
position. Fitch also expects that retained earnings are likely to
remain the key source of capital generation for Groupama.
The quality of capital has some key weaknesses, including high
exposure to the revaluation reserve, which represented 22% of the
adjusted equity (before the inclusion of the subordinated debt)
recorded primarily on fixed-income securities. In addition, the
company has material goodwill and a relatively high proportion of
subordinated debt compared with adjusted equity.
On the regulatory side, Groupama reported a 263% Solvency II
ratio at end-2015, which included the transitional measure on
technical life reserves of Groupama GAN Vie. Without this
transitional measure, the ratio would have stood at 133%.
Solvency II is covering the wide perimeter of the group,
including Caisses Regionales, unchanged from Groupama's
supervisory perimeter under Solvency I.
Groupama's financial leverage ratio has been decreasing over the
last five years and reached 25% at end-2015, which is now in line
with the 'A' category. The improvement was particularly notable
in 2014, when the insurer recorded substantial unrealised gains
on fixed-income securities and also repaid a EUR650 million bank
loan facility. The current fixed charge coverage at 3.7x remains
a constraining rating factor.
At end-2015, the group's total invested assets totalled about
EUR85.6bn, which included unrealised gains. Excluding unit-linked
assets (8.2% of the total), fixed-interest securities accounted
for 77% of insurance invested assets, mutual funds 9%, equities
and affiliates 7%, real estate 2%, and other investments 5%. Over
the last five years Groupama has reduced investments in real
estate and equities. Notable investments in mutual funds were
introduced in 2014 only.
RATING SENSITIVITIES
Key rating triggers that could result in an upgrade include
reducing risk in the investment portfolio with the risky assets
to equity ratio below 100%, continuing profitability, maintenance
of 'strong' capital score in Prism FBM. A stronger capital
structure could also contribute to an upgrade.
Alternatively, a significant weakening of capital adequacy, as
reflected in the Prism FBM capital model score falling to
'adequate' or below, growth of the financial leverage ratio to
over 30%, a return to net loss, or further growth in the
riskiness of the investment portfolio could result in negative
rating action.
FULL LIST OF RATING ACTIONS
Groupama S.A.
IFS rating affirmed at 'BBB+'; Outlook Stable
Long-term IDR affirmed at 'BBB'; Outlook Stable
Dated subordinated debt (ISIN FR0010815464) affirmed at 'BB+'
Undated subordinated debt (ISIN FR0011896513) affirmed at 'BB+'
Undated deeply subordinated debt (ISIN FR0010533414) affirmed
at 'BB'
Groupama GAN Vie
IFS rating affirmed at 'BBB+'; Outlook Stable
GAN Assurances
IFS rating affirmed at 'BBB+'; Outlook Stable
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G E R M A N Y
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MAPLE BANK: Creditors' Registered Claims Total EUR3.3 Billion
-------------------------------------------------------------
Michael Bracher and Volker Vostmeier at Handelsblatt report that
the collapse of the German subsidiary of Canada's Maple Bank due
to its alleged involvement in dividend-stripping deals looks
worse than first thought.
According to Handelsblatt, creditors are now asking for
approximately EUR3.3 billion back.
The bank, which has its roots in Canada, became bankrupt after it
was forced to set money aside to pay back taxes, a move which
would have increased its debt significantly, Handelsblatt
relates. Those taxes involved millions of euros being demanded
by the German treasury due to its use of controversial tax
avoidance schemes known as dividend-stripping deals, which are
likely to be deemed illegal, Handelsblatt says.
The bank's insolvency has had more serious financial consequences
for creditors than previously feared, Handelsblatt notes. A
spokesperson for the insolvency court told Handelsblatt that 236
creditors have registered claims totaling EUR3.3 billion, or
US$3.68 billion, Handelsblatt relays.
This would make the case one of the biggest insolvencies ever in
the German banking sector, Handelsblatt states.
About Maple Bank and MBTOR
Maple Bank Gmbh is a German bank with 5 billion in assets and
equity capital of 300 million euros before it shut operations in
February 2016. Maple Bank is a unit of Canada-based Maple
Financial Group Inc. and specializes in market transactions. The
bank played a prominent role in attempts by the Porsche family to
take over Volkswagen in 2008.
On Feb. 6, 2016, Germany's Federal Financial Supervisory
Authority, or BaFin, closed Maple Bank's operations in Germany.
Four days later BaFin filed an application for the opening of
insolvency proceedings for Maple Bank before the Frankfurt Lower
District Court (Amtsgericht Frankfurt am Main), Case No. 810 IN
128/16 M.
Michael C. Frege -- michael.frege@cms-hs.com -- was appointed
Maple Bank's insolvency administrator.
The insolvency proceedings were a culmination of an investigation
by German prosecutors into trading activities involving tax years
2006 to 2010. German authorities are seeking to hold Maple Bank
liable for tax evasion of 450 million euros in connection with
dividend-stripping trades.
On Feb. 15, 2016, the insolvency administrator commenced a
Chapter 15 bankruptcy case in the U.S. Bankruptcy Court in New
York (Case No. 16-10336) to seek U.S. recognition of the
insolvency proceedings in Germany as a foreign main proceeding.
Dentons US LLP serves as counsel to the insolvency administrator
in the Chapter 15 case.
Maple Bank GmbH, Toronto, Canada Branch ("MBTOR") is the Canadian
branch of Maple Bank. Canada's top banking regulator announced
on Feb. 15, 2016, it has taken "permanent control" of the assets
of MBTOR. The Attorney General of Canada on Feb. 15 filed an
application with a Canadian court for an order administering the
winding-up of MBTOR. Regional Senior Justice Morawetz of the
Ontario Superior Court of Justice issued a winding up order and
appointed KPMG Inc. as the Canadian Liquidator in respect of the
winding up of MBTOR's business in Canada on Feb. 16, 2016.
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I R E L A N D
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AVOCA CLO XVI: Moody's Assigns (P)B2 Rating to Class F Notes
------------------------------------------------------------
Moody's Investors Service announced that it has assigned these
provisional ratings to notes to be issued by Avoca CLO XVI
Designated Activity Company:
EUR273,250,000 Class A Senior Secured Floating Rate Notes due
2029, Assigned (P)Aaa (sf)
EUR55,850,000 Class B Senior Secured Floating Rate Notes due
2029, Assigned (P)Aa2 (sf)
EUR25,650,000 Class C Deferrable Mezzanine Floating Rate Notes
due 2029, Assigned (P)A2 (sf)
EUR22,500,000 Class D Deferrable Mezzanine Floating Rate Notes
due 2029, Assigned (P)Baa2 (sf)
EUR27,750,000 Class E Deferrable Junior Floating Rate Notes due
2029, Assigned (P)Ba2 (sf)
EUR11,800,000 Class F Deferrable Junior Floating Rate Notes due
2029, Assigned (P)B2 (sf)
Moody's issues provisional ratings in advance of the final sale
of financial instruments, but these ratings only represent
Moody's preliminary credit opinions. Upon a conclusive review of
a transaction and associated documentation, Moody's will endeavor
to assign definitive ratings. A definitive rating (if any) may
differ from a provisional rating.
RATINGS RATIONALE
Moody's provisional rating of the rated notes addresses the
expected loss posed to noteholders by the legal final maturity of
the notes in 2029. The provisional ratings reflect the risks due
to defaults on the underlying portfolio of loans given the
characteristics and eligibility criteria of the constituent
assets, the relevant portfolio tests and covenants as well as the
transaction's capital and legal structure. Furthermore, Moody's
is of the opinion that the collateral manager, KKR Credit
Advisors (Ireland) ("KKR"), has sufficient experience and
operational capacity and is capable of managing this CLO.
Avoca CLO XVI is a managed cash flow CLO. At least 90% of the
portfolio must consist of senior secured loans and senior secured
floating rate notes and up to 10% of the portfolio may consist of
unsecured loans, second-lien loans, mezzanine obligations and
high yield bonds. The portfolio is expected to be approximately
60-70% ramped up as of the closing date and to be comprised
predominantly of corporate loans to obligors domiciled in Western
Europe.
KKR will manage the CLO. It will direct the selection,
acquisition and disposition of collateral on behalf of the Issuer
and may engage in trading activity, including discretionary
trading, during the transaction's four-year reinvestment period.
Thereafter, purchases are permitted using principal proceeds from
unscheduled principal payments and proceeds from sales of credit
risk and credit improved obligations, and are subject to certain
restrictions.
In addition to the six classes of notes rated by Moody's, the
Issuer will issue EUR 46.0 mil. of subordinated notes, which will
not be rated.
The transaction incorporates interest and par coverage tests
which, if triggered, divert interest and principal proceeds to
pay down the notes in order of seniority.
Factors that would lead to an upgrade or downgrade of the
ratings:
The rated notes' performance is subject to uncertainty. The
notes' performance is sensitive to the performance of the
underlying portfolio, which in turn depends on economic and
credit conditions that may change. KKR's investment decisions
and management of the transaction will also affect the notes'
performance.
Loss and Cash Flow Analysis:
Moody's modeled the transaction using CDOEdge, a cash flow model
based on the Binomial Expansion Technique, as described in
Section 2.3 of the "Moody's Global Approach to Rating
Collateralized Loan Obligations" rating methodology published in
December 2015. The cash flow model evaluates all default
scenarios that are then weighted considering the probabilities of
the binomial distribution assumed for the portfolio default rate.
In each default scenario, the corresponding loss for each class
of notes is calculated given the incoming cash flows from the
assets and the outgoing payments to third parties and
noteholders. Therefore, the expected loss or EL for each tranche
is the sum product of (i) the probability of occurrence of each
default scenario and (ii) the loss derived from the cash flow
model in each default scenario for each tranche. As such,
Moody's encompasses the assessment of stressed scenarios.
Moody's used these base-case modeling assumptions:
Par amount: EUR 450,000,000
Diversity Score: 37
Weighted Average Rating Factor (WARF): 2750
Weighted Average Spread (WAS): 4.20%
Weighted Average Recovery Rate (WARR): 43.5%
Weighted Average Life (WAL): 8 years.
Moody's has analyzed the potential impact associated with
sovereign related risk of peripheral European countries. As part
of the base case, Moody's has addressed the potential exposure to
obligors domiciled in countries with local currency country risk
ceiling of A1 or below. Following the effective date, and given
the portfolio constraints and the current sovereign ratings in
Europe, such exposure may not exceed 10% of the total portfolio.
As a result and in conjunction with the current foreign
government bond ratings of the eligible countries, as a worst
case scenario, a maximum 10% of the pool would be domiciled in
countries with a local currency country ceiling of A3. The
remainder of the pool will be domiciled in countries which
currently have a local currency country ceiling of Aaa or Aa1 to
Aa3.
Stress Scenarios:
Together with the set of modeling assumptions above, Moody's
conducted additional sensitivity analysis, which was an important
component in determining the provisional rating assigned to the
rated notes. This sensitivity analysis includes increased
default probability relative to the base case. Below is a
summary of the impact of an increase in default probability
(expressed in terms of WARF level) on each of the rated notes
(shown in terms of the number of notch difference versus the
current model output, whereby a negative difference corresponds
to higher expected losses), holding all other factors equal:
Percentage Change in WARF: WARF + 15% (to 3163 from 2750)
Ratings Impact in Rating Notches:
Class A Senior Secured Floating Rate Notes: 0
Class B Senior Secured Floating Rate Notes: -2
Class C Deferrable Mezzanine Floating Rate Notes: -2
Class D Deferrable Mezzanine Floating Rate Notes: -2
Class E Deferrable Junior Floating Rate Notes: -1
Class F Deferrable Junior Floating Rate Notes: 0
Percentage Change in WARF: WARF +30% (to 3575 from 2750)
Class A Senior Secured Floating Rate Notes: -1
Class B Senior Secured Floating Rate Notes: -3
Class C Deferrable Mezzanine Floating Rate Notes: -3
Class D Deferrable Mezzanine Floating Rate Notes: -2
Class E Deferrable Junior Floating Rate Notes: -2
Class F Deferrable Junior Floating Rate Notes: -2
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's
Global Approach to Rating Collateralized Loan Obligations"
published in December 2015.
AVOCA CLO XVI: S&P Assigns Prelim. 'B' Rating to Class F Notes
--------------------------------------------------------------
S&P Global Ratings has assigned its preliminary credit ratings to
Avoca CLO XVI DAC's class A, B, C, D, E, and F floating-rate
notes. At closing, Avoca CLO XVI will also issue unrated
subordinated notes.
Avoca CLO XVI is a cash flow collateralized loan obligation (CLO)
transaction securitizing a portfolio of primarily senior secured
loans granted to European and U.S. speculative-grade corporates.
KKR Credit Advisors (Ireland) will manage the transaction.
Under the transaction documents, the rated notes will pay
quarterly interest unless a frequency switch event occurs.
Following this, the notes will permanently switch to semiannual
interest payments.
The portfolio's reinvestment period will end approximately four
years after closing, and the portfolio's maximum average maturity
date will be approximately eight years after closing.
On the effective date, S&P understands that the portfolio will
represent a well-diversified pool of corporate credits, with a
fairly uniform exposure to all of the credits. Therefore, S&P
has conducted its credit and cash flow analysis by applying its
criteria for corporate cash flow collateralized debt obligations.
The manager expects that the effective date portfolio will have a
par amount of at least EUR450.0 million, an average spread on the
floating-rate assets of at least 4.20%, and an average coupon on
the fixed-rate assets of at least 6.00%. S&P has used these
assumptions in its cash flow analysis. On the effective date,
S&P will review the transaction and perform a new cash flow
analysis in order to confirm the ratings.
The Bank of New York Mellon, London branch will be the bank
account provider and custodian. The issuer will enter into asset
swap transactions to hedge the foreign exchange risk on non-euro-
denominated assets from their purchase date.
At closing, S&P anticipates that the participants' downgrade
remedies will be in line with its current counterparty criteria.
At closing, S&P understands that the issuer will be in line with
its bankruptcy remoteness criteria.
Following S&P's analysis of the credit, cash flow, counterparty,
operational, and legal risks, S&P believes its preliminary
ratings are commensurate with the available credit enhancement
for each class of notes.
RATINGS LIST
Avoca CLO XVI DAC
EUR462.8 mil floating-rate notes (including subordinated notes)
Prelim Amount
Class Prelim Rating (mil. EUR)
A AAA (sf) 273.25
B AA (sf) 55.85
C A (sf) 25.65
D BBB (sf) 22.50
E BB (sf) 27.75
F B (sf) 11.80
Sub NR 46.00
NR--Not rated.
===================
L U X E M B O U R G
===================
CONTOURGLOBAL POWER: Moody's Withdraws B3 Rating on $400MM Notes
----------------------------------------------------------------
Moody's Investors Service has withdrawn ContourGlobal L.P.'s B3
corporate family rating and B3-PD probability of default rating,
as well as the B3 rating and loss given default (LGD) assessment
of LGD4 of ContourGlobal Power Holdings S.A.'s $400 million
7.125% guaranteed senior secured notes due in 2019.
RATINGS RATIONALE
Moody's has withdrawn the rating because it believes it has
insufficient or otherwise inadequate information to support the
maintenance of the rating.
ContourGlobal owns and operates power projects in Europe, Africa,
the Caribbean and South America. The generating capacity is a
mix of coal, natural gas, wind, hydro, solar and fuel oil. The
plants typically benefit from long-term power purchase agreements
(PPAs) with local utility off-takers. Payments under these PPAs
are typically based on plant availability, rather than dispatch,
and adjustment clauses insulate the operators against changes in
fuel costs.
GLOBAL CLOSURE: Moody's Withdraws B3 Corporate Family Rating
------------------------------------------------------------
Moody's Investors Service has withdrawn all the ratings of
Financiere Daunou 1 SA (Global Closure Systems) because of
inadequate information to monitor the rating.
RATINGS RATIONALE
Moody's has withdrawn the rating because it believes it has
insufficient or otherwise inadequate information to support the
maintenance of the rating.
LIST OF AFFECTED RATINGS
Ratings withdrawn:
Issuer: Financiere Daunou 1 SA
-- Corporate Family Rating, Withdrawn, previously rated B3
-- Probability of Default Rating, Withdrawn, previously rated
B3-PD
-- Outlook, Changed To Rating Withdrawn, previously Positive
QGOG CONSTELLATION: Fitch Cuts Issuer Default Ratings to 'B+'
-------------------------------------------------------------
Fitch Ratings has downgraded the Long-Term foreign and local
currency Issuer Default Ratings (IDRs) of QGOG Constellation S.A.
(QGOG, or the HoldCo) to 'B+' from 'BB-'. The Rating Outlook is
Negative. The rating action affects the long-term rating on the
company's $US700 million of senior unsecured notes due 2019,
which were also downgraded to 'B+/RR4' from 'BB-'.
QGOG's downgrade reflects the deeper than previously expected
downturn in the offshore drilling services industry as well as
the increased uncertainty about the company's medium-term cash
flow generation created by the potential contract renegotiation
with Petrobras, its main off-taker. Furthermore, the rating
action incorporates Petrobras' credit quality deterioration over
the past 18 months as well its efforts to reduce capex and
expenses by downsizing its drilling rig fleet in line with the
current deterioration of the oil market. As a result, Fitch
expects more contract renegotiation in its backlog, which could
affect QGOG's future cash flow generation and slow down its
deleveraging process. This risk is heightened by the short- to
medium-term need to renew some of QGOG's contracts as they
expire.
The Negative Outlook reflects the high uncertainty surrounding
the company's contractual position over the medium term as well
as the potential for a deeper and longer offshore drilling-rig
market down-cycle.
KEY RATING DRIVERS
Roll-Over and Day-Rate Risk
Throughout the oil and gas industry, companies are feeling the
pressure to renegotiate day rates. While this could impact QGOG,
a larger concern is renewal of its contracts with Petrobras that
expire in 2018, given Petrobras' decision to reduce capital
expenditures. The contract with Petrobras for the deep-water rig
Olinda Star expired in December 2015 and QGOG was only able to
re-contract for a short period of time with Karoon Petroleo e Gas
Ltda for the third quarter of 2016. Five out of nine of the
company's operating offshore drilling rigs (the OpCos) have
contracts that expire over the next two years. QGOG's credit
quality would be under pressure if it faces difficulties in
finding new contracts for its drilling rig assets as they expire.
Oil Price Pressures
Offshore drillers continue to face depressed market conditions
due to lower demand and a significant oversupply of rigs. The
severe decline in oil prices has compounded the effects of the
offshore-rig oversupply cycle, resulting in continued global
market day-rate deterioration. Fitch believes that demand for
drill rigs will rebound in the medium to long term and absorb the
newer high-quality assets. Fitch also believes that an uptick in
demand for rigs will lag oil & gas price levels (estimated at
$US65 - $US70/barrel for deep water) by at least six to 12
months.
Expected Deleveraging at Risk
QGOG's previously expected deleveraging trajectory is at risk
from an early renegotiation of contracts at lower day rates. As
of the last 12 months (LTM) ended March 31, 2016, consolidated
gross leverage reached 3.5x, down from 5.0x as of year-end 2013
as a result of OpCo level debt repayment. In its base case, Fitch
expects QGOG's leverage could increase to approximately 5x in
2017 if the company renegotiates its contracts early with a
significant reduction in its day rates, and leverage could return
to current levels by 2019 or 2020. Total consolidated debt as of
March 31, 2016 was $US2.56 billion, of which approximately $US925
million was at the HoldCo, down from $US3 billion as of year-end
2013, while LTM EBITDA spiked to $US733 million.
Structural Subordination
The potential retention of cash flows after debt service at the
OpCo level makes cash flow to the HoldCo less stable and less
predictable than cash flow from operations of the subsidiaries.
Some of the project finance debt at the OpCos has cash sweep
provisions and minimum debt service coverage ratios (DSCR) (e.g.
1.2x or above) restricting cash flow distributions to the HoldCo.
Cash distributions to Constellation are sensitive to the
operating performance of the OpCos (i.e. the rigs) uptime
performance. Under Fitch's base case assumption of an average
uptime rate of 94%, and an early renewal of contracts at day
rates of between $US275,000 to $US300,000, net cash flow
distributions to QGOG from its OpCos could range between $US40
million to $US80 million per year over the next four years. This
is a significant decrease from the average $US160 million per
year average reported over the past three years.
KEY ASSUMPTIONS
-- WTI and Brent oil price trend up from an average of
$US35/barrel in 2016 to a longer-term price of $US65/barrel;
-- The majority of QGOG's contracts are negotiated effectively
in 2017 to a lower day rate in exchange for longer contract
tenures; OpCo level creditors agree to contract
renegotiation;
-- Market day rates are assumed to be $US275,000 for higher-
specification ultra-deepwater rigs, with other rig classes
seeing similarly steep price discounts;
-- Operating expenditures are assumed to remain in line with
recently reported levels;
-- Capital expenditures average approximately $US70 million to
$US80 million over the next four years and are entirely
earmarked for maintenance.
RATING SENSITIVITIES
-- Through-the-cycle consolidated debt/EBITDA of 5.0x or above
on a sustained basis;
-- Contracts are not rolled over at expiration or are
unilaterally terminated by the off-taker before the
expiration date.
No positive rating actions are currently contemplated over the
near term given the weak offshore oilfield services outlook.
LIQUIDITY
Constellation's liquidity is supported by the company's cash on
hand. As of March 31, 2016, QGOG's cash, cash equivalent and
short-term investments amounted to $US498.8 million, up from
$US423.4 million as of YE 2015, when there was approximately
$US336.2 million at the HoldCo level, with the balance at the
OpCos. This compares with a relatively manageable debt maturity
profile at the HoldCo level, which has a $US226.7 million bank
loan with Bradesco due in 2017 and the $US700 million senior
unsecured note due in 2019. QGOG capex for the upcoming years is
expected to average between $US70 million to $US80 million per
year and is intended for maintenance as the company has no
contracted orders for newbuilds.
FULL LIST OF RATING ACTIONS
Fitch has downgraded QGOG Constellation S.A.'s ratings as
follows:
-- Long-Term Foreign Currency Issuer Default Rating (IDR) 'B+'
from 'BB-'; Outlook Negative;
-- Long-Term Local Currency IDR to 'B+' from 'BB-'; Outlook
Negative;
-- Senior Unsecured notes due 2019 to 'B+/RR4' from 'BB-'.
=====================
N E T H E R L A N D S
=====================
BOYNE VALLEY: Moody's Hikes Class E Notes Rating From Ba2(sf)
-------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the
following notes issued by Boyne Valley B.V.:
-- EUR15.6M Class D Deferrable Interest Floating Rate Notes due
2022, Upgraded to Aa1 (sf); previously on Oct 13, 2015
Upgraded to A1 (sf)
-- EUR13.5M Class E Deferrable Interest Floating Rate Notes due
2022, Upgraded to Baa3 (sf); previously on Oct 13, 2015
Upgraded to Ba2 (sf)
Moody's has also affirmed the ratings on the following notes:
-- EUR38.8 million (current outstanding balance of EUR 25.1M)
Class C-1 Deferrable Interest Floating Rate Notes due 2022,
Affirmed Aaa sf); previously on Oct 13, 2015 Upgraded to Aaa
(sf)
-- EUR6.8 million (current outstanding balance of EUR 6.8M)
Class C-2 Deferrable Interest Fixed Rate Notes due 2022,
Affirmed Aaa (sf); previously on Oct 13, 2015 Upgraded to
Aaa (sf)
-- EUR10 million Class S Combination Notes due 2022, Affirmed
Aaa (sf); previously on Oct 13, 2015 Upgraded to Aaa (sf)
Boyne Valley B.V., issued in December 2005, is a collateralized
loan obligation (CLO) backed by a portfolio of mostly high-yield
senior secured European loans managed by GSO Capital Partners
International LLP. The transaction's reinvestment period ended in
February 2012.
RATINGS RATIONALE
The rating actions on the notes are primarily a result of the
deleveraging since last rating action in October 2015.
In February 2016 payment date the Class B notes fully repaid its
EUR4.7 million outstanding balance and the Class C notes repaid
EUR13.8 million. As a result overcollateralization (OC) ratios of
Class C, Class D and Class E notes have increased significantly.
As per the trustee report dated April 2016, Class C, Class D, and
Class E OC ratios are reported at 252.6%, 169.6% and
132.1%compared to August 2015 levels of 157.0%, 133.0%, and
117.5%, respectively.
The rating of the combination notes addresses the repayment of
the rated balance on or before the legal final maturity. The
rated balance at any time is equal to the principal amount of the
combination notes on the issue date minus the sum of all payments
made from the issue date to such date, of either interest or
principal. The rated balance will not necessarily correspond to
the outstanding notional amount reported by the trustee.
The key model inputs Moody's uses in its analysis, such as par,
weighted average rating factor, diversity score and the weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool as having a
performing par and principal proceeds balance of EUR69.1 million,
a weighted average default probability of 24.5% over a 2.9 year
weighted average life(consistent with a WARF of 4117), a weighted
average recovery rate upon default of 46.2% for a Aaa liability
target rating, a diversity score of 12 and a weighted average
spread of 4.0%.
The default probability derives from the credit quality of the
collateral pool and Moody's expectation of the remaining life of
the collateral pool. The estimated average recovery rate on
future defaults is based primarily on the seniority of the assets
in the collateral pool. In each case, historical and market
performance and a collateral manager's latitude to trade
collateral are also relevant factors. Moody's incorporates these
default and recovery characteristics of the collateral pool into
its cash flow model analysis, subjecting them to stresses as a
function of the target rating of each CLO liability it is
analyzing.
JUBILEE CDO I-R: Moody's Affirms B2 Rating on Class E Notes
-----------------------------------------------------------
Moody's Investors Service has upgraded the ratings on these notes
issued by Jubilee CDO I-R B.V.:
EUR74.25 mil. Class B Senior Secured Floating Rate Notes due
2024, Upgraded to Aaa (sf); previously on Oct. 7, 2015,
Upgraded to Aa1 (sf)
EUR72 mil. Class C Senior Secured Deferrable Floating Rate
Notes due 2024, Upgraded to A1 (sf); previously on Oct. 7,
2015, Upgraded to A2 (sf)
EUR43.2 mil. Class D Senior Secured Deferrable Floating Rate
Notes due 2024, Upgraded to Baa3 (sf); previously on Oct. 7,
2015, Upgraded to Ba1 (sf)
EUR8 mil. (current rated balance of EUR3.88 mil.) Class Q
Combination Notes due 2024, Upgraded to Aa3 (sf); previously
on Oct. 7, 2015, Upgraded to A1 (sf)
Moody's affirmed the ratings on these notes issued by Jubilee CDO
I-R B.V.:
EUR594 mil. (current balance outstanding of EUR307.17 mil.)
Class A Senior Secured Floating Rate Notes due 2024, Affirmed
Aaa (sf); previously on Oct. 7, 2015, Affirmed Aaa (sf)
EUR33.75 mil. Class E Senior Secured Deferrable Floating Rate
Notes due 2024, Affirmed B2 (sf); previously on Oct. 7, 2015,
Upgraded to B2 (sf)
Jubilee CDO I-R B.V., issued in May 2007, is a collateralized
loan obligation (CLO) backed by a portfolio of mostly high-yield
senior secured European loans. The portfolio is managed by
Alcentra Limited. The transaction's reinvestment period ended in
July 2014.
RATINGS RATIONALE
The upgrades to the ratings on the notes are primarily a result
of the improvement in their overcollateralization (OC) ratios
since the last rating action in October 2015. On January 2016
payment date, Class A notes were paid down by EUR77 million or
13% of their original balance. As a result of this deleveraging,
the OC ratios have increased. According to the May 2016 trustee
report the OC ratios of Classes A/B, C, D and E are 144.86%,
121.86%, 111.26% and 104.18% compared to 137.30%, 118.66%,
109.73% and 103.63% respectively in December 2015. The Principal
Account Balance of EUR57.7 mil., as of May 2016 trustee report,
will be used to pay Class A notes at the next payment date in
July 2016 thus further increasing the OC levels.
The rating of the Class Q combination Notes addresses the
repayment of the rated balance on or before the legal final
maturity. The rated balance at any time is equal to the
principal amount of the combination note on the issue date minus
the sum of all payments made from the issue date to such date, of
either interest or principal. The rated balance will not
necessarily correspond to the outstanding notional amount
reported by the trustee.
The key model inputs Moody's uses in its analysis, such as par,
weighted average rating factor, diversity score and the weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool as having a
performing par of EUR500.73 million and principal proceeds
balance of EUR57.7 million, defaulted par of EUR8.9 million, a
weighted average default probability of 22.77% over a 4.48 year
WAL (consistent with a 10 year WARF of 3148), a weighted average
recovery rate upon default of 45.98% for a Aaa liability target
rating, a diversity score of 28 and a weighted average spread of
3.87%.
The default probability derives from the credit quality of the
collateral pool and Moody's expectation of the remaining life of
the collateral pool. The estimated average recovery rate on
future defaults is based primarily on the seniority of the assets
in the collateral pool. In each case, historical and market
performance and a collateral manager's latitude to trade
collateral are also relevant factors. Moody's incorporates these
default and recovery characteristics of the collateral pool into
its cash flow model analysis, subjecting them to stresses as a
function of the target rating of each CLO liability it is
analyzing.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's
Global Approach to Rating Collateralized Loan Obligations"
published in December 2015.
Factors that would lead to an upgrade or downgrade of the
ratings:
In addition to the base-case analysis, Moody's conducted
sensitivity analyses on the key parameters for the rated notes,
for which it assumed a lower weighted average recovery rate of
the portfolio. Moody's ran a model in which it lowered the
weighted average recovery rate of the portfolio by 5%; the model
generated outputs that were within one notch of the base-case
results for Classes C and E and two notches for Class D.
This transaction is subject to a high level of macroeconomic
uncertainty, which could negatively affect the ratings on the
note, in light of uncertainty about credit conditions in the
general economy. CLO notes' performance may also be impacted
either positively or negatively by 1) the manager's investment
strategy and behavior and 2) divergence in the legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Additional uncertainty about performance is due to:
1) Portfolio amortization: The main source of uncertainty in
this transaction is the pace of amortization of the
underlying portfolio, which can vary significantly depending
on market conditions and have a significant impact on the
notes' ratings. Amortization could accelerate as a
consequence of high loan prepayment levels or collateral
sales by the collateral manager or be delayed by an increase
in loan amend-and-extend restructurings. Fast amortization
would usually benefit the ratings of the notes beginning
with the notes having the highest prepayment priority.
2) Recovery of defaulted assets: Market value fluctuations in
trustee-reported defaulted assets and those Moody's assumes
have defaulted can result in volatility in the deal's
overcollateralization levels. Further, the timing of
recoveries and the manager's decision whether to work out or
sell defaulted assets can also result in additional
uncertainty. Moody's analyzed defaulted recoveries assuming
the lower of the market price or the recovery rate to
account for potential volatility in market prices.
Recoveries higher than Moody's expectations would have a
positive impact on the notes' ratings.
3) Around 13.7% of the collateral pool consists of debt
obligations whose credit quality Moody's has assessed by
using credit estimates. As part of its base case, Moody's
has stressed large concentrations of single obligors bearing
a credit estimate as described in "Updated Approach to the
Usage of Credit Estimates in Rated Transactions", published
in October 2009 and available at:
http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_120461
In addition to the quantitative factors that Moody's explicitly
modeled, qualitative factors are part of the rating committee's
considerations. These qualitative factors include the structural
protections in the transaction, its recent performance given the
market environment, the legal environment, specific documentation
features, the collateral manager's track record and the potential
for selection bias in the portfolio. All information available
to rating committees, including macroeconomic forecasts, input
from other Moody's analytical groups, market factors, and
judgments regarding the nature and severity of credit stress on
the transactions, can influence the final rating decision.
NIBC BANK: Fitch Affirms 'B+' Rating on Hybrid Tier Securities
--------------------------------------------------------------
Fitch Ratings has revised the Outlook on NIBC Bank NV's (NIBC)
Long-Term Issuer Default Rating (IDR) to Positive from Stable and
affirmed the IDR at 'BBB-' and Viability Rating (VR) at 'bbb-'.
The revision of the Outlook reflects structurally improving
earnings, which now provide a more acceptable buffer against
potential unexpected losses in the loan book.
KEY RATING DRIVERS
IDRS, VR AND SENIOR DEBT
NIBC's IDRs and VR reflect its niche franchise and business
model, improving but concentrated earnings and overall adequate
asset quality. The ratings are also underpinned by the bank's
strong capitalization.
NIBC's business model is focused on providing tailored asset-
based lending solutions to its target segment of medium-sized
companies. In addition, it offers residential mortgage loans in
the Netherlands and online savings. Revenues are mainly driven by
net interest income and depend on NIBC's pricing power, which is
overall lower than major Dutch banks.
The recent improvement in profitability (operating profit/risk-
weighted assets ratio more than doubled since 2012 to over 1% in
2015) has chiefly been driven by increases in the net interest
margin, which is now in line with peers. NIBC was able to achieve
higher margins mainly through loan repricing as it has been
focusing on its core businesses where it has a competitive
advantage. This reflects NIBC's ability to use its niche
franchise to price risks at a sustainable level, ensuring revenue
is the first line of defense against losses rather than capital
and drives the revision of the Outlook.
NIBC's loan book is a combination of a granular Dutch residential
mortgage loan portfolio (around half of total loans at end-2015)
and a relatively concentrated corporate book. The bank's business
model exposes it to some cyclical industries (particularly
commercial real estate, shipping and oil & gas, in total over 40%
of corporate loans) and lower rated corporate borrowers. However,
the bank has so far managed to mitigate risks by high
collateralization and a proactive approach to restructuring.
The quality of mortgage loans is good and in line with that of
the larger Dutch banks. Overall reported impaired loans as a
percentage of gross loans have been moderate and compare well
with similarly rated peers.
NIBC's capitalization is strong both on a risk-weighted and un-
weighted basis and compares well with domestic and international
peers. At end-2015, the Fitch core capital/risk-weighted assets
ratio stood at 17% and the fully-loaded Basel III leverage ratio
was solid at over 7%. Despite moderate coverage and reliance on
collateral, the bank's exposure to unreserved impaired loans is
manageable at below 20% of equity.
NIBC has been reducing its reliance on wholesale funding by
attracting retail savings, which at end-2015 made up over half of
non-equity funding excluding derivatives, and by tapping
institutional deposits through its subsidiary in Germany.
However, the bank remains structurally dependent on the market to
fund part of its loan book and is hence sensitive to investor
sentiment. Liquidity is comfortable, underpinned by a reasonable
buffer of liquid assets in the absence of sizeable wholesale
funding repayments in 2016-2017.
SUPPORT RATING AND SUPPORT RATING FLOOR
The Support Rating '5' and Support Rating Floor of 'No Floor'
reflect Fitch's view that senior creditors can no longer rely on
receiving full extraordinary support from the sovereign if NIBC
becomes non-viable. This reflects the bank's lack of systemic
importance in the Netherlands, as well as the implementation of
the EU's Bank Recovery and Resolution Directive (BRRD) and the
Single Resolution Mechanism (SRM). These provide a framework for
resolving banks that is likely to require senior creditors
participating in losses, if necessary, instead of or ahead of a
bank receiving sovereign support.
Similarly, while there is a possibility that its owner, a
consortium led by the private equity firm JC Flowers & Co, may
support NIBC in case of need, Fitch is unable to adequately
assess the owner's capacity to support. As a result potential
support from its ultimate shareholders is not factored into
NIBC's Support Rating.
SUBORDINATED DEBT AND OTHER HYBRID SECURITIES
The rating of NIBC's subordinated and hybrid debt is notched off
the bank's VR. Tier 2 debt issued by NIBC is rated one notch
below the bank's VR to reflect the above-average loss severity of
this type of debt. Hybrid Tier 1 securities are rated four
notches below NIBC's VR, reflecting the higher than average loss
severity risk of these securities (two notches from the VR) as
well as a high risk of non-performance (an additional two
notches).
RATING SENSITIVITIES
IDRS, VR AND SENIOR DEBT
The Long-term IDR and VR will likely be upgraded provided the
improvement in profitability is sustained. Should the improvement
prove unsustainable either as a result of weaker revenues or
consistently higher loan impairment charges, the Outlook will
likely be revised to Stable. A significant shock to asset quality
resulting in a material erosion of NIBC's capitalization or sharp
deterioration of the bank's liquidity position, although not
expected, could result in a downgrade.
SUPPORT RATING AND SUPPORT RATING FLOOR
Any upgrade of the Support Rating and upward revision of the
Support Rating Floor would be contingent on a positive change in
the Netherland's propensity to support its banks, as well as NIBC
significantly growing its domestic franchise. While not
impossible, this is highly unlikely in Fitch's view.
SUBORDINATED DEBT AND OTHER HYBRID SECURITIES
Subordinated and hybrid debt ratings are primarily sensitive to
change in NIBC's VR. Hybrid Tier 1 securities are also sensitive
to Fitch changing its assessment of the probability of their non-
performance relative to the risk captured in NIBC's VR.
The rating actions are as follows:
Long-Term IDR: affirmed at 'BBB-'; Outlook revised to Positive
from Stable
Short-Term IDR: affirmed at 'F3'
Viability Rating: affirmed at 'bbb-'
Support Rating: affirmed at '5'
Support Rating Floor: affirmed at 'No Floor'
Senior unsecured debt: affirmed at 'BBB-'/'F3'
Subordinated debt: affirmed at 'BB+'
Hybrid Tier 1 securities: affirmed at 'B+'
SAMVARDHANA MOTHERSON: S&P Assigns 'BB+' Rating to $300MM Notes
---------------------------------------------------------------
S&P Global Ratings said that it had assigned its 'BB+' issue
rating to the proposed up to $300 million senior secured notes to
be issued by Samvardhana Motherson Automotive Systems Group B.V.
(SMRP; BB+/Stable/--), a tier 1 supplier to the global automotive
industry.
At the same time, S&P affirmed the 'BB+' issue ratings on the
existing EUR500 million senior secured notes due 2021 and EUR100
million senior secured notes due 2025.
The recovery rating on the proposed and existing senior secured
notes is '4' indicating S&P's expectation of average (30%-50%)
recovery in the event of a payment default. S&P's recovery
expectations are in the lower half of the 30%-50% range.
RECOVERY ANALYSIS
The issue and recovery ratings on the proposed senior secured
notes are constrained by the existence of prior-ranking
liabilities and by the large amount of pari passu senior secured
debt. The ratings are supported by S&P's going-concern valuation
of the company, its strong asset base, and the fair security
package provided to noteholders.
S&P expects that the proceeds from the proposed new senior
secured notes will be used to fund growth and improve liquidity.
S&P views the security package provided to noteholders as fair,
since the notes will be secured by first-ranking security
interest granted not only over capital stock, but also over
certain property and tangible assets of the issuer and of certain
guarantors. According to the intercreditor agreement, the
collateral will secure the senior secured notes and the senior
secured revolving credit facilities on a pari passu basis.
S&P highlights that the notes' documentation allows for
significant additional debt baskets, and given that recovery
prospects are in the lower half of the 30%-50% range, any
additional debt incurrence could result in a deterioration of
S&P's recovery expectations for noteholders.
In S&P's hypothetical default scenario, it assumes that adverse
market conditions would trigger the cancellation or delay of
programs, loss of market shares, and deterioration of profit
margins due to increased price pressures from original equipment
manufacturers.
S&P values SMRP as a going concern, given its strong order book,
strong niche market positions, and strong customer relations,
which create significant barriers to entry.
Simulated default assumptions:
-- Year of default: 2021
-- EBITDA at default: EUR152 million
-- Implied enterprise value multiple: 5.0x
-- Jurisdiction: Germany
Simplified waterfall:
-- Gross enterprise value at default: about EUR760 million
-- Administrative costs: about EUR53 million
-- Net value available to creditors: EUR707 million
-- Priority claims: EUR271 million(1)
-- Senior secured debt claims: about EUR1.24 billion(2)
-- Recovery expectation: 30%-50% (lower half of range)
(1) Priority debt includes pension liabilities, finance leases,
and non-recourse factoring liabilities.
(2) All debt amounts include six months' prepetition interest.
===========
P O L A N D
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SKOK KUJAWIAK: Declared Bankrupt by Financial Market Regulator
--------------------------------------------------------------
Bokszczanin Marcin at PAP reports that financial market regulator
KNF said in a statement two ailing credit unions, SKOK Kujawiak
and SKOK Jowisz with total client deposits at some PLN270
million, were declared bankrupt by courts.
SKOK Kujawiak and SKOK Jowisz are based in Poland.
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R U S S I A
===========
BANK OF MOSCOW: Moody's Confirms Ba2 Currency Deposit Ratings
-------------------------------------------------------------
Moody's Investors Service has confirmed the Ba2 long-term local
and foreign currency deposit ratings of Bank of Moscow as well as
the B1 long-term senior subordinated debt rating and affirmed the
bank's Not-Prime short-term foreign currency deposit ratings. At
the same time, the rating agency has downgraded the bank's
baseline credit assessment (BCA) to caa1 from b2. Moody's has
also confirmed the bank's LT Counterparty Risk Assessment (CRA)
of Ba1(cr) and adjusted BCA of ba2 and affirmed the ST CRA of
Not-Prime(cr). The outlook on the long term deposit ratings is
negative.
These actions conclude the rating review initiated by Moody's on
March 9, 2016.
RATINGS RATIONALE
Moody's decision to confirm Bank of Moscow's deposit ratings at
Ba2 and subordinated debt rating at B1 was driven by the rating
agency's assessment of a very high probability of government
support channeled through its parent, the state-owned VTB Bank
(b1 BCA/Ba1 long-term local currency deposit rating, negative),
to Bank of Moscow. This assessment is based on VTB Bank's
commitment to finalize Bank of Moscow's rehabilitation.
At the same time, the downgrade of Bank of Moscow's BCA to caa1
is driven by a change in the bank's credit profile following the
spin-off of a substantial part of the bank's operations and
transfer of its performing assets to the parent VTB Bank. The
remaining activities of Bank of Moscow will operate in a run-off
mode, focusing on the foreclosure of problem loans and completing
associated rehabilitation plan by 2026.
As part of the spinoff exercise, VTB Bank received Bank of
Moscow's performing loan book, part of its liquid assets,
customer funding and other obligations that were not linked to
the bank's ability to conclude the rehabilitation. Bank of
Moscow's residual assets are mainly represented by problem
loans -- fully provisioned under the IFRS-- and liquid government
bonds. On the liabilities side, the bank is funded by the
Deposit Insurance Agency's rehabilitation deposit (maturing in
September 2016 and carrying 0.51% per annum), and subordinated
and other interbank facilities from VTB Group. The bank's assets
and non-equity funding are in our view balanced in terms of
maturity and anticipated cash-flows. However, there is a risk of
failing to complete the rehabilitation program as the bank does
not generate recurring banking revenues. These considerations
drive the downgrade of the BCA to a caa1 category.
The negative outlook on the long-term ratings of Bank of Moscow
reflects the negative outlook on the Russia sovereign rating of
Ba1.
WHAT COULD MOVE RATINGS UP OR DOWN
Bank of Moscow's stand-alone BCA has little potential for
upgrades as the bank is operating in a run-off mode with no
sustainable banking franchise and recurring revenues. The
negative outlook on the bank's supported deposit ratings
illustrates limited opportunity for upward adjustment due to a
combination of the continued difficult operating environment and
the negative outlook on VTB Bank's and sovereign ratings. The
bank's deposit ratings could be downgraded if the capacity and/or
willingness of its ultimate parent to provide such support in the
event of need are materially affected by the weakening operating
environment.
The principal methodology used in these ratings was Banks
published in January 2016.
BELGOROD REGION: Fitch Affirms 'BB' Issuer Default Ratings
----------------------------------------------------------
Fitch Ratings has affirmed the Russian Belgorod Region's Long-
Term Foreign and Local Currency Issuer Default Ratings (IDR) at
'BB', Short-Term Foreign Currency IDR at 'B' and National Long-
Term Rating at 'AA-(rus)'. The Outlooks on the Long-Term Ratings
are Stable.
The region's outstanding senior unsecured domestic bonds have
been affirmed at Long-term local currency 'BB' and National Long-
term 'AA-(rus)'.
The affirmation reflects Fitch's unchanged base case scenario
regarding the region's stable fiscal performance, moderate,
albeit growing, direct risk and contingent liabilities, amid a
prolonged economic slowdown in Russia.
KEY RATING DRIVERS
The 'BB' ratings reflect the region's sound operating
performance, moderate direct debt and a well-diversified economy.
The ratings also take into account the region's exposure to
contingent risk as well as the domestic recessionary environment
and a weak institutional framework in Russia, which could in turn
negatively influence the region's credit metrics.
Fitch expects the region to maintain stable fiscal performance
with an operating margin of about 8%-10% in 2016-2018 (2015:
10.8%). This will be supported by expected moderate growth of tax
revenue and current transfers, along with continuous control on
opex. Fitch projects average opex growth to remain close to 4% in
2016-2018 (2014-2015: average 3.4%).
Fitch said, "Belgorod's deficit before debt variation widened
immaterially to 3.5% of total revenue in 2015 from 1.4% in the
previous year. The larger deficit is attributed to capex funding
needs, as the region invested in roads and development of
logistics and transport services. However, financing flexibility
remains limited with the region having already cut back capital
outlays twofold to 11.7% of total spending over 2011-2015. In our
view, the region's deficit is likely to widen further to 5%-7% in
2016-2017, which will lead to debt financing."
Fitch projects moderate growth of the region's direct risk up to
60% of current revenue in 2016-2018. The region's direct risk
increased slightly to 52.2% of current revenue in 2015 at RUB32.6
billion, from 51% a year earlier. Belgorod's 2015 debt stock
comprised domestic bonds (45%), followed by budget loans (37%)
and bank loans (18%). Fitch views the RUB4.8 billion loan at the
region's public company Obldorsnab as direct risk; Belgorod
provides the company with subsidies to cover principal and
interest repayments on this loan.
Fitch said, "We view Belgorod's exposure to refinancing risk as
limited, with 12% of currently outstanding debt scheduled for
repayments in 2016. Nevertheless, despite a smooth maturity
profile of the region's current debt portfolio (three years and
six months), it lags behind the 2015 payback period (direct risk-
to-current balance) of seven years."
Fitch projects gradual growth of the region's net overall risk
before stabilizing at below 80% of current revenue in 2016-2018
(2015: 67%). The region's contingent risk stems mostly from
guarantees, which decreased to RUB9.7 billion in 2015 from
RUB11.5 billion in 2014. The region issues guarantees in support
of several companies, largely operating in agriculture. Debt at
Belgorod's public sector entities stabilized at RUB3.8 billion in
2014-2015.
Russia's institutional framework for sub-nationals is a
constraint on the region's ratings. Frequent changes in both the
allocation of revenue sources and the assignment of expenditure
responsibilities between the tiers of government limit Belgorod's
forecasting ability and negatively affect its strategic planning,
and debt and investment management
The region's administration projects continued economic growth,
at about 3%-5% per annum in 2016-2018. The region's gross
regional product (GRP) expanded 2.2% in 2015 (2013-2014: growth
3%), according to the administration's preliminary estimates,
outpacing Russia's broader economy, which contracted 3.7%. A
potentially extended economic downturn in Russia could constrain
the region's economic development over the medium term.
RATING SENSITIVITIES
An improved national economy leading to a sustainable operating
balance and debt coverage in line with the region's average
maturity profile could result an upgrade.
Growth in direct risk to above 70% of current revenue, coupled
with close to a zero current margin, could lead to a downgrade.
FAR EASTERN BANK: Moody's Cuts LT Deposit Ratings to 'B3'
---------------------------------------------------------
Moody's Investors Service has downgraded the long-term local and
foreign currency deposit ratings of Far Eastern Bank to B3 from
B1, the bank's long-term Counterparty Risk Assessment (CRA) to
B2(cr) from Ba3(cr) as well as the bank's Adjusted Baseline
Credit Assessment to b3 from b1. At the same time, the rating
agency affirmed the bank's Baseline Credit Assessment (BCA) of
b3, the short-term local and foreign currency deposit ratings of
Not-Prime and the short-term CRA of Not-Prime(cr). All ratings
carry a stable outlook.
The rating action concludes the review initiated by Moody's on
March 9, 2016.
RATINGS RATIONALE
Moody's downgrade of Far Eastern Bank's long-term deposit ratings
to B3 from B1 is driven by the fact that Russian Regional
Development Bank (Ba3 negative) -- owned by OJSC Oil Company
Rosneft (Ba1 negative) -- sold its 100% stake in the bank to
Investment Company "Region" (unrated). As a result, the rating
agency removed its assessment of a very high probability of
support from Russian Regional Development Bank from the bank's
deposit ratings, which currently do not incorporate any
probability of parental support from Investment Company "Region"
either.
Moody's said, "The rating agency's decision to affirm Far Eastern
Bank's standalone BCA of b3 is underpinned by the bank's solid
capital cushion (with Basel I Tier 1 and total capital adequacy
ratios reported at 12.9% and 20.1%, respectively, at year-end
2015) supported by healthy profitability metrics (with RoE of
16.4% and RoAA of 2.6% in 2015 as well as over 100% coverage of
the bank's problem loans by respective provisions as at 1 January
2016). We note, however, the bank's relative small size and
limited franchise in Russia context, and its new shareholder's
risk appetite has yet to be seen."
WHAT COULD MOVE THE RATING UP/DOWN
Negative credit conditions in Russia provides little scope for
upwards rating pressure; however, this could develop over time
following improvement in Far Eastern Bank's business
diversification supported by maintenance of adequate solvency and
liquidity metrics.
Negative pressure could be exerted on Far Eastern Bank's ratings
as a result of any weakening of the bank's financial
fundamentals, in particular, its profitability, asset quality
and/or liquidity profile.
RUSSIAN REGIONAL: Moody's Confirms Long-Term Ba3 Deposit Ratings
----------------------------------------------------------------
Moody's Investors Service has today confirmed the Ba3 long-term
local and foreign currency deposit ratings of Russian Regional
Development Bank following Moody's confirmation on April 26, 2016
of the Ba1 rating on OJSC Oil Company Rosneft, the bank's
ultimate parent. At the same time, the rating agency has affirmed
the bank's baseline credit assessment (BCA) of b2 and its short
term deposit ratings of Not-Prime. Moody's has also affirmed the
bank's Counterparty Risk Assessment of Ba2(cr)/Not-Prime(cr). All
ratings carry a negative outlook.
These actions conclude the rating reviews initiated by Moody's on
March 9, 2016.
RATINGS RATIONALE
The confirmation of Russian Regional Development Bank's deposit
ratings at Ba3 with a negative outlook was driven by confirmation
of OJSC Oil Company Rosneft's rating at Ba1 with a negative
outlook. This reflects Moody's view that the capacity and
willingness of the company to assist its strategically important
subsidiary in the event of need remain substantially unchanged.
The negative outlook on the long-term ratings of Russian Regional
Development Bank reflects the negative outlook on its parent
company rating.
WHAT COULD MOVE RATINGS UP OR DOWN
The negative outlook on Russian Regional Development Bank's
ratings indicates little potential for upgrades currently, due to
a combination of the continued difficult operating environment
and the negative outlook on OJSC Oil Company Rosneft's rating.
The bank's deposit ratings could be downgraded if the capacity
and/or willingness of its ultimate parent to provide such support
in the event of need are materially affected by the weakening
operating environment.
SPECIAL PURPOSE: S&P Assigns 'BBp' Rating to Repack Notes
---------------------------------------------------------
S&P Global Ratings assigned its 'BBp' credit rating to Special
Purpose Company "Structured Investments 1" LLC's notes. S&P's
rating addresses only the repayment of the notes' principal,
amounting to RUB10 billion, by the legal final maturity date and
not any payments of interest.
Special Purpose Company "Structured Investments 1" is a
repackaging of Russian-government issued local currency bonds
maturing in August 2023. The funds available to the issuer in
order to redeem the notes' principal comprise the accumulated
coupon payments on the government bonds until their legal
maturity and their principal. In S&P's view, the issuer's
ability to repay the notes' principal is sensitive to the risk of
the Russian government's nonpayment on the bonds and the risk of
early redemption of the bonds, whereby not all of the scheduled
coupon payments will be received. The risk of a Russian
government default on the bonds is captured by S&P's 'BBB-'
local-currency long-term sovereign rating on the Russian
Federation, which imposes a cap on our rating on the notes. S&P
deems the risk of early redemption of the government bonds to be
ratings remote because it is not expressly permitted by the
bonds' terms.
The transaction structure comprises three special-purpose
entities (SPEs) established in different jurisdictions: the
notes' issuer, which is a Russian legal entity, and the borrower
and the agent, which are both Dutch companies. S&P has obtained
comfort on the bankruptcy remoteness of the Dutch entities. In
S&P's view, the bankruptcy remoteness characteristics of the
issuer have some weaknesses that are fully mitigated by the
notes' security mechanism. The notes' security is established
under Luxembourgian law. It includes the pledge of the
government bonds and cash proceeds to the agent.
Given that the transaction structure involves multiple
jurisdictions, S&P views it as highly exposed to a change of law
risk. However, S&P's rating on the notes does not address this
risk.
The transaction is exposed to the counterparty risk of Banque
Internationale a Luxembourg, which serves as a custodian and a
bank account provider to the Dutch SPE that is a borrower to the
issuer under the loan facility agreement and is a holder of the
collateral. As the counterparty documentation does not contain
replacement language in accordance with S&P's current
counterparty criteria, its long-term 'A-' rating on the
counterparty caps its rating on the notes. The transaction is
also exposed to the counterparty risk of JSC Alfa-Bank, which is
a bank account provider to the notes' issuer. In the absence of
replacement language that complies with S&P's current
counterparty criteria, its rating on the notes is capped by its
long-term 'BB' rating on JSC Alfa-Bank.
Considering S&P's above analysis and by applying its approach for
assessing credit quality by the weakest link, S&P's rating on the
notes is weak-linked to the lower of the (i) rating on the
Russian government bonds, (ii) S&P's long-term rating on JSC
Alfa-Bank, and (iii) S&P's long-term rating on Banque
Internationale a Luxembourg. S&P has therefore assigned its
'BBp' rating to the notes.
=========
S P A I N
=========
CATALUNYA BANC: Moody's Upgrades CR Assessments From Ba2(cr)
------------------------------------------------------------
Moody's Investors Service announced that it has upgraded the
ratings of two series of Spanish multi-issuer covered bonds
(SMICBs). Moody's has also upgraded the rating of one
subordinated loan.
RATINGS RATIONALE:
The rating actions on the SMICBs follow Moody's upgrades to the
CR Assessments (CRA) of the following banks:
1) Catalunya Banc SA CRA upgraded from Ba2(cr) to Baa3(cr) on
March 22, 2016
2) Bankia, S.A. CRA upgraded from Ba1(cr) to Baa3(cr) on
April 12, 2016
3) Kutxabank, S.A. CRA upgraded from Baa3(cr) to Baa2(cr) on
April 28, 2016
The CB anchor for these issuers is the CR Assessment plus one
notch.
The actions also take into account updated information on the
underlying mortgage pools of participating issuers.
Moody's has upgraded the rating of three series (including one
subordinated loan) because of an improvement in the expected loss
and/or probability of default of the SMICBs (as defined below)
since the last rating actions in November 2015 and January 2016.
Loss and Cash Flow Analysis:
The ratings assigned by Moody's address the expected loss posed
to investors.
SMICBs can be considered as a repackaging of a pool of Spanish
covered bonds. Each SMICB is backed by a group of Spanish covered
bonds (Cedulas Hipotecarias, CHs) that are bought by a Fund,
which in turn issues SMICBs. Moody's rating for any SMICB is
determined after applying a three-step process:
First step: Calculating the Expected Loss (EL) for the Cedulas
backing the SMICB
The main driver of an SMICB's EL is the credit strength of the
Cedulas backing the SMICB. If the Cedulas perform, the SMICBs
will be fully repaid. Cedulas are rated according to our
published"Moody's Approach to Rating Covered Bonds."
Second step: Calculating the EL for the SMICBs.
In the absence of any credit support (for example, such as a
reserve fund), the EL of the SMICB is determined directly from
the weighted-average EL (weighted by their outstanding amounts)
of the Cedulas backing the SMICB. Where the SMICB benefits from a
reserve fund, the SMICB may achieve a lower EL than the weighted-
average EL of the Cedulas backing the SMICB. The EL of the SMICB
is the average EL of the single tranche ranking senior to the
subordinated loan which originally funded the reserve fund. The
loss distribution is determined by a single factor model which is
numerically solved through a Monte Carlo simulation.
Third step: Calculating the probability of default for the SMICB
or assessing the sufficiency of the Liquidity Facility (LF) for
the SMICB.
Under the SMICB rating approach, Moody's gives value to two
primary liquidity support mechanisms, which improve the
probability of timely payment if any Cedula backing the SMICB
fails to make a payment on a scheduled payment date. These are:
i) the maturity extension on the SMICB, which should ensure that
a period of at least two years is available following any default
on the Cedula. This period would be available to realise the
value of the assets backing the Cedulas; and ii) a LF that is
available to cover interest payments on the SMICB. Under the
SMICB rating method, the LF for an SMICB is sized to improve the
timely payment of the SMICB to a level commensurate with the
rating of the SMICBs. The size of the LF is primarily determined
by: i) the probability of default of the Cedulas backing the
SMCIB; ii) the correlation between these Cedulas; and iii) the
level of concentration to the different Cedulas backing the
SMCIB. However, regardless of the size of the LF, Moody's would
limit the maximum rating of the SMICB by applying its Timely
Payment Indicator (TPI) methodology for covered bonds. The TPI
framework limits the rating uplift that SMICBs may achieve over
the weighted average CB anchor of the underlying Cedulas' issuers
and may constrain the final covered bond rating to a lower level
than the maximum potential rating under the EL Model. The TPI
used to assess the maximum rating uplift over the weighted
average CB anchor of the underlying Cedulas' issuers for each
SMICB is typically two levels above the one assigned to the
underlying Cedulas.
Factors that would lead to an upgrade or downgrade of the
ratings:
The robustness of a structured multi-issuer covered bond rating
largely depends on the underlying issuers' credit strength as
reflected in their CB anchors, and the support provided by the
liquidity facility and reserve fund, if any.
A multiple-notch downgrade of the SMICBs might occur in certain
limited circumstances, such as (i) a sovereign downgrade
negatively affecting the issuers' CB anchor and the TPI; (ii) a
multiple-notch lowering of the CB anchor or (iii) a material
reduction of the value of the cover pool.
PYMES BANESTO 2: Fitch Hikes Class B Notes Rating to 'BBsf'
-----------------------------------------------------------
Fitch Ratings has upgraded FTA, Pymes Banesto 2's notes, as
follows:
EUR35.3 million class A2 notes (ISIN ES0372260010): upgraded to
'Asf' from 'BBB-sf'; Outlook Stable
EUR24.3 million class B notes (ISIN ES0372260028): upgraded to
'BBsf' from 'Bsf'; Outlook Stable
EUR34.0 million class C notes (ISIN ES0372260036): affirmed at
'CCsf'; RE 0%
FTA PYMES Banesto 2 (the issuer) is a cash flow SME CLO
originated by Banco Espanol de Credito S.A., now part of Banco
Santander S.A. (A-/Stable/F2). At closing, the issuer used the
note proceeds to purchase a EUR1.0bn portfolio of secured and
unsecured loans granted to Spanish small and medium enterprises
and self-employed individuals. The transaction is managed by
Santander de Titulizacion, S.G.F.T., S.A.
KEY RATING DRIVERS
The upgrade of the class A2 and B notes reflects the increase in
credit enhancement (CE) and the transaction's improved
performance over the past 12 months. Since the last review, the
class A2 notes have amortized by EUR33.3 million, resulting in a
large increase in CE for the class A2 and B notes of 17% and
7.8%, respectively.
Fitch said, "The transaction's performance has improved since our
last review. Current defaults have decreased to EUR16.6 million
from EUR22.5 million and delinquencies over 90 days and 180 days
decreased to EUR1.2 million and EUR847,000 from EUR3.8 million
and EUR2.5 million, respectively. The portfolio remains granular.
The top obligor concentration has increased slightly to 0.84%
from 0.74% and the top 10 obligors increased to 5.7% from 4.7% at
last review."
Despite the increase in total recoveries of EUR4 million after
the last review, the weighted average recovery rate is relatively
low at 17.85%. In its analysis, Fitch assumed the portfolio as
unsecured and applied 10 years recovery lag to reflect the low
observed recovery rate.
The reserve fund has been completely depleted since March 2012
and the principal deficiency ledger has decreased for the first
time in the last three years to EUR15.6 million from EUR16.6
million. However, the class C notes remain under collateralized
and are at risk of default. In addition, the transaction has no
liquidity line to mitigate any disruption of the collection
process and to maintain timely payments to the noteholders. As a
result, the transaction's ratings are capped at 'Asf'.
RATING SENSITIVITIES
Fitch tested an increase of the default probability by 25% and a
reduction of recoveries by 25%, which would not impact the
ratings in each case.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation
to this rating action.
DATA ADEQUACY
Fitch has checked the consistency and plausibility of the
information it has received about the performance of the asset
pool and the transaction. There were no findings that were
material to this analysis. Fitch has not reviewed the results of
any third party assessment of the asset portfolio information or
conducted a review of origination files as part of its ongoing
monitoring.
Fitch did not undertake a review of the information provided
about the underlying asset pool ahead of the transaction's
initial closing. The subsequent performance of the transaction
over the years is consistent with the agency's expectations given
the operating environment and Fitch is therefore satisfied that
the asset pool information relied upon for its initial rating
analysis was adequately reliable.
Overall, Fitch's assessment of the information relied upon for
the agency's rating analysis according to its applicable rating
methodologies indicates that it is adequately reliable.
===========
T U R K E Y
===========
ARCELIK AS: Fitch Affirms 'BB+' Long-Term Issuer Default Ratings
----------------------------------------------------------------
Fitch Ratings has affirmed Arcelik A.S.'s Long-term foreign and
local currency Issuer Default Ratings (IDR) at 'BB+' and National
Long-term rating at 'AA(tur)'. The Outlooks are Stable. Fitch has
also affirmed Arcelik's senior unsecured rating at BB+.
KEY RATING DRIVERS
Improved Leverage Metrics
Fitch forecasts Arcelik's receivable adjusted funds from
operations (FFO) net leverage to come down to 1x at end 2016 from
1.8x at end 2015. The improvement will be mainly driven by the
cash proceeds from the sale of Koc Financial Services shares
totalling TRY558 million, which will be used for short-term debt
payments. Fitch believes that Arcelik will maintain a receivable
adjusted FFO net leverage ratio below 1.5x in the medium term,
driven by stable EBITDA margins around 10.5% and slightly
positive free cash flow (FCF) generation driven by improvements
in working capital (WC) needs.
Unwinding WC Needs
Recent measures taken by Arcelik's management has led to an
unwinding in WC needs in the past year, bringing the WC/sales
ratio down to 31% at end-2015 from 40% a year ago. Improved
inventory management, and re-negotiations with domestic dealers
has turned FCF positive in 2015 from -1% in 2014. Fitch forecasts
slightly positive FCF generation, below Arcelik's positive rating
sensitivities, and believes that a track record should be set
before the change can be deemed structural. Despite the
improvement in leverage metrics, Arcelik's FFO and FCF generation
is still considered weak compared with its peers, and a
sustainable improvement would be needed for positive rating
action.
Strong Growth in International Markets
Arcelik has achieved strong top line growth in the past years
outside Turkey, taking advantage of more price-conscious
consumers in Western Europe as well as its previous marketing and
distribution network expansion efforts. Further growth in
developed markets in the short to medium term is likely as the
company continues to capitalize on its present momentum and
current market trends. However, this may place pressure on
profitability as Fitch believes that margins in international
markets tend to be lower than Turkey.
Fitch said, "We believe that recent investment/expansion plans in
the ASEAN region is a positive step towards further geographic
diversification. Targeting markets where appliance penetration
rates are lower than the rest of the world could also support
strong revenue growth. The new refrigeration plant is expected to
bring $US500 million of extra revenues in the medium term and is
likely to provide the first footprint for additional export
opportunities in the region. However, Arcelik's exposure to
emerging markets is higher than its close peers, which could lead
to more vulnerability to FX movements, political risks and
volatile macroeconomic conditions."
Improved Debt Maturity Profile and Diversification
Arcelik has been diversifying its funding base in the past two
years with the issuance of $US500 million 2023 and EUR350 million
2021 eurobonds, taking advantage of the historically low interest
rates. The issuances have improved Arcelik's debt maturity
profile to approximately four years from less than two years in
2012. Fitch believes that diversifying the funding base away from
short-term bank financing practices in Turkey is credit positive.
Also, both Eurobonds are senior unsecured and have fixed interest
rates, providing security for potential increase in interest
rates in Turkey, and international markets in general.
KEY ASSUMPTIONS
-- Single digit growth both in domestic and European markets.
-- Profitability in-line with historical averages.
-- No significant M&A.
-- Normalized capex levels, in line with historical levels.
RATING SENSITIVITIES
Positive: Future developments that could lead to positive rating
action include:
-- Receivable-adjusted FFO net leverage ratio below 1.5x.
-- FFO margins consistently above 10%.
-- FCF margin above 2% on a sustainable basis.
Negative: Future developments that could lead to negative rating
action include:
-- Receivable-adjusted FFO net leverage ratio above 2.5x.
-- FFO margin below 8%.
-- Consistently negative FCF.
BURSA MUNICIPALITY: Fitch Affirms 'BB+' Issuer Default Ratings
--------------------------------------------------------------
Fitch Ratings has affirmed the Metropolitan Municipality of
Bursa's Long-term foreign currency and local currency Issuer
Default Ratings (IDR) at 'BB+' and National Long-term Rating at
'AA(tur)'. The Outlooks are Stable.
Fitch said, "The affirmation reflects our expectation that
Bursa's operating performance will remain strong and tax revenues
to increase by 11% on a nominal basis annually., As of end-2015,
tax revenues excluding transfers received had increased by 33%
yoy on a nominal basis with an annual inflation rate of 8.5%
which has been boosted by Law 6360, which came into force in
March 2014. However, Fitch considers that the increase in shared
tax revenues of Bursa due to Law 6360 was completed as of end
2015."
KEY RATING DRIVERS
Fitch said, "We expect operating performance to remain strong at
40% in 2016-2018 supported by the strong and diversified local
economy. We also expect that city will exercise spending
discipline after a one-off increase of its capex above budget for
the first time since 2007.
"In 2015, Bursa posted a strong operating margin of 43%, which
was slightly below our estimate of 46%, although the increase in
operating expenditure growth was 6% above operating revenue. The
local economy was resilient to the adverse sentiment change in
the international capital markets in 2015. After the one-off
increase in shared tax revenues in 2014-2015, we expect tax
revenues to grow above inflation by 11% on a nominal basis
annually."
The city posted a deficit of 16% before debt variation due to an
increase of opex of 6% yoy higher than the operating revenue and
27% higher capex than budgeted, which was not reflected in
Fitch's baseline scenario. This was mainly due to the newly
assigned responsibilities of the city from Law 6360, especially
for the rural areas. It was also to some extent due to the
general election period in 2015, where projects were rushed to be
finalized. The city plans capital-intensive investments stemming
from its new responsibilities by the end of 2017, which may cause
another deficit before debt variation in 2016.
Fitch expects that strong operating performance and wealthy
economy together with high capital revenue will support a high
self-financing capacity for the ongoing large capex investments
envisaged for 2016-2018. This may result in an increase of debt
to current revenue to 120% in 2016..
New responsibilities will drive capital spending and increase the
debt to current revenue ratio to 120%-130% in 2016-2017, but in
Fitch's baseline scenario the ratio will decrease again to below
120% in 2018. This will be supported by the city's continued
strong operating surpluses, and sound financial management,
keeping the debt payback ratio at three years.
In 2015, Bursa continued with its commitment to reduce its FX
risk. The city has reduced its FX liabilities, which are related
to its project financing and euro-denominated. In 2015, its FX
exposure declined to 52.7% from 59.5%, although lira depreciated
12.6% yoy. Since 2013 the city has not taken on any new foreign-
currency denominated debt and there is none envisaged in its
three-year plan. Accordingly, Fitch expects the FX share to
reduce below 50% of the debt portfolio as of 2018. The weighted
average of maturity of Bursa's FX debt is 12 years, and its total
debt is 10 years as of 2015, well above its debt payback ratio.
Bursa is Turkey's fourth-largest contributor to its GVA,
contributing 6% on average in 2004-2011 (last available
statistics). The metropolitan city accounts for 3.6% of the
Turkish population, or 2.8 million people in 2015. The city is
the main hub for the country's automobile and automotive
industry, followed by steel production, textile and food-
processing industries.
The city's authorities follow a solid budgetary policy and
improving financial planning, which guarantees solid operating
performance, although adjustments in improved liquidity planning
could be undertaken. Sound financial planning enables further
large financing needs of capex investments to be covered in a
timely and forward-looking manner.
RATING SENSITIVITIES
A sharp increase in external and local debt and a deterioration
of the deficit before financing to more than 15% of total
revenues could prompt a downgrade, although this is not Fitch's
base case scenario.
Sustainable reduction of overall risk and continuation of strong
budgetary performance with operating expenditure not higher than
budgeted would be positive for the Long-term IDRs and National
Ratings.
TURCAS PETROL: Fitch Affirms Then Withdraws 'B' Long-Term IDRs
--------------------------------------------------------------
Fitch Ratings has affirmed Turcas Petrol A.S.'s (Turcas) Long-
term foreign and local currency Issuer Default Ratings (IDR) at
'B' and its National Long-Term Rating at 'BBB-(tur)'. The
Outlooks are Stable. Fitch has subsequently withdrawn the
ratings.
Fitch is withdrawing the ratings as Turcas has chosen to stop
participating in the rating process. Therefore, Fitch will no
longer have sufficient information to maintain the ratings.
Accordingly, Fitch will no longer provide ratings (or analytical
coverage) for Turcas.
Turcas is an investment holding company with minority stakes in
JVs in energy-related sectors in Turkey (BBB-/Stable). Its main
investments are a 30% stake in the leading Turkish fuel
distributor Shell & Turcas Petrol (STAS) and a 30% stake in the
775MW gas-fired power plant (RWE & Turcas Guney Elektrik Uretim
A.S. or RTG), commissioned in 2013 in Denizli, Turkey, a JV with
RWE AG (BBB/Negative). Turcas's credit profile is subordinate to
the weighted average credit profile of these companies as it does
not have direct access to their operating cash flows and assets.
Constraints on Turcas's ratings include its small size and the
limited diversification of its dividend income stream.
KEY RATING DRIVERS
Reliance on STAS
STAS remains Turcas's primary source of revenue as RTG's weak
financial results constrain its capacity to fully cover
shareholder loan repayments or contribute dividends. STAS,
Turcas's JV with Royal Dutch Shell plc (AA-/Negative), is
Turkey's leading fuel distributor with 1,036 Shell-branded gas
stations and reported EBITDA of TRY0.5bn in 2015. Concentrated
dividend inflows are a key rating constraint for Turcas.
Higher Leverage at STAS
Fitch said, "We do not rate STAS but based on a comparison with
other rated fuel retailers, we believe that its profile would
warrant a standalone rating in the 'BB' category. This captures
its leading market position in the growing domestic market
overlaid by STAS's limited geographical diversification, full
exposure to Turkey's regulatory and macro-economic environment
and growing leverage. Reported debt to EBITDA increased to 3.0x
in 2015 from a healthy 1.0x in 2013. We expect STAS's leverage to
moderate in the short to medium term as the dealer contract
renewal cycle is over. We also assume STAS will resume dividend
payouts in 2016 following no dividend payment in 2015. A longer
than expected pause in STAS's dividend payments would be rating
negative."
Pressure on Power Plant's Cash Flows
Turcas's 775 megawatt gas-fired power plant is one of the most
efficient in Turkey, but the project's economics remain
challenging. Spark spreads in Turkey continue to be weak and RTG
realised a net loss for 2015 of TRY134m. Combined with the power
plant's asset concentration and limited operational track record,
RTG's standalone rating is constrained to the low 'B' category.
Fitch said, "Turcas's debt consists of project loans raised to
finance its 30% share in the construction of the plant. We
previously assumed that from 2015, the debt service of these
facilities would be fully covered by payments from RTG under a
shareholder loan structured to mirror their terms. Our forecasts
now project that Turcas will have to fund a shortfall in
repayments in the medium term. In December 2015 Turcas converted
TRY168m of shareholder loans to RTG to equity, lowering the cash
inflows from interest and principal payments to Turcas unless
RTG's financial performance improves allowing the JV to pay
dividend to its shareholder. The outstanding RTG's shareholder
loan amount owed to Turcas equalled TRY207 million at end-2015."
New Investments
Fitch said, "In May 2014, Turcas sold its 18.5% stake in the STAR
refinery project to State Oil Company of the Azerbaijan Republic
(BB+/Negative) for $US59.4m. The most advanced new investment
project currently realised by the company is the geothermal power
plant with 18MW capacity in western Turkey. Turcas holds 92% of
shares in the project - Turcas BM Kuyucak Jeotermal Elektrik
Uretim A.S. (TBK). Total project cost amount to $US71m with 80/20
debt to equity split. In March 2016, TBK secured financing for
the project, which is guaranteed on an interim basis by Turcas.
We include around TRY30 million of EBITDA generated by TBK in our
forecast starting from 2018."
FX Risks Weigh on Profile
Turcas's cash inflows, except for management fee from STAS, are
linked to the lira, while its debt is euro and US dollar
denominated. Foreign exchange risk is a credit constraint, partly
mitigated by US dollar denominated cash and deposit balances."
KEY ASSUMPTIONS
Fitch's key assumptions within the rating case for Turcas
include:
-- $US/TRY exchange rate of 3.1 in 2016-2019 in line with
average exchange rate as per Fitch's sovereign team.
-- Average stable management fee and dividend from STAS of
TRY57 million in 2016-2019.
-- Shareholder loan repayments from RTG averaging TRY16m in
2016-2019.
-- Capital expenditures mainly for geothermal power plant
investment project.
-- Dividend payments equal to TRY12m per year in 2016-2019.
RATING SENSITIVITIES
Not applicable.
LIQUIDITY
Strong Liquidity, Comfortable Maturities
At end-2015, Turcas's liquidity was adequate with TRY168 million
of cash and TRY78 million of short-term debt. Total debt
consisted of TRY444 million of mainly project-related ECA long-
term loans denominated in euros and US dollars.
* TURKEY: Takes Steps to Address Bankruptcy Suspension Problems
---------------------------------------------------------------
Sefer Levent at Hurriyet Daily News reports that Ankara is been
working on a draft to overcome a number of problems in the
implementation of bankruptcy suspension, Customs and Trade
Minister Bulent Tuefenkci has stated.
"We are working to resolve several unjust results in bankruptcy
cases, together with the Ministry of Justice. We will submit our
draft to the Prime Ministry as soon as we finalize it," Hurriyet
Daily News quotes Mr. Tufenkci as saying at a meeting in the
eastern province of Malatya.
More than 1,000 companies in Turkey have sought to have their
bankruptcy proceedings suspended since the beginning of 2015, but
experts warn that the misuse of the condition could lead a domino
effect in the economy, Hurriyet Daily News relates.
Mr. Tuefenkci also vowed that the required draft regulation to
revise the check system, which has long been demanded by
businesspeople, would be addressed by the government, Hurriyet
Daily News discloses.
"In terms of the figures there is actually not a dramatic rise in
the number of bad checks. But the business world has recently
adopted a negative perception about this sort of payment. Many
businesspeople try not to accept checks unless they have to.
This has led to problems in trade. In order to resolve these
problems, we have finalized a draft regulation and are ready to
submit this package to the cabinet and parliament,"
Mr. Tuefenkci, as cited by Hurriyet Daily News, said.
Mr. Tuefenkci also said Turkey needs a raft of structural reforms
to increase its share in global trade and to raise its
competiveness, Hurriyet Daily News notes.
=============
U K R A I N E
=============
KHRESCHATYK BANK: Deposit Fund Starts Liquidation Procedure
-----------------------------------------------------------
Interfax-Ukraine reports that the Individuals' Deposit Guarantee
Fund using decision No. 46-rsh of the board of the National Bank
of Ukraine (NBU) dated June 2, 2016 eliminating the bank license
and liquidating insolvent bank Khreschatyk has started the bank
liquidation procedure.
The fund said on its website that the decision was made by its
executive directorate on June 3, Interfax-Ukraine relates.
The liquidation procedure was launched on June 6 and will last
until June 5, 2018, Interfax-Ukraine discloses.
Ihor Kostenko has been appointed liquidator of the bank,
Interfax-Ukraine relays.
The NBU on April 5 declared Bank Khreschatyk insolvent,
Interfax-Ukraine recounts recounts.
The bank's depositors are 308,000 individuals, 98.7% of them will
be fully reimbursed for their funds (up to UAH200,000),
Interfax-Ukraine states. The total amount to be recovered is
UAH2.8 billion, according to Interfax-Ukraine.
The Individuals' Deposit Guarantee Fund introduced temporary
administration until June 4, 2016, Interfax-Ukraine notes.
The main reason for the bank's insolvency is the reluctance of
other shareholders to invest in the capitalization of the
financial institution, Interfax-Ukraine states.
Kyiv-based Bank Khreschatyk was founded in 1993. It ranked 18th
among 123 Ukrainian banks on October 1, 2015 in terms of total
assets (UAH10.09 billion).
KYIV: Fitch Removes Reference to Distressed Debt Exchange
---------------------------------------------------------
Fitch Ratings issued a correction to its November 11, 2015
release.
This rating action commentary corrects the version published on
November 11, 2015. It removes reference to Distressed Debt
Exchange as a reason for the default. The corrected version is as
follows:
Fitch Ratings has downgraded the City of Kyiv's Long-term foreign
currency Issuer Default Rating (IDR) to 'D' (Default) from 'C'.
Under EU credit rating agency (CRA) regulation, the publication
of International Public Finance reviews is subject to
restrictions and must take place according to a published
schedule, except where it is necessary for CRAs to deviate from
this in order to comply with their legal obligations.
Fitch said, "We interpret this provision as allowing us to
publish a rating review in situations where there is a material
change in the creditworthiness of the issuer that we believe
makes it inappropriate for us to wait until the next scheduled
review date to update the rating or Outlook/Watch status. In this
case the deviation was caused by the missed payment on the city's
eurobond."
KEY RATING DRIVERS
The following are the key drivers for the rating action and their
relative weights:
HIGH
The downgrade of Kyiv's Long-term foreign currency IDR follows
missed payment on the city's $US250 million eurobond and the
subsequent activation of the cross default clause on the $US300
million eurobond. The city introduced an interim moratorium on
any payments to its eurobond holders on November 6, 2015.
According to the original schedule Kyiv's $US250 million eurobond
final maturity date was 6 November 2015 and its $US300 million
eurobond July 11, 2016. Fitch considers the missed payment as a
default leading to today's downgrade of the city's Long-term and
Short-term foreign currency IDRs to 'D' from 'C'.
The introduced payment moratorium will be valid until the
eurobonds' conditions are amended and the exchange offer
accepted. The right for the city to suspend the repayment of its
eurobonds was granted by Ukraine's parliament in May 2015. The
city was mandated to extend the maturity of its external debt as
part of a broader exercise to support Ukraine's public sector
finances and external liquidity following the introduction of the
IMF's Extended Fund Facility for Ukraine in March 2015.
Additionally, the City of Kyiv extended the maturities of its
domestic bonds, which led to the recent downgrade of its Long-
term local currency IDR. Prior to that Ukraine had missed the
payment on its eurobond, which led to a recent sovereign
downgrade.
As the city's all four outstanding bond obligations are in
default, the Long-term local currency IDR has also been
downgraded to 'D' from 'RD'. Simultaneously Fitch has withdrawn
the City of Kyiv's Short-term foreign currency IDR as it is no
longer considered by Fitch to be relevant to the agency's
coverage because the city is no longer issuing short-term
external debt.
MEDIUM
Fitch expects Kyiv's budgetary performance to remain volatile due
to the overall weakness of the sovereign's public finances, lower
predictability of fiscal policy and short planning horizon, all
exacerbated by a negative macro-economic trend. Fitch expects
Ukraine's economy to contract 10% in 2015, negatively affecting
the city's fiscal capacity.
RATING SENSITIVITIES
Fitch will review the city's ratings once the debt exchange is
completed and sufficient information is available on Kyiv's
credit profile. Kyiv's Long-term foreign- and local currency IDRs
will be upgraded after Fitch determines that the exchange has
been accepted. The new ratings will be consistent with the city's
prospective credit profile. However, the ratings will likely
remain low, given high country risks and Ukraine's 'CCC' Country
Ceiling.
The rating actions are as follows:
-- Long-term foreign currency IDR: downgraded to 'D' from 'C'
-- Long-term local currency IDR: downgraded to 'D' from 'RD'
-- Short-term foreign currency IDR: downgraded to 'D' from 'C'
and withdrawn
-- National Long-term rating: downgraded to 'D(ukr)' from
'RD(ukr)'
-- Senior unsecured eurobonds (ISIN XS0233620235, US225407AA34):
downgraded to 'D' from 'C''
-- Senior unsecured eurobonds (ISIN XS0644750027, US50154TAA34):
downgraded to 'D' from 'C''
-- Senior unsecured domestic bonds: affirmed at 'D'/'D(ukr)'
===========================
U N I T E D K I N G D O M
===========================
ASTON MARTIN: S&P Affirms 'B-' CCR, Outlook Stable
--------------------------------------------------
S&P Global Ratings said that it affirmed its 'B-' long-term
corporate credit rating on U.K.-based auto manufacturer Aston
Martin Holdings (UK) Ltd. The outlook is stable.
At the same time, S&P affirmed its 'B-' senior secured debt
rating on GBP304 million notes issued by Aston Martin Capital
Ltd. The recovery rating on these notes is unchanged at '4',
indicating S&P's expectation of average recovery prospects, at
the lower end of the 30%-50% range, for noteholders in the event
of a payment default.
S&P also affirmed its 'CCC' subordinated debt rating on
$165 million 10.25% unsecured subordinated payment-in-kind (PIK)
notes due July 2018, issued by AM. The recovery rating on these
notes is unchanged at '6', indicating S&P's expectation of
negligible (0%-10%) recovery prospects for noteholders in the
event of a payment default.
The affirmation reflects S&P's expectation that AM will
soon begin to see the benefits from its substantial multi-year
investments in replacing and updating its range of luxury sports
cars, with the first new car -- the DB11 -- due to be rolled-out
in September 2016. This is supported by a growing order book and
a positive reception in the trade press. In S&P's base-case
scenario, it expects AM's operating performance to strengthen in
2016 and 2017, with higher volumes, revenues, and reported
EBITDA. This new car and others which follow will also strengthen
AM's competitive position and help provide stronger cash flows to
fund future investments.
S&P's revised assessment of AM's liquidity reflects S&P's view,
however, that the company will have reduced liquidity headroom
over the next year, due to ongoing negative free operating cash
flow (FOCF) in 2016 and 2017. AM's liquidity was replenished by
shareholders who issued preference shares of GBP100 million in
April 2015 and a further GBP100 million in April 2016. However,
AM continues to invest heavily in research and development (R&D)
and capital expenditures (capex) in executing its strategy.
Based on management guidance, capitalized R&D and capex could be
in the region of GBP180 million-GBP190 million during 2016, after
spending GBP163 million in 2015.
Despite less liquidity headroom, S&P expects the company to have
enough funding to meet this level of spending, but this depends
on the timely and successful DB11 product launch. Liquidity is
also supported by retained cash of GBP37 million (as at March 31,
2016), and the lack of major debt repayments in 2016 and 2017.
S&P notes that AM has substantial debt maturities in July 2018,
which over the next year pose a growing and material refinancing
risk.
The company's operating results for 2015 remained very weak. On
an S&P Global Ratings-adjusted basis, EBITDA was negative
GBP60 million and funds from operations (FFO) was negative GBP105
million, as S&P expenses the significant development costs
incurred by the company, while AM largely capitalizes them. AM
also has substantial interest expenses, which are partly non-cash
on PIK notes and preference shares which are capitalized and
added to reported debt. S&P do not add-back GBP10 million of
restructuring and other costs to its EBITDA and FFO figures.
FOCF was negative at GBP118 million.
In S&P's base-case scenario for 2016 and 2017, it assumes:
-- Continued volume growth in the luxury auto segment. This
is ahead of the 2%-3% S&P expects for the global auto
market being in line with global GDP growth. Higher
revenues in both years, supported by the new volumes and
average selling prices of the DB11 model launch in
September 2016. An improvement in reported EBITDA to
around GBP85 million in 2016 (at the low end of management
guidance), assisted by cost improvements, with adjusted
EBITDA at about negative GBP40 million.
-- Continued heavy annual capitalized R&D and capex of around
GBP180 million.
-- Sizable negative FOCF in excess of GBP100 million in 2016,
reducing in 2017.
Based on these assumptions, S&P continues to expect negative
leverage ratios of FFO to adjusted debt and adjusted debt to
EBITDA in 2016.
Adjusted debt on March 31, 2016 was GBP552 million, which was
similar to reported gross debt of GBP532 million, to which S&P
added small amounts for pensions and operating leases. S&P does
not deduct any cash -- which was GBP37 million -- in its debt
calculation. Under S&P's criteria for non-common equity
financing, it regards the GBP102 million of preference shares as
debt-like obligations. S&P will similarly treat the remaining
GBP100 million, which was drawn in April 2016.
S&P's assessment of AM's business risk profile is unchanged and
remains constrained by the company's high cost structure and
reported operating losses, very limited product range and
operating diversity, as well as the cyclical demand for luxury
sports cars. AM also has a niche market position, compared with
its far larger and stronger peers. Mitigating factors include
strong brand recognition; a modular production platform; and
above-average growth rates in the super-premium automotive
segment. S&P also notes the company's track record in launching
successful special edition cars, and expect the DB11 and
subsequent new production models to strengthen AM's competitive
position.
S&P's assessment of AM's financial risk profile is unchanged and
remains constrained by its negative S&P Global Ratings-adjusted
EBITDA and FFO and heavily negative FOCF, rising adjusted debt,
and lack of meaningful leverage or coverage metrics. AM's
principal debt instruments -- the senior secured notes, the PIK
notes, and its GBP40 million revolving credit facility -- all
mature in July 2018.
S&P's 'b-' anchor is unchanged. S&P maintains its "financial-
sponsor 6" assessment, given AM's private ownership profile.
The stable outlook reflects S&P's expectation that AM will
successfully launch the DB11 car in or around September 2016;
meet reported EBITDA in 2016 of around GBP85 million; and have
sufficient liquidity to fully fund the negative FOCF that S&P
forecasts for 2016 and 2017, despite S&P's view that liquidity
headroom will be reduced.
S&P does not envisage raising the ratings during the next year,
given negative FOCF, rising adjusted debt, and 2018 debt
maturities.
S&P could lower the ratings if the DB11 launch was delayed or
experienced production problems or if S&P felt that negative FOCF
will not be fully funded during 2016 or 2017 by available
liquidity. S&P could also lower the ratings if no steps were
taken to begin to refinance 2018 debt maturities.
AUBURN SECURITIES 5: Moody's Raises Rating on Cl. E Notes to B1
---------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of 9 notes in
Auburn Securities 4 PLC and Auburn Securities 5 PLC. Additionally
Moody's Investors Service has affirmed the ratings on 3 notes
across these 2 transactions.
RATINGS RATIONALE
The upgrades reflect (1) the decrease in the operational risk;
(2) the update in collateral assumptions; and (3) the swap
counterparty risk re-assessment. The rating affirmations are
driven by sufficient credit enhancement.
-- OPERATIONAL RISK
The servicer and cash manager for Auburn Securities 4 PLC and
Auburn Securities 5 PLC is Capital Home Loans. Permanent tsb plc
acts as the back-up servicer and there is no back-up facilitator
in place and both deals have reserve funds which are fully
funded. Permanent tsb plc has sold its stake in Capital Home
Loans and as a result Moody's considers that the strong level of
linkage between the servicer and the back-up servicer has
reduced. Therefore the likelihood of missed payments if there
were to be a servicer disruption has decreased. To reflect this
reduction in operational risk, Moody's has increased its rating
cap from A2 (sf) to Aa2 (sf) on the notes issued by Auburn
Securities 4 PLC and Auburn Securities 5 PLC.
-- REVISION OF KEY COLLATERAL ASSUMPTIONS
Moody's has reassessed its lifetime loss expectation on Auburn
Securities 4 PLC and Auburn Securities 5 PLC and has reduced the
portfolio expected loss assumption to 0.60% and 1.22% of the
original pool balance, from the previous levels of 0.70% and
1.57% respectively.
Moody's has also reduced the MILAN CE for Auburn Securities 5 PLC
from 15% to 11% and maintained the MILAN CE assumption for Auburn
Securities 4 PLC at 10%.
--- COUNTERPARTY EXPOSURE
As part of the rating review, Moody's has also re-assessed the
exposure to Permanent tsb plc, which is acting as interest rate
swap provider for both deals. Moody's has reassessed the
transaction loss for the most junior non-investment grade tranche
of Auburn Securities 5 PLC, resulting in a one notch upgrade in
tranche E.
The analysis undertaken by Moody's at the initial assignment of
ratings for RMBS securities may focus on aspects that become less
relevant or typically remain unchanged during the surveillance
stage. Please see Moody's Approach to Rating RMBS Using the MILAN
Framework for further information on Moody's analysis at the
initial rating assignment and the on-going surveillance in RMBS.
Factors that would lead to an upgrade or downgrade of the
ratings:
Factors or circumstances that could lead to an upgrade of the
ratings include (1) better-than-expected performance of the
underlying collateral; (2) deleveraging of the capital structure;
and (3) improvements in the credit quality of the transaction
counterparties (4) a decline in counterparty risk.
Factors or circumstances that could lead to a downgrade of the
ratings include (1) a worse than expected performance of the
underlying collateral (2) deterioration in the notes' available
credit enhancement (3) deterioration in the credit quality of the
transaction counterparties (4) an increase in counterparty risk.
LIST OF AFFECTED RATINGS
Issuer: Auburn Securities 4 PLC
-- GBP597.5 million A2 Notes, Upgraded to Aa2 (sf); previously
on Oct 21, 2015 Affirmed A2 (sf)
-- GBP40 million B Notes, Upgraded to Aa2 (sf); previously on
Oct 21, 2015 Affirmed A2 (sf)
-- GBP40 million C Notes, Upgraded to Aa2 (sf); previously on
Oct 21, 2015 Upgraded to A2 (sf)
-- GBP25 million D Notes, Affirmed Baa3 (sf); previously on Oct
21, 2015 Affirmed Baa3 (sf)
-- GBP12.5 million E Notes, Affirmed Ba1 (sf); previously on Oct
21, 2015 Upgraded to Ba1 (sf)
-- GBP15M million Notes, Upgraded to Aa2 (sf); previously on Oct
21, 2015 Affirmed A2 (sf)
Issuer: Auburn Securities 5 PLC
-- GBP255.6 million A2 Notes, Upgraded to Aa2 (sf); previously
on Jan 27, 2014 Affirmed A2 (sf)
-- GBP9 million B Notes, Upgraded to Aa2 (sf); previously on Jan
27, 2014 Affirmed A2 (sf)
-- GBP18 million C Notes, Upgraded to Aa3 (sf); previously on
Jan 27, 2014 Affirmed A2 (sf)
-- GBP11.25 million D Notes, Affirmed Baa3 (sf); previously on
Jan 27, 2014 Confirmed at Baa3 (sf)
-- GBP5.65 million E Notes, Upgraded to B1 (sf); previously on
Jan 27, 2014 Confirmed at B2 (sf)
-- GBP20M million Notes, Upgraded to Aa2 (sf); previously on Jan
27, 2014 Affirmed A2 (sf)
PEABODY HOLDINGS: Applies for Recognition of Ch.11 Proceedings
--------------------------------------------------------------
Cristina Cavilla at Gibraltar Chronicle reports that the largest
privately-owned coal mining group in the world is the subject of
the first foreign insolvency case to be dealt with in Gibraltar
under the new legislation.
American coal giant Peabody Energy filed for Chapter 11
bankruptcy proceedings in April in a US court, citing
"unprecedented" industry pressures and a sharp decline in the
price of coal, Gibraltar Chronicle recounts.
At a hearing at Gibraltar's Supreme Court last week lawyers
acting on behalf of Amy Schewtz -- Executive Vice President and
Chief Financial Officer of Peabody Energy -- applied for
recognition of those proceedings in respect of the locally-
registered Peabody Holdings Gibraltar, Gibraltar Chronicle
relates.
Two Gibraltar subsidiaries hold and control the company's
Australian assets, Gibraltar Chronicle discloses.
About Peabody Energy Corporation
Headquartered in St. Louis, Missouri, Peabody Energy Corporation
claims to be the world's largest private-sector coal company. As
of Dec. 31, 2014, the Company owned interests in 26 active coal
mining operations located in the United States (U.S.) and
Australia. The Company has a majority interest in 25 of those
mining operations and a 50% equity interest in the Middlemount
Mine in Australia. In addition to its mining operations, the
Company markets and brokers coal from other coal producers, both
as principal and agent, and trade coal and freight-related
contracts through trading and business offices in Australia,
China, Germany, India, Indonesia, Singapore, the United Kingdom
and the U.S.
Peabody posted a net loss of $1.988 billion for 2015, wider from
the net loss of $777 million in 2014 and the $513 million net
loss in 2013.
At Dec. 31, 2015, the Company had total assets of $11.02 billion
against $10.1 billion in total liabilities, and stockholders'
equity of $918.5 million.
On April 13, 2016, Peabody Energy Corp. and 153 affiliates filed
voluntary petitions for relief under Chapter 11 of the United
States Bankruptcy Code. The 154 cases are pending joint
administration before the Honorable Judge Barry S. Schermer under
Case No. 16-42529 in the U.S. Bankruptcy Court for the Eastern
District of Missouri.
As of the Petition Date, PEC has approximately $4.3 billion in
outstanding secured debt obligations and $4.5 billion in
outstanding unsecured debt obligations.
The Debtors tapped Jones Day as general counsel; Armstrong,
Teasdale LLP as local counsel; Lazard Freres & Co. LLC and
investment banker Lazard PTY Limited as investment banker; FTI
Consulting, Inc., as financial advisors; and Kurtzman Carson
Consultants, LLC, as claims, ballot and noticing agent.
The Office of the U.S. Trustee appointed seven creditors of
Peabody Energy Corp. to serve on the official committee of
unsecured creditors. The Committee is represented by:
Dimitra Doufekias, Esq.
MORRISON & FOERSTER LLP
2000 Pennsylvania Avenue
NW Suite 6000
Washington DC
Telephone: (202) 887-1500
Facsimile: (202) 887-0763
- and -
Sherry K. Dreisewerd, Esq.
SPENCER FANE LLP
1 North Brentwood Boulevard, Suite 1000
St. Louis, MO 63105
Tel: (314) 863-7733
Fax: (314) 862-4656
E-mail: sdreisewerd@spencerfane.com
Counsel to Citibank, N.A. as Administrative Agent and L/C Issuer
under the Debtors' Postpetition Secured Credit Facility and as
Administrative Agent, Swing Line Lender and L/C Issuer under the
Debtors' Prepetition Secured Credit Facility:
DAVIS POLK & WARDWELL LLP
Michael J. Russano, Esq.
450 Lexington Avenue
New York, NY 10017
Tel: (212) 450-4000
Fax: (212) 607-7983
E-mail: michael.russano@davispolk.com
Local Counsel to Citibank, N.A. as Administrative Agent and L/C
Issuer under the Postpetition Secured Credit Facility and as
Administrative Agent, Swing Line Lender and L/C Issuer under the
Prepetition Secured Credit Facility:
BRYAN CAVE
Laura Uberti Hughes, Esq.
One Metropolitan Square
211 North Broadway, Suite 3600
St. Louis, MO 63102
Tel: (314) 259-2000
Fax: (314) 259-2020
E-mail: Laura.hughes@bryancave.com
SILCOX COACH: In Administration, 40 Jobs Affected
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Chris Kelsey at WalesOnline reports that Silcox Coach Company has
gone into administration with the loss of around 40 jobs.
According to WalesOnline, despite attempts by administrators from
Sheffield-based Wilson Field to secure a buyer with various
interested parties, the 134-year-old company, which operated a
fleet of 65 coaches and buses from its base in Pembroke Dock, has
now ceased trading.
Insolvency practitioners Kelly Burton and Joanne Wright from
Wilson Field Limited were appointed by shareholders after the
company experience financial difficulties, and as a result all 92
staff at the company have been made redundant, WalesOnline
relates.
Silcox Coach Company is based in Pembrokeshire.
THPA FINANCE: S&P Affirms B+ Ratings on Two Note Classes
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S&P Global Ratings affirmed at 'B+ (sf)' and removed from
CreditWatch negative its credit ratings on THPA Finance Ltd.'s
class B and C notes.
The rating actions follow S&P's review of the borrower's (PD
Portco) performance and its future cash flow generation
potential. S&P maintains its view of the PD Portco group's
business risk profile at fair.
On Dec. 3, 2015, S&P lowered to 'B+ (sf)' from 'BB- (sf)' and
placed on CreditWatch negative its ratings on the class B and C
notes, pending S&P's assessment of the likelihood that PD Portco
will not meet the financial covenant under the loan agreement
with THPA Finance, which would lead to an event of default if not
cured.
Given the magnitude of S&P's estimates for the required cure
amounts, GBP1 million to GBP2 million annually in 2016 and 2017,
relative to the equity position and the value of the asset, S&P
currently believes that the equity investor, Brookfield
Infrastructure Partners L.P., is likely to make a capital
contribution to cure any covenant breach.
Consequently, S&P has affirmed its 'B+ (sf)' ratings on the class
B and C notes and have removed them from CreditWatch negative.
The transaction is a corporate securitization of the operating
business of PD Portco, which closed in April 2001. The cash
flows that support THPA Finance's rated classes of notes are
derived from the operations of a borrowing group that sits within
the securitization group, comprising PD Logistics Ltd., PD Port
Services Ltd., PD Teesport Ltd., and Tees and Hartlepool Pilotage
Company Ltd.
S&P's ratings address the full and timely payment of interest and
timely payment of principal due on the notes. S&P bases this
primarily on its ongoing assessment of the underlying business
risk of the borrowers, the integrity of the legal and tax
structure of the transaction, and the robustness of the cash flow
supported by structural enhancements.
UPSIDE SCENARIO
S&P could consider raising its ratings if PD PortCo delivered
better-than-expected operating performance or diversified itself
from the commodity sector. For example, if thanks to gaining new
clients, its annual EBITDA would exceed GBP40 million, while
liquidity improved to the level considered by us to be adequate
under S&P's corporate criteria, and it is able to cover its
needed capital expenditures without parental support. An increase
in funds from operations to debt to above 12% could also trigger
a positive
rating action.
DOWNSIDE SCENARIO
S&P could consider lowering its credit ratings if PD Portco
experienced a material gap between its sources and uses of
liquidity over the next year, if it breached its EBITDA debt
service coverage ratio covenant of 1.25:1, or if it were to
suffer a further deterioration of its business, due to loss of
other material customers.
RATINGS LIST
THPA Finance Ltd.
GBP305 Million Fixed- And Floating-Rate Asset-Backed Notes
Class Rating
To From
Ratings Affirmed And Removed From CreditWatch Negative
B B+ (sf) B+ (sf)/Watch Neg
C B+ (sf) B+ (sf)/Watch Neg
*********
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
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re-mailing and photocopying) is strictly prohibited without prior
written permission of the publishers.
Information contained herein is obtained from sources believed to
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The TCR Europe subscription rate is US$775 per half-year,
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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
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* * * End of Transmission * * *