/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/161101.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Tuesday, November 1, 2016, Vol. 17, No. 216 Headlines B E L G I U M TELENET INTERNATIONAL: S&P Rates Proposed EUR500MM Term Loan 'B+' C R O A T I A HRVATSKA ELEKTROPRIVREDA: S&P Raises CCR to 'BB', Outlook Neg. G E O R G I A JSC TBC: Moody's Affirms Ba3 Local Currency Deposit Rating I R E L A N D ALFA BOND: Fitch Assigns B Rating to Perpetual Add'l. AT1 Notes BLACKROCK EUROPEAN: Moody's Assigns (P)B2 Rating to Class F Notes SCF RAHOITUSPALVELUT: Moody's Assigns Ba2 Rating to Class E Notes SCF RAHOITUSPALVELUT: Fitch Assigns BB+ Rating to Cl. E Notes I T A L Y SIENA PMI 2016: Fitch Assigns B- Rating to Class C Notes K A Z A K H S T A N KAZAKHTELECOM: S&P Affirms 'BB' CCR & Revises Outlook to Positive N E T H E R L A N D S DRYDEN 46 EURO: S&P Assigns B- Rating to Class F Notes R O M A N I A CARPATICA ASIG: Court Rejects Bankruptcy Ruling Appeal R U S S I A IG SEISMIC: Moody's Confirms B3 Corporate Family Rating CB KUBAN UNIVERSAL: Put on Provisional Administration MOSCOW UNITED: Fitch Affirms 'BB+' IDR, Outlook Stable RUSSIAN HELICOPTERS: Fitch Raises LT IDR to 'BB+', Outlook Stable U N I T E D K I N G D O M BRACKEN MIDCO1: Fitch Assigns 'B+' IDR, Outlook Stable CLAVIS SECURITIES 2006-01: Fitch Puts BB Rating on Watch Neg. EXPRO HOLDINGS: S&P Lowers Corporate Credit Rating to 'SD' IGAS ENERGY: Bond Waivers Take Effect, In Talks with Investors SOHO HOUSE: Obtains GBP40 Mil. in Fresh Funds Following Losses TES GROUP: In Administration, Sells Consulting Business THPA FINANCE: Fitch Affirms 'B' Rating on Class C Notes ********* ============= B E L G I U M ============= TELENET INTERNATIONAL: S&P Rates Proposed EUR500MM Term Loan 'B+' ----------------------------------------------------------------- S&P Global Ratings said that it has assigned its 'B+' issue ratings to the proposed EUR500 million term loan AE to be borrowed by Telenet International Finance S.a.r.l. and the proposed $750 million term loan AF to be borrowed by Telenet Financing USD LLC. The recovery rating on the proposed term loans is '3', indicating S&P's expectation of recovery prospects in the lower half of the 50%-70% range. Telenet Group Holding N. V. (Telenet; B+/Stable/--), Belgian provider of telecommunications and cable TV services, intends to use the proceeds of these loans to partially repay its existing term loans. In addition, S&P affirmed its 'B+' issue ratings on Telenet's existing senior secured term loans and the senior secured notes issued by special-purpose vehicles. The recovery rating on this debt is '3', indicating S&P's expectation of recovery prospects in the lower half of the 50%-70% range. In S&P's view, the recovery prospects on Telenet's debt instruments are constrained by the amount of pari passu secured debt. As part of the proposed partial refinancing, the company intends to amend the term loans' documentation, in particular, incorporate the removal of the financial maintenance covenants. Under S&P's hypothetical default scenario, it assumes materially increasing competitive pressure, difficulties and additional costs related to the integration of BASE into the group, and, to a lesser extent, unfavorable regulatory changes, resulting in weaker-than-expected revenues and lower margins. S&P values Telenet as a going concern given S&P's view of its leading market position in cable TV and fixed broadband in its service area, the superior quality of its network, and the high barriers of entry in the industry. SIMULATED DEFAULT ASSUMPTIONS -- Year of default: 2020 -- EBITDA at emergence: EUR606 million -- Implied enterprise value multiple: 5.5x -- Jurisdiction: Belgium SIMPLIFIED WATERFALL -- Gross enterprise value at default: EUR3,330 million -- Administrative costs: EUR165 million -- Net value available to creditors: EUR3,165 million -- Priority claims: EUR480 million -- Senior Secured debt claims: EUR4,736 million* -- Recovery expectation: 50%-70% (lower half of the range) *All debt amounts include six months of prepetition interest. S&P's long-term corporate credit rating and outlook on Telenet are unaffected by the proposed transaction. Although S&P thinks the transaction could modestly lower Telenet's interest expense, S&P forecasts that the company's S&P Global Ratings-adjusted leverage will remain unchanged. Furthermore, S&P continues to expect that Telenet's adjusted free operating cash flow will stay below 5% of adjusted debt over the next 12 months. ============= C R O A T I A ============= HRVATSKA ELEKTROPRIVREDA: S&P Raises CCR to 'BB', Outlook Neg. -------------------------------------------------------------- S&P Global Ratings said that it had raised its long-term corporate credit rating on Hrvatska Elektroprivreda d.d. (HEP) to 'BB' from 'BB-'. The outlook is negative. At the same time, S&P raised the issue rating on its senior unsecured debt to 'BB' from 'BB-'. The upgrade is largely as a result of HEP's much stronger liquidity. The company has built up a large cash balance of Croatian kuna (HRK) 2.8 billion, predominantly from the more favorable hydrology and commodity price environment during the past two years. In addition, HEP has an improved outlook for working capital management given its, as yet untested, energy- tariff-setting authority for its universal retail customers. S&P also understands that the company's uncommitted bank facilities are being renegotiated. "We expect HEP's cash flow from year to year to continue to be volatile, although not as volatile as in the past. We currently assume lower and relatively flat fossil fuel prices in the next two to three years. In 2014 and 2015, credit metrics benefited from very favorable hydrological conditions, declining electricity import prices, and decreasing procurement costs for natural gas. As a result, funds from operations (FFO) was about HRK4 billion or more and adjusted FFO to debt around 90% or better. It is worth remembering that in the drought years of 2011 and 2012, FFO was below HRK2 billion and adjusted FFO to debt below 30%. The drought conditions in those years were out of the ordinary and concurrent with higher-than-average fossil fuel prices. HEP owns and operates the monopoly regulated distribution and transmission networks in Croatia, which generate about 50% of annual EBITDA (forecast at about HRK4.3 billion in an average hydrology year; equivalent to EUR540 million). The rate-setting methodology and framework, established by the regulator in 2006, aims to allow the utility to recover its costs and earn an approved rate of return. However, a meaningful track record of regulatory independence has not been established because, until recently, the government set the final rates. S&P therefore views regulatory support as weaker than in many other western European jurisdictions. The other half of HEP's EBITDA is derived from the company's generation supply and retail segments. The generation supply business represents about 80% of the market and benefits from significant hydrological resources (including pump storage facilities) and some nuclear base load generation (about 15% of national demand). Its assets are well diversified and located across the country, with only around 20% of energy derived from carbon-based fuels in an average year. However, in S&P's view, an even earnings track record through various economic and political cycles will be required to fully demonstrate that commodity rate-setting is insulated from political intervention. HEP also has a dominant retail market share (about 85%). The company has the advantage of supplying legacy universal customers (those that have not selected an unregulated retail supplier) and guaranteed customers (those who are faced with a nonperforming retail supplier) with its own supply. These relatively sticky universal household customers still represent the bulk of the retail market. Since market opening, only 15% of the retail market has moved to competitors. Given the modest commodity price forecast, S&P do not expect a large amount of switching to HEP's competitors. S&P considers HEP to be a government-related entity, and believe there is a high likelihood that the Croatian government (BB/Negative/B) would provide extraordinary support to HEP in the event of financial distress. HEP is key to implementing the government's energy policies and S&P do not believe there is any plan to privatize the company. Both the Minister of Economy and the Minister of Energy and the Environment participate in the company's resource-planning process. Although dividends from HEP are an important source of government revenue, the government has provided liquidity support under stress conditions in the past. The negative outlook on HEP reflects the negative outlook on the sovereign and that a one-notch downgrade of Croatia would likely lead us to lower the rating on HEP. This is because S&P do not view HEP as sufficiently protected from potential extraordinary government intervention in a postulated government default scenario to warrant rating it above the sovereign. S&P would likely lower the rating on HEP if S&P lowered the rating on Croatia to 'BB-'. Although S&P do not currently see pressure on HEP's stand-alone credit worthiness within its 12-18 month outlook period, S&P could lower the rating on HEP if its liquidity deteriorates again to less than adequate or if S&P expects the company to lever up its balance sheet to fund a major construction project, such as the proposed new coal-fired generation at Plomin C (estimated total cost of EUR1.4 billion). All else being equal, S&P would expect to revise the outlook back to stable if S&P took a similar action on Croatia. ============= G E O R G I A ============= JSC TBC: Moody's Affirms Ba3 Local Currency Deposit Rating ---------------------------------------------------------- Moody's Investors Service, (Moody's) has affirmed JSC TBC Bank's (TBC) Ba3/Not-Prime local currency and B1/Not-Prime foreign currency deposit ratings. Moody's also affirmed the bank's standalone baseline credit assessment (BCA) and Adjusted BCA of ba3 and its Counterparty Risk Assessment of Ba2(cr) and Not-Prime(cr). The outlook on the bank's long-term deposit ratings is stable. The rating action follows TBC's 100% acquisition of JSC Bank Republic (Bank Republic) on 20 October 2016, Societe Generale's (SG; Deposits A2 Stable, BCA baa2) Georgian subsidiary, for $101 million in cash and around 3 million of TBC Bank Group Plc (TBC's UK holding company; unrated) shares. RATINGS RATIONALE The ratings affirmation, with a stable outlook, reflects Moody's view that the reduction in TBC's capital ratios that will result from the transaction will be counterbalanced by an enhanced market position, underlying strong recurring profitability and potential synergies that would lead to higher earnings and therefore sustained strong internal capital generation capacity. Furthermore, the acquisition will have limited impact on TBC's asset risk and funding profiles, while TBC has demonstrated its ability to successfully acquire banks in the past. Moody's estimates that the acquisition of Bank Republic will erode TBC's capital ratios by roughly 2-3 percentage points. The acquisition price reflects a price-to-book value of approximately 1.1x, of which 70% was paid in cash and 30% in new shares issued to SG and the European Bank for Reconstruction and Development (ERBD; Issuer Rating Aaa, Stable; Bank Republic's minority shareholder). Nevertheless, the rating agency expects TBC's tangible common equity to risk-weighted assets to remain adequate at around 12% by year-end 2016, and in line with peers. Furthermore, the bank has historically maintained strong internal capital generation capacity with an average net income to tangible assets of 3% in the last three years. Moody's also notes that, following the completion of the transaction, TBC will incorporate Bank Republic's GEL1.7 billion (roughly $700 million) assets, 333,000 clients and 41 branches to its network, boosting its market position as a leading bank in Georgia with a lending and deposit market share of approximately 35%. TBC expects to extract pre-tax cost synergies of around GEL21 million per year, but also a potentially higher cost of funds of about GEL6 million as Bank Republic had benefited from lower cost of funds due mainly to SG guarantees on some of its borrowings, translating to an increase in return on equity of roughly one percentage point. The acquisition is aligned with TBC's strategy of reinforcing its position in the retail banking segment, and also presents potential opportunities for cross- selling to newly acquired customers. Market funding reliance will increase; Bank Republic's net loans to deposit ratio was 162% at the end of 2015, higher than that of TBC. However, most of Bank Republic's borrowings were from international financial institutions (IFIs), including the EBRD, which are long-term and relatively less confidence sensitive than other market funds. As such, Moody's expects that TBC Bank's net loans over customer deposits and IFI funding will remain broadly unchanged at around 96% by the end of the year. Moody's expects that the transaction will not have a material impact on TBC's asset risk as it does not significantly change the bank's portfolio makeup, in which retail, micro and, small and medium enterprises loans will continue to account for roughly two-thirds of total lending, and adds a relatively seasoned and so far adequately performing portfolio. Bank Republic's credit costs in 2015 were 1.4% compared with 1.7% of gross loans for TBC, while problem loans at Bank Republic were adequately covered by provisions at 87% as of December 2015. The rating agency notes that its assessment of TBC continues to reflect elevated credit risks arising from extensive foreign currency lending (which stood at 66% of total loans as of June 2016) and an expected resumption of rapid credit growth in the coming quarters. In addition, the transaction, which is the largest bank acquisition so far in Georgia, will entail execution risks. However, in recent years TBC has gained experience incorporating assets, new customers, branches and employees. In 2014, it successfully acquired Bank Constanta and, in 2015, a micro-loan portfolio from ProCredit Bank (unrated). The outlook on the long-term deposit ratings is stable, reflecting TBC's resilient credit profile despite the expected reduction in the bank's capital ratios that will arise from the acquisition and Moody's expectation that internal capital generation will remain strong and allow the bank to rebuild its capital buffers. JSC TBC Bank is headquartered in Tbilisi, Georgia and reported GEL 6.8billion ($2.9 billion) of consolidated assets as of 30 June 2016, before the acquisition of Bank Republic. FACTORS THAT COULD LEAD TO AN UPGRADE Upward pressure on TBC's ratings is contingent on the evolution and diversification of the Georgian economy and a substantial reduction of loan and deposit dollarisation. The bank's B1 long-term foreign-currency deposit rating is constrained by Georgia's foreign-currency deposit ceiling and would be upgraded in the event that the ceiling for such deposits is raised. FACTORS THAT COULD LEAD TO A DOWNGRADE Downward pressure on TBC's ratings would develop as a result of: (1) rising levels of non-performing loans, which would impact bottom-line profitability; (2) the bank's capital metrics falling below those of domestic peers; (3) a resurgence of political risk that would lead to significant funding outflows; or (4) a significant deterioration of domestic operating conditions in Georgia, as described in Moody's Macro Profile for the country. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Banks published in January 2016. ============= I R E L A N D ============= ALFA BOND: Fitch Assigns B Rating to Perpetual Add'l. AT1 Notes --------------------------------------------------------------- Fitch Ratings has assigned Alfa Bond Issuance plc's (ABI) upcoming issue of perpetual additional Tier 1 (AT1) notes an expected long-term rating of 'B(EXP)'. The final rating is contingent upon the receipt of final documents conforming to information already received. ABI, an Irish SPV issuing the notes will be on-lending the proceeds in form of a perpetual subordinated loan to Russian JSC Alfa-Bank (Alfa, BB+/Negative/bb+). KEY RATING DRIVERS The planned notes should qualify as AT1 instrument in regulatory accounts due to a full coupon omission option at Alfa's discretion and full or partial write-down in case of either Alfa's core equity tier 1 (CET1) ratio falling below 5.125% (versus 4.5% generally required minimum) or the Central Bank of Russia (CBR) approving a plan for the participation of the Deposit Insurance Agency (DIA) in bankruptcy prevention measures in respect of the bank (Fitch believes the latter is possible as soon as a bank breaches any of its mandatory capital ratios or certain other liquidity and capital requirements). Alfa's AT1 perpetual notes are rated four notches lower than the bank's 'bb+' Viability Rating (VR), the maximum rating under Fitch's Global Bank Criteria that can be assigned to deeply subordinated notes with fully discretionary coupon omission issued by banks with a VR anchor of 'bb+'. The notching comprises (i) two notches for higher loss severity relative to senior unsecured creditors and (ii) a further two notches for non-performance risk, as Alfa has an option to cancel at its discretion the coupon payments. The latter is more likely if the capital ratios fall in the capital buffer zone, although this risk is somewhat mitigated by Alfa's stable financial profile and general policy of maintaining decent headroom (about 150bps-200bps) over minimum capital ratios. The notes will have no established redemption date; however, Alfa will have an option (subject to CBR approval) to repay the notes at the first coupon reset date (2021) and quarterly at each future coupon date payment afterwards. Alfa's regulatory CET1 and Tier 1 ratios were both at 8.1% at end-8M16, but will decrease by about 30bps-40bps as a result of the consolidation of the rehabilitated Bank Baltyiskiy planned for 4Q16-1H17. The required minimums including applicable buffers (capital conservation buffer of 0.625% and 0.15% systemic importance buffer) are currently, respectively, 5.3% and 6.8%. The buffers are being gradually phased in until 2019 when they should reach 2.5% and 1%, resulting in fully loaded minimum requirements of, respectively, 8% and 9.5%. RATING SENSITIVITIES The issue rating is primarily sensitive to a downgrade of Alfa's VR. If the VR is downgraded to 'bb', the notes will also be downgraded by one notch. The rating would also be downgraded if Fitch changes its assessment of the probability of their non- performance relative to the risk captured in the bank's VR or if the instrument becomes non-performing, i.e. if the bank cancels any coupon payment or at least partially writes off the principal. In that case the issue will be downgraded based on Fitch's expectations about the form and duration of non- performance. However, if Alfa's VR is upgraded to 'bbb-' (unlikely in the medium term as we expect to keep at least one notch difference between Alfa and the Russian sovereign rating, which is currently 'BBB-'), Fitch will likely increase the notching between the notes' rating and Alfa's VR and affirm the notes at 'B', as this is the maximum rating under Fitch's Global Bank Criteria that can be assigned to deeply subordinated notes with fully discretionary coupon omission issued by banks with a VR anchor of 'bbb-'. BLACKROCK EUROPEAN: Moody's Assigns (P)B2 Rating to Class F Notes ----------------------------------------------------------------- Moody's Investors Service announced that it has assigned the following provisional ratings to notes to be issued by BlackRock European CLO II Designated Activity Company (the "Issuer" or "BlackRock CLO II"): -- EUR 244,000,000 Class A Senior Secured Floating Rate Notes due 2030, Assigned (P)Aaa (sf) -- EUR 48,000,000 Class B Senior Secured Floating Rate Notes due 2030, Assigned (P)Aa2 (sf) -- EUR 23,000,000 Class C Senior Secured Deferrable Floating Rate Notes due 2030, Assigned (P)A2 (sf) -- EUR 20,000,000 Class D Senior Secured Deferrable Floating Rate Notes due 2030, Assigned (P)Baa2 (sf) -- EUR 25,000,000 Class E Senior Secured Deferrable Floating Rate Notes due 2030, Assigned (P)Ba2 (sf) -- EUR 12,000,000 Class F Senior Secured Deferrable Floating Rate Notes due 2030, Assigned (P)B2 (sf) Moody's issues provisional ratings in advance of the final sale of financial instruments, but these ratings only represent Moody's preliminary credit opinions. Upon a conclusive review of a transaction and associated documentation, Moody's will endeavour to assign definitive ratings. A definitive rating (if any) may differ from a provisional rating. RATINGS RATIONALE Moody's provisional rating of the rated notes addresses the expected loss posed to noteholders by legal final maturity of the notes in 2030. The provisional ratings reflect the risks due to defaults on the underlying portfolio of loans given the characteristics and eligibility criteria of the constituent assets, the relevant portfolio tests and covenants as well as the transaction's capital and legal structure. Furthermore, Moody's is of the opinion that the Collateral Manager, BlackRock Investment Management (U.K.) Limited ("BlackRock"), has sufficient experience and operational capacity and is capable of managing this CLO. BlackRock CLO II is a managed cash flow CLO. At least 90% of the portfolio must consist of secured senior loans or senior secured bonds and up to 10% of the portfolio may consist of unsecured senior loans, second-lien loans, high yield bonds and mezzanine loans. The portfolio is expected to be at least 70% ramped up as of the closing date and to be comprised predominantly of corporate loans to obligors domiciled in Western Europe. The remainder of the portfolio will be acquired during the six month ramp-up period in compliance with the portfolio guidelines. BlackRock will manage the CLO. It will direct the selection, acquisition and disposition of collateral on behalf of the Issuer and may engage in trading activity, including discretionary trading, during the transaction's four-year reinvestment period. Thereafter, purchases are permitted using principal proceeds from unscheduled principal payments and proceeds from sales of credit risk and credit improved obligations, and are subject to certain restrictions. In addition to the six classes of notes rated by Moody's, the Issuer will issue EUR 44,500,000 of subordinated notes. Moody's will not assign rating to this class of notes. The transaction incorporates interest and par coverage tests which, if triggered, divert interest and principal proceeds to pay down the notes in order of seniority. Factors that would lead to an upgrade or downgrade of the ratings: The rated notes' performance is subject to uncertainty. The notes' performance is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. BlackRock's investment decisions and management of the transaction will also affect the notes' performance. Loss and Cash Flow Analysis: Moody's modeled the transaction using CDOEdge, a cash flow model based on the Binomial Expansion Technique, as described in Section 2.3 of the "Moody's Global Approach to Rating Collateralized Loan Obligations" rating methodology published in October 2016. The cash flow model evaluates all default scenarios that are then weighted considering the probabilities of the binomial distribution assumed for the portfolio default rate. In each default scenario, the corresponding loss for each class of notes is calculated given the incoming cash flows from the assets and the outgoing payments to third parties and noteholders. Therefore, the expected loss or EL for each tranche is the sum product of (i) the probability of occurrence of each default scenario and (ii) the loss derived from the cash flow model in each default scenario for each tranche. Moody's used the following base-case modeling assumptions: -- Par Amount: EUR 400,000,000 -- Diversity Score: 36 -- Weighted Average Rating Factor (WARF): 2775 -- Weighted Average Spread (WAS): 4.05% -- Weighted Average Coupon (WAC): 5.25% -- Weighted Average Recovery Rate (WARR): 43.50% -- Weighted Average Life (WAL): 8 years As part of the base case, Moody's has addressed the potential exposure to obligors domiciled in countries with local currency country risk ceiling (LCC) of A1 or below. As per the portfolio constraints, exposures to countries with local currency country risk ceiling rating of between A1 to A3 cannot exceed 10%. Following the effective date, and given these portfolio constraints and the current sovereign ratings of eligible countries, the total exposure to countries with a LCC of A1 or below may not exceed 10% of the total portfolio. The remainder of the pool will be domiciled in countries which currently have a LCC of Aa3 and above. Given this portfolio composition, the model was run without the need to apply portfolio haircuts as further described in the methodology. Stress Scenarios: Together with the set of modelling assumptions above, Moody's conducted an additional sensitivity analysis, which was an important component in determining the provisional rating assigned to the rated notes. This sensitivity analysis includes increased default probability relative to the base case. Below is a summary of the impact of an increase in default probability (expressed in terms of WARF level) on each of the rated notes (shown in terms of the number of notch difference versus the current model output, whereby a negative difference corresponds to higher expected losses), holding all other factors equal: Percentage Change in WARF: WARF + 15% (to 3191 from 2775) Ratings Impact in Rating Notches: -- Class A Senior Secured Floating Rate Notes: 0 -- Class B Senior Secured Floating Rate Notes: -2 -- Class C Senior Secured Deferrable Floating Rate Notes: -2 -- Class D Senior Secured Deferrable Floating Rate Notes: -2 -- Class E Senior Secured Deferrable Floating Rate Notes: -1 -- Class F Senior Secured Deferrable Floating Rate Notes: 0 Percentage Change in WARF: WARF +30% (to 3608 from 2775) Ratings Impact in Rating Notches: -- Class A Senior Secured Floating Rate Notes: -1 -- Class B Senior Secured Floating Rate Notes: -3 -- Class C Senior Secured Deferrable Floating Rate Notes: -4 -- Class D Senior Secured Deferrable Floating Rate Notes: -2 -- Class E Senior Secured Deferrable Floating Rate Notes: -2 -- Class F Senior Secured Deferrable Floating Rate Notes: -3 Methodology Underlying the Rating Action: The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in October 2016. SCF RAHOITUSPALVELUT: Moody's Assigns Ba2 Rating to Class E Notes ----------------------------------------------------------------- Moody's Investors Service assigned definitive ratings to the following asset-backed securities (ABS) notes issued by SCF Rahoituspalvelut II Designated Activity Company: -- EUR543.4M Class A Floating Rate Notes due 2025, Definitive Rating Assigned Aaa (sf) -- EUR27.3M Class B Fixed Rate Notes due 2025, Definitive Rating Assigned Aa3 (sf) -- EUR9.1M Class C Fixed Rate Notes due 2025, Definitive Rating Assigned A3 (sf) -- EUR6.1M Class D Fixed Rate Notes due 2025, Definitive Rating Assigned Baa2 (sf) -- EUR10.3M Class E Fixed Rate Notes due 2025, Definitive Rating Assigned Ba2 (sf) -- Subordinated and unrated EUR11.0M Class F Fixed Rate Notes due 2025 is also issued. RATINGS RATIONALE Today's rating assignment reflects the transaction's structure as a static cash securitisation of auto loans extended to obligors in Finland by Santander Consumer Finance Oy (not rated), which is a wholly owned subsidiary of Santander Consumer Bank AS, which in turn is a wholly owned subsidiary of Santander Consumer Finance S.A. (A3/P-2/A3(cr)/P-2(cr)). This is the fifth Moody's rated public securitisation transaction sponsored by Santander Consumer Finance Oy. The seller also acts as servicer of the portfolio. A back-up servicer facilitator is appointed at close (Santander Consumer Finance S.A.) and the structure envisions the selection of a back-up servicer within 60 days should (i) Santander Consumer Finance S.A. be downgraded below a Baa3 rating or (ii) Santander Consumer Finance S.A. no longer holds at least 50% of the share capital of the servicer. The securitised portfolio of underlying assets consists of auto loans distributed through dealers to private individuals and self-employed individuals (together 82.5%) or commercial entities (17.5%). These loans finance new cars (36.4%) and used cars (63.6%). As of October 2016 the securitised portfolio consists of 39,481 loans with a weighted average seasoning of 6.6 months. The portfolio consists of approximately 47.5% "balloon" loans, which have equal instalments during the life of the loan and a larger balloon payment at loan maturity. On average, the balloon instalment portion accounts for 30.7% of the total principal of balloon loans and 14.6% of the entire portfolio cash flows. According to Moody's, the transaction benefits from various credit strengths such as a granular portfolio and an amortising liquidity reserve of 1% of Class A and Class B outstanding notes balance. However, Moody's notes that the transaction features some credit weaknesses such as an unrated servicer and a higher likelihood of deferred interest payments due on the Class E Notes. Various mitigants have been included in the transaction structure such as a back-up servicer facilitator which is obliged to appoint a back-up servicer if certain triggers are breached. Moody's analysis focused, amongst other factors, on (i) historical portfolio performance information; (ii) the credit enhancement provided by the subordination; (iii) the liquidity support available in the transaction by way of the amortising 1% liquidity reserve and the possibility of using principal to pay interest; (iv) the appointment of a back-up servicer facilitator at closing; (v) the independent cash manager and calculation agent; (vi) the notification of the borrowers near the closing date of the sale of the receivables and direction to borrowers to pay directly into the issuer account, and (vii) the legal and structural integrity of the transaction. MAIN MODEL ASSUMPTIONS: Moody's determined the portfolio lifetime expected defaults of 2.75%, expected recoveries of 45% and Aaa portfolio credit enhancement ("PCE") of 11.5% related to borrower receivables. "The expected defaults and recoveries capture our expectations of performance considering the current economic outlook, while the PCE captures the loss we expect the portfolio to suffer in the event of a severe recession scenario," Moody's said. Expected defaults and PCE are parameters used by Moody's to calibrate its lognormal portfolio loss distribution curve and to associate a probability with each potential future loss scenario in the ABSROM cash flow model to rate Auto ABS. These main assumptions remain unchanged compared to the previously rated SCF Rahoituspalvelut I Designated Activity Company transaction on 29 October 2015. Portfolio expected defaults of 2.75% are lower than the EMEA Auto Loan ABS average and are based on Moody's assessment of the lifetime expectation for the pool taking into account (i) historic performance of the loan book of the originator, (ii) benchmark transactions, and (iii) other qualitative considerations, such as the high balloon loan component of the portfolio. Portfolio expected recoveries of 45% are in line with the EMEA Auto Loan ABS average and are based on Moody's assessment of the lifetime expectation for the pool taking into account (i) historic performance of the loan book of the originator, (ii) benchmark transactions, and (iii) other qualitative considerations. PCE of 11.5% is in line with the EMEA Auto Loan ABS average and is based on Moody's assessment of the pool which is mainly driven by the high exposure to balloon loans despite considering the strength of the originator and the relative ranking to originator peers in the EMEA auto loan market. The PCE level of 11.5% results in an implied coefficient of variation ("CoV") of 57.89%. METHODOLOGY: The principal methodology used in these ratings was Moody's Global Approach to Rating Auto Loan-and-Lease Backed ABS, published in October 2016. The ratings address the expected loss posed to investors by the legal final maturity. In Moody's opinion the structure allows for the timely payment of interest on the Class A to Class B Notes and the ultimate payment of interest and principal at par on the Class A to Class E Notes on or before the rated final legal maturity date. Moody's ratings address only the credit risks associated with the transaction. Other non-credit risks have not been addressed, but may have a significant effect on yield to investors. Provisional ratings were assigned on October 13, 2016. FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS: Factors that may cause an upgrade of the ratings include a significant better than expected performance of the pool together with an increase in credit enhancement of notes. Factors that may cause a downgrade of the ratings include a decline in the overall performance of the pool and change in control of the servicer or insolvency of the servicer. LOSS AND CASH FLOW ANALYSIS: Moody's used its cash flow model ABSROM as part of its quantitative analysis of the transaction. The ABSROM cash flow model enables users to model various features of a standard European ABS transaction - including the specifics of the loss distribution of the assets, their portfolio amortisation profile, yield as well as the specific priority of payments, swaps and reserve funds on the liability side of the ABS structure. STRESS SCENARIOS: In rating auto loan ABS, default rate and recoveries are two key inputs that determine the loss distribution. Parameter sensitivities for this transaction have been tested for each rated class of notes in the following manner: Moody's tested nine scenarios derived from a combination of mean default: 2.75% (base case), 3.00% (base case + 0.25%), 3.25% (base case + 0.5%) and recoveries: 45% (base case), 40% (base case - 5%), 35% (base case - 10%). The results for Class A notes under these scenarios vary from Aaa (base case) model output to Aa1 (model output where the mean default is 3.25% and recoveries are 35%). Parameter sensitivities provide a quantitative/model indicated calculation of the number of notches that a Moody's rated structured finance security may vary if certain input parameters used in the initial rating process differed. The analysis assumes that the deal has not aged. It is not intended to measure how the rating of the security might migrate over time, but rather how the initial model output of the security might have differed if the two parameters within a given sector that have the greatest impact were varied. Results for all other rated classes of notes can be found in Moody's new issue report. SCF RAHOITUSPALVELUT: Fitch Assigns BB+ Rating to Cl. E Notes ------------------------------------------------------------- Fitch Ratings has assigned SCF Rahoituspalvelut II Designated Activity Company final ratings as: EUR543.4 mil. class A: 'AAAsf'; Outlook Stable EUR27.3 mil. class B: 'AAsf'; Outlook Stable EUR9.1 mil. class C: 'A+sf'; Outlook Stable EUR6.1 mil. class D: 'Asf'; Outlook Stable EUR10.3 mil. class E: 'BB+sf'; Outlook Stable EUR11 mil. class F: not rated Due to revised note margins since assigning expected ratings, the final rating for the class D note is a notch higher than the expected rating assigned. The transaction is a securitisation of auto loan receivables originated to Finnish individuals and companies by Santander Consumer Finance Oy (SCF Oy), a 100% subsidiary of Norway-based Santander Consumer Bank AS (SCB AS, A-/Stable/F2). KEY RATING DRIVERS Solid Receivables Performance Default rates have improved significantly since SCF Oy started originations in 2007. In Fitch's view, this is due to improved economic conditions and origination practices. Fitch set a default rate assumption of 1.75%, taking into account the continued sound performance of previous comparable transactions from this originator. Fitch has maintained the high stress default multiple of 7.0x for 'AAAsf', which reflects the presence of balloon payments, together with the low default base case and fairly late default definition. High Recoveries The recoveries achieved by SCF Oy are among the highest for rated European auto ABS. Fitch has used a recovery assumption of 70%, which was stressed with a high recovery haircut of 60% for 'AAAsf'. The high haircut reflects a small used-car market and a reliance on the government vehicle valuation mechanism in determining the value of repossessed vehicles. Adequate Liquidity Coverage A liquidity reserve provides adequate liquidity coverage to the class A and B notes. The class C and below notes do not benefit from the reserve, which means timely payment of interest on the notes may not be achieved in the case of a servicing disruption, constraining their highest achievable rating to 'A+sf'. Stable Asset Outlook Fitch believes the Finnish economic recovery is gathering pace, with investment and consumer spending helping lift GDP growth to an average of 0.8% year-on-year in 1H16. Unemployment, which is considered a key driver of asset performance, peaked at 9.5% in 2015 and is expected to gradually improve in 2016 and 2017. Fitch expects stable auto loan performance in Finland. RATING SENSITIVITIES Expected impact on the notes' rating of increased defaults (class A/B/C/D/E): Current rating: 'AAAsf'/'AAsf'/'A+sf'/'Asf'/'BB+sf' Increase default base case by 10%: 'AAAsf'/'AA- sf'/'A+sf'/'Asf'/'BB+sf' Increase default base case by 25%: 'AAAsf'/'AA-sf'/'Asf'/'A- sf'/'BB+sf' Increase default base case by 50%: 'AAsf'/'Asf'/'A- sf'/'BBB+sf'/'BBsf' Expected impact on the notes' rating of reduced recoveries (class A/B/C/D/E): Current rating: 'AAAsf'/'AAsf'/'A+sf'/'Asf'/'BB+sf' Reduce recovery base case by 10%: 'AAAsf'/'AAsf'/'A+sf'/'Asf'/'BB+sf' Reduce recovery base case by 25%: 'AAAsf'/'AA-sf'/'A+sf'/'A- sf'/'BB+sf' Reduce recovery base case by 50%: 'AAAsf'/'A+sf'/'A- sf'/'BBB+sf'/'BB-sf' Expected impact on the notes' rating of increased defaults and reduced recoveries (class A/B/C/ D/ E): Current rating: 'AAAsf'/'AAsf'/'A+sf'/'Asf'/'BB+sf' Increase default base case by 10%; reduce recovery base case by 10%: 'AAAsf'/'AA-sf'/'A+sf'/'A-sf'/'BB+sf' Increase default base case by 25%; reduce recovery base case by 25%: 'AA+sf/'A+sf'/'A-sf'/'BBB+s'f/'BBsf' Increase default base case by 50%; reduce recovery base case by 50%: 'AA-sf'/'BBB+sf'/'BBB-sf'/'BB+sf'/'B-sf' DATA ADEQUACY Fitch reviewed the results of a third party assessment conducted on the asset portfolio information, and concluded that there were no findings that affected the rating analysis. Fitch conducted a review of a small targeted sample of SCF Oy's origination files and found the information contained in the reviewed files to be of adequate consistency with the originator's policies and practices and the other information provided to the agency about the asset portfolio. Overall and together with the assumptions referred to above, Fitch's assessment of the asset pool information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. ========= I T A L Y ========= SIENA PMI 2016: Fitch Assigns B- Rating to Class C Notes -------------------------------------------------------- Fitch Ratings has assigned Siena PMI 2016 S.r.l.'s notes final ratings as: EUR470,000,000 Class A1: 'AA+sf'; Outlook Negative EUR400,000,000 Class A2: 'AA+sf'; Outlook Negative EUR150,000,000 Class B: 'A-sf'; Outlook Stable EUR313,000,000 Class C: 'B-sf'; Outlook Stable EUR406,300,000 junior notes: not rated The transaction is a EUR1.7 bil. revolving securitisation of secured and unsecured loans granted to Italian small- and medium- sized businesses (SMEs) by Banca di Monte dei Paschi di Siena (BMPS; B-/RWE/B/RWN). KEY RATING DRIVERS High Default Probability Fitch set a bank benchmark annual average probability of default of 7.1% based on the observed default rates (ODRs) for the originator's SME lending book. The bank benchmark reflects a challenging economic environment in Italy. Low Recoveries The portfolio at closing comprised mostly unsecured loans. Fitch expects a base case recovery rate of 30% for unsecured loans. Revolving Period The transaction is able to purchase additional assets from the originator until February 2018. Fitch has considered in its analysis the potential migration of portfolio characteristics due to replenishment. Granular Portfolio The size of the largest obligor group is limited to 0.5% of the total portfolio. The largest 10 obligor groups are limited to 4% of the total portfolio in aggregate. Rapid Deleveraging Fitch expects the portfolio to be made up mostly of unsecured loans, for which the remaining time to maturity is limited to seven years by the eligibility criteria. Fitch therefore expects the overall weighted average life (WAL) of the portfolio to be less than four years at the end of the replenishment period. Set-Off and Commingling Risk The transaction features a set-off reserve, which partially covers set-off exposure. Fitch estimates the set-off exposure not covered by the reserve to be 4.1% of the initial portfolio. Additionally, Fitch estimates the commingling exposure at 5.6% of the initial portfolio balance. The large commingling exposure is driven by the clustering of loan payment dates on the last day of June and December each year as a result of the originator's underwriting practices. Sovereign Rating Cap The class A notes are capped at 'AA+sf' with a Negative Outlook, driven by sovereign dependency, in accordance with Fitch's Criteria for Sovereign Risk in Developed Markets for Structured Finance and Covered Bonds. RATING SENSITIVITIES An increase of 25% in the default probabilities assigned to each obligor or a reduction of 25% in expected recovery rates would lead to a downgrade of one notch for the rated notes. DATA ADEQUACY Fitch reviewed the results of a third party assessment conducted on the asset portfolio information, and concluded that there were no findings that affected the rating analysis. Fitch conducted a review of a small targeted sample of the originator's origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio. Overall, Fitch's assessment of the asset pool information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. =================== K A Z A K H S T A N =================== KAZAKHTELECOM: S&P Affirms 'BB' CCR & Revises Outlook to Positive ----------------------------------------------------------------- S&P Global Ratings revised its outlook on Kazakhstan-based telecommunications operator Kazakhtelecom JSC to positive from stable. At the same time, S&P affirmed its 'BB' long-term foreign and local currency corporate credit ratings and the 'kzA+' Kazakhstan national scale rating. S&P has also affirmed its 'BB' and 'kzA+' issue ratings on the group's Kazakhstani tenge (KZT) 45.5 billion senior unsecured bond. The outlook revision reflects Kazakhtelecom's strengthening credit metrics, particularly S&P's expectation that S&P Global Ratings-adjusted debt to EBITDA will decline below 1.0x in 2016- 2018. S&P also takes into account Kazakhtelecom's solid balance sheet, with a large balance of cash and deposits at around KZT53 billion at end-June 2016, and S&P's expectation that it will increase, supported by strongly positive free operating cash flow (FOCF). Although S&P is mindful of the general weakness of the Kazakh banking system, it considers that the structure of cash and deposits is well-diversified and that Kazakhtelecom has a track record of easily accessing cash in previous years. Importantly, a significant part of Kazakhtelecom's cash and deposit is held in foreign currency (U.S. dollars), which mitigates the currency risk related to the group's notes that are linked to the dollar. S&P's adjusted debt calculation of KZT52.5 billion at year-end 2016 mainly consists of KZT27.4 billion senior unsecured notes due in 2019, around KZT27.6 billion of amortizing debt fully guaranteed by Samruk-Kazyna, the parent company of Kazakhtelecom, finance leases, and guarantees of the new debt raised by the mobile joint venture between the group and Tele2, adjusted by surplus cash. In S&P's analysis, it factors in that in 2019 Kazakhtelecom will face a put option on its 49% stake in the mobile joint venture, which S&P currently values at the amount of the shareholder loans contributed by Tele2. At the time the joint venture was created, the value equaled KZT97 billion, but S&P understands that the value may change. S&P expects that the group's adjusted leverage (debt to EBITDA) could increase in 2019 but still remain at or below 1.5x. S&P's assessment of Kazakhtelecom's business risk profile remains constrained by the group's exposure to country risk in Kazakhstan. All group assets are located there, and S&P assess the country risk as high. S&P also factors in its exposure to fixed-line voice business, which is declining due to fixed-to- mobile substitution, and pressure on Kazakhtelecom's public policy role, requiring it at times to invest in projects with low profitability or long payback periods. S&P also considers that Kazakhtelecom no longer directly owns any mobile assets following the creation of the joint venture with Tele2. These weaknesses are partly offset by the group's dominant incumbent position in the fixed-line telephony market in Kazakhstan. In many areas of the country, it is the sole provider of fixed-line telecom services. This market has minimal competition, which enables Kazakhtelecom to derive growth from increasing broadband penetration and compensate for the declining usage of fixed-line voice services. "In our analysis, we anticipate that Kazakhtelecom will face continued margin pressure in 2016-2017, partly because of the impact of the weaker tenge. We expect an adjusted margin of about 33% in 2016-2017, as compared with around 38% in 2015. That said, we expect that Kazakhtelecom will generate approximately 5% organic revenue growth (excluding the mobile segment) in 2016, primarily on interconnect services, line rentals, data transfer, and pay-TV services. That said, we expect that fixed-line services which account for about 20% of total revenues, will gradually decrease as a result of fixed-to- mobile substitution. We expect that in 2017, Kazakhtelecom's revenues will increase only marginally, with declining fixed-line revenues offset by other segments," S&P said. S&P's rating on Kazakhtelecom also reflects its negative financial policy assessment and some uncertainty around the joint venture. Despite the group's low debt, we think leverage could increase, given management's leverage target of below 2.0x, calculated as gross debt to EBITDA, and the existing dividend payout policy, at between 15% and 100% of the previous year's net income. That said, the financial policy could change in the event of an IPO, although there is uncertainty around the timeline. The joint venture is in an active growth phase, which we think may require further investment. Although we do not expect that Kazakhtelecom will need to contribute additional funds, we see some uncertainty about the joint venture's long- term ability to generate positive FOCF," S&P said. The positive outlook reflects the possibility that S&P could raise its rating on Kazakhtelecom in the next 12 months, if adjusted debt to EBITDA remains consistently below 1.5x while the joint venture's operating performance gradually improves. An upgrade would rely on adjusted debt to EBITDA below 1.5x, even factoring in the exercise of the option on the Tele2 stake in the joint venture in 2019. Achieving this ratio will depend on both Kazakhtelecom's and the joint venture's operating performance. S&P could revise the outlook to stable if Kazakhtelecom's leverage were to increase above 1.5x, as a result of a negative impact from the joint venture or high dividend distribution. ===================== N E T H E R L A N D S ===================== DRYDEN 46 EURO: S&P Assigns B- Rating to Class F Notes ------------------------------------------------------ S&P Global Ratings has assigned its credit ratings to Dryden 46 Euro CLO 2016 B.V.'s class A-1, A-2, B-1, B-2, C, D, E, and F notes. At closing, Dryden 46 Euro CLO 2016 also issued an unrated subordinated class of notes. The ratings assigned to Dryden 46 Euro CLO 2016's notes reflect S&P's assessment of: -- The diversified collateral pool, which consists primarily of broadly syndicated speculative-grade senior secured term loans and bonds that are governed by collateral quality and portfolio profile tests. The credit enhancement provided through the subordination of cash flows, excess spread, and overcollateralization. -- The collateral manager's experienced team, which can affect the performance of the rated notes through collateral selection, ongoing portfolio management, and trading. The transaction's legal structure, which in S&P's view is bankruptcy remote. S&P considers that the transaction's documented counterparty replacement and remedy mechanisms adequately mitigate its exposure to counterparty risk under our current counterparty criteria. Following the application of S&P's structured finance ratings above the sovereign criteria, S&P considers the transaction's exposure to country risk to be limited at the assigned rating levels, as the exposure to individual sovereigns does not exceed the diversification thresholds outlined in S&P's criteria. S&P considers the transaction's legal structure to be bankruptcy remote, in line with its European legal criteria. Following S&P's analysis of the credit, cash flow, counterparty, operational, and legal risks, S&P believes its ratings are commensurate with the available credit enhancement for each class of notes. Dryden 46 Euro CLO 2016 is a broadly syndicated collateralized loan obligation (CLO) managed by PGIM Ltd., which is the principal asset management business of Prudential Financial, Inc. This is PGIM's second CLO to date in 2016, following Dryden 44 Euro CLO 2015 B.V., which closed in June 2016. RATINGS LIST Ratings Assigned Dryden 46 Euro CLO 2016 B.V. EUR471.18 Million Secured Floating- And Fixed-Rate Notes (Including Subordinated Notes) Class Rating Amount (mil. EUR) A-1 AAA (sf) 236.50 A-2 AAA (sf) 33.50 B-1 AA (sf) 44.51 B-2 AA (sf) 12.87 C A (sf) 25.43 D BBB (sf) 24.08 E BB (sf) 26.90 F B- (sf) 13.28 Sub NR 54.11 NR--Not rated. ============= R O M A N I A ============= CARPATICA ASIG: Court Rejects Bankruptcy Ruling Appeal ------------------------------------------------------ The Bucharest Court of Appeal rejected, on October 26, 2016, the appeal filed by Carpatica Asig S.A. to suspend the effects of the Decision no. 1498/27.07.2016 issued by the Financial Supervisory Authority (ASF). Through the respective decision, ASF ordered the end of the financial recovery procedure based on recovery plan, setting the state of insolvency, triggering the bankruptcy proceedings and withdrawing the operating authorization of S.C. Carpatica Asig S.A. The decision of the Court of Appeal is not final, the company being entitled to appeal within five days from the notification of the sentence. The Board of the Financial Supervisory Authority decided, in the meeting held on July 27, 2016, to withdraw the operating authorization of Carpatica Asig S.A. and promote the request to trigger bankruptcy proceedings, under Law no. 503/2004 (republished) and Law no. 85/2014. The Decision of ASF Board was based on conclusions of Financial Audit Report for 2015 prepared by Mazars, in conjunction with the Evaluation Report prepared by Deloitte, as well as the Report on fulfillment by the Policyholders Guarantee Fund (FGA) of the mandate of temporary administrator. About ASF ASF -- www.asfromania.ro -- is the national authority, established in 2013 under GEO 93/2012 approved by Law 113/2013, for the regulation and supervision of insurance, private pensions and capital markets. ASF contributes to consolidating the integrated framework of operation of the three sectors, totaling over 10 million participants. About Carpatica Asig Carpatica Asig was the seventh biggest insurer in Romania, in 2015, with gross premiums underwritten of over EUR130 million and a market share of 6.7%. The company was one of the leaders on the mandatory car insurance (RCA) segment, according to Romania Insider. =========== R U S S I A =========== IG SEISMIC: Moody's Confirms B3 Corporate Family Rating ------------------------------------------------------- Moody's Investors Service has confirmed the B3 corporate family rating (CFR) of IG Seismic Services Plc (IGSS), the leading seismic services company in Russia. Concurrently, the probability of default rating (PDR) was confirmed at B3-PD and an /LD indicator was assigned. The outlook on all the ratings is negative. This action concludes the rating review initiated by Moody's on September 16, 2016. The /LD designation reflects Moody's view that the recent bond exchange constitutes a distressed exchange under Moody's definition of default. Moody's will remove the /LD designation from the PDR in two business days. RATINGS RATIONALE Today's confirmation reflects the recently announced refinancing of IGSS's RUB3 billion bond due in 2018 via the exchange for an amortising RUB3 billion bond maturing in October 2019. The bond exchange allowed the company to successfully remove the risks related to the put option on the existing bond that could be exercised as of 24 October 2016. However, the company's liquidity profile still remains fairly weak, given the negative free cash flow expected in 2016-17 and substantial debt service requirements, which will require additional financing in 2017. At the same time, Moody's positively acknowledges the evidence of the company's strong relationship with its key creditor, Bank Otkritie Financial Corporation PJSC (Ba3 negative) and expects that it will continue to support IGSS going forward by providing the necessary financing. In particular, the company has recently signed a new 3-year RUB3.2 billion loans with the bank and obtained a waiver for financial covenants under all its credit facilities until October 2018. The B3 rating with the negative outlook continues to reflect Moody's expectation of a substantial weakening in IGSS's earnings in 2016 owing to contracting demand for seismic services in Russia amid the dramatic oil price volatility in Q1 2016. Overall, IGSS's leverage (measured as adjusted debt/EBITDA) is expected to rise to nearly 6.0x (4.1x in 2015) driven by negative operating cash flow, a significant reduction in EBITDA and rising interest expenses coupled with the step up in debt. Despite a marginal revival in demand from Q2 2016, as oil prices somewhat stabilised, Moody's expects that the company's operations and financial metrics will remain weak through 2017. Moreover, the rating agency continues to see downside risks as the industry stays under pressure. IGSS's B3 CFR also factors in its (1) modest scale by global standards; and (2) exposure to Russia-related political, economic and legal risks. More positively, the rating takes into account (1) IGSS's dominant position in the Russian seismic services market, which benefits from still strong longer-term fundamentals; (2) its significant presence in all major hydrocarbon-rich basins in Russia and its high level of customer diversification; and (3) the company's strategic partner, Schlumberger Ltd (A1 stable), which supports IGSS's strong technological expertise. RATIONALE FOR THE NEGATIVE OUTLOOK The negative outlook on the ratings reflects Moody's expectation that IGSS's operating and financial performance may further deteriorate with adjusted debt/EBITDA increasing to above 6.0x given that the industry remains under ongoing pressure from still weak oil prices and potential new market shocks can't be fully ruled out. The inability to successfully refinance the upcoming debt maturities or any other signs of limited access to new funding may also put renewed pressure on IGSS's ratings. WHAT COULD CHANGE THE RATINGS DOWN/UP A rating downgrade could be triggered by (1) any further negative developments in the company's operating environment and/or business profile that leads to the deterioration of its metrics beyond Moody's current expectations, with adjusted debt/EBITDA above 6.0x and adjusted EBITDA/interest below 1.0x, all on a sustained basis; and (2) any signs of deterioration of its ability to access new funding. Though unlikely in the near term, IGSS's rating could be upgraded if the company is able to achieve on a sustainable basis (1) reduced leverage measured by adjusted debt/EBITDA at or below 4.0x; (2) improved interest coverage measured as EBITDA/interest expense at or above 2.0x; and (3) a solid liquidity profile with comfortable near-term refinancing needs. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Global Oilfield Services Industry Rating Methodology published in December 2014. Domiciled in Cyprus and headquartered in Moscow, Russia, IG Seismic Services Plc (IGSS) is the Russia's largest seismic services company. The company provides high-quality seismic data acquisition, data processing and interpretation services to a diversified client base, and has a foothold in all major oil and gas provinces in the country. In 2015, IGSS generated sales of $310 million and adjusted EBITDA of approximately $82 million. CB KUBAN UNIVERSAL: Put on Provisional Administration ----------------------------------------------------- The Bank of Russia, by its Order No. OD-3673, dated October 27, 2016, revoked the banking license of Krasnodar-based credit institution Commercial Bank Kuban Universal Bank, LLC from October 27, 2016, according to the press service of the Central Bank of Russia. On revocation of banking license and appointment of provisional administration of Kuban Universal Bank. The Bank of Russia took such an extreme measure -- revocation of the banking license -- due to the credit institution's failure to comply with federal banking laws and Bank of Russia regulations, and application of measures envisaged by the Federal Law "On the Central Bank of the Russian Federation (Bank of Russia)", considering a real threat to the bank's creditors and depositors. CB Kuban Universal Bank LLC invested funds in low-quality assets and did not create loss provisions adequate to the risks assumed. Adequate assessment of the risks assumed as required by the supervisor and fair presentation of the bank's assets resulted in the reasons for implementing insolvency (bankruptcy) prevention measures by the credit institution. The bank management and owners did not take required measures to normalize its activities. Under the circumstances the Bank of Russia took a decision to take out CB Kuban Universal Bank LLC from the banking services market. The Bank of Russia, by its Order No. OD-3674, dated October 27, 2016, appointed a provisional administration of CB Kuban Universal Bank LLC for the period until the appointment of a receiver pursuant to the Federal Law "On Insolvency (Bankruptcy)" or a liquidator under Article 23.1 of the Federal Law "On Banks and Banking Activities". In accordance with federal laws, the powers of the credit institution's executive bodies are suspended. CB Kuban Universal Bank LLC is a member of the deposit insurance system. The revocation of banking license is an insured event envisaged by Federal Law No. 177-FZ "On Insurance of Household Deposits with Russian Banks" regarding the bank's obligations on household deposits determined in accordance with the legislation. The said Federal Law provides for the payment of indemnities to the bank's depositors, including individual entrepreneurs, in the amount of 100% of the balance of funds but no more than 1.4 million rubles per depositor. According to the financial statements, as of October 1, 2016, CB Kuban Universal Bank LLC ranked 377th by assets in the banking system of the Russian Federation. MOSCOW UNITED: Fitch Affirms 'BB+' IDR, Outlook Stable ------------------------------------------------------ Fitch Ratings has affirmed PJSC Moscow United Electric Grid Company's (MOESK) Long-Term foreign-currency Issuer Default Rating at 'BB+' with a Stable Outlook. MOESK's Long-Term IDR reflects the company's solid business profile supported by its regulated electricity distribution business in the relatively wealthy city of Moscow and the wider Moscow region. Although below-inflation tariff growth and increased dividend pay-out weigh on the financial metrics, we view the company's efforts to mitigate their impact, namely capex cuts and controllable cost management, as sufficient for maintaining financial profile commensurate with the rating in the medium term. The company's 'BB+' rating incorporates one-notch uplift for parental support from its majority shareholder, PJSC ROSSETI, and ultimately the Russian state (BBB-/Stable). KEY RATING DRIVERS High Tariff Uncertainty Although long-term regulatory asset base (RAB) regulation was formally introduced in 2011, and the key regulatory parameters were set for 2012-2017, the RAB regulation for MOESK continues to be implemented in a managed way. Tariff increases remain unpredictable, particularly during periods of macroeconomic instability. Fitch views the short- to medium-term unpredictability of tariff increases as one of the key rating risks for the company. Uncertainty of the regulatory framework after 2017 adds to the risks. Regulatory Decisions Drive Financials MOESK's financial profile is significantly affected by the tariff decisions as nearly all of its revenues and about half of its operating costs are regulated. Regulated costs include electricity transmission services of Federal Grid Company (BBB-/Stable), distribution services of the local network companies and purchases of electricity lost in the networks. The pace of the regulated cost growth is therefore as important as the tariff increase itself. Tariff Increases Below Inflation In 2014-2016, the company's tariff increases (net of the regulated costs) were below the rate of inflation, which has led to a modest decline in profitability and EBITDA. Following a 5.6% average net tariff increase in 2016, the company expects 2017 tariffs to be raised by 3.9%, in line with the government- forecast consumer inflation. There will be further pressure on profitability and free cash flow should the actual inflation rate be higher than forecast. MOESK partially mitigated the financial impact of insufficient tariff increases through capex reductions in 2014-2016. In 2015, the company reduced its investments by 17% via postponing non- critical capex to later periods. A cut of 14%-16% is anticipated in 2016. However, even with this measure we expect MOESK's financial profile to slightly deteriorate in 2016. Commensurate Financial Ratios Fitch expects the company's FFO gross adjusted leverage (net of connection fees) to average 3.3x in 2016-2019, which is comfortably below our downgrade guideline of 4.0x. Average FFO fixed-charge cover (net of connection fees) is anticipated to be close to the negative guidance of 3.25x over 2016-2019. This is an improvement versus the last year's forecast of 3.0x. The company's financial profile is largely driven by tariff decisions and central bank's policy rate, which in turn are reflective of the macroeconomic situation in Russia. Cost of Debt Normalises MOESK's average cost of debt peaked at 10.3% in the beginning of 2016 before falling to 9.5% in September. The decrease reflects the company's efforts to refinance relatively expensive debt raised in late 2014-mid 2015 with cheaper bonds and loans. In 2016, the company refinanced its expensive RUB7 bil. 13.2% bonds at about 10% and issued RUB5 bil. bonds at 9.7%, below the central bank's policy rate of 10.5%. Fitch expects a further gradual decline in policy rates in 2017 and 2018. Given the company's relatively short debt maturity profile, lower policy rates could translate into stronger fixed charge cover ratios towards 2019. Higher Dividends Add Pressure In 2016, the Russian government requested state-owned entities to pay a dividend of at least 50% of their net income as a one-off measure. An extension of this measure to three-year period is being discussed. For MOESK, a step-up in the dividend pay-out ratio to 50% from 25% adds to the free cash flow pressures. One-Notch Uplift for Parental Support Fitch incorporates a one-notch uplift in MOESK's 'BB+' Long-Term IDR for implied parental support as we assess the overall strategic, operational and, to a lesser extent, legal ties between the company and its majority shareholder, PJSC ROSSETI and ultimately the state, as moderately strong. DERIVATION SUMMARY MOESK is the principal electricity distribution company in Moscow and the wider Moscow region. It compares well with other rated network companies in the CIS region, Russian electricity transmission operator FedGrid, Kazakhstan's electricity transmission operator KEGOC based on operational metrics. Peers are also subjects to the regulatory uncertainties and low visibility over medium-term tariff increases, while their investment programmes are sizeable. MOESK's FFO-based leverage is similar to that of rated peers, varying historically between 2.0x and 3.0x. KEY ASSUMPTIONS Fitch's key assumptions within the rating case for MOESK include: -- Average "common pot" tariffs increase at CAGR of 4.4% a year during 2017-2019. -- Electricity distribution volumes grow in line with Russian GDP, on average 1.2% a year in 2017-2019. -- Average consumer price inflation of 6.2% in 2016-2019. -- Controllable costs grow slightly below inflation, at CAGR 4.8% a year during 2017-2019. -- Non-controllable costs grow above MOESK tariff growth, at CAGR 8.6% a year during 2017-2019. -- Average annual capex of RUB37.5bn (excluding VAT) in 2016- 2019. -- Average cost of new borrowings of 10.5% in 2016, 9.5% in 2017 and 8.5% thereafter. -- Dividend pay-out at 50% of net profit. RATING SENSITIVITIES Positive: Developments that may, individually or collectively, lead to positive rating action include: -- Improvement of the Russian regulatory framework for electricity distribution and record of its stability and predictability. -- Evidence that the company can maintain FFO gross adjusted leverage (excluding connection fees) well below 3.0x and FFO fixed charge cover (excluding connection fees) above 4.5x on a sustained basis would be positive for the standalone rating. Negative: Developments that may, individually or collectively, lead to negative rating action include: -- Significant deterioration of the credit metrics on a sustained basis (FFO gross adjusted leverage (excluding connection fees) above 4.0x and FFO fixed-charge cover (excluding connection fees) below 3.25x) due to, for example, low tariff growth, insufficient to cover inflationary cost increases, not compensated by capex cuts. -- Material adverse changes to the regulatory framework, especially from 2017. -- Weaker links with the parent and ultimately the state. LIQUIDITY MOESK's liquidity is satisfactory with RUB48.4 bil. of available long-term credit lines maturing in 2016-2021 and RUB0.2 bil. of cash and cash equivalents at end-September 2016 sufficient to cover short-term debt maturities of RUB12 bil. and Fitch- projected negative free cash flow of RUB11.1bn. MOESK does not pay commitment fees for its credit lines, which is common practice in Russia. The core lending group consists of major Russian state-owned banks and we do not anticipate difficulties in drawing down liquidity. The company's average weighted maturity of debt improved to 3.2 years at September 2016 from 2.5 years last year. Fitch forecasts MOESK to remain free cash flow negative over 2016-2019 and expect the company to rely on external funding for debt refinancing. FULL LIST OF RATING ACTIONS JSC Moscow United Electric Grid Company Long-Term foreign-currency IDR: affirmed at 'BB+'; Outlook Stable Short-Term foreign-currency IDR: affirmed at 'B' Long-Term local-currency IDR: affirmed at 'BB+'; Outlook Stable National Long-Term Rating: affirmed at 'AA(rus)'; Outlook Stable Local currency senior unsecured rating affirmed at 'BB+' National senior unsecured rating: affirmed at 'AA(rus)' RUSSIAN HELICOPTERS: Fitch Raises LT IDR to 'BB+', Outlook Stable ----------------------------------------------------------------- Fitch Ratings has upgraded Russian Helicopters JSC's (RH) Long-Term Issuer Default Rating to 'BB+' from 'BB' and affirmed the Short-Term IDR at 'B'. The Outlook on the Long-Term IDR is Stable. The upgrade reflects Fitch's views that the recent improvement in the company's funds from operations (FFO), whilst essentially caused by the depreciation of the rouble, will probably lead to a sustainably improved financial profile with key financial ratios remaining at a level commensurate with new rating. Fitch believes that the company has achieved a structural improvement in its pricing and cost structure and is well placed to apply future expected strong free cash flow (FCF) towards debt reduction. In line with Fitch's parent-subsidiary linkage methodology, the ratings incorporate a one-notch uplift for support for the company from its ultimate parent, the Russian Federation (BBB- /Stable). KEY RATING DRIVERS State Support Russian Helicopters JSC' (RH) IDR benefits from a one-notch uplift from the standalone rating of 'BB', based on the support given to the company by the Russian state. Any change to the nature of that support, whether real or perceived, could have a rating impact. Average Business Profile RH has a strong market position, with a globally dominant role in certain segments, such as attack and heavy-lift helicopters. These are high-priced items on which RH can generate robust returns thanks to efficient production and low labour costs. Nevertheless, RH is only strong in certain types of helicopter segments (although these constitute a significant share of the global market), remains heavily reliant on the Russian Ministry of Defence for much of its business, and its service business is underdeveloped. Mixed Financial Profile RH's financial profile, on balance, is indicative of a 'BB' category industrial company. The significant depreciation of the rouble aagainst the USD since 2014 has had the effect of lifting earnings and FFO margins, as well as the free cash-flow (FCF) generation and leverage to levels which are better than industry peers. Although these ratios are likely to at least partially deteriorate in the medium to long term as the positive effect of the rouble depreciation wears off, they should remain in line with the new rating. RH's FFO margin was 16.5% for the last 12 months (LTM) to June 30, 2016, down slightly from the 21% achieved in 2014 and 17.3% in 2015 as a result of the somewhat higher input and operating costs. Its LTM 1H16 FCF margin was strong at 6.5% as a result of working-capital inflows in 1H16, and is likely to remain positive in FY16 and stay above 5% of revenue in the medium term as a result of working-capital inflows as well as declining capex and development costs. Improved Leverage The company's debt levels, at RUB92 bil. at end-1H16, are lower than the end-2015 peak of RUB120 bil. The relative stability in FFO resulted in FFO gross leverage improved to under 2x, from 2.6x at end-2015. Fitch Ratings expects leverage to stabilize at around 2x - 2.5x from end-2016 onwards as the effect of the sharp swings in the rouble valuation subside. DERIVATION SUMMARY The company continues to exhibit many characteristics expected of a 'BB' category CIS-based company like a strong market position, long-term history of innovation, a relatively good backlog and a large captive customer/shareholder committed to supporting the company not only through long-term contracts but other tangible means. Historically, the group has displayed high leverage levels, volatile free cash flows as a result of high investment needs and only moderate financial flexibility. It has achieved a material improvement in its results since 2014, but the primary cause of this was the fall in the rouble against the dollar. Fitch do not expect the high margins achieved in 2014 and 2015 to become a permanent/long-term feature of the financial profile, although Fitch do expect margins will remain higher than pre-2014 and relatively strong through the medium term for the 'BB' rating. KEY ASSUMPTIONS Fitch's key assumptions within our rating case for the issuer include: -- Helicopter deliveries to be slightly down in 2016 and decline marginally each year thereafter -- Gross and EBIT margin gradually decline but remain above historical average in the long term as the currency effect of 2014/15 is only somewhat smoothed out via changes in pricing and operating costs -- The benefit from present restructuring measures will also have some positive effect on margins in the short to medium term -- Working-capital cash flows to turn positive from 2016 owing to the decline in production/deliveries -- Capitalized development costs to continue to decline from their peak in 2014 but remain relatively high -- Tangible capex to also decline gradually from its 2015 peak -- Dividends to rise steadily in line with profits RATING SENSITIVITIES Positive: Future developments that could lead to positive rating actions include: -- Evidence of a greater state support, for example, in the form of state guarantees for external debt issued by non- state controlled banks. -- Improvement in the business profile, including greater diversification, reduced dependence on the Russian Ministry of Defence (MoD) and a higher portion of service revenues. -- FCF margin in mid-single digits on a sustained basis. -- A visible and sustainable increase in the order backlog -- Improvement in the liquidity position with adjusted cash levels and committed bank lines significantly in excess of short term debt maturities. Negative: Future developments that could lead to negative rating action include: -- A visible reduction in state support. -- CFO margin declining below 10% on a sustained basis. -- FFO-adjusted gross leverage consistently above 3x. -- FCF margin below 2% on a sustainable basis. -- Worsening of the company's liquidity LIQUIDITY Adequate Liquidity: RH's liquidity position remains adequate although somewhat vulnerable. At end-1H16, the group had reported cash of RUB47.9 bil. on its balance sheet against short- term debt of RUB27.4 bil. which is broadly in line with historical levels. Approximately 60% of the cash is held in US dollars, with the rest in roubles. The issue of long-term bonds in 2013 has improved the balance of short- to long-term debt somewhat, although the company remains reliant on regular refinancing of maturing debt. High investment needs as well as possible large working-capital swings mean that FCF was negative in three of the past five years, although it is likely to be positive in the short to medium term. FULL LIST OF RATING ACTIONS Russian Helicopters JSC -- International foreign currency Long-term IDR upgraded to 'BB+' from 'BB'; Outlook Stable'; -- International foreign currency Short-term IDR affirmed at 'B'; -- International local currency Long-term IDR upgraded to 'BB+' from 'BB'; Outlook Stable; -- National Long-term rating upgraded to 'AA(rus)' from 'AA-(rus)'; Outlook Stable'; -- National Short-term rating affirmed at 'F1+(rus)'; =========================== U N I T E D K I N G D O M =========================== BRACKEN MIDCO1: Fitch Assigns 'B+' IDR, Outlook Stable ------------------------------------------------------ Fitch Ratings has assigned Bracken MidCo1 plc a Long-Term Issuer Default Rating of 'B+' with Stable Outlook, and its subordinated senior PIK toggle notes an expected rating of 'B-(EXP)'. At the same time the agency has affirmed the IDRs of Jerrold Holdings Limited (JHL) at 'BB-' with Stable Outlook, and the senior secured debt rating of subsidiary Jerrold FinCo plc at 'BB-'. The final rating of the senior PIK toggle notes is contingent on the receipt of final documents conforming to information already received. JHL is a UK specialist mortgage provider, offering both retail and commercial loans to niche market segments under-served by mainstream lenders. In connection with the buyout of JHL's minority shareholders by the principal owner, MidCo1 is being established as a new holding company above JHL, and issuing GBP220 mil. of senior PIK toggle notes as part of the finance the buyout. The notes allow interest to be deferred in the event that MidCo1 lacks the necessary resources at the time to service it, but require payment if conditions pre-defined in the notes documentation are satisfied. Additional buyout funding will come from the issuance by further new companies above MidCo1 of GBP100m junior PIK notes and a new GBP43m shareholder loan, the latter partially replacing GBP60m of shareholder subordinated debt previously issued by JHL. KEY RATING DRIVERS JHL - IDRS AND SENIOR DEBT JHL continues to perform soundly, reporting a record pre-tax profit of GBP90.3 mil. for the year to June 30, 2016. Earnings are underpinned by the group's franchise and pricing power in areas such as second-charge mortgages and bridging finance, and risk is well-remunerated via wide margins. Funding is wholesale market-focused, but diversified within that between two securitisation programmes, the group's senior secured notes and a revolving credit facility. Within the GBP1.66 bil. total wholesale funding only GBP29 mil. matures before August 2018. In recent periods asset growth has been rapid, but the impact on leverage has been contained by concurrent strong internal capital generation, as JHL has not paid dividends. Fitch is of the view that MidCo1's senior PIK toggle notes will implicitly represent an additional obligation of JHL, as MidCo1 has no separate financial resources of its own with which to service them, and failure to do so would have considerable negative implications for JHL's creditworthiness. Therefore Fitch will in future consolidate the senior PIK toggle notes when assessing JHL's gearing, increasing the ratio of debt-to-tangible equity (inclusive of subordinated shareholder loan) from 2.1x per figures reported at June 30, 2016, to 4.3x if the GBP220m of additional funding is added to debt and deducted from tangible equity. Conversely, Fitch will exclude the junior PIK notes when calculating JHL's leverage, in the light of their deeper structural and contractual subordination, and non-cash payment features. The Stable Outlook on JHL's Long-Term IDR reflects Fitch's view that JHL should continue to report adequate profitability without substantially increasing leverage further. JHL's implicit obligation to service the coupon on the MidCo1 senior PIK toggle notes will require associated dividend payments by JHL in the next five years. However, Fitch expects implied interest coverage (JHL's net income divided by the senior PIK toggle notes' interest service requirement) to remain fairly comfortable (above 3x), and JHL not to make distributions beyond those needed to fund the MidCo1 senior PIK toggle notes debt service, which should limit the pressure on JHL's internal capital generation. Other rating factors, notably JHL's risk appetite and underwriting standards, remain unaffected by the proposed transaction and continue to support the 'BB-' Long-Term IDR. MIDCO1 - IDR AND SENIOR PIK TOGGLE NOTES MidCo1's Long-Term IDR is notched off once from JHL's Long-Term IDR, reflecting the former's structural subordination and double leverage, which is expected to be close to 250%. Fitch has limited the rating differential between the two companies to one notch, primarily because of the sizeable headroom within JHL's restricted payment basket under the terms of the senior secured notes (50% of post-June 2013 accumulated net income, equivalent to around GBP85m at end-June 2016). The notching between MidCo1's IDR and the rating of the senior PIK toggle notes themselves reflects Fitch's view of the likely recoveries in the event of MidCo1 defaulting. While sensitive to a number of assumptions, this scenario would only be likely to occur in a situation where JHL is also in much weakened financial condition, as otherwise its upstreaming of dividends for MidCo1 debt service would have been maintained. The subordinated rank of the senior PIK toggle notes would then place their holders in a weaker position than JHL's senior secured creditors for available recoveries from the group's assets. RATING SENSITIVITIES JHL - IDRS AND SENIOR DEBT Near-term upside for JHL's ratings is limited by the additional debt now being taken on at MidCo1, which diminishes rating headroom. A significant further increase in leverage, or worsening profitability, for instance due to a deteriorating operating environment adversely affecting asset quality, could lead to a downgrade. MIDCO1 - IDR AND SENIOR PIK TOGGLE NOTES MidCo1's Long-Term IDR is primarily sensitive to changes to JHL's Long-Term IDR. Equalisation of the IDRs is unlikely in view of MidCo1's structural subordination, but a weakening of implied interest coverage within MidCo1, for instance as a result of diminishing net income at JHL or any other restrictions on JHL's dividend upstream capacity, could widen their notching and so be negative for MidCo1's Long-Term IDR. The rating of the senior PIK toggle notes is sensitive primarily to changes to MidCo1's IDR, from which it is notched, as well as to Fitch's assumptions regarding recoveries in a default scenario. Lower asset encumbrance by senior secured creditors could lead to higher recovery assumptions and therefore narrower notching from MidCo1's IDR. The rating actions are: Bracken MidCo1 plc Long-Term IDR assigned at 'B+'; Outlook Stable Senior PIK toggle notes rating assigned at 'B-(EXP)'/ Recovery Rating 'RR6' Jerrold Holdings Ltd Long-Term IDR affirmed at 'BB-'; Outlook Stable Short-Term IDR affirmed at 'B' Jerrold FinCo Plc Senior secured debt rating affirmed at 'BB-' CLAVIS SECURITIES 2006-01: Fitch Puts BB Rating on Watch Neg. ------------------------------------------------------------- Fitch Ratings has placed Clavis Securities plc Series 2006-01 (Clavis 06) on Rating Watch Negative (RWN). The transaction contains a pool of residential mortgages originated by GMAC-RFC Limited, a non-conforming mortgage lender. KEY RATING DRIVERS The class A3a and A3b notes have a legal final maturity date in December 2031 while the other rated notes have a legal final maturity date in December 2039. As of August 2016 the portfolio contained 21 loans equal to approximately 5% of the current pool balance, with a scheduled maturity date beyond that of the class A3a and A3b notes. The transaction is currently amortising on a pro-rata basis and will switch to sequential upon the breach of certain performance based triggers. However, in its base case scenario Fitch expects that pro-rata amortisation will continue until the legal final maturity date of the class A3a and A3b notes. In Fitch's opinion the earlier legal final maturity date of the class A3a and A3b notes, combined with the ongoing pro-rata amortisation, exposes the class A3a and A3b noteholders to the risk that they will not be paid in full by the legal final maturity date under the scenario of benign asset performance. For example, in the event of base case defaults and annual prepayments of 10% a small amount of the class A3a and A3b notes are expected to remain outstanding at the legal final maturity date. Although any outstanding class A3a and A3b note balance would be expected to be recoverable, and modest in relation to the current note balance, such an event would constitute a default for ratings of the class A3a and A3b notes and may give risk to an event of default under the transaction documentation. Consequently Fitch has placed all note rating on Rating Watch Negative. Fitch will conduct further analysis including consideration of different prepayment scenarios and other assumptions. Fitch expects to resolve the RWN within one month. RATING SENSITIVITIES Fitch will conduct further analysis to determine the appropriate rating action. Once this process has been completed, it may lead to the note ratings being downgraded. DATA ADEQUACY Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. There were no findings that affected the rating analysis. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring. Fitch did not undertake a review of the information provided about the underlying asset pool ahead of the transaction's initial closing. The subsequent performance of the transaction over the years is consistent with the agency's expectations given the operating environment and Fitch is therefore satisfied that the asset pool information relied upon for its initial rating analysis was adequately reliable. Overall, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. Fitch has taken this action: Clavis Securities plc Series 2006-01 Class A3a ISIN(XS0255457706); 'AAAsf'; on RWN Class A3b ISIN(XS0255438748); 'AAAsf'; on RWN Class M1a ISIN(XS0255424441); 'AA+sf'; on RWN Class M1b ISIN(XS0255439043); 'AA+sf'; on RWN Class M2a ISIN(XS0255425414); 'Asf'; on RWN Class B1a ISIN(XS0255425927); 'BBBsf'; on RWN Class B1b ISIN(XS0255440728); 'BBBsf'; on RWN Class B2a ISIN(XS0255426818); 'BBsf'; on RWN EXPRO HOLDINGS: S&P Lowers Corporate Credit Rating to 'SD' ---------------------------------------------------------- S&P Global Ratings' lowered its long-term corporate credit rating on U.K.-based oilfield services company Expro Holdings U.K. 3 Ltd. (Expro) to 'SD' (selective default) from 'CCC+'. At the same time, S&P lowered its issue rating on Expro's mezzanine facility to 'D' (default) from 'CCC'. The recovery rating remains unchanged at '5', indicating S&P's expectation of recovery prospects in the lower half of the 10%-30% range. S&P also affirmed its 'B-' issue ratings on Expro's $175 million revolving credit facility (RCF) and $1.3 billion term loan. The recovery rating on these facilities is unchanged at '2', indicating S&P's expectation of recovery in the lower half of the 70%-90% range. The downgrade follows Expro's recent announcement that about 98% of the holders of its $800 million outstanding mezzanine facility exchanged their debt for equity. In S&P's view, the meaningful conversion is tantamount to a default. In this assessment S&P takes into consideration: -- S&P's view of the company's rating prior to the transaction (in S&P's 'CCC' category) and the very challenging market environment the company continues to operate in. -- S&P's view that the noteholders are obtaining less than the originally promised amount. This view takes into account the uncertain cash flows that underpin the valuation, compared to the defined characters of the mezzanine. Following the transaction, the company's adjusted debt will be about $1.4 billion, consisting of $120 million drawn under the RCF, about $1.2 billion under the term loan, and a $16 million mezzanine facility (held by one single investor). There are no maturities until 2021 and Expro will not be subject to maintenance financial covenants anymore under the mezzanine facility. In addition, the company's free operating cash flow would improve by $40 million with the reduction in the interest cash payment related to the mezzanine facility. Under S&P's base-case, it now estimates that S&P Global Ratings' adjusted debt to EBITDA (excluding cash) to be above 8x on average in fiscal years 2017 and 2018 (ending March 31). S&P understands that after the transaction, Expro will continue to be majority owned by private equity firms. IGAS ENERGY: Bond Waivers Take Effect, In Talks with Investors -------------------------------------------------------------- Proactive Investors reports that IGas Energy Plc's bondholders cast their votes on proposals put forward by the company to relax liquidity obligations. According to Proactive Investors, a quorate of holders of the group's unsecured bonds (56.2% of voting bonds were represented at the meeting) voted unanimously in favor of the proposal to waive liquidity covenants, whereas 43% of a quorate of secured bond holders (68.6% of holders were represented) voted in favor. As such waivers are now effective for the unsecured bonds, but the proposal was not approved for the company's secured bonds, Proactive Investors notes. IGas emphasized that it is in compliance with its liquidity covenants at present, albeit a breach is forecast to occur this week, Proactive Investors relates. It told investors it had US$27.5 million of cash, and it holds US$21.1 million of its own bonds, Proactive Investors discloses. According to Proactive Investors, in a statement the company said: "Notwithstanding the contractual requirements in the daily liquidity financial covenants set out in the bond agreements, the company therefore continues to meet, and expects to continue to meet, its actual ordinary course financing and trading obligations." IGas told investors that it continues to believe that a consensual solution is possible, and it said that would be in the interests of all stakeholders, Proactive Investors relays. IGas also noted that it continues to pursue discussions with a number of possible strategic investors, Proactive Investors discloses. IGas Energy Plc is a British oil and gas explorer and developer, producing 2,500 barrels of oil equivalent per day from over 100 sites across the country. SOHO HOUSE: Obtains GBP40 Mil. in Fresh Funds Following Losses -------------------------------------------------------------- James Quinn at The Daily Telegraph reports that Soho House, the private members club business popular with celebrities and socialites, has had an injection of GBP40 million to finance more expansion after a year of increased operating losses. The American billionaire Ron Burkle, whose Yucaipa group of companies bought a 60% stake in the business, has led a GBP21.2 million equity financing round alongside fellow shareholders Richard Caring and Nick Jones, The Daily Telegraph relates. The group has also received a previously undeclared GBP13.8 million injection thanks to the sale of a 50% stake in its Pizza East, Dirty Burger and Chicken Shop chain of restaurants to a private investor last year, The Daily Telegraph notes. In addition, it has increased its revolving credit facility with its bank by GBP5 million to GBP30 million, The Daily Telegraph states. The cash comes after Soho House's credit rating was downgraded to junk Caa2 status by the credit rating agency Moody's in April, The Daily Telegraph relays. Soho House took out a further GBP40 million in costly borrowing via a tranche of so-called "Payment in Kind" (PIK) notes, which carry interest payments of 12% plus Libor, in October 2015, The Daily Telegraph recounts. The PIK notes, repayable in October 2019, come on top of a GBP152.5 million fundraising in 2014 designed to refinance the group, The Daily Telegraph says. The state of Soho House's finances are laid bare in accounts recently filed at Companies House for SHG Acquisition (UK), Soho House's parent company, The Daily Telegraph relates. SHG made an operating loss of GBP11.8 million in the year to January, after including GBP15.6 million of depreciation and amortization costs, down from an operating loss of GBP577,000 in the 2014 financial year, The Daily Telegraph discloses. TES GROUP: In Administration, Sells Consulting Business ------------------------------------------------------- Pat Sweet at CCH Daily reports that Jim Tucker, David Pike -- david.j.pike@kpmg.co.uk -- and Ed Boyle -- ed.boyle@kpmg.co.uk -- of KPMG have been appointed as joint administrators of a number of companies which together make up the TES Group, which operates in the aircraft engines sector, and have sold one business to a US buyer in a deal securing half of the jobs at risk. According to CCH Daily, the business and assets of Total Engine Support Ltd., (the group's consulting, technical services and asset management business) have been sold to Willis Asset Management Ltd., a subsidiary of California-based Willis Lease Finance Corporation. As part of the sale, 32 employees transferred to the US company which specializes in leasing aircraft engines, CCH Daily discloses. The other companies in the group are TES Parts Ltd, TES Holdings Ltd, TES Aviation Services Ltd and TES Aviation Ltd., CCH Daily states. In total the group, which is headquartered in Bridgend in South Wales, employs 67 people, CCH Daily notes. The administrators have retained the rest of the employees not transferred while options are explored for the remaining assets, which comprise aircraft engines and related parts, CCH Daily relays. "The group has been through considerable transformation and turnaround activity in recent months, and the company's directors have concluded that the group's current financing structure is no longer sustainable and therefore taken the difficult decision to place the group into administration," CCH Daily quotes Mr. Tucker as saying. "The sale of the consulting business to Willis is a very good start to the administration. It has ensured that the consulting part of the group continues under new ownership and has safeguarded a number of jobs." THPA FINANCE: Fitch Affirms 'B' Rating on Class C Notes ------------------------------------------------------- Fitch Ratings has taken these rating actions on THPA Finance Limited: GBP110.7 mil. class A2 secured 7.127% fixed-rate notes due 2024: affirmed at 'BBB'; Outlook Negative; GBP70 mil. class B secured 8.241% fixed-rate notes due 2028: affirmed at 'BB-'; Outlook Negative; GBP30 mil. class C secured 10% fixed-rate notes due 2031: affirmed at 'B'; Outlook revised to Negative from Stable. The negative outlook on the classes A and B notes, and the revision of the outlook on the class C notes reflect the uncertainty in respect of the company's ability to crystallise the cost savings. They also reflect the risk of further falls in revenues after the 2015 volume shock with the closure of the Redcar steel plant, together with the limited visibility of both business developments and UK's trade flows following the Brexit vote. The non-investment-grade ratings of the junior class B and C notes reflect their deep contractual subordination and exposure to a potential breach of the EBITDA DSCR covenant of 1.25x. If not cured, Fitch understands this could allow the senior noteholders to enforce and accelerate the notes, possibly at the expense of the junior notes. Fitch does not expect the covenant to be breached, but the junior class B and C notes are weakened by the small headroom to the covenant, their low average projected free cash flow (FCF) debt service coverage ratio (DSCR) under Fitch's rating case of about1.0x for the class B notes and 0.9x for the class C notes and the absence of dedicated liquidity reserves. The solid debt structure for the benefit of the senior class A notes, typical of a UK WBS transaction, together with a stable FCF DSCR averaging 1.3x, explains the multiple notches difference between the class A and the junior classes. Despite THPA's business profile showing high concentration risk in volatile cargo types and customers, the impact of throughput declines is also to some extent mitigated by the flexibility to raise tariffs and the contributions of long-term contracts to margins, together with some barriers to entry provided by the privileged location. Peers ABP Finance PLC (A-/Negative) is a large, well-diversified UK ports group with a five-year average net debt to EBITDA at about 7.2x in Fitch's rating case. ABP's stronger business profile explains the two-notch difference with THPA's class A rating despite the higher leverage. ABP's synthetic FCF DSCR calculation shows also higher coverage over 1.6x under Fitch's rating case. KEY RATING DRIVERS Customer Concentration, Volatile Cargo - Volume: Midrange Tees and Hartlepool is a secondary port of call, a single site with customer and industry concentration. Following the closure of the Redcar steel plant, ConocoPhillips (oil and gas export) accounted alone for 38% of the total volumes in 2015, exacerbating THPA's exposure to the volatile oil trade. Fitch expects the port to handle some additional volumes in relation to the biomass plant project developed by MGT Teesside, once the plant starts its operations after 2020. The facility is well connected to the local market and the inland, limiting the competitive exposure to other regional facilities. However, Fitch believes the hinterland will be less of a growth driver of traffic: the Tees valley is a low-growth area focused on chemical and manufacturing industry, affected by cheap supplies from emerging countries and contraction in the global demand. The port operates its facilities and also receives rental income from leasing agreements. Tariffs Flexibility, Long Leases - Price: Midrange Tariffs are unregulated and to a varying extent linked to UK RPI. The portion of guaranteed revenue fell in 2015 after striking off SSI's contribution at about 10%, sustained by the property rental business. The proportion is expected to grow slightly thanks to the long-term lease contracted with MGT Teesside in August 2016. Some Flexibility in Capex Funding - Infra-Renewal Risk: Midrange The port is well maintained but some larger refurbishments were made in 2014 and 2015 to allow the processing of a wider range of vessels. Capex spend was comparatively low in previous years (in some years hardly more than covenanted min. capex was spent). Capex are partly funded internally (FCF) but also through external sources i.e. unsecured debt and largely by the equity sponsor, through repayment of historical loans to shareholders. Senior Class A Well Protected - Debt Structure: Stronger for Class A Notes and Midrange for Class B and C notes All classes are fully amortising, with a strong security package (fixed and floating charges) typical for WBS with possibility to appoint an administrative receiver. No interest rate risk is present. A borrower event of default could, however, lead the class A noteholders to enforce and accelerate at the expense of the junior notes. The deep contractual subordination weigh on the ratings of the junior notes especially during a downturn, when senior noteholders may seek alternative investments with lower risk. The agency notes the discrepancy between THPA's offering circular and the legal documentation resulting in a lack of availability of the liquidity facility for the class B and C notes. This is not materially prejudicial to the current ratings of the senior class A notes and the junior class B and C notes because the junior debt service can be deferred. Fitch's analysis is aligned with the transaction documentation, so any deferral of junior debt service does not represent a payment default until the final maturity of each respective note. Furthermore, amortisation of the junior notes is back ended, starting after the class A notes have been fully redeemed. Weak Credit Metrics for Junior Notes - Financial Analysis The FCF DSCR profile for all classes is fairly stable under Fitch's rating case. The minimum between the projected median and average FCF DSCR stands at 1.3x for class A notes, 1.0x for class B notes and 0.9x for class C notes. Fitch's break-even analysis shows that class A notes is able to sustain up to an annual decline of 4.5% in EBITDA before reaching an average FCF DSCR of 1.0x and consequently drawing on liquidity. Fitch's rating case incorporates conservative free cash flow assumptions factoring some low organic growth in both the port operations and the conservancy business, the contribution of the long term lease contracted with MGT Teesside from August 2016, conservative maintenance capex projections of GBP7.5 mil. a year (indexed) and pension deficit contributions of GBP2m a year. RATING SENSITIVITIES The ratings could be downgraded if a reduction in oil revenues or the loss of another major customer adversely impact the transaction's revenues, or if cost savings turn out to be temporary. FCF DSCR forecasts under Fitch's rating case consistently below 1.3x at class A, 1.0x and 0.9x for class B and C respectively could trigger further negative rating actions. The Outlook may be revised to Stable if, absent other negative developments, EBITDA proves to be consistently in line with Fitch's base case. SUMMARY OF CREDIT THPA is a securitisation of the assets held, and earnings generated, by the PD Ports group, which owns and operates the port of Tees and Hartlepool as the statutory harbour authority on the northeast coast of England. Operational update THPA's volumes have not recovered after Redcar's closure in October 2015 and reached their lowest quarterly volume in 2Q16 at 5.8m tonnes, affected also by the unplanned maintenance of the Norpipe system. EBITDA margin has proved resilient thanks to the active costs management put in place. With permanent annual savings of about GBP2 mil. as of June 2016, the borrower was able to meet the financial condition of EBITDA DSCR above 1.25x, overperforming Fitch's 2015 base case. ********* 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 * * *