---

        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

          Thursday, October 13, 2016, Vol. 17, No. 203


                            Headlines


G E R M A N Y

HELIOCENTRIS: Applies for Opening of Insolvency Proceedings


I T A L Y

UNIPOL GRUPPO: Fitch Affirms 'BB+' Senior Unsecured Debt Rating


L U X E M B O U R G

GALAPAGOS HOLDING: S&P Lowers CCR to 'B-', Outlook Stable


N E T H E R L A N D S

MS MODE NEDERLAND: GA Europe Assumes Control of Significant Assets


R U S S I A

BANK OTKRITIE: S&P Assigns 'BB-' Rating to US$400MM Notes
CB VITYAZ: Liabilities Exceed Assets, Assessment Shows
KOKS PAO: Fitch Affirms 'B' LT Currency Issuer Default Ratings
POLYUS GOLD: Moody's Assigns (P)Ba1 Rating to $500MM Sr. Notes
POLYUS GOLD: Fitch Affirms 'BB-' LT Issuer Default Rating

SILKNET JSC: Fitch Affirms 'B+' Long-Term Issuer Default Rating


S P A I N

DEOLEO SA: Moody's Lowers CFR to Caa1, Outlook Negative


U K R A I N E

FERREXPO PLC: S&P Affirms 'CCC/C' CCRs, Outlook Negative


U N I T E D   K I N G D O M

BANK OF IRELAND UK: Moody's Raises LT Deposit Ratings to Ba1
BHS GROUP: Arcadia Paid Favored Staff Following Collapse
GRANT THORNTON: Louisiana Court Dismisses Securities Claims
INTERVIAS GROUP: Moody's Affirms B2 CFR, Outlook Stable
JA SUPERMARKET: Director Gets 6-Year Disqualification

KEMBLE WATER: Fitch Affirms 'BB-' LT Issuer Default Rating
LINCOLN FINANCE: Fitch Affirms 'BB-' Rating on Sr. Secured Notes
MAMHEAD HOUSE: Ceases Trading, Owes Creditors GBP150,000
MIND CANDY: In Talks to Extend Loan Repayments, Future Uncertain
MONARCH AIRLINES: Gets GBP165MM Lifeline from Greybull Capital

SPICE FACTORY: High Court Winds Up Two Film Investment Companies
* UK: South West Transport Businesses at Risk of Insolvency


                            *********



=============
G E R M A N Y
=============


HELIOCENTRIS: Applies for Opening of Insolvency Proceedings
-----------------------------------------------------------
Reuters reports that Heliocentris Energy Solutions AG said on
Oct. 11 it applied for the initiation of insolvency proceedings
under its own administration in order to restructure the company
under its own management and control.

Reuters says the reason for the filing is the liquidity gap caused
by the significantly reduced revenue expectations. The required
financing to close this gap could not be secured on time, Reuters
relates.

Heliocentris Energy Solutions AG provides energy management
systems and hybrid power solutions for distributed stationary
industrial applications worldwide.



=========
I T A L Y
=========


UNIPOL GRUPPO: Fitch Affirms 'BB+' Senior Unsecured Debt Rating
---------------------------------------------------------------
Fitch Ratings has affirmed Unipol Gruppo Finanziario (Unipol)
Long-Term Issuer Default Rating (IDR) at 'BBB-'. Fitch has also
affirmed UnipolSai (Unipol's primary insurance subsidiary) Insurer
Financial Strength (IFS) rating at 'BBB' and the Long-Term IDR at
'BBB-'. The Outlooks on the IFS rating and the Long-Term IDRs are
Stable.

KEY RATING DRIVERS

The ratings reflect Fitch's expectations that Unipol's adequate
capital and profitability are likely to be negatively affected by
the extremely weak credit quality of its banking operations
(Unipol Banca) in the coming years. Fitch believes that Unipol's
ownership of Unipol Banca will be a drag on Unipol's earnings and
ultimately weaken capital, in view of the likely need to support
the banking operations.

Fitch's view on Unipol's capital is driven by the company's score
under Fitch's Prism Factor Based Model (Prism FBM). Unipol's score
improved to "Strong", based on end-2015 financials, from
"Adequate" in 2014, as Unipol underwrote a smaller amount of
premiums. The quality of capital is negatively affected by the
amount of goodwill on the balance sheet (EUR1.6bn or 20% of total
shareholders' funds at end-June 2016) and various contingent
liabilities, including the bank. However, goodwill is excluded
from total available capital in Prism.

Unipol's consolidated regulatory Solvency II ratio, calculated
using undertaking specific parameters (USP), decreased to 140% at
end-June 2016 from 150% at end-2015 due to stock-market volatility
and lower interest rates. The financial leverage ratio (FLR) is
relatively high at 35% at end-June 2016. Fitch expects FLR to
remain commensurate with the current ratings.

Unipol's non-life combined ratio improved to 96% at end-June 2016
(end-June 2015: 97%) driven by a more favourable natural
catastrophe trend than last year. However, net income decreased to
EUR160m at end-June 2016 (end-June 2015: EUR255m), as
exceptionally high net realised gains in 2015 cannot be repeated
in 2016, due to stock-market volatility. Fitch-calculated net
income return on equity was 3.4% at end-June 2016. Net profit is
likely to remain volatile due the uncertainty linked to non-
insurance operations, notably banking and real estate, and
financial markets.

The exposure of Unipol to Italian government debt (BBB+/Stable)
was EUR39bn at end-June 2016, about 5x consolidated shareholders'
funds. Like most Italian insurers, this creates concentration risk
in Unipol's investment portfolio. However, Unipol plans to reduce
this exposure. In addition, Unipol's exposure to real-estate
assets (about 7% of total investment assets at end-June 2016) is
negative to Unipol's ratings, as some of these assets are loss-
making. However, Unipol continues to reduce its exposure to real
estate. The difficult Italian property market is hampering this
policy.

Unipol has a strong franchise in Italy and is the largest Italian
non-life insurance group by non-life gross written premiums.
Unipol acquired Fondiaria-SAI in 2012 to create the largest motor
underwriter in Italy. The group distributes its insurance products
through a multichannel approach.

RATING SENSITIVITIES

Factors that could trigger a downgrade of Unipol's ratings
include:

   -- Prism FBM assessment worsens to "Somewhat Weak"

   -- FLR deteriorates to above 40% for a sustained period.

   -- Return on equity falls below 3% for a sustained period.

Factors that could trigger an upgrade include:

   -- Prism FBM assessment remains "Strong" for a sustained
      period.

   -- Return on equity remains above 6% for a sustained period.

FULL LIST OF RATING ACTIONS

Unipol Gruppo Finanziario

   -- Long-Term IDR affirmed at 'BBB-'; Outlook Stable

   -- EMTN programme: affirmed at 'BB+'

   -- Senior unsecured debt: affirmed at 'BB+'

UnipolSai

   -- IFS rating affirmed at 'BBB'; Outlook Stable

   -- Long-Term IDR affirmed at 'BBB-'; Outlook Stable

EMTN programme:

   -- Senior debt: affirmed at 'BBB-'

   -- Dated/undated subordinated debt: affirmed at 'BB'

   -- Dated subordinated debt: affirmed at 'BB+'

   -- Undated subordinated debt: affirmed at 'BB'



===================
L U X E M B O U R G
===================


GALAPAGOS HOLDING: S&P Lowers CCR to 'B-', Outlook Stable
---------------------------------------------------------
S&P Global Ratings lowered its long-term corporate credit rating
on Luxembourg-based heat-exchanger equipment provider Galapagos
Holding S.A. to 'B-' from 'B'.  The outlook is stable.

At the same time, S&P lowered these ratings on the group's debt:

   -- S&P's issue rating on the super senior secured facilities,
      comprising a EUR75 million revolving credit facility (RCF)
      and a EUR400 million guarantee facility, to 'B+' from 'BB-'.
      The '1' recovery rating on these facilities remains
      unchanged, reflecting S&P's expectations of very high
      (90%-100%) recovery prospects in the event of a payment
      default;

   -- S&P's issue rating on the senior secured notes to 'B-' from
      'B'.  The recovery rating on the notes remains at '4', with
      recovery prospects in the higher half of the 30%-50% range;
      and

   -- S&P's issue rating on the senior unsecured notes to 'CCC'
      from 'CCC+'.  The recovery rating on these notes is '6',
      reflecting S&P's expectations of negligible (0%-10%)
      recovery.

The downgrade reflects S&P's view that recent sluggish performance
points to deterioration in Galapagos' business risk profile, and
that its credit ratios will remain weak for the next 12 to 18
months.

"We now view the group's business risk profile as weak, compared
with fair previously. Our initial assumption that Galapagos'
business diversity -- represented through its subsidiaries
Kelvion, ENEXIO, and DencoHappel -- had stabilized financial
performance by making the company less vulnerable to cyclical
downturns is now less valid given the group's divestment of
DencoHappel.  In our reassessment of Galapagos' business risk, we
also factor in the volatility of intrayear results.  The group's
past results show that economic conditions and exposure to
cyclical and mature markets -- including power, climate and
energy, oil and gas, and marine and chemicals -- hamper revenues
and operating performance. The high fixed-cost base and
significant restructuring charges negatively affect EBITDA.  We
anticipate that the group's continued restructuring needs will
markedly pull down operating performance in 2017, in turn denting
profitability in absolute terms and holding margins in check," S&P
said.

The divestment of DencoHappel to FlÑkt Woods has a positive impact
on Galapagos' financial risk profile because the sale proceeds of
EUR192 million will be used for a conditional redemption of a
portion of its EUR325 senior secured notes and reduce the interest
burden.  The transaction has been cleared by the relevant merger
control authorities and is expected to be legally completed on
Oct. 12, 2016, at a total purchase price of EUR255 million.

Despite this disposal, high debt and negative free operating cash
flow generation constrain the rating, in S&P's view.  Galapagos'
adjusted debt reached about EUR886.3 million on Dec. 31, 2015,
with adjustments for operating leases of about EUR47.1 million,
approximately EUR32.7 million for unfunded postretirement
obligations, and about EUR13.4 million of finance leases.  This
translates into adjusted debt-to-EBITDA and EBITDA-to-interest
ratios of about 6.8x and 2.3x, respectively.  Despite management's
plans to implement major profit protection measures (such as the
cash optimization project with a main focus on trade working
capital, capital expenditures [capex], and trapped cash) and other
improvement initiatives, S&P still anticipates negative free
operating cash flow generation for the next 12 months.

The stable outlook reflects S&P's view that Galapagos will
maintain an adjusted FFO cash interest coverage ratio above 1.5x.
S&P further expects Galapagos will continue aiming to enhance its
revenues and optimize its cost base to improve operating and
financial performance.

S&P could lower the rating if Galapagos' adjusted funds from
operations cash interest coverage ratio dropped to below 1.5x or
if S&P perceived weakening liquidity.  Negative rating pressure
would also arise if reported EBITDA fell below EUR80 million, or
if S&P considered that the capital structure had become
unsustainable.  This could occur if the group failed to succeed
with its restructuring program.

S&P regards the likelihood of an upgrade as limited at this stage
because Galapagos' leverage is high and S&P sees only a distant
possibility that the group would significantly strengthen its
credit metrics.  S&P notes that Galapagos' private equity sponsor
ownership contributes an element of uncertainty regarding
potential changes to the group's acquisition or disposal strategy,
and its financial policy.



=====================
N E T H E R L A N D S
=====================


MS MODE NEDERLAND: GA Europe Assumes Control of Significant Assets
------------------------------------------------------------------
GA Europe, a retail restructuring specialist and a division of
Great American Group (GA), has assumed control of significant
assets of the Dutch plus size retailer, MS Mode Nederland B.V.,
which filed for insolvency on August 11.  GA Europe acquired these
assets including EUR36 million retail inventory within 130
Nederland stores.

With the goal to deliver a sustainable, restructured business to a
going concern investor, GA Europe will be operating the business
and executing a store closure program for MS Mode's stores that
will enable the retailer to focus on its remaining profitable
operations.

"By assuming control of the operations and implementing a proven
restructuring program, GA Europe will provide critical support to
MS Mode in its pursuit to revitalize an important retailer in the
plus size fashion business," said Dr. Tino Bauer, Managing
Director of GA Europe.  "Having successfully completed over 25
similar transactions, GA Europe has the experience to not only
provide capital quickly, but is also positioned to expertly manage
the restart of the business."

                        About GA Europe

GA Europe, a division of Great American Group, LLC, offers deep
retail expertise and a compelling track record in solving
challenging retail situations, operating in partnership with
retailers, private equity sponsors, financial stakeholders,
corporate lenders and their professional advisors.  GA Europe's
services focus on valuing retail assets, lending to retailers and
working out complex distressed situations, often by taking senior
investment positions.



===========
R U S S I A
===========


BANK OTKRITIE: S&P Assigns 'BB-' Rating to US$400MM Notes
---------------------------------------------------------
S&P Global Ratings assigned its 'BB-' issue rating to the
US$400 million 4.5% senior unsecured loan participation notes
(LPNs) due in 2019, issued by special purpose vehicle (SPV) OFCB
Capital PLC for the sole purpose of financing a loan to Russia-
based Bank Otkritie Financial Co. (BB-/Negative/B; 'ruAA-/--/--).

The rating is in line with the update on Aug. 9, 2016, of S&P's
"Group Rating Methodology," which clarifies how it rates LPNs
issued by SPVs for the sole purpose of financing a loan to a
corporate entity, financial institution, or insurance company
(including their holding companies).

S&P rates LPNs issued by an SPV at the same level as it would rate
an equivalent-ranking debt of the underlying borrower (the
sponsor) and treat the contractual obligations of the SPV as
financial obligations of the sponsor when these conditions are
met:

   -- All of the SPV's debt obligations are backed by equivalent-
      ranking obligations with equivalent payment terms issued by
      the sponsor;

   -- The SPV is a strategic financing entity for the sponsor set
      up solely to raise debt on behalf of the sponsor's group;
      and

   -- S&P believes the sponsor is willing and able to support the
      SPV to ensure full and timely payment of interest and
      principal when due on the debt issued by the SPV, including
      payment of any of the SPV's expenses.

S&P considers that the LPNs meet all the aforementioned
conditions.  Therefore, the rating on the LPNs is equivalent to
our long-term counterparty credit rating on Bank Otkritie
Financial Co.


CB VITYAZ: Liabilities Exceed Assets, Assessment Shows
------------------------------------------------------
The provisional administration of CB Vityaz (LLC) appointed by
virtue of Bank of Russia Order No. OD-3185, dated November 16,
2016, following revocation of its banking license, revealed in the
course of examination of the bank's financial standing indications
of moving out assets or concealing facts of earlier moved out
assets through extending loans to organizations not involved in
real economic activities and known to be unable to fulfill their
obligations, according to the press service of the Central Bank of
Russia.

According to estimates by the provisional administration, the
asset value of CB Vityaz (LLC) does not exceed RUB0.98 billion,
while its liabilities to creditors amount to RUB2.7 billion,
including liabilities worth RUB0.26 billion to households.

On January 20, 2016, the Court of Arbitration of the city of
Moscow took a decision to recognize CB Vityaz (LLC) insolvent
(bankrupt) with the state corporation Deposit Insurance Agency
appointed as a receiver.

The Bank of Russia submitted the information on the financial
transactions bearing the evidence of criminal offences conducted
by the former management and owners of CB Vityaz (LLC) to the
Prosecutor General's Office of the Russian Federation, the Russian
Ministry of Internal Affairs and the Investigative Committee of
the Russian Federation for consideration and procedural decision
making.


KOKS PAO: Fitch Affirms 'B' LT Currency Issuer Default Ratings
--------------------------------------------------------------
Fitch Ratings has removed Russian pig iron company PAO Koks
Group's (KOKS) ratings from Rating Watch Negative (RWN) and has
affirmed the Long-Term Foreign- and Local-Currency Issuer Default
Ratings (IDRs) at 'B' with a Negative Outlook.

The affirmation of the ratings and their removal from RWN reflect
reduced refinancing risk, underpinned with a smoother debt
maturity profile over the short term since it made a partial
Eurobond repayment in June 2016.

The Negative Outlook is driven by a combination of deleveraging
and remaining liquidity risks. Fitch said, "In particular, we
expect KOKS to deleverage, with funds from operations (FFO)-
adjusted leverage falling below 4x after being 4.2x at end-2016,
and to progress in obtaining more diversified and longer-term
funding. Failure to progress in deleveraging and to achieve
further liquidity improvements would result in a rating
downgrade."

KEY RATING DRIVERS

Liquidity Tight but Manageable

Fitch considers KOKS' liquidity tight as it relies on undrawn
committed short-term facilities and the company's ability to roll
over already drawn funds in due course. KOKS's short-term debt
fell to RUB25bn at end-1H16 (FYE15: RUB37bn) but remained a
significant 51% of total RUB49bn debt. This short-term debt
largely consists of revolving credit facilities (RCFs) with annual
pay-down features. Fitch said, "We consider them short term even
though some are multi-year facilities with a record of regular
prolongations."

"Taking into account the diversity of RCF creditors and the
available undrawn long-term debt of above RUB2bn at end-1H16, we
expect refinancing risk to have become more appropriate for the
current rating since the last review in March 2016, as a large
Eurobond repayment was due in June 2016," Fitch said.

Leverage Peak in 2016

"We expect KOKS to deleverage in 2H16 to 4.2x and 3.7x in 2017 as
pig iron and steel markets rebound after their lows in 2H15-1H16.
Recovering pig iron prices, a weak rouble and increasing
contributions from the Butovskaya mine are among the factors
supporting sales at around RUB60bn and margin growth to 27% by
2017," Fitch said.

"However, we expect leverage to stabilize at 3.6x-3.7x from 2017
due to post-2017 margin moderation back to below 25% on mid-
single-digit cost inflation and the strengthening rouble. We also
incorporate the upper amount of KOKS' RUB6bn-RUB12bn investment
range assumed for the off-balance-sheet Tula-Steel project," Fitch
said.

Partial Self-Sufficiency

KOKS is over 100% self-sufficient in coke, 71% in iron ore and 50%
in coking coal. KOKS expects to achieve 100% self-sufficiency in
coking coal by 2018 with the commissioning of the Tikhova mine in
2017 and further production ramp-up at the recently commissioned
Butovskaya mine. The commissioning of the iron ore deposit at
Kombinat KMA Ruda that would bring KOKS's self-sufficiency in iron
ore to 100% is likely to be after 2018.

Strong Position in Pig Iron

KOKS is the world's largest exporter of merchant pig iron and top
producer of merchant coke in Russia. In 2015 it controlled 15% of
the world's pig iron exports and 29% of total CIS pig iron sales.
KOKS accounted for 25% of total coke sales in CIS. The company is
geographically diversified in its pig iron sales with a strong
presence in North America (38% of total sales), Europe (29%),
Turkey and the Middle East (25%), and Asia (8%).

KOKS specializes in commercial pig iron, which is used in the
automotive, machinery and tools industries, which require
high-quality pig iron (low content of sulphur and phosphorus).
KOKS' new de-sulphurizing machine may increase the share of
premium pig iron up to 50%, if economically feasible.

Tula-Steel Project

KOKS is developing a steel project in European Russia with two
partners, DILON Cooperatif U.A. and LLC Steel. All three partners
are ultimately controlled by the Zubitskiy family. At present LLC
Steel and DILON control the Tula-Steel project through equity
interests of 66.7% and 33.3%, respectively.

KOKS has no control, legal ties or debt recourse and does not
consolidate the project in its financial results. However, it has
so far been the only project funding source (end-2015: RUB6bn)
excluding Gazprombank's committed RUB20bn eight-year project
financing. Fitch said, "We conservatively assume KOKS will provide
a further RUB12bn."

The company expects a 2mtpa steel plant to be commissioned by end-
2017 with ramp-up in 2018. The steel plant will produce specialty
steel for the machinery and automotive sectors, sourcing pig iron
from neighboring Tulachermet, a subsidiary of KOKS.

KOKS may consider consolidating Tula-Steel should its leverage
moderate. Fitch does not consolidate Tula-Steel, but its
consolidation or higher-than-expected contributions from KOKS will
create leverage and rating pressure. Consolidating the project may
also create a significant secured debt layer affecting the
recoveries of senior unsecured bondholders.

KEY ASSUMPTIONS

Fitch's key assumptions within its rating case for the issuer
include:

   -- Average export pig iron price decline of 3% in 2016 with
      mid-single-digit recovery after 2016

   -- Further ramp-up at Butovskaya coal mine and commissioning
      of Tikhova coal mine in 2017

   -- Average USD/RUB68.5 in 2016 with gradual rouble
      appreciation towards 57 in 2019

   -- Capex at below RUB5bn and no dividends until 2019

   -- RUB12bn funding contribution to non-consolidated Tula-Steel
      in 2016-2017

RATING SENSITIVITIES

Negative: developments that may, individually or collectively,
lead to negative rating action include:

   -- tightening liquidity and increasing refinancing risk,
      coupled with an inability to improve the liquidity ratio to
      close to 1x by mid-2017;

   -- market deterioration, capex overrun or Tula-Steel project
      consolidation causing FFO-adjusted gross leverage to rise
      above above 4x;

   -- FFO fixed charge cover sustained below 2x.

Positive: Fitch does not expect any rating upgrade at this stage.
Developments that may, individually or collectively, lead to the
revision of the Outlook to stable include:

   -- positive FCF across the cycle, leading to FFO-adjusted
      gross leverage reverting below 4x on a sustained basis;

   -- adequate liquidity position with manageable refinancing
      risk.

FULL LIST OF RATING ACTIONS

PAO Koks Group:

   -- Long-Term Foreign-Currency Issuer Default Rating (IDR) of
      'B' affirmed; Outlook Negative; off RWN

   -- Long-Term Local-Currency Issuer Default Rating (IDR) of 'B'
      affirmed; Outlook Negative; off RWN

   -- Short-Term IDR of 'B' affirmed; off RWN

Koks Finance Limited:

   -- Senior unsecured rating for Eurobond issue due in 2018 of
      'B'(RR4) affirmed; off RWN


POLYUS GOLD: Moody's Assigns (P)Ba1 Rating to $500MM Sr. Notes
--------------------------------------------------------------
Moody's Investors Service has assigned a provisional (P)Ba1 (LGD3)
rating to Polyus Gold International Limited's (Polyus Gold)
proposed $500 million senior unsecured notes.  The notes will be
guaranteed by Polyus Gold's key operating subsidiary, Joint-Stock
Company Gold-Mining Company Polyus (JSC Polyus), which contributes
more than 75% to the group's consolidated EBITDA and operating
cash flow.

The bond proceeds will be primarily used to refinance the
company's existing credit facilities.

Moody's issues provisional ratings in advance of the final sale of
securities, and these ratings represent only the rating agency's
preliminary opinion.  Upon a conclusive review of the transaction
and associated documentation, Moody's will assign definitive
ratings to the securities.  A final rating may differ from a
provisional rating.

List of Affected Ratings:

Assignments:

Issuer: Polyus Gold International Limited

  Backed Senior Unsecured Regular Bond/Debenture, Assigned
   (P)Ba1(LGD3)

                         RATINGS RATIONALE

The notes' rating of (P)Ba1 is at the same level as Polyus Gold's
corporate family rating, which reflects Moody's assumption that
the notes will rank pari passu with other unsecured and
unsubordinated obligations of Polyus Gold's group, which is the
only type of debt in the group's debt portfolio structure.
Moody's expects that the issuance proceeds will be mostly used for
early repayment of part of the group's existing debt maturing in
2018-19, so the new notes placement will not increase Polyus
Gold's leverage.

                       PRINCIPAL METHODOLOGY

The principal methodology used in this rating was "Global Mining
Industry" published in August 2014.

Jersey-domiciled Polyus Gold is a holder of a 93.3% effective
stake in Russia-based PJSC Polyus, which is one of the lowest-cost
gold producers globally, with six operating mines and one
development project in Russia.  In 2015, the company produced 1.8
million ounces of gold, ranking as the ninth-largest producer
globally, and generated revenues of $2.2 billion and Moody's-
adjusted EBITDA of $1.3 billion.  Polyus Gold is beneficially
controlled by Mr. Said Kerimov.  Polyus Gold owns a 63.72% stake
in PJSC Polyus, while a 31.75% stake in PJSC Polyus are quasi-
treasury shares owned by its subsidiary LLC Polyus Invest, and
4.53% is in free float on the Moscow Exchange and ADRs in the OTC
market.


POLYUS GOLD: Fitch Affirms 'BB-' LT Issuer Default Rating
---------------------------------------------------------
Fitch Ratings has revised the Outlook on Polyus Gold
International's (PGIL) Long-Term Issuer Default Rating (IDR) to
Positive from Negative and affirmed it at 'BB-'. Fitch has
affirmed the Short-Term IDR at 'B'. The senior unsecured rating of
the existing senior unsecured guaranteed notes has also been
affirmed at 'BB-'.

Simultaneously, Fitch has assigned an expected senior unsecured
rating of 'BB-(EXP)' to PGIL's planned notes issue. The assignment
of a final rating to the notes is conditional on the receipt of
final documentation in line with the draft already received.

The revision of the Outlook to Positive reflects Fitch's view that
Polyus Gold will maintain a conservative financial profile with no
additional share buyback or one-off dividend payments over the
next two to three years, supported by the adoption of a new
dividend policy which links the dividend payout percentage to
group leverage. The company's significant cash balances and the
management's commitment to reduce leverage by end-2016 also
underpin the Positive Outlook.

"In the medium term, we expect production growth at existing
operations and the planned Natalka project being brought on
stream. We forecast the company's funds from operations (FFO)
adjusted gross leverage to reduce below 3.0x by 2018 compared with
an expected 4.3x as at FYE2016," Fitch said.

The notes will be guaranteed by JSC Gold Mining Company Polyus, a
key operating subsidiary and a holding company for all company's
key subsidiaries accounting for 100% of 2016 EBITDA and 100% of
fixed assets at end-2016. The proceeds from the offering are
expected to be used to repay existing debt maturing in 2017-2018.
The notes will rank pari passu with PGIL's existing and future
unsecured and unsubordinated obligations. The guarantee will rank
pari passu with all existing and future unsecured and
unsubordinated obligations of the guarantor.

KEY RATING DRIVERS

Corporate Governance Changes

The previously strong corporate governance structures at PGIL were
dismantled following the change in shareholding structure in late
2015. The company has since implemented a new framework at the
PJSC Polyus level, including independent director representation.
Fitch said, "At present, we regard corporate governance within the
group as being slightly below average compared with its peer group
of major Russian corporates and notch its rating down by two
notches compared with international peers. This factors in Fitch's
view of the higher than average systemic risks associated with the
Russian business and jurisdictional environment as well as its
assessment of the company's specific corporate governance
practices."

Leverage Reduction by 2018

The USD3.4 billion share buyback completed in 1H16 was funded
using USD2.5 billion of new debt and USD0.9 billion of balance
sheet cash. This resulted in a material increase in leverage,
driving FFO adjusted gross leverage to 4.3x in 2016 under Fitch's
base case compared with 2.7x in FY15. Fitch expects net
debt/EBITDA to exceed 2.5x in 2016 and 3.0x in 2017, compared with
historical levels below 1.0x. Fitch said, "We also expect absolute
debt levels to remain elevated until 2018 when expected production
increases from the company's new Natalka mine, as well as
increased volumes from some existing mines, will start to have a
positive impact on metrics. For 2018, our base case expectation is
for FFO gross leverage at around 3.0x and FFO net leverage to be
less than 2.0x."

Competitive Cost Position

Operationally PGIL remains a strong group with good quality gold
reserves and large efficient open pit assets, which place it in
the first quartile of the global cost curve (total cash costs
(TCC)). In 1H16, TCC declined to USD377/oz - a 14% decline year-on
year. This was driven by local currency (RUB) devaluation as well
as operational improvements, which resulted in higher processing
volumes and better recovery rates.

Strong Production Prospects

The group reported production growth of 7% in 1H16 to 839k/oz of
metal versus 784k/oz in 1H15. This is in line with the positive
trend over the past two years. Most of the increase came from the
Blagodatnoe and Verninskoe mines, which delivered higher
processing volumes and better recoveries. Fitch expects production
to reach 1,900k/oz in 2016 versus 1,775k/oz in FY15.

In terms of growth, the group intends to concentrate on
streamlining and improving capacity on its key producing mines. In
addition, Fitch expects the group's key development mine - the
Natalka mine - to start producing in late 2017 with a full ramp up
in 2018, resulting in an approximate 15%-20% year-on year increase
in the group gold production.

KEY ASSUMPTIONS

   -- No cash upstreaming over the rating horizon by way of share
      buybacks and no dividend payments in 2016

   -- Dividends in line with new dividend policy of 30% of EBITDA
      if net debt/EBITDA is less than 2.5x

   -- Average gold price of USD1,246/oz in 2016, USD1,141/oz in
      2017, USD1,120/oz in 2018 and USD1,100/oz afterwards
      (realised prices adjusted to reflect gold price hedging
      entered into by the company)

   -- USD/RUB exchange rate of 67.7 in 2016, 65 in 2017, 60 in
      2018 and 57 thereafter

   -- Natalka project to commence production in 2H17 and ramp up
      over 2018-2019

   -- Operating efficiencies at the existing mines as per
      management's expectations

RATING SENSITIVITIES

Positive: Future developments that may, individually or
collectively, lead to positive rating action include:

   -- Expectation of FFO gross leverage below 3.0x by end-2018

   -- Sustained positive FCF generation

Negative: Future developments that could lead to negative rating
action include:

   -- Higher than expected dividend payments or other shareholder
      distributions over 2016-2019 leading to weaker liquidity
      and sustaining high leverage metrics

   -- FFO gross leverage expected to be sustained above 4.0x by
      end-2018.

   -- Sustained negative FCF generation

LIQUIDITY

Polyus Gold's liquidity position is strong, with USD1.7 billion of
cash and USD0.7 billion of undrawn committed bank facilities as of
1H16, compared with only USD129 million of short-term borrowings.


SILKNET JSC: Fitch Affirms 'B+' Long-Term Issuer Default Rating
---------------------------------------------------------------
Fitch Ratings has affirmed JSC Silknet's Long-Term Issuer Default
Rating (IDR) at 'B+' with a Stable Outlook.

The agency also expanded the downgrade trigger to 3x funds from
operations (FFO)-adjusted net leverage, from 2.5x, due to
significantly lower FX risks after Silknet's successful
refinancing of all its FX-denominated debt into local currency in
September 2016.

Silknet is the incumbent fixed-line telecoms operator in Georgia,
holding sustainably strong market positions of above 40% in both
fixed-voice and broadband services. Voice revenue is falling, but
it has long-term growth prospects in broadband, and generates
stable cash flow from a growing subscriber base. The lack of
significant mobile operations is a strategic weakness, as is its
small absolute scale -- Silknet services fewer than 375,000 fixed
lines and it generated GEL55m (about USD24m) EBITDA in 2015.

Silknet's liquidity is weak as it relies on uncommitted facilities
from its relationship bank to regularly re-finance its amortizing
debt, so far without disruption. Refinancing risk is mitigated by
moderate leverage -- Fitch projects it to remain at or below 2x
FFO-adjusted net leverage (1.6x at end-2015). The company's
corporate governance has been weak, but recent changes suggest it
is on track to improve.

KEY RATING DRIVERS

Strong Incumbent Positions Outside Tbilisi

Silknet benefits from its strong position as the incumbent fixed-
line telecoms provider across most of Georgia's territory, with
the notable exception of the capital, Tbilisi, and some other
large cities. The company was relatively late to realise the
potential of broadband services. Competitors have taken a
significant broadband market share as they rolled out their own
infrastructure and have been able to cherry-pick the most
commercially attractive locations, typically in large cities.

"We expect Silknet to defend its market position. Its advantage of
being able to offer almost nationwide ADSL coverage across its
existing fixed-line franchise will be supported by significant
investments in new fibre infrastructure. Competition is typically
less intense outside large cities, and the lower-speed ADSL-based
service remains competitive in those areas," Fitch said.

The company's large fixed-line franchise and extensive copper
infrastructure has allowed it to rapidly develop its broadband
subscriber base despite its late start and become the largest
broadband operator in Georgia. In June 2016 the company controlled
45% of fixed lines and 61% of fixed voice revenues in the country;
its subscriber and revenue broadband market shares were 40% and
41%, respectively.

Revenue Growth Challenges

"We expect Silknet's revenue growth to remain sluggish, at low- to
mid-single-digit percentages. The traditional fixed-line voice
segment is in structural decline, which is likely to continue,"
Fitch said. This segment accounted for 20% of Silknet's 2015
revenue, and its double-digit contraction significantly weighs on
the total. Fixed-to-mobile substitution is likely to continue
unabated, as customers can typically obtain better pricing options
on mobile-to-mobile calls.

Broadband and pay-TV services remain key growth drivers. However,
their contribution is only likely to offset voice decline and keep
revenue growth slightly positive. Subscriber broadband growth has
significantly slowed in Georgia since 2014. Potential revenue
growth from upselling bundled services and market share gains is
likely to be limited, due to continued competition and relatively
limited consumer purchasing power outside the large cities.

"Revenue growth in the Georgian telecoms market has slowed to
single-digit percentages and we believe acceleration is unlikely,"
Fitch said. Revenue from the still-expanding broadband and pay-TV
segments grew by only 2.7% yoy and 8.1% yoy, respectively, in
2Q16, compared with 18.0% yoy and 21.3% yoy growth, respectively,
in 2Q15, according to data from the regulator. Slower organic
growth may lead to intensified price competition, as smaller
companies tend to become more disruptive if they are unable to
achieve meaningful expansion of their subscriber base.

Low GDP Per Capita Constrains Growth

Relatively low GDP per capita of USD3,249 (at market exchange
rates in 2015) in Georgia is likely to constrain revenue growth
and efforts to increase an average telecom bill through offering
premium-quality services at a higher price.

The current moderate broadband subscriber penetration level of
close to 50% of households in Georgia suggests some longer-term
subscriber growth potential. However, year-on-year subscriber
growth had already slowed to 6% at end-1H16, with revenue growth
lagging behind due to price competition. Key urban areas have
already been covered, while less populated areas are less affluent
than the national average.

Fibre Improving Competitiveness; Execution Risks

The company's strategy of rapid fibre development will improve its
competitive position. Fitch said, "We believe Silknet's plans to
achieve ARPU growth from the existing customer base may be more
challenging."

Silknet plans to continue to make significant fibre investments,
which would allow it to achieve network quality parity with its
key broadband competitors, which typically operate proprietary
fibre networks. Silknet's ability to offer ADSL service on its
legacy copper network give it the advantage of quick subscriber
coverage, but fibre peers can offer higher-speed, better-quality
broadband connections.

Improving network quality will come at a price. There is a risk
that investments may not be quickly recouped from higher,
incremental revenue. The management considers the current ADSL
customer base likely to migrate to a better-quality fibre service,
and that customers are more likely to pay more for higher
connection speeds, while increasingly taking up pay-TV that would
further increase ARPUs. Fitch said, "We believe some positive
traction is likely; however, the mass market is extremely price
sensitive in Georgia and competition remains intense."

Size Limits Efficiency Gains, Funding Options

The company's small absolute size is likely to be a drag on its
efforts to improve profitability. It will also be a limiting
factor for its funding options. Its small operational size of
fewer than 375,000 fixed lines may hamper its ability to achieve
economies of scale on a par with larger peers. Silknet's small
scale may also hamper access to international financial markets.

Mobile Lack a Strategic Disadvantage

"Silknet does not have any significant mobile operations, which we
view as a strategic disadvantage. It may face more intense
competition from Magticom, Georgia's only quad-play-enabled
operator," Fitch said. Magticom, the largest mobile operator in
the country, recently entered the fixed-line broadband segment by
acquiring Caucasus Online, the second-largest broadband operator
and Silknet's key rival.

Silknet has a portfolio of mobile frequencies, including for LTE
services, but organic mobile development would entail significant
execution risks and be likely to weigh on financial results and
leverage. The Georgian mobile market is highly competitive, with
third entrant Vimpelcom struggling to stabilize its EBITDA margin
at above 20% despite controlling almost 25% of the subscriber base
-- which does not leave many opportunities for a new potential
entrant. Fitch would treat Silknet's acquisition of an existing
mobile operator as an event risk.

Gradual Margin Improvement Helped By Cost Optimization

Silknet intends to remain focused on cost optimization, leading to
gradual profitability improvement. It spun off some non-core
service operations, including network repair and subscriber
installations, into ServiceNet LLC in 2015. It concurrently
entered into a long-term contract with ServiceNet, aiming to
achieve a 5% cost saving on these services. The spin-off is likely
to result in higher reported EBITDA and capex as some costs
previously treated as operating may now be capitalized, but this
should only have a minor impact on free cash flow.

Evolving Corporate Governance

Silknet is a subsidiary of Silk Road Group, a diversified group
with assets in Georgia's transport, trading, real estate, retail
and banking sectors. The group is ultimately majority controlled
by Mr. Ramishvili, a Georgian-born individual, and two other
individuals, through a number of holding companies. Silknet's
corporate governance situation is evolving as the company is
establishing formal procedures to increase transparency and
introduce some checks on shareholders' access to the company's
cash flows, with some important steps already taken.

Silknet has a history of upstreaming cash to shareholders through
large loans that were later set off against equity. It also
effectively guaranteed some debt of its sister companies. The
company expects these practices to be stopped. Silknet made
amendments to its charter of incorporation in July 2016 to impose
restrictions on dividend distributions and related-party
transactions. Fitch said, "We view these amendments as positive,
although shareholders retain the ability to reverse most of them."
Board practices are somewhat informal, with no independent
directors.

Moderate Leverage, Improving Cash-Flow Generation

Leverage was moderate at 1.6x FFO-adjusted net leverage and 1.7x
net debt/EBITDA at end-2015. Fitch said, "We expect FFO-adjusted
leverage to remain at or below 2x in the medium to long term. FFO
was boosted in 2015 by significant one-off IRU proceeds, which are
likely to decline. We therefore project FFO-adjusted net leverage
to rise in 2016 but not to exceed 2x. Leverage may come under
pressure from an ambitious investment program unless accompanied
by significant EBITDA growth from wider fibre take-up and improved
market share."

"We project Silknet's pre-dividend cash flow to start gradually
increasing, helped by an ongoing focus on improving cost
efficiency, modest revenue growth and lower corporate profit tax
in Georgia. We do not expect the company's capex to exceed 25% of
revenue on average across 2016-2019," Fitch said.

Modest FX Risks

Silknet's FX risks are modest and primarily relate to operating
expenses and capex, after the company successfully refinanced all
its debt into domestic currency in September 2016 at the cost of
paying slightly higher interest. In addition to equipment spare
parts, which are almost entirely imported, most of its content and
international interconnection costs, including for internet
traffic, are foreign-currency denominated. Fitch said, "We
estimate that the proportion of Silknet's operating expenses in
foreign currency is higher than for most of its international
peers."

Stretched Liquidity

Silknet does not have sufficient liquidity to repay its amortizing
debt of slightly above GEL15m a year. The company heavily relies
on Bank of Georgia (BB-/Stable), by far the largest creditor and
key relationship bank, for refinancing. Silknet had a GEL217m
credit line with this bank at end-2015, but this facility is
uncommitted. High refinancing risk is somewhat mitigated by
Silknet's moderate leverage.

KEY ASSUMPTIONS

Fitch's key assumptions within the rating case for Silknet
include:

   -- a significant reduction in cash flow from IRU, leading to
      weaker 2016 FFO than in 2015;

   -- low- to mid-single-digit percentage organic revenue growth
      in 2016-2019;

   -- low corporate profit tax after tax reforms in Georgia;

   -- a sharp one-off improvement in the reported 2016 EBITDA
      margin, due to the spin-off of ServiceNet in 2015; and

   -- capex at around 25% of revenues on average across 2016-
      2019.

RATING SENSITIVITIES

Positive: developments that may, individually or collectively,
lead to positive rating action include:

   -- improved FCF generation, alongside stable operating
      performance, comfortable liquidity and a track record of
      improved corporate governance.

Negative: developments that may, individually or collectively,
lead to negative rating action include:

   -- leverage rising to and sustainably above 3x FFO-adjusted
      net leverage without a clear path for deleveraging; and

   -- a rise in corporate governance risks due to, among other
      things, related-party transactions or upstreaming loans to
      shareholders.



=========
S P A I N
=========


DEOLEO SA: Moody's Lowers CFR to Caa1, Outlook Negative
-------------------------------------------------------
Moody's Investors Service has downgraded Deoleo S.A. corporate
family rating to Caa1 from B3 and probability of default rating
(PDR) to Caa1-PD from B3-PD.  Concurrently, Moody's has also
downgraded to Caa1 from B3 the ratings on the senior secured
EUR460 million first lien term loan and the EUR85 million first
lien revolving credit facility, and to Caa3 from Caa2 the rating
on the senior secured EUR55 million second lien term loan.  The
rating outlook has been changed to negative from stable.

                         RATINGS RATIONALE

"The rating action reflects the slower than expected recovery in
EBITDA in the last 12 months and our expectation that Moody's
adjusted Debt/EBITDA will hover around 10x at year end 2016 which
is high and no longer commensurate with a B3 rating" says Emmanuel
Savoye AVP at Moody's and lead analyst on Deoleo.

The rating action also reflects Moody's view that a number of
challenges remain going forward, including: (1) the ability to
recover volumes and market share in Southern Europe resulting from
the strategic decision to increase sales prices and following
product recalls that could have a detrimental impact on the
strength of the company's brands in Italy; (2) the expectation
that olive oil prices will normalize but remain above the
historical average and continue to create pressure on margins; (3)
the implementation of the strategic plan following recent
management changes including the resignation and replacement of
the CEO and CFO.

Excluding exceptional costs, margins have positively improved to
7.1% in the first half of 2016 compared to 4.4% in 2015 and EBITDA
reached EUR24.1 million.  The decision to increase prices and to
concentrate on the most profitable brands has been positive in
Southern Europe, which generated a combined reported EBITDA of
EUR6.7 million in the first half of 2016, an increase of 27% on
the same period last year.  Deoleo returned to profit in Spain
after being loss making in 2015.  However, the price increases,
the reduction of promotional activities, and the quality crisis in
Italy negatively impacted sales by 25% in Southern Europe and by
17% for the group, and illustrate the difficulty of passing on
higher prices to retailers and consumers.

According to some early forecasts, the 2016/2017 harvest season
should be in line with last year, with a slightly better
production in Spain balanced by lower output in Italy and Tunisia.
We expect prices to continue to normalize following the
historically high prices of September 2015, but to remain higher
than historical levels.  As a result, pressure on margins and
liquidity may persist.

Moody's views positively the company's plan to strengthen its
position in the profitable North American market, reduce the
number of SKUs, as well as efforts in implementing an alternative
purchasing strategy of olive oil directly from producers and to
improve the capacity utilization of its factories.  However, the
implementation of this plan has only shown early signs of improved
financial performance and it has been offset by setbacks in the
Italian market where the company had to recall products due to
quality issues.

Deoleo's liquidity is adequate although it has been weakening over
time.  The extraordinary costs of EUR19 million related to the
operations in Italy are hefty and unexpected and will weigh
negatively on the free cash flow generation this year.  As of
June 30, 2016, the company has cash balances of approximately
EUR29 million and EUR35 million available under its undrawn
revolving credit facility (RCF) maturing in 2020.  The company's
ability to fully draw down the RCF is currently constrained by the
facility's first lien net leverage covenant of 7.75x.  The
covenant is only tested at the end of each quarter when the RCF is
used above 40% or EUR35 million.  The company has no material debt
maturities before June 2021.  Additionally, we note that the
company has secured committed factoring facilities.

                              OUTLOOK

The negative outlook reflects Moody's views that Deoleo faces a
number of challenges in the implementation of its strategic plan.

                WHAT COULD CHANGE THE RATING UP/DOWN

Moody's could downgrade the ratings if the company fails to
deleverage from the current levels, in the event of lack of
improvement in operating performance in 2017, if the liquidity
position weakens as a result of negative free cash flow, and/or if
the company breaches covenant.

Upward pressure on the ratings could arise if operating
performance starts recovering sustainably over the next 12 to 18
months.  Over time, there could be positive pressure if Moody's-
adjusted debt/EBITDA ratio falls towards 7x on a sustained basis
whilst generating positive free cash flow and keeping an adequate
liquidity profile.

                        PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was Global
Packaged Goods published in June 2013.

Founded in 1990 and headquartered in Madrid, Deoleo is the largest
branded olive oil company globally.  The company engages in the
refining, blending, distribution and sale of olive oil (84% of
revenues), seed oil (14%) and vinegars and sauces (2%) mostly
through the retail channel.  Deoleo generated EUR817 million sales
in 2015.  The company is majority owned by funds advised by CVC
Capital Partners, a leading private equity firm.



=============
U K R A I N E
=============


FERREXPO PLC: S&P Affirms 'CCC/C' CCRs, Outlook Negative
--------------------------------------------------------
S&P Global Ratings said that it has affirmed its 'CCC/C' corporate
rating on Ukrainian iron ore producer Ferrexpo PLC.  The outlook
is negative.

S&P also affirmed the 'CCC' long-term issue rating on Ferrexpo's
senior unsecured notes due in 2019.

The affirmation reflects the company's reliance on the favorable
prevailing iron ore prices and pellet premiums to meet its debt
maturities in the coming quarters.  In S&P's view, a drop in iron
ore prices to $45 per ton from the current price of about $55/ton,
together with some softness in pellet premiums for two consecutive
quarters, would result in Ferrexpo generating insufficient EBITDA
to cover its interest expenses and quarterly debt maturities of
about $50 million.  The company would therefore need to tap into
its limited cash on the balance sheet.  Under this scenario, the
company could default or need to enter into a distressed exchange
offer in the coming 12 months.

The rally in iron ore prices since the beginning of the year, with
prices averaging $53/ton and a healthy premium on pellets
($25-$30/ton), coupled with Ferrexpo being a low cost producer,
has been highly beneficial for the company.  In the first half of
the year the company generated free operating cash flow (FOCF) of
about $120 million, enough to fully cover its $120 million debt
maturities in the same period.  With favorable conditions in the
third quarter, S&P expects the company to generate about $40
million-$50 million of FOCF before facing maturities of
$50 million.  If prices remain at their current level, the company
would be able to build up some cash cushion by year end.

That said, S&P expects iron ore prices to soften in 2017 to about
$45/ton as the impact of stimulus measures in China fades,
reflecting industry supply and demand dynamics.  S&P also
understands that all iron ore producers continue to reduce costs,
a process that could support a further shift in the global cash-
cost curve and potentially lead to lower prices.

Under S&P's base-case scenario, it projects that Ferrexpo's S&P
Global Ratings-adjusted EBITDA will be $340 million-$360 million
in 2016, falling to about $170 million-$190 million in 2017.  The
company is likely to outperform S&P's expectations over the short
term if prices, especially iron ore, remain at the current level.
These assumptions underpin S&P's estimates:

   -- Iron ore production of 11.2 million tons in 2016,
      increasing to about 12.0 million tons in 2017.

   -- An iron ore price of $50/ton for the rest of 2016 and
      $45/ton in 2017.  The current spot price is about $55/ton.
      Pellet premiums of about $25/ton in 2017, coming down from
      a recent level of $30/ton.  While softer iron ore prices
      could support higher premium prices, those could be under
      pressure if the Brazilian pellet producer Samarco resumes
      its operations in 2017.  Direct cash cost of about $29/ton
      in 2017, reflecting cost inflation and some depreciation in
      the Ukrainian hryvnia against the U.S. dollar.  The cash
      cost reflects no change from the current mining plan.
      According to the company, under those price levels, they
      would likely to take some cost-cutting measures (such as
      deferring stripping costs).  Capital expenditure (capex) of
      $50 million-$60 million.

   -- No dividends.

These assumptions translate into FOCF of $80 million-$90 million
in the coming 12 months.  S&P estimates that, as of Sept. 30,
2016, the company only has about $60 million-$70 million in cash
(of which the majority is held outside Ukraine), and maturities of
about $200 million in the coming 12 months.  In S&P's view, unless
Ferrexpo secures new funds that help it to match its cash flows
with a more comfortable maturity schedule, the company could run
out of funds by mid-2017.

That said, if existing iron ore prices and pellet premiums
persist, or if the hryvnia experiences sharp depreciation, the
company should be able to fully cover its upcoming maturities from
operating cash flows.

S&P continues to assess Ferrexpo's business risk profile as
vulnerable, driven primarily by its exposure to Ukrainian country
risk.  S&P's assessment also reflects the cyclicality and capital
intensity of the mining industry; Ferrexpo's focus on a single
commodity, iron ore pellets; and the concentration of assets in
one country.  On the other hand, S&P takes into account Ferrexpo's
competitive cost position in supplying iron ore pellets to Central
and Eastern European steel markets, the long life of the mines,
and the relative stability of iron ore pellets compared with iron
ore.

The negative outlook on Ferrexpo reflects the risk of a default or
a debt restructuring over the coming 12 months if iron ore prices
fall from the current spot price of about $55/ton to S&P's base-
case assumption, without corresponding actions on costs or lower
local currency, and pellet premiums soften, unless Ferrexpo
manages to refinance its current debt.

S&P could lower the rating if iron ore prices fell below $45/ton
for more than a quarter, without mitigating factors on the cost
side, and debt maturities remained elevated at a level of about
$50 million a quarter, resulting in a quick depletion of the
company's cash position and indicating a near-term liquidity
crisis.

Under a slightly less likely scenario, if the company reached an
agreement with its lending bank regarding the coming debt
maturities that met S&P's criteria for a distressed exchange (for
example, a maturity extension without appropriate compensation),
we could lower the ratings to 'SD' (selective default).  After the
completion of such an exchange, S&P would raise the rating on
Ferrexpo, taking into account its improved liquidity and more
comfortable debt maturity.

S&P could take a positive rating action if the company improves
its liquidity position, such that its future cash flows better
match its debt maturity profile.



===========================
U N I T E D   K I N G D O M
===========================


BANK OF IRELAND UK: Moody's Raises LT Deposit Ratings to Ba1
------------------------------------------------------------
Moody's Investors Service has upgraded the long-term deposit
ratings of Bank of Ireland (UK) Plc (BOI UK) to Ba1 from Ba2.
Moody's also upgraded the bank's baseline credit assessment (BCA)
and adjusted BCA to ba1 from ba2 and its long-term counterparty
risk assessment (CR Assessment) to Baa1(cr) from Baa2(cr).  The
bank's short-term deposit ratings have been affirmed at Not-Prime
and the short-term CR Assessment at Prime-2(cr).  Subsequently,
Moody's placed the bank's BCA, Adjusted BCA and, consequently, its
deposit ratings and CR Assessment on review for upgrade.

The action follows the upgrade of the bank's parent, Bank of
Ireland's (BOI, Baa1 deposits/Baa2 senior unsecured, positive, ba1
BCA), ratings on Sept. 19.  Moody's has maintained the alignment
of the BCAs of both entities at ba1, given the historically very
high level of integration between BOI and BOI UK.

Following the upgrade of BOI, Moody's has also upgraded to
Ba3(hyb) from B1(hyb) the rating of the backed pref. stock issued
by Bank of Ireland UK Holdings plc.  Since these instruments are
directly backed by BOI Group, they will not affected by the review
of BOI UK.

The watch status of BOI UK's BCA reflects the progress the bank
has made towards reducing operational linkages with BOI and
therefore, reducing the joint probability of default.  Currently
BOI UK's credit fundamentals are stronger than those of its
parent's, and Moody's has initiated a review process to assess
whether the increased operational independence is sufficient to
support a BCA above its parent's.

                        RATINGS RATIONALE

RATIONALE FOR THE UPGRADE OF THE BCA

The upgrade of BOI UK's BCA and adjusted BCA to ba1, in line with
the BCA of BOI, reflects the current assessment of high level of
integration of the bank's operations with its parent.  This is
evidenced by historical intra-group transfers of assets,
liabilities and capital from and to BOI.  Between 2012 and 2014,
BOI UK acquired a total of GBP6.3 billion mortgages from its
parent.  Since its creation in 2010, the bank has also received a
number of capital contributions from BOI.  In May 2015 BOI UK
repurchased GBP300 million preference shares held by the parent
and issued GBP200 million additional tier 1 (AT1) securities to
the parent, repatriating GBP100 million of capital to BOI.  In
November 2015 the bank restructured GBP523 million subordinated
debt into GBP100 million high-trigger AT1 notes and GBP200 million
new Tier 2 issuance, also issued to BOI, and received a GBP165
million contribution from the parent.  As part of this
transaction, the bank repatriated GBP58 million to its parent.
Although these transactions significantly strengthened BOI UK's
capital position, with the bank's common equity tier 1 (CET1)
ratio increasing to 16.3% as of December 2015 from 12.7% a year
earlier, they highlight the ongoing evolution of the bank's
connection with its parent.

The upgrade of BOI UK's BCA was also supported by the bank's: (1)
improving asset risk metrics, despite the downside risk arising
from the bank's relatively high average loan-to-value (LTV) ratio
compared to other UK lenders and its legacy commercial loan book;
(2) strengthened capital position following the restructuring
transactions; (3) improved profitability, although business
volumes and interest margins could be challenged in the uncertain
operating environment in the wake of the UK's decision to leave
the EU; and (4) solid funding profile and a broad deposit base,
reinforced by the bank's strategic partnerships with the Post
Office and AA plc.

                  RATIONALE FOR THE WATCH STATUS

In Moody's view, BOI UK's standalone financial metrics are
stronger than BOI's, partially driven by the different operating
environment in both the UK and Ireland.  While BOI UK's ratings
are currently capped by BOI's BCA, Moody's considers that
demonstrated progress in achieving greater operational
independence from its parent could lead to a higher rating for BOI
UK than for its parent.  Despite the recent capital and asset
transactions between the two entities, Moody's believes the bank
has shown good progress towards reducing the operational reliance
on BOI since 2013.  The reassessment of these linkages is
therefore, the main driver for the review.

Intra-group exposures decreased to around GBP2.6 billion at the
end of 2015 from almost GBP26 billion at the end of 2012 after the
bank decided to replace cash flow hedges with derivatives.  BOI UK
has also now fully implemented its own transfer pricing mechanism,
having previously relied on BOI's methodology.

RATIONALE FOR THE UPGRADE OF BANK OF IRELAND UK HOLDINGS
INSTRUMENTS

Following the upgrade of BOI's ratings on 19 of September, Moody's
has upgraded the backed debt rating of the pref. stock issued by
Bank of Ireland UK holdings plc to Ba3(hyb) from B1(hyb).  Given
their backing by BOI, the rating of these instruments will not be
affected by the review process for BOI UK.

                          DEPOSIT RATINGS

The Ba1 deposit ratings incorporate the results of Moody's
Advanced Loss Given Failure (LGF) analysis, which indicates that
BOI UK's deposits are likely to face a moderate loss-given-
failure.

A low level of subordinated debt in the liability structure, that
would otherwise provide a loss absorbing cushion for deposits, and
a relatively modest layer of junior deposits in the liability
structure, given the bank's largely retail depositor base, result
in no uplift from the BCA level for deposit ratings.

                WHAT COULD MOVE THE RATING UP / DOWN

BOI UK's deposit ratings could be upgraded as a result of (1) an
increase of its standalone ba1 BCA; (2) an upgrade of its parent,
BOI's BCA or (3) a significant increase in the bank's bail-in-able
debt.

During the review period, Moody's is looking to assess: (1)
whether at this point the bank's balance sheet has stabilized and
future intra-group transfers will be limited to capital pay-ups
through dividends; (2) the degree of remaining control and risk
management inter-linkages with the parent; (3) the extent and
areas of reliance on the parent's services through the existing
service level agreements; and (4) if the bank has developed a
standalone funding plan to finance expansion.

Given the initiated review for upgrade, a downgrade of the ratings
is unlikely.  But BOI UK's deposit ratings could be downgraded as
a result of a downgrade of its ba1 BCA driven by asset quality
deterioration, or unexpected losses that lead BOI UK's
capitalization to decline.

                     PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was Banks
published in January 2016.


BHS GROUP: Arcadia Paid Favored Staff Following Collapse
--------------------------------------------------------
Mark Vandevelde at The Financial Times reports that while
thousands of former BHS employees surveyed their shrunken pensions
and shop staff toiled through their final shifts earlier this
year, a far smaller group of workers at the stricken retailer's
Marylebone Road headquarters shared a multimillion-pound windfall
from Sir Philip Green.

The collapse of BHS, barely a year after Sir Philip sold it for
GBP1 to a little-known consortium of business people, has put
11,000 people out of work and sliced through the retirement
incomes of thousands more, the FT relates.

Sir Philip pledged in June to "sort" the pensions shortfall,
although talks with regulators and trustees have yet to produce a
deal, the FT recounts.

But Sir Philip's Arcadia Group moved quickly to offer bonuses to
head office staff in the aftermath of the retailer's collapse,
according to Darren Topp, who was the retailer's chief executive
at the time of its April demise, the FT discloses.

According to the FT, Sir Philip's company paid a total of about
GBP2 million to 200 or so head office staff, according to the BBC,
which first reported the bonuses.  Arcadia was not required to
make the payments, which Mr. Topp, as cited by the FT, said were
intended to reward "key people" who stayed at the business while
administrators tried to find a buyer.

Most staff at head office received a payment, the FT relays,
citing a person briefed on the arrangements.

BHS Group was a high street retailer offering fashion for the
whole family, furniture and home accessories.


GRANT THORNTON: Louisiana Court Dismisses Securities Claims
-----------------------------------------------------------
Stroock & Stroock & Lavan LLP client Grant Thornton International
Ltd. was dismissed from a federal lawsuit seeking $100 million in
damages from numerous defendants for alleged securities law
violations.  On September 15, 2016, District Court Judge Shelley
D. Dick of the Middle District of Louisiana dismissed all claims
against Grant Thornton International Ltd., which have been pending
since 2013, for lack of personal jurisdiction.

The victory follows Stroock's earlier successful appeal to the
United States Court of Appeals for the Fifth Circuit, which in a
matter of first impression, vacated the District Court's prior
order remanding the case to state court and directed that the case
proceed in federal court under the Court's bankruptcy subject
matter jurisdiction.  Stroock then continued to advocate for
dismissal of Grant Thornton International Ltd. for lack of
personal jurisdiction.  This is an actively evolving area of the
law where it has become increasingly difficult to bring claims
against foreign entities in US courts when those claims do not
arise from contacts between those entities and the relevant forum
in the US.  The Court agreed that was the case here.

Stroock attorneys representing Grant Thornton International Ltd.
were James L. Bernard -- jbernard@stroock.com -- and David M.
Cheifetz -- dcheifetz@stroock.com -- along with Craig Isenberg --
cisenberg@barrassousdin.com -- and Stephen L. Miles --
smiles@barrassousdin.com -- of Barrasso, Usdin, Kupperman, Freeman
& Sarver in New Orleans.

Stroock's Bernard and Cheifetz said, "We are extremely pleased
with the Court's decision, including that Grant Thornton
International Ltd. is a non-practicing UK-based umbrella entity
that had nothing to do with the audit reports or transactions at
issue in this case and had no relevant contacts with the US that
would subject it to the jurisdiction of US courts."

Additional Matter Details

Plaintiffs were several Louisiana municipal pension funds that
brought various claims in Louisiana state court seeking to recover
their alleged $100 million lost investment in a bankrupt Cayman
Islands hedge fund.  Plaintiffs alleged that Grant Thornton
International Ltd was liable for plaintiffs' losses in connection
with audit reports prepared for the fund.

The Court found that Grant Thornton International Ltd. is a
non-practicing international umbrella entity, incorporated in
England and Wales and headquartered in London, which performs no
audit work.  The Court then evaluated Grant Thornton International
Ltd's alleged contacts with the United States and found that it
had insufficient contacts with the United States for either
general or specific personal jurisdiction.

The Court agreed with Stroock's argument that absent exceptional
circumstances, which were not present in this case, controlling
authority from the United States Supreme Court excluded the
possibility for general jurisdiction in the United States over a
United Kingdom entity such as Grant Thornton International Ltd.
The Court further agreed that the plaintiffs did not meet their
burden to establish specific jurisdiction over Grant Thornton
International Ltd. because the plaintiffs did not plead any direct
or purposeful communication by Grant Thornton International Ltd
directed at the United States from which the claims arose.

Earlier in the proceedings, after defendants removed the case to
federal court, Judge Dick decided to abstain from exercising
federal subject matter jurisdiction and ordered the case remanded
to Louisiana state court without deciding Grant Thornton
International Ltd's pending motion to dismiss.  Stroock
successfully led the appeal of that decision on various
bankruptcy-related grounds to the Fifth Circuit Court of Appeals,
which, after considering several issues of first impression,
unanimously vacated the District Court's abstention and remand
order and required the District Court to exercise its federal
jurisdiction over the claims.  Following the Supreme Court's
denial of plaintiffs' petition for certiorari, to which Stroock
filed an opposition, Judge Dick then granted Grant Thornton
International Ltd's motion to dismiss for lack of personal
jurisdiction.

Stroock & Stroock & Lavan LLP -- http://www.stroock.com-- is a
law firm providing transactional, regulatory and litigation
guidance to financial institutions, multinational corporations,
investment funds and entrepreneurs in the U.S. and abroad.  With a
rich history dating back 140 years, the firm has offices in New
York, Washington, DC, Los Angeles and Miami.


INTERVIAS GROUP: Moody's Affirms B2 CFR, Outlook Stable
-------------------------------------------------------
Moody's Investors Service has affirmed the B2 corporate family
rating and the B3-PD probability of default rating (PDR) of
Intervias Group Limited, the ultimate parent of the Euro Garages
(EG) group.  Concurrently, Moody's has affirmed the B2 ratings to
the existing senior secured facilities of Intervias Finco Limited
(Finco) and has assigned B2 ratings to Finco's proposed new senior
secured facilities.  Finco's existing and new facilities will
total approximately EUR2.1 billion and comprise Term Loan B, Term
Loan C, and Capex/Acquisition tranches together with Revolving
Credit and Letter of Credit Facilities.  The outlook on all
ratings is stable.

The rating action follows the announcement on Oct. 5, 2016, of the
planned merger between EG, one of the leading independent motor-
fuel forecourt operators in the UK, and its Netherlands
headquartered counterpart, the European Forecourt Retail (EFR)
group.  Finco's new facilities are being raised in connection with
this transaction, which is expected to be completed no later than
November 2016.  Upon consummation of the transaction, Moody's will
withdraw the existing B2 CFR and B2-PD PDR ratings of EFR Group
B.V. and the B1 and Caa1 instrument ratings of EFR B.V.'s First
Lien and Second Lien facilities respectively.

Funds managed by TDR Capital LLP and the two brothers Mohsin &
Zuber Issa, the founders of EG, will each own 50% of Intervias
after the EFR transaction has completed.

                         RATINGS RATIONALE

"The decision of the Issa brothers and TDR Capital to combine Euro
Garages and EFR under a common ownership structure makes sense
strategically" said David Beadle, a Moody's Vice President and
lead analyst for both companies.  "The opportunities to share best
practices across the two businesses, as well as benefit from
enhanced negotiating power with both fuel and non-fuel suppliers,
should drive profitability growth and are therefore credit
positives.  The transaction will however result in an increase in
leverage, which we expect to remain above 6x until the second half
of next year.  While that is above the quantitative trigger for
downward rating pressure, the stable outlook reflects our
expectations of deleveraging.  The rating is also supported by the
benefits of increased scale, earnings diversity, and scope for
synergies", he added.

The B2 CFR of Intervias reflects: (i) the strong market positions
as a leading independent fuel station operator in the UK, the
Benelux and France; (ii) exposure to broadly stable fuel demand
patterns and supportive long-term trends towards convenience
offerings and; (iii) large and well-invested portfolio of sites,
with a significant proportion of freeholds; and (iv) opportunities
to continue to improve the company's profitability via the ongoing
roll-out of its 'Food-to-Go' retail offering and fuel pricing
optimization, with scope to apply best practice and increased
bargaining power following the combination of EG and EFR under a
common parent.

The B2 CFR also reflects: (i) relatively high earnings
concentration in the EFR portfolio of sites, notwithstanding the
diluted concentration on a group-wide basis after the combination
with EG; (ii) the inherently low profit margins associated with
fuel retail operations; (iii) high adjusted debt to EBITDA of
around 7.0x at closing; and (iv) a degree of ongoing execution
risk as well as event risk should the company choose to make
further sizeable portfolio acquisitions.

Notwithstanding the typically stable volumes and margins for fuel
retail, between December 2015 and April 2016 there was a period of
particularly competitive fuel pricing in the UK.  This was led by
the traditional low-price setters, supermarkets, as the depressed
oil price enabled them to heavily promote the availability of fuel
at under GBP1 per litre.  At this level the price differential
with premium-pricers, such as the oil majors and independents, was
highly visible for consumers.  Volumes at EG's most recently
acquired portfolios of sites proved less resilient than in its
core estate.  Management attempted to maintain pricing premiums
despite a less established EG-run convenience offering and a lower
penetration of Food-to-Go compared to the core estate.  This
period is a major reason why EG results have lagged management
expectations during 2016, although we note that since that time,
results have been on an improving trend against budget.  EFR's
results during 2016 have been in line with its budget, which
demonstrates how a larger portfolio with greater diversity across
countries can benefit overall earnings stability.

Moody's considers the liquidity of Intervias to be adequate.  The
transaction bringing EFR into the group structure will leave the
enlarged business with very modest cash on balance sheet.
However, internal sources of liquidity support a strong underlying
level of cash generation, notwithstanding periodic variability in
total capex spend due to, for example, EFR highway site concession
renewals.  Liquidity is further supported by Moody's expectation
of full availability under the enlarged Revolving Credit Facility
of GBP 135 million, which Moody's expect will be fully sufficient
to cover working capital needs.  The senior secured credit
facilities have one maintenance covenant based on net senior
secured leverage, to be first tested in March 2017, and against
which Moody's expects Intervias to have headroom of at least 30%.
The senior secured credit facilities are rated B2, in line with
the CFR, and will be secured and guaranteed by at least 85% of
assets and EBITDA.

                           RATING OUTLOOK

The stable outlook reflects Moody's expectations that fuel volumes
will remain resilient, and that both EG's and EFR's financial
performance will continue to improve.  Moreover, it assumes an
ongoing successful roll-out of additional Food-to-Go units by EG,
and the gradual adoption of best practices between EG and EFR with
regard to convenience retail and fuel pricing optimization.  No
material acquisitions are factored in.

The rating could experience upward pressure if the company
achieves sustained earnings growth, leading to positive free cash
flow; a debt/EBITDA ratio falling sustainably below 5.0x.

Negative pressure could be exerted on Intervias's ratings if
operating performance deteriorates or does not improve resulting
in leverage exceeding 6.0x on a sustained basis; or free cash flow
were to turn negative for an extended period of time; or liquidity
were to weaken.

                      PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was Retail
Industry published in October 2015.

                        CORPORATE PROFILE

Intervias, to be headquartered in London, is the parent company of
Euro Garages, one of the leading independent motor-fuel forecourt
operators in the UK, operating around 340 sites across Great
Britain.  Euro-Garages has three main segments: fuel (operated
under the Esso, BP, and Shell brands), convenience retail (under
the Spar brand), and Food-to-Go, which chiefly comprises the
company's franchises of Greggs, Starbucks and Subway.

Subject to regulatory approvals, Intervias will acquire the
Netherlands headquartered European Forecourt Retail, which
operates approximately 1,100 sites across the Benelux and France.
EFR retails fuel under the brands of Texaco, BP, Esso Express and
its own Firezone, while key non-fuel brands include its own Go
fresh and the retailers Louis Delhaize and Carrefour.

The EFR transaction, which is expected to be completed by November
2016, will result in an equalization of the ownership of Intervias
between funds managed by TDR Capital LLP and the two brothers
Mohsin & Zuber Issa, the founders of Euro Garages.  Currently,
Intervias is majority owned by the Issa brothers, with a minority
stake held by funds advised by TDR, while EFR is majority owned by
funds advised by TDR.

The combined operations of Euro Garages and European Forecourt
Retail will have pro-forma annual Revenues of more than
EUR3 billion and Run-Rate EBITDA (as defined by Intervias) of
EUR300 million.


JA SUPERMARKET: Director Gets 6-Year Disqualification
-----------------------------------------------------
Najeb Kosar, the Managing Director of JA Supermarket Ltd, has been
disqualified for 6 years for purchasing goods subject to unpaid
excise duty and failing to carry out adequate checks to verify the
duty had been paid.

Mr. Kosar also allowed JA to employ a worker who was not entitled
to work in the UK which resulted in a penalty been issued by the
Home Office Immigration Enforcement Department.

Mr. Kosar of Walker, Newcastle Upon Tyne, signed a
disqualification undertaking on Aug. 7, 2016, which, from August
31, prevents him from directly or indirectly becoming involved in
the promotion, formation or management of a company until 2013.

Robert Clarke, Chief Investigator at the Insolvency Service, said
in respect of the non payment of Excise duty and the employment of
an illegal worker:

"The Insolvency Service will rigorously pursue traders who seek an
unfair advantage over their competitors by not paying Excise duty
to the Government. If you run a limited company, you have
statutory protections as well as obligations. If you fail to
comply with your obligations, The Insolvency Service will
investigate you and you could lose the protection of limited
liability.

"The Insolvency Service rigorously pursues directors who fail to
pay fines imposed by the government for breaking employment and
immigration laws. We have worked closely in this case with our
colleagues at the Home Office to achieve this disqualification.

"The director sought an unfair advantage over his competitors by
employing an individual who did not have the right to work in the
UK in breach of his duties as a director.

"The public has a right to expect that those who break the law
will face the consequences. Running a limited company, means you
have statutory protections as well as obligations. If you fail to
comply with your obligations then the Insolvency Service will
investigate you."

Carl Gordon who is a Finance and Debt Recovery Officer within the
Civil Penalty Compliance Team of the Home Office, said:

"Illegal working is not victimless. It undercuts honest employers,
cheats legitimate job seekers out of employment opportunities and
defrauds the taxpayer.

"Businesses should be aware that they have a duty to check that
their staff have permission to work in the UK. We are happy to
work with employers who play by the rules but those who do not
should know that they will not go under our radar."

JA Supermarket Ltd was incorporated on July 11, 2012, and latterly
traded from its headquarters at 813-815 Welbeck Road, Walker,
Newcastle Upon Tyne, NE6 4JN and 154 High Street, Wallsend,
Newcastle Upon Tyne.

Mr. Kosar was a director from July 11, 2012 to until the date the
company ceased trading on June 28, 2014. The Company went into
liquidation on Sept. 4, 2014 with an estimated deficiency of
GBP238,923.


KEMBLE WATER: Fitch Affirms 'BB-' LT Issuer Default Rating
----------------------------------------------------------
Fitch Ratings has affirmed Kemble Water Finance Limited's (Kemble
Water) Long-Term Issuer Default Rating (IDR) at 'BB-' with a
Stable Outlook and its senior secured rating at 'BB'. The agency
also affirmed Thames Water (Kemble) Finance PLC's (TWKF) GBP400m
and GBP175m senior secured bond issues at 'BB', which are
guaranteed by Kemble Water.

Kemble Water is a holding company of Thames Water Utilities
Limited (Thames Water), the regulated monopoly provider for water
and wastewater services in London and the surrounding areas.

The affirmation and Stable Outlook reflect adequate credit metrics
and Fitch's expectation that Kemble Water will have adequate
ability to service its debt despite dividend cover being weak in
the first two years of period April 2015 to March 2020 (asset
management plan 6; AMP6) due to low inflation expectations and
Thames Water's high capital expenditure.

The ratings also take into account Thames Water's position in the
lower half of the similarly rated peer group in terms of
regulatory and operational performance, as the main operating
subsidiary of the group, as well as the structurally and
contractually subordinated nature of the holding-company financing
at the Kemble level.

KEY RATING DRIVERS

Initially Weak Dividend Cover

For AMP6, Fitch forecasts average dividend cover above 2x and
average post-maintenance and post-tax interest cover (PMICR) at
around 1.2x. Fitch said, "We also forecast Kemble Water will
maintain gearing below 90% pension-adjusted net debt/regulatory
asset value (RAV) over AMP6. For the year ended 31 March 2016
(FY16) Fitch calculates Kemble's dividend cover at 1.07x ,
pension-adjusted net debt/RAV at 88.3%, and PMICR at 1.3x. These
financial ratios differ from Kemble Water's investor report. Fitch
adjusts cash interest to reflect non-cash debt movements resulting
from certain index-linked swaps.

"For FY17 dividend, cover is projected to be weak as we expect the
operating company to only distribute sufficient funds to service
holding-company debt, progressively increasing to around 3x in the
later years of the price control. This is due to lower expected
inflation and materially higher capital expenditure in the early
years. If there are any developments that would restrict dividend
cover for longer, a downgrade would be considered. We view other
metrics as adequate for the rating," Fitch said.

Conservative Outperformance Included in Forecast

Fitch expects the company to outperform total expenditure (totex)
targets over AMP6, given the implementation of the company's
Transformation Programme which includes a new organizational
structure and implementation of new processes in order to deliver
efficiencies for this period. Following the conclusion of the
first year of price control, management has more clarity and
confidence in achieving the operational efficiencies identified
prior to the start of the price control. Fitch forecasts include
total expenditure (totex) outperformance of GBP50m, in nominal
terms over AMP6. Fitch said, "We also include GBP125m of
underperformance in the rating forecast for the retail function
which reflects the efficiency challenge related to the average
cost to serve and de-linking retail costs from RPI and additional
expenditure to improve in the area of customer service."

Some Improvement to Weak Regulatory Performance

For FY16, Thames has reported stable asset health (previously
known as asset serviceability) for water non-infrastructure assets
and sewerage infrastructure and non-infrastructure assets, (the
latter improving from deteriorating reported in FY15). However,
health of water infrastructure assets has deteriorated to marginal
from stable in FY15. It has also reported improvement in
performance related to drinking water quality, leakage and
pollution incidents. However, the company is still lagging behind
peers in customer service and performance for internal flooding
incidents has also deteriorated. In terms of the service incentive
mechanism, which measures customer satisfaction, the company
scored 76.74 out of 100 for FY16, a low ranking in the industry.
The doubtful debt charge and debt management costs remain at a
high level. Although the company has improved over AMP5 and the
first year of AMP6, in some areas we believe there is scope for
further improvement in regulatory and operational performance over
AMP6, especially in the area of retail services.

Sale of Non-household Retail Business

Thames Water recently announced the sale of its non-household
retail business to Castle Water Limited, a provider of retail
services based in Scotland. Castle Water will be responsible for
customer services, billing and collection while Thames Water will
still be responsible for the water supplied to customer's
premises. In our view, the sale of the non-household retail
business, which represents 15% of its total retail business, is
likely to be neutral for the ratings and should enable the company
to focus on improving services for its household customers. Fitch
said, "We currently consider counterparty risk as low. In order to
mitigate counterparty risk, we expect certain measures to be
included in the market code for non-household retail supply, which
is still being developed by Ofwat (the regulator for the UK water
sector)." The sale is contingent on the opening of the non-
household retail market on 1 April 2017.

RCV Reduction in March 2020

Ofwat will make a one-off midnight adjustment to UK water
companies' regulated capital values (RCVs) in March 2020 as a
result of the price review 2014 (PR14) rulebook reconciliation.
The adjustment will not affect the companies' cash flows over AMP6
as they will retain the run-off revenues and the return earned
through AMP6. However, it will result in a reduction in RCV of
around 2% for water companies, although the reduction for each
company will depend on its capex. For Thames Water, the RCV will
be reduced by GBP243m (at 2013 prices). This represents an
increase in leverage of around 1.9% based on Fitch's forecast RCV
for 2020.

"In our view, the RCV reduction could put pressure on companies'
credit metrics for AMP7, especially those with high gearing. The
increase in gearing following the RCV adjustment could decrease
financial flexibility as a result of reduced liquidity and
increased refinancing risk, as it may limit the ability of some
companies to take on more debt. However, we believe they have
sufficient time to adapt their strategies over AMP6 to protect
ratings either by reducing dividends or through equity
injections," Fitch said.

Index-linked Swaps

Thames Water has a portfolio of index-linked swaps with a notional
amount of GBP1.4bn embedded in its capital structure, which do not
contain breaks. Around GBP700m of those swaps contain five-year
pay-down provisions and the timing of such payments is spread
across with pay down of accretion of swap notional each year. In
our view these swaps do not have the same cash-enhancing effect as
long-dated index-linked bonds. Therefore, Fitch has conservatively
removed these swaps from the calculation of PMICR.

KEY ASSUMPTIONS

Fitch's key assumptions for Thames Water include:

   -- Regulated revenues in line with the final determination of
      tariffs for AMP6, ie assuming no material over- or under-
      recoveries

   -- Combined totex outperformance of around GBP50m in nominal
      terms over AMP6

   -- Retail costs around GBP125m above allowances over the five-
      year period (profile of under-performance skewed towards
      the later years of the price control)

   -- Unregulated EBITDA of around GBP10m per annum

   -- Retail price inflation of 2% for FY17 and 2.5% thereafter

   -- No impact on cash-flow generation from outcome delivery
      incentives, given that financial rewards and penalties will
      all be taken into account as part of the next price review

Fitch's key assumptions for Kemble Water include:

   -- Incremental debt at the holding-company level based on
      pension adjusted net/debt to RAV of 90% or below for the
      whole group

   -- Average annual finance charge at holding company level of
      around GBP59m

RATING SENSITIVITIES

Negative: Future developments that may, individually or
collectively, lead to a negative rating action:

   -- Dividend cover at Kemble Water below 2.5x for a sustained
      period, increase of gearing above 90% and/or decrease of
      post-maintenance and post-tax interest cover below 1.05x

   -- RPI remaining at or below 1.5% for an extended period of
      time

   -- Possibility of a dividend lock-up at Thames Water

   -- Weakening of operational and regulatory performance at
      Thames Water

Positive: Rating upside is limited. A higher rating for the
holding company would be contingent on Thames Water materially
reducing its regulatory gearing and substantially improving its
performance.

LIQUIDITY

Kemble Water mainly relies on dividends for debt service. As of 31
March 2016, Kemble Water held GBP29m in cash and cash equivalents
and had access to a committed GBP65m revolving credit facility to
bridge short-term liquidity needs. Compared with Kemble Water's
annual finance charge of around GBP59m, Fitch deems available
back-up liquidity as adequate.

During 2015, the group refinanced the bank debt at the holding-
company level including the issuance of a GBP175m 5.875% fixed
rate bond maturing in 2022 and extended the GBP65m revolving
credit facility available which expires in 2019. The next debt
maturity is a GBP400m fixed-rate bond maturing in 2019.


LINCOLN FINANCE: Fitch Affirms 'BB-' Rating on Sr. Secured Notes
----------------------------------------------------------------
Fitch Ratings has affirmed LeasePlan Corporation NV's (LeasePlan)
Long-Term Issuer Default Rating (IDR) at 'BBB+' and Viability
Rating (VR) at 'bbb+' following the completion of its fleet
leasing peer review. Fitch has also affirmed Lincoln Finance Ltd's
(LFL) senior secured notes Long-term rating at 'BB-' and their
guarantor's, Lincoln Financing Holdings Pte Limited's (LFHPL),
Long-Term IDR at 'BB-'. The Rating Outlooks on LeasePlan and
LFHPL's Long-Term IDRs are Stable.

KEY RATING DRIVERS

LEASEPLAN's IDRS, VR, SENIOR DEBT AND SUPPORT RATING

LeasePlan's IDRs, VR and senior debt ratings are driven by the
company's global, market-leading vehicle leasing franchise, strong
risk management and sound funding and liquidity profile. The
ratings also factor in the company's sizeable - albeit well-
managed - exposure to residual value risk, its modestly higher
than peers' tangible leverage, and the effects of its acquisition
in March 2016 by a consortium of long-term investors.

The change of ownership was partly funded by LFL's issue of
EUR1.25 billion and USD0.4 billion senior secured notes,
guaranteed by new holding company, LFHPL. None of the acquisition-
related debt is LeasePlan's own direct responsibility, but Fitch
believes the revised group structure could still somewhat reduce
LeasePlan's financial flexibility through the need to upstream
dividends to service it, as LFHPL presently has no other source of
income. At the same time Fitch recognizes that the extent of this
potential negative influence on internal capital generation is
contained by LeasePlan's status as a regulated bank, as supervisor
De Nederlandsche Bank (DNB) can exercise the power to prohibit or
restrict upstream dividend distributions.

The Stable Outlook reflects Fitch's expectation that the new
ownership will not result in LeasePlan adopting a significantly
different strategy in the future, relative to that employed at
present.

As the world's largest fleet and vehicle management company,
LeasePlan holds leading market positions in most of its 32
countries of operation. This geographic diversification
counterbalances the group's monoline business model and renders
its performance less susceptible to economic downturn in any
individual market. Since 2013, profits have been boosted by gains
on used vehicle sales in excess of the longer-term trend, with
pre-tax return on average assets reaching 2.8% in 1H16, but the
underlying operating performance has also remained strong. Fitch
expects used vehicle values to begin to normalize, which will
likely create modest but manageable earnings pressure on LeasePlan
along with other fleet lessors.

LeasePlan's banking regulatory risk-weighted capital ratios are
strong (CET1 ratio of 18.1% at end-June 2016) and improving.
However, its debt-to-tangible equity leverage (6.0x at end-June
2016) is modestly higher than broader leasing peers'. The group
has a significant exposure to residual value risk via the large
proportion of closed-end operating leases in its portfolio. While
residual value risk cannot be entirely eliminated, as it depends
on external factors such as second-hand car prices, efficient risk
management has historically allowed the group to avoid material
losses. This, together with the short-term nature of LeasePlan's
assets and hence strong cash flow generation capability, partly
mitigates the risk of higher balance sheet leverage.

LeasePlan's banking status is unusual among leasing companies and
gives it potential access to European Central Bank (ECB)
refinancing operations, if needed. It has also allowed the company
to achieve a more diversified funding profile than peers through
the gathering of retail savings in the Netherlands and, since
2015, in Germany (in total 28% of end-June 2016 non-equity
liabilities). Most of these deposits are eligible for the Dutch
deposit guarantee scheme, which supports the deposits' stability.
Wholesale funding is mostly unsecured through a range of
instruments, but LeasePlan also maintains access to the
securitization market. Liquidity and refinancing risk are
prudently managed.

LeasePlan's Support Rating of '5' indicates Fitch's view that
institutional support from its shareholders, if ever required, may
be possible but cannot be relied upon.

In light of LeasePlan's banking status and deposit taking
activities Fitch used 'Global Bank Rating Criteria' dated July 15,
2016 to help inform its assessment of certain aspects of
LeasePlan's standalone profile, such as operating environment (and
in particular, the regulatory framework), company profile,
capitalization and leverage, and funding and liquidity.

LFHPL's IDR AND LFL's SENIOR SECURED NOTES

LeasePlan represents LFHPL's only significant asset, and neither
LFHPL nor LFL will have material sources of income other than
dividends from LeasePlan, while LeasePlan's regulator could
prohibit or restrict upstream dividend distributions. There are no
cross-guarantees of debt between LFL and LeasePlan. In Fitch's
view, debt issued by LFL is sufficiently isolated from LeasePlan
so that failure to service it, all else being equal, may have
limited implications for the creditworthiness of LeasePlan.
Consequently, the instrument rating is based on the standalone
profile of LFL and the guarantor.

LFHPL commenced ownership of LeasePlan with an interest reserve
account containing cash covering 2.6 years of LFL's coupon
payments on the senior secured notes, and an interest coverage
account covering an additional 1.8 years. This eases LFL's initial
debt service pressure and potential upstream dividend demands
placed up LeasePlan. LFHPL is also covenanted to maintain at least
this same level of cash coverage in the interest reserve account
thereafter. However, replenishment of this cash will be dependent
both on LeasePlan's ongoing ability to generate profits and on DNB
approval for their distribution in dividend form.

RATING SENSITIVITIES

LEASEPLAN's IDRS, VIABILITY RATING AND SENIOR DEBT

Negative rating pressure could develop from a material
deterioration of the group's capitalization or leverage, which
could result from a higher than expected use of LeasePlan in
servicing the acquisition debt or from a less effective management
of residual value risk amid a fall in used vehicle prices.
Adoption of a riskier strategy or a less conservative approach
towards liquidity would also be negative for the ratings.

Ratings could benefit in the medium term from improving leverage,
without evidence of increased pressure from the new owners for
upward dividend flow. A significant reduction of acquisition-
related debt either as a result of partial repayment or from a
build-up and retention of a dedicated cash cushion at the LFHPL
level would be credit positive.

Fitch currently does not expect changes to LeasePlan's Support
Rating.

LFHPL's IDR AND LFL's SENIOR SECURED NOTES

Both the IDR of LFHPL and the rating of LFL's notes are correlated
with the ratings of LeasePlan. The ratings would also be
negatively affected by significant depletion of liquidity within
LFHPL which affects its ability to service its debt obligations.
This would most likely be prompted by a material fall in earnings
within LeasePlan restricting its capacity to pay dividends.

Positive rating action would likely stem from an accumulation of
significant additional cash within LFHPL, accompanied by
expectation of its retention there, as this would reduce the
dependence of ongoing debt service on future LeasePlan dividends.

The ratings could also be sensitive to the addition of new
liabilities or assets within LFHPL, but the impact would depend on
the balance struck between increasing LFHPL's debt service
obligations and diversifying its income away from reliance on
LeasePlan dividends.

Fitch has affirmed the following ratings:

   LeasePlan

   -- Long-term IDR at 'BBB+', Outlook Stable;

   -- Short-term IDR at 'F2';

   -- Viability Rating at 'bbb+';

   -- Support Rating at '5';

   -- Senior unsecured debt Long-term rating at 'BBB+';

   -- Senior unsecured debt and commercial paper short-term
      rating at 'F2'.

  LFHPL

   -- Long-term IDR at 'BB-', Outlook Stable.

  LFL

   -- Senior secured notes long-term rating at 'BB-'.


MAMHEAD HOUSE: Ceases Trading, Owes Creditors GBP150,000
--------------------------------------------------------
The Herald reports that insolvency practitioners have confirmed
Mamhead House and Castle Ltd., the company operating the Devon
wedding venue used by Peter Andre, has ceased trading leaving
brides-to-be, unpaid staff and suppliers thousands out of pocket.

According to The Herald, the company is said to owe GBP150,000 to
a string of creditors including brides due to get married at the
luxury venue.

Now, they have lodged their claims with an insolvency firm in a
bid to get their money back, The Herald relays.

It is understood that up to six brides, each who have put up to
GBP15,000 forward for a deposit are among more than 20 creditors
owed money, The Herald discloses.

Insolvency practitioner Shane Biddlecombe said that the company
owes in the region of GBP150,000, The Herald relates.

He has written to creditors explaining that the business is
without funds and has stopped trading, according to The Herald.

Mr. Biddlecombe, as cited by The Herald, said that he would pursue
a course of action that would best suit creditors.  Options
include a Company Voluntary Arrangement, an informal forgiveness
of debt or Liquidation, The Herald states.

Richard Fuller, company director, said that Mamhead House and
Castle Ltd is still an active company and is expected funds to be
received which might otherwise be lost were the company to be
placed in administration, The Herald relays.


MIND CANDY: In Talks to Extend Loan Repayments, Future Uncertain
----------------------------------------------------------------
Mark Sweney at The Guardian reports that Mind Candy, the developer
of the children's online game Moshi Monsters, is in talks to
extend loan repayments after revenues almost halved last year,
potentially putting the future of the company in doubt.

Mind Candy, which claims 100 million people have at some point
registered to play Moshi Monsters online, sustained a 46% fall in
revenues from GBP13.2 million to GBP7.2 million in 2015, The
Guardian discloses.

The British firm, which reported a pre-tax loss of GBP10.9
million, was due to start paying down a GBP6.5 million loan taken
from technology startup specialist TriplePoint in 2014 in July,
The Guardian says.  However, Mind Candy said it was instead forced
to negotiate "reduced capital repayments" from July to December,
The Guardian notes.

Full repayments are due to be made from January, but the company
has said it cannot afford to pay at the high level of interest,
according to The Guardian.

The terms of the original loan -- Mind Candy took out a further
GBP684,000 loan last year -- is for full payment by next June, The
Guardian states.

"Management has prepared cash flow projections for the 2016 and
2017 financial years.  These projections indicate that the company
requires an extension to the payment terms of the existing long-
term loan," The Guardian quotes Mind Candy as saying in Companies
House filings.

"The company has a good relationship with the lender and will look
to renegotiate the repayment schedule towards the end of 2016.  In
the event that the negotiations are not successful, or that the
company cannot generate sufficient revenues, then there exists a
material uncertainty which may cast significant doubt over the
company's ability to continue as a going concern."

Mind Candy's directors, as cited by The Guardian, said they were
confident they could secure further financial support if necessary
but there were "no binding agreements in place".


MONARCH AIRLINES: Gets GBP165MM Lifeline from Greybull Capital
--------------------------------------------------------------
Jillian Ambrose and Tom Ough at The Telegraph report that Monarch
Airlines has clinched its biggest ever investment from owners
Greybull Capital in a bid to secure the survival of the no-frills
airline.

The GBP165 million lifeline has convinced the regulator to renew
its Air Travel Operators' Licence (Atol) until next September
after granting a last-minute extension to Monarch's existing
license just four hours before it was due to expire at the end of
last month, The Telegraph relates.

Central to Monarch's rescue bid is a restructuring of a US$2
billion (GBP1.5 billion) deal with Boeing for up to 45 aircraft,
which is expected to release significant cash back into the
business and delay an increase in costs for two years, The
Telegraph discloses.

Monarch boss Andrew Swaffield confirmed that the rejigged deal
would include a "sale-and-leaseback agreement" that could see
Boeing buy Monarch's order on the condition that the airline
agrees to lease the aircraft from 2018 when the first planes are
set to be delivered, The Telegraph relays.

According to The Telegraph, the company said that the Boeing
agreement had "facilitated" the GBP165 million cash injection from
Greybull, which holds a 90pc stake in the company after agreeing
to pump GBP125 million of capital into Monarch in 2014.

Greybull's latest bailout is the fourth for the airline in the
space of five years, The Telegraph notes.

Monarch Airlines, also known as and trading as Monarch, is a
British airline based at Luton Airport, operating scheduled
flights to destinations in the Mediterranean, Canary Islands,
Cyprus, Egypt, Greece and Turkey.


SPICE FACTORY: High Court Winds Up Two Film Investment Companies
----------------------------------------------------------------
Two film investment companies that took in GBP3 million from the
public but failed to provide any returns have been wound up in the
High Court following an investigation by Company Investigations of
the Insolvency Service.

On Aug. 31, 2016, Mr. Registrar Briggs ordered that Spice Factory
(UK) Limited and Gummy Bear Films Limited be wound up in the
public interest after hearing that the companies misled the public
and spent, at most, 11% of funds received from the public on film
production. The remainder of the money was divided between the
brokers who recruited investors, the director Michael Cowan, his
former business partner Steven Wilkinson and companies they
controlled.

The court heard private individuals entered into investor
agreements with Gummy Bear Films Limited after introductions by
brokers. It was intended that these private investment funds would
receive an equity profit in a film, Gummy Bear 3D The Movie, which
has not been made.

The court heard that the funds received from investors were not
ring fenced or safeguarded in any way and were either paid into
Spice Factory's current account, where they were treated as
general income of the company, or via escrow accounts to various
third parties.

Mr. Cowan allowed Mr. Wilkinson, who was at the time an
undischarged bankrupt, to operate Spice Factory's bank account
without Mr. Cowan, who was the company's director, exercising any
oversight or control. Mr. Registrar Briggs noted that there was no
doubt the companies should be wound up in the public interest. He
was particularly concerned by the lack of commercial probity.

The public had been misled into making investments which they
would not have made had they known the truth, which was that
around 89% of their investment was not going to film production
costs.

Registrar Briggs considered that the companies had failed to
operate the business with transparency as a result of Mr. Cowan's
delegation of financial control to Mr. Wilkinson and further noted
that the company's failure to take steps to establish whether
members of the public were "high net worth individuals" or
"sophisticated investors", represented a failure to protect the
interests of those who entrusted them with their money.

David Hill, a Chief Investigator, Company Investigations said
that: "The companies persuaded members of the public to part with
substantial sums of money to invest in films. No films were
produced and the money raised from the public in reality was used
to benefit those running the companies.

"As so often is the case, if an investment scheme appears to be
too good to be true, it probably is."

The petitions were presented under s124A of the Insolvency Act
1986 on June 29, 2016. By virtue of the winding up orders made on
Aug. 31, 2016, the Official Receiver is liquidator of the
companies.

Spice Factory (UK) Limited was incorporated on Feb. 24, 1997,
under registration number 03322915. The registered office of the
company is at Suite 9, Regency House, 91 Western Road, Brighton
BN1 2NW. The current recorded director of the company is Mr.
Michael Lionello Cowan.

Gummy Bear Films Limited was incorporated on Oct. 24, 2013, under
registration number 08745729. The registered office of the company
is at Suite 9, Regency House, 91 Western Road, Brighton BN1 2NW.
The current recorded director of the company is Mr. Jason Nicholas
Piette.


* UK: South West Transport Businesses at Risk of Insolvency
-----------------------------------------------------------
Stephen Farrell at Insider Media reports that more than one third
of transport and haulage companies in the South West UK are at
heightened risk of insolvency in the next 12 months, according to
business recovery trade body R3.

The organisation found that 39% of the region's businesses in the
sector were at risk, Insider Media says.

This is on a par with the UK average for the industry of 40 per
cent but is considerably higher than the South West average of all
businesses at risk at 23%, reports Insider Media.

"It's not unusual for transport and haulage to be at the top end
of the insolvency risk spectrum. The instability in the sector
here in the South West is replicated nationally. Businesses in the
sector tend to work to tight margins, so managing cash-flow is
particularly important. Costs may be increasing as oil prices
rebound from their records lows of earlier this year," Insider
Media quotes Alan Bennett, regional chairman of R3 in the South
West and partner at Ashfords, as saying.

"The sector may be have added concerns in light of the decision by
the UK to leave the European Union, particularly due to doubt
around future trade restrictions and potential changes to border
controls."

R3 uses research compiled from Bureau van Dijk's 'Fame' database
of company information to track the number of businesses in key
regional sectors that have a heightened risk of entering
insolvency in the next year, Insider Media states.



                            *********

Monday's edition of the TCR delivers a list of indicative prices
for bond issues that reportedly trade well below par.  Prices are
obtained by TCR editors from a variety of outside sources during
the prior week we think are reliable.  Those sources may not,
however, be complete or accurate.  The Monday Bond Pricing table
is compiled on the Friday prior to publication.  Prices reported
are not intended to reflect actual trades.  Prices for actual
trades are probably different.  Our objective is to share
information, not make markets in publicly traded securities.
Nothing in the TCR constitutes an offer or solicitation to buy or
sell any security of any kind.  It is likely that some entity
affiliated with a TCR editor holds some position in the issuers'
public debt and equity securities about which we report.

Each Tuesday edition of the TCR contains a list of companies with
insolvent balance sheets whose shares trade higher than US$3 per
share in public markets.  At first glance, this list may look like
the definitive compilation of stocks that are ideal to sell short.
Don't be fooled.  Assets, for example, reported at historical cost
net of depreciation may understate the true value of a firm's
assets.  A company may establish reserves on its balance sheet for
liabilities that may never materialize.  The prices at which
equity securities trade in public market are determined by more
than a balance sheet solvency test.

Each Friday's edition of the TCR includes a review about a book of
interest to troubled company professionals.  All titles are
available at your local bookstore or through Amazon.com.  Go to
http://www.bankrupt.com/booksto order any title today.


                            *********


S U B S C R I P T I O N   I N F O R M A T I O N

Troubled Company Reporter-Europe is a daily newsletter co-
published by Bankruptcy Creditors' Service, Inc., Fairless Hills,
Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA.
Valerie U. Pascual, Marites O. Claro, Rousel Elaine T. Fernandez,
Joy A. Agravante, Julie Anne L. Toledo, Ivy B. Magdadaro, and
Peter A. Chapman, Editors.

Copyright 2016.  All rights reserved.  ISSN 1529-2754.

This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding, electronic
re-mailing and photocopying) is strictly prohibited without prior
written permission of the publishers.

Information contained herein is obtained from sources believed to
be reliable, but is not guaranteed.

The TCR Europe subscription rate is US$775 per half-year,
delivered via e-mail.  Additional e-mail subscriptions for members
of the same firm for the term of the initial subscription or
balance thereof are US$25 each.  For subscription information,
contact Peter Chapman at 215-945-7000 or Nina Novak at
202-362-8552.


                 * * * End of Transmission * * *