/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/170829.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, August 29, 2017, Vol. 18, No. 171 Headlines A R M E N I A VTB BANK: Moody's Lowers Local Currency Deposit Rating to B1 G E R M A N Y AIR BERLIN: Assets Attract Rival Operators' Interest AIR BERLIN: Bridge Loan Better Than Uncontrolled Insolvency I R E L A N D G HOTEL: Enters Examinership After Deutsche Bank Receivership Bid PERMANENT TSB: Moody's Lifts Senior Unsecured Debt Rating to Ba3 M A L T A VISTAJET GROUP: US$150MM Equity Investment Positive, Fitch Says N E T H E R L A N D S AERIALTRONICS: In Suspension of Payments R U S S I A AFK SISTEMA: No Creditors Demanded Early Debt Repayment DONAVIA: Russian Court Declares Unit Insolvent S P A I N BANCO POPULAR ESPANOL: Investors Sue Over Sale to Santander HIPOCAT 9: Fitch Affirms 'Csf' Rating on Class E Tranche S W E D E N FASTIGHETS AB: Moody's Rates New EUR350MM Subordinated Notes Ba2 U K R A I N E UKRAINE: Moody's Hikes Ratings to Caa2 & Alters Outlook to Pos. U N I T E D K I N G D O M BHS GROUP: Creditors to Get GBP30MM After Arcadia Settles Claim TURNSTONE MIDCO 2: Fitch Cuts IDR to B- Then Withdraws Rating ********* ============= A R M E N I A ============= VTB BANK: Moody's Lowers Local Currency Deposit Rating to B1 ------------------------------------------------------------ Moody's Investors Service has downgraded VTB Bank's (Armenia) local currency deposit rating to B1 from Ba3. Concurrently, Moody's has downgraded the bank's baseline credit assessment (BCA) to b3 from b2 and adjusted BCA to b1 from ba3, and the long-term counterparty risk assessment to Ba3(cr) from Ba2(cr). The bank's B2 long-term foreign currency deposit rating, NP short-term bank deposit ratings, and NP(cr) short-term counterparty risk assessment were affirmed. All long term deposit ratings carry a stable outlook. RATINGS RATIONALE The downgrade of VTB Bank's (Armenia) (VTBAR) BCA to b3 from b2 and long-term local -- currency deposit ratings to B1 from Ba3 is driven by the bank's weakened standalone credit profile, in particular, its solvency position. This is reflected by its large stock of problem assets, loss-making performance and Moody's expectation that the bank will be increasingly reliant on external support from its parent Bank VTB, JSC (LT LC deposits rating Ba1 stable/LT FC deposit rating Ba2 stable, b1 BCA) to strengthen its capital position. VTBAR's total stock of problem (individually impaired) loans increased to around 33% of gross loans at the end of 2016 from 22% of gross loans at the end of 2015, though Moody's expects the level of problem loans to gradually decrease over the coming years. Moody's also estimates that the bank will need to gradually increase its problem loans coverage which currently remains low at around 56% of problem loans. VTBAR maintains a sufficient capital buffer reported under Basel I, but a modest capital position reported under local GAAP. The bank currently complies with the Central Bank of Armenia's capital requirements and reported total CAR of 12.99% (against minimum requirements of 12%) at the end June 2017 down from 14% at the end of 2016. Because of under provisioning, Moody's expects the bank to remain loss-making this year before returning to profitable performance in 2018. As the bank will need to strengthen its capital position in order to comply with regulatory requirements, Moody's expects VTB group to provide capital support as it has done in the past. VTB group has shown commitment to the bank's financial support through a track record of capital injections and funding allocation. VTBAR's liquidity and funding profiles remain stable. Liquid assets amounted to around 30% of total assets at the end of June 2017, providing a sufficient buffer against funding and liquidity shocks. VTBAR's B1 local-currency deposit ratings benefit from two-notch uplift above the bank's b3 BCA, based on Moody's expectations of a high probability of affiliate support from Russia-based Bank VTB JSC. STABLE OUTLOOK The stable outlook reflects Moody's expectation that VTBAR's credit profile will not deteriorate going forward and the bank will return to profitable performance over the next 12-18 months, and also receive capital injection from its parent. WHAT COULD MOVE THE RATINGS UP/DOWN The ratings could be upgraded if the bank materially improves its solvency profile by successfully repossessing and disposing of collateral, including writing off large parts of its problem assets. Furthermore, a substantial core capital increase would be positive for the rating. The ratings could be downgraded if the bank fails to improve its solvency profile and its capital position materially deteriorates. A material worsening in VTBAR's credit costs beyond the level currently anticipated by Moody's, or a change in Moody's supports assumptions could also negatively impact the ratings. LIST OF AFFECTED RATINGS Issuer: VTB Bank (Armenia) Downgrades: -- LT Bank Deposits (Local Currency), Downgraded to B1 from Ba3, Outlook Changed To Stable From Negative -- Adjusted Baseline Credit Assessment, Downgraded to b1 from ba3 -- Baseline Credit Assessment, Downgraded to b3 from b2 -- LT Counterparty Risk Assessment, Downgraded to Ba3(cr) from Ba2(cr) Affirmations: -- LT Bank Deposits (Foreign Currency), Affirmed B2, Outlook Changed To Stable From Negative -- ST Bank Deposits (Local & Foreign Currency), Affirmed NP -- ST Counterparty Risk Assessment, Affirmed NP(cr) Outlook Actions: -- Outlook, Changed To Stable From Negative PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Banks published in January 2016. ============= G E R M A N Y ============= AIR BERLIN: Assets Attract Rival Operators' Interest ---------------------------------------------------- Tobias Buck at The Financial Times reports that the assets of insolvent German carrier Air Berlin are attracting growing interest from rival operators as worries increase that the group's demise could deal a blow to competition and raise prices. Lufthansa, the national flag carrier, has already made clear it plans to bid for parts of the group and further boost its already strong position in the German market, the FT relates. But Lufthansa is likely to face competition from rival airlines including Condor, a subsidiary of Thomas Cook, the FT notes. Condor is expected to bid for a "high double-digit" number of medium-haul planes currently belonging to Air Berlin, as well as "some" long-haul planes, the FT relays, citing a person briefed on the negotiations. According to the FT, EasyJet, the UK low-cost carrier, has been tipped as another bidder for Air Berlin assets, while a consortium led by German businessman Hans Rudolf Woehrl has said it wants to take over the stricken airline in its entirety. Over the past six years Air Berlin racked up losses of about EUR2 billion, with net debt reaching EUR1.2 billion, the FT discloses. About Air Berlin In operation since 1978, Air Berlin PLC & Co. Luftverkehrs KG is a global airline carrier that is headquartered in Germany and is the second largest airline in the country. In 2016, Air Berlin operated 139 aircraft with flights to destinations in Germany, Europe, and outside Europe, including the United States, and provided passenger service to 28.9 million passengers. Within the first seven months of 2017, the Debtor carried approximately 13.8 million passengers. It employs approximately 8,481 employees. Air Berlin is a member of the Oneworld alliance, participating with other member airlines in issuing tickets, code-share flights, mileage programs, and other similar services. Air Berlin has racked up losses of about EUR2 billion over the past six years, and has net debt of EUR1.2 billion. On Aug. 15, 2017, Air Berlin applied to the Local District Court of Berlin-Charlottenburg, Insolvency Court for commencement of an insolvency proceeding. On the same day, the German Court opened preliminary insolvency proceedings permitting the Debtor to proceed as a debtor-in-possession, appointed a preliminary custodian to oversee the Debtor during the preliminary insolvency proceedings, and prohibited any new, and stayed any pending, enforcement actions against the Debtor's movable assets. To seek recognition of the German proceedings, representatives of Air Berlin filed a Chapter 15 petition (Bankr. S.D.N.Y. Case No. 17-12282) on Aug. 18, 2017. The Hon. Michael E. Wiles is the case judge. Thomas Winkelmann and Frank Kebekus, as foreign representatives, signed the petition. Madlyn Gleich Primoff, Esq., at Freshfields Bruckhaus Deringer US LLP, is serving as counsel in the U.S. case. AIR BERLIN: Bridge Loan Better Than Uncontrolled Insolvency ----------------------------------------------------------- Richard Weiss at Bloomberg News reports that TUI AG Chief Executive Officer Fritz Joussen said supplying insolvent Air Berlin Plc with liquidity through the help of a government bridge loan was a better option than letting the airline go bust. "The alternative to the process chosen would have been an uncontrolled insolvency, an airline grounding, employees would have lost their jobs, and customers would have stranded," Bloomberg quotes Mr. Joussen as saying on Aug. 25 in Hamburg. Keeping the carrier afloat through an orderly procedure was "the right thing to do." Germany provided the EUR150 million (US$179 million) loan after Air Berlin filed for insolvency on Aug. 15, Bloomberg recounts. The move, which authorities said was aimed at keeping the airline flying until its liquidation, has been criticized by industry players as favoring Deutsche Lufthansa AG, which is looking at taking on half of its German competitor's fleet, Bloomberg states. Germany's government has supported Lufthansa's interest on the assumption that any deal would be speedy and allow many of Air Berlin's 8,600 employees to keep their jobs, Bloomberg relates. A deal to combine TUI's German airline TUIfly with Air Berlin's Niki leisure-flight unit collapsed in June, Bloomberg recounts. Under an earlier agreement between the two carriers, TUIfly leases 14 planes and crews to Niki, Bloomberg discloses. "TUI, like all other parties sitting with the insolvency administrator, has an interest in getting things wrapped up in a fair way for employees to save as many jobs as possible," including those in the TUIfly-Niki partnership, Mr. Joussen, as cited by Bloomberg, said on Aug. 25. According to Bloomberg, Bild am Sonntag reported on Aug. 27, citing unidentified people familiar with the negotiations, that the bridge loan to be provided by state-owned Kreditanstalt fuer Wiederaufbau development bank hasn't yet been signed, and no money has been paid out, amid a dispute on the terms. The newspaper cited an Economy Ministry spokeswoman as saying talks are going according to plan amid technical discussions, Bloomberg notes. About Air Berlin In operation since 1978, Air Berlin PLC & Co. Luftverkehrs KG is a global airline carrier that is headquartered in Germany and is the second largest airline in the country. In 2016, Air Berlin operated 139 aircraft with flights to destinations in Germany, Europe, and outside Europe, including the United States, and provided passenger service to 28.9 million passengers. Within the first seven months of 2017, the Debtor carried approximately 13.8 million passengers. It employs approximately 8,481 employees. Air Berlin is a member of the Oneworld alliance, participating with other member airlines in issuing tickets, code-share flights, mileage programs, and other similar services. Air Berlin has racked up losses of about EUR2 billion over the past six years, and has net debt of EUR1.2 billion. On Aug. 15, 2017, Air Berlin applied to the Local District Court of Berlin-Charlottenburg, Insolvency Court for commencement of an insolvency proceeding. On the same day, the German Court opened preliminary insolvency proceedings permitting the Debtor to proceed as a debtor-in-possession, appointed a preliminary custodian to oversee the Debtor during the preliminary insolvency proceedings, and prohibited any new, and stayed any pending, enforcement actions against the Debtor's movable assets. To seek recognition of the German proceedings, representatives of Air Berlin filed a Chapter 15 petition (Bankr. S.D.N.Y. Case No. 17-12282) on Aug. 18, 2017. The Hon. Michael E. Wiles is the case judge. Thomas Winkelmann and Frank Kebekus, as foreign representatives, signed the petition. Madlyn Gleich Primoff, Esq., at Freshfields Bruckhaus Deringer US LLP, is serving as counsel in the U.S. case. ============= I R E L A N D ============= G HOTEL: Enters Examinership After Deutsche Bank Receivership Bid ----------------------------------------------------------------- Colin Gleeson at The Irish Times reports that the landmark G Hotel and adjoining Eye Cinema in Galway have been placed in examinership days after Deutsche Bank had a receiver appointed to the properties owned by high-profile developer Gerry Barrett. According to The Irish Times, in an affidavit filed to the High Court on Aug. 22, Mr. Barrett applied for the appointment of an examiner after receiver KPMG had been dispatched to the five-star hotel on the edge of Lough Atalia days earlier. Following the High Court's appointment of Neil Hughes as examiner, the hotel and cinema have been granted the protection of the court for a period of 100 days, during which time the receiver can take no action, The Irish Times relates. PERMANENT TSB: Moody's Lifts Senior Unsecured Debt Rating to Ba3 ---------------------------------------------------------------- Moody's Investors Service upgraded the long-term senior unsecured debt and deposit ratings of Permanent tsb p.l.c. (PTSB) to Ba3 and Ba2 from B1 and Ba3, respectively. The short-term deposit ratings of Not Prime were affirmed. As part of the same rating action, Moody's upgraded the standalone baseline credit assessment (BCA) to b2 from b3, reflecting improvements in the bank's credit fundamentals. Moody's maintained a positive outlook on the bank's long-term senior unsecured debt and deposit ratings, driven by the expectation of a further recovery in its asset quality and profitability in the context of the supportive operating environment in the Republic of Ireland. RATINGS RATIONALE BCA The upgrade of PTSB's long-term ratings was driven by the revision of the bank's BCA to b2 from b3. The upgrade of the BCA reflects: (1) the bank's decreased reliance on wholesale and central bank funding, which resulted in an improved net loan-to deposit ratio of 110% as at end-June 2017, down from 124% a year earlier; (2) a return to profitability, net of write-backs, and an improved net interest margin of 1.6% in the first half of 2017; (3) a solid capital level, with Tangible Common Equity (TCE) of 16.5% of Risk-Weighted Assets (RWAs) as at end-June 2017, up from 16.2% as at end-December 2017. The sale of PTSB's non-core UK mortgage book in December 2016 has enabled the bank to reshape its funding profile, eliminating a key structural weakness, reducing its use of expensive wholesale funding and supporting improvements in its profitability and capital metrics. In addition, the bank has continued to enhance its operating efficiency, with a reported cost-to-income ratio of 65% as at end-June 2017 versus 69% a year earlier. The bank's stock of non-performing loans continued its slow decline, to EUR4.8 billion at end-June 2017, with a coverage ratio of 51% broadly unchanged. The BCA remains lower than those of the other major Irish banks, reflecting the remaining sizeable stock of non-performing loans, in addition to a significant portion of forborne loans with low amortization rates. The bank's problem loans as a percentage of its capital and loan loss reserves was 112% as at end-June 2017, comparing unfavorably with its higher-rated Irish peers, and is improving at a slower rate. However, Moody's expects that the improving trend in the bank's profitability will prevail and that the management's focus on an accelerated reduction of non-performing assets will bear visible results for asset quality ratios over the outlook horizon. Positive trends in the bank's fundamentals are also expected to be supported by the benign operating environment in Ireland, reflecting growing economic activity, increasing consumer confidence and strong demand for housing. LONG-TERM RATINGS The long-term senior unsecured debt and deposit ratings were upgraded to Ba3 and Ba2 from B1 and Ba3 respectively, as a result of the upgrade of the bank's BCA, with uplift under Moody's Advanced Loss Given Failure (LGF) analysis relative to the BCA remaining unchanged. The senior unsecured debt rating and bank deposit rating benefit from one notch and two notches of uplift respectively, given their different weights in the bank's liability structure and, consequently, different degrees of subordination and loss-rates. In addition, the long-term ratings incorporate one notch for potential government support, which also remains unchanged, in view of PTSB's systemic importance in Ireland. In addition, Moody's has corrected the rating originally assigned on June 22, 2017 to Permanent TSB Group Holdings plc's senior unsecured medium-term note program to (P)Caa1 from (P)B1, and subsequently upgraded it to (P)B3. The program was assigned an incorrect rating due to an internal administrative error. OUTLOOKS The positive outlooks on PTSB's long-term senior unsecured debt and deposit ratings reflect the potential upside for the bank's standalone BCA during the outlook period, as noted above. While Moody's expects the group to issue debt from its holding company, which would provide additional protection for the bank's senior unsecured debt and deposits, the rating agency does not believe that this issuance will be sufficient to lead to higher ratings over the outlook horizon. CR Assessment (CRA) The bank's long-term CRA was upgraded to Ba1(cr) from Ba2(cr). The CRA incorporates four notches of uplift from the bank's BCA given the protection provided by subordinated debt, senior debt and wholesale deposits. The CR Assessment also benefits from one notch of government support, in line with the agency's assessment of a moderate probability of support for deposits and senior unsecured debt. WHAT COULD MOVE THE RATINGS UP/DOWN PTSB's long-term debt and deposit ratings could be upgraded as a result of: (1) an increase of its standalone BCA; or (2) a significant increase in the bank's bail-in-able debt, beyond the agency's current expectations. PTSB's BCA could be upgraded if the bank (1) continues to improve its asset risk metrics; and (2) shows further sustainable improvements in profitability. PTSB's ratings could be downgraded as a result of: (1) a lowering of its standalone BCA; or (2) the redemption of maturing instruments without their replacement. PTSB's BCA could be downgraded because of: (1) an unexpected significant deterioration in the bank's capital level; (2) a reversal in the improving profitability trend; or (3) a deterioration in asset quality and provisioning coverage. LIST OF AFFECTED RATINGS Issuer: Permanent tsb p.l.c. Upgrades: -- LT Bank Deposits, Upgraded to Ba2 from Ba3, Outlook Remains Positive -- Senior Unsecured Regular Bond/Debenture, Upgraded to Ba3 from B1, Outlook Remains Positive -- Senior Unsecured MTN Program, Upgraded to (P)Ba3 from (P)B1 -- Subordinate MTN Program, Upgraded to (P)B3 from (P)Caa1 -- Junior Subordinate MTN Program, Upgraded to (P)Caa1 from (P)Caa2 -- Adjusted Baseline Credit Assessment, Upgraded to b2 from b3 -- Baseline Credit Assessment, Upgraded to b2 from b3 -- LT Counterparty Risk Assessment, Upgraded to Ba1(cr) from Ba2(cr) Affirmations: -- ST Bank Deposits, Affirmed NP -- Other Short Term, Affirmed (P)NP -- ST Counterparty Risk Assessment, Affirmed NP(cr) Outlook Actions: -- Outlook, Remains Positive Issuer: Permanent TSB Group Holdings plc Upgrades: -- LT Issuer Rating, Upgraded to B3 from Caa1, Outlook Assigned Positive -- Senior Unsecured MTN Program, upgraded to (P)B3 from corrected (P)Caa1 Affirmations: -- Other Short Term, Affirmed (P)NP Outlook Actions: -- Outlook, Remains Positive PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Banks published in January 2016. ========= M A L T A ========= VISTAJET GROUP: US$150MM Equity Investment Positive, Fitch Says --------------------------------------------------------------- Fitch Ratings views the USD150 million equity investment in VistaJet Group Holding Limited (B-/Stable) by Rhone Capital as positive. The investment is in the form of preferred equity with no cash dividend payment requirement and will improve the liquidity position of VistaJet. VistaJet plans to retain the majority of the USD150 million investment as cash, substantially improving its financial flexibility. Fitch expects VistaJet to continue to secure the refinancing of its amortising aircraft finance for the time being, preserving cash. Fitch believes this liquidity buffer will help the company refinance any balloon payments that come due. VistaJet has a heavy debt amortisation profile, with over USD200 million of debt principal repayments every year during 2017-2019, substantially higher than Fitch's forecast average free cash-flow generation of USD126 million pa during the same period. VistaJet's rating is based on Fitch's expectation that its leverage will substantially improve, driven by increases in yield per hour, increases in hours flown per aircraft, greater revenue certainty through its flight solutions programme as well as repayment of debt. VistaJet's 2Q17 results, reported along with the equity investment announcement, show some of this expected improvement. Fitch affirmed VistaJet's Long-Term IDR at 'B-' with a Stable Outlook on Aug. 4, 2017. The affirmation reflected VistaJet's 2016 financial performance in line with Fitch's forecast, and Fitch's expectation that the company will improve its credit metrics from 2017 to be within Fitch's negative rating guidelines for the 'B-' rating. At the time of the rating affirmation, Fitch expected the company's liquidity to remain stretched over 2017- 2018 with a high reliance on refinancing of short-term maturities. The announced equity investment improves the liquidity position, but the company will need to continue to refinance existing debt amortisation until internal cash-flow generation exceeds amortising debt, at which point the company will build up a cash balance that could be used to repay debt maturities. ===================== N E T H E R L A N D S ===================== AERIALTRONICS: In Suspension of Payments ---------------------------------------- Gary Mortimer at sUAS News reports that Dutch multirotor manufacturer Aerialtronics are in suspension of payments. This was confirmed by communications coordinator Katy Spring by email to sUAS News on Aug. 17. "We are working with the trustee, Mark Aukema of RWV Advocaten. Together, we are working to find a sustainable solution for the enterprise," the report quotes Ms. Spring as saying. The Dutch insolvency code has three types of insolvency -- bankruptcy, suspension of payments and debt restructuring, the report discloses. sUAS News relates that the goal of suspension of payment is to solve, if possible, problems of liquidity, through rationalization or restructuring or otherwise. Suspension of payment can be terminated if all creditors are paid, a private or judicial agreement is reached, or if the company is declared bankrupt. Founded in 2012, Aerialtronics (AT) -- https://www.aerialtronics.com/ -- was one of the first movers in the market for commercial drones. =========== R U S S I A =========== AFK SISTEMA: No Creditors Demanded Early Debt Repayment ------------------------------------------------------- Olga Voitova and Ilya Khrennikov at Bloomberg News report that AFK Sistema company representative Sergey Kopytov said none of the company's creditors demanded early repayment of debt after covenant violation due to the claim of Rosneft. In July, Sistema had technical default on RUR3.9 billion credit because of dispute with Rosneft, Bloomberg relates. According to Bloomberg, on July 17, Sistema said it continues to service debt "on time and in full," and the technical default "is a pure formality". AFK Sistema PAO is a Russia-based diversified investment company. The investments of the Company comprises stakes in Russian businesses in a range of sectors, including telecommunications, electric power, real estate, retail, high technology, paper and packaging, pharmaceutical, medical and healthcare services, agriculture, finance services, hospitality and tourism, among other industries. It invests in a range of private and public companies. The Company's investment portfolio includes MTS, SSTL, MTS Bank, RTI, Sistema Venture Capital, OZON, Concept Group, Detsky mir, Intourist, Medsi, Binnopharm, Segezha Group, Agrokholding Step, among others. DONAVIA: Russian Court Declares Unit Insolvent ---------------------------------------------- Polina Montag-Girmes at ATW Online reports that a Russian court has declared Aeroflot Airline subsidiary Donavia insolvent following a bankruptcy filing in January when Aeroflot filed on behalf of its two subsidiaries -- Orenburg-based Orenair and Rostov-on-Don-based Donavia. Orenair was declared bankrupt in February 2017. In November 2011, Aeroflot received shares of five Russian regional carriers -- including Orenair, Donavia and Saint Petersburg-based Rossiya Airlines -- from Russian state corporation Rostec. In October 2015, Aeroflot announced it would combine the assets of three subsidiaries under the brand Rossiya Airlines. In May 2016, Donavia's air operator's certificate was canceled after the assets were combined. In August 2016, Aeroflot recovered a RUB884 million ($13 million) overdue loan it had granted to Donavia last year, ATW Online recalls. ========= S P A I N ========= BANCO POPULAR ESPANOL: Investors Sue Over Sale to Santander ----------------------------------------------------------- Thomas Hale at The Financial Times reports that international investors have launched legal action against the European authorities that oversaw the failure of Banco Popular Espanol, in the latest attempt to overturn the decisions that led to the bank's sale to Santander in June for EUR1. The FT relates that Quinn Emanuel, a law firm, filed a claim at the European Court of Justice on August 17 on behalf of clients including Anchorage Capital, Algebris and Ronit Capital, that aims to annul decisions made by the European Commission and a Brussels body designed to address bank failure. In June, regulators deemed Banco Popular to be "failing or likely to fail", in a process in which shareholders and junior bondholders were wiped out, the FT recalls. The report says the incident was the first significant intervention by European officials since a new post-crisis system for dealing with financial failure was developed, which includes a wide-reaching Brussels directive. According to the FT, the suit is the latest of several legal challenges to the Single Resolution Board, set up in 2015 to handle bank failure, as part of the fallout over the treatment of Banco Popular. This month, a group of Mexican investors led by Antonio del Valle, a prominent businessman, launched a similar claim at the ECJ, the FT notes. Those investors had bought around $600 million of shares in total in Banco Popular. The FT says Richard East of Quinn Emanuel pointed to public comments from the SRB on Banco Popular, which he says "undermined investor confidence and resulted in a run on the bank". Investors have raised a series of questions about the process that led to the sale, not least how Banco Popular was valued, why other offers of help were not taken up and why the bank ran out of emergency liquidity so quickly, the FT states. The FT relates that the bondholders represented by Quin Emmanuel contend that SRB relied on "incomplete information" for its decision, and point to a valuation report by Deloitte that has not been made public. Pimco is part of the originally formed "bondholder group" created following the losses, but is not included in Thursday's specific action, the report says. It held EUR279 million of the bank's riskiest bonds as of the end of March, the FT discloses citing regulatory filings. Before regulators intervened, Banco Popular's share price had fallen sharply over concerns regarding its exposure to bad real estate assets. Earlier in August, Blackstone agreed to buy a majority stake in that property portfolio, the FT notes. The Ft says the attempt to overturn the regulators' decisions around Banco Popular has potential implications for Santander. Brussels signed off on the purchase this month, saying the transaction "would not raise market concerns". Quinn Emanuel wrote a letter to Santander in early July, seen by the Financial Times, which asks for assurance that it "will not take any steps to deal with, and/or dissipate the current shares in Banco Popular and/or its assets in a manner which would be likely to materially and adversely affect the interests of the AHG and its Bonds, pending the outcome of the likely proceedings for annulment". Santander in the same month launched a EUR1 billion scheme to compensate retail investors in Spain who lost out over the process. Lawyers in Spain welcomed the move, but said they would press ahead with legal action, the FT adds. Santander declined to comment, the FT notes. About Banco Popular Banco Popular Espanol SA is a Spain-based commercial bank. The Bank divides its business into four segments: Commercial Banking, Corporate and Markets; Insurance Activity, and Asset Management. The Bank's services and products include saving and current accounts, fixed-term deposits, investment funds, commercial and consumer loans, mortgages, cash management, financial assessment and other banking operations aimed at individuals and small and medium enterprises (SMEs). The Bank is a parent company of Grupo Banco Popular, a group which comprises a number of controlled entities, such as Targobank SA, GAT FTGENCAT 2005 FTA, Inverlur Aguilas I SL, Platja Amplaries SL, and Targoinmuebles SA, among others. In January 2014, the Company sold its entire 4.6% stake in Inmobiliaria Colonial SA during a restructuring of the property firm's capital. As reported in the Troubled Company Reporter-Europe on June 15, 2017, S&P Global Ratings said that it raised its long- and short- term counterparty credit ratings on Banco Popular Espanol S.A. to 'BBB+/A-2' from 'B/B'. The outlook is positive. In addition, S&P lowered its issue-level ratings on Banco Popular's outstanding preference shares and subordinated debt to 'D' from 'CC' and 'CCC-', respectively, and S&P subsequently withdrew them. The rating actions follow the Single Resolution Board's announcement on June 7, 2017, that it had taken a resolution action in respect of Banco Popular. This resulted from the ECB's conclusion that the bank was failing or likely to fail as a result of a significant deterioration in its liquidity position. The resolution entailed the sale of Banco Popular to Banco Santander S.A. (A-/Stable/A-2) for EUR1, after absorption of losses by Banco Popular's shareholders and holders of Tier 1 and Tier 2 capital instruments. HIPOCAT 9: Fitch Affirms 'Csf' Rating on Class E Tranche -------------------------------------------------------- Fitch Ratings has upgraded seven tranches of the Hipocat RMBS series and affirmed 20 tranches. The transactions consist of mortgages originated in Spain by Catalunya Banc S.A. (now part of BBVA Group; A-/Stable/F2), which previously traded as Caixa Catalunya. KEY RATING DRIVERS Improving Asset Performance The Hipocat series continues to see fewer borrowers falling into early-stage arrears as the macroeconomic environment in Spain improves. As late stage arrears continue to roll through to default the transactions continue to report a decline in three months plus arrears. As of end-May 2017 loans in arrears by more than 90 days stood at between 0.7% (Hipocat 6) and 1.9% (Hipocat 9), down from between 2.0% (Hipocat 7) and 4.0% (Hipocat 11) in June 2016. The volume of cumulative defaults currently ranges between 1.0% (Hipocat 6) and 24.7% (Hipocat 11) of the initial pool balance. Fitch believes that asset performance is likely to continue improving across transactions, mainly driven by the high seasoning of the underlying portfolios, between 140 months (Hipocat 11) and 196 months (Hipocat 6), and stable macroeconomic conditions. This expectation is reflected in the affirmations. The solid performance combined with growing credit enhancement led Fitch to upgrade the senior, B, and C notes of Hipocat 7 and the senior and B notes of Hipocat 9 and the class C note of Hipocat 8. Fitch has also assigned the highest rated notes in Hipocat 7 a Positive Outlook, in light of the revision of the Outlook on the Spanish sovereign to Positive. Exposure to Payment Interruption Risk Payment interruption risk is adequately covered in Hipocat 6 as the cash reserve is sufficient to pay senior expenses and interest due on the notes. The level of cash reserve for Hipocat 7 continues to replenish and is currently sufficient to pay senior expenses and interest due on the notes. However, the senior notes may be exposed to payment interruption risk if significant draws on the reserve fund take place, given there are no structural mitigants to cover for a disruption to the collection process. In Hipocat 8-11, payment interruption risk is not mitigated as the cash reserves remain fully depleted. The notes exposed to payment interruption can achieve a maximum rating of 'A+sf', given BBVA's rating. High Deficiency Ledgers The principal deficiency ledgers (PDL) have reduced for Hipocat 8 to EUR10.6 million (as of June 2017) from EUR16.4 million (as of May 2016), for Hipocat 9 to EUR20.2 million from EUR22.8 million (as of June 2016), and for Hipocat 10 to EUR79.2 million from EUR82.3 million (as of June 2016). The PDL for Hipocat 11 has increased slightly to EUR138.6 million from EUR137.1 million (as of May 2016). RATING SENSITIVITIES The ratings on Hipocat 6 and 7's class A notes are sensitive to changes to Spain's Country Ceiling and, consequently, changes to the highest achievable rating for Spanish structured finance notes. A worsening of the Spanish macroeconomic environment, especially employment conditions, or an abrupt shift in interest rates could jeopardise the ability of the underlying borrowers to meet their payment obligations. USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO RULE 17G-10 No third party due diligence was provided or reviewed in relation to this rating action. DATA ADEQUACY Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring. Fitch did not undertake a review of the information provided about the underlying asset pools ahead of the transactions' initial closing. The subsequent performance of the transactions over the years is consistent with the agency's expectations given the operating environment and Fitch is therefore satisfied that the asset pool information relied upon for its initial rating analysis was adequately reliable. Overall, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. SOURCES OF INFORMATION The information below was used in the analysis: Transaction reporting provided by Europea de Titulizacion SGFT S.A: - May 2017 for all the transactions Loan-by-loan data provided by Europea de Titulizacion SGFT S.A and downloaded from the European Data Warehouse as of: - June 2017 for Hipocat 6 and 8 - April 2017 for Hipocat 7, 9, 10 and 11 MODELS The models below were used in the analysis. Click on the link for a description of the model: ResiEMEA. EMEA RMBS Surveillance Model. EMEA Cash Flow Model. The rating actions are as follows: Hipocat 6 Class A (ISIN): affirmed at 'AA+sf'; Outlook Positive Class B (ISIN): affirmed at 'AAsf'; Outlook Stable Class C (ISIN): affirmed at ' A+sf'; Outlook Stable Hipocat 7 Class A2 (ISIN): upgraded to 'AA+sf' from 'AA-sf'; Outlook Positive Class B (ISIN): upgraded to 'AAsf' from 'A+sf' '; Outlook Stable Class C (ISIN): upgraded to 'BBB+sf' from 'BBBsf'; Outlook Stable Class D (ISIN): affirmed at 'BBsf'; Outlook Stable Hipocat 8 Class A2 (ISIN): affirmed at 'A+sf'; Outlook Stable Class B (ISIN): affirmed at 'Asf' '; Outlook Stable Class C (ISIN): upgraded to 'BB+sf' from 'BBsf'; Outlook Stable Class D (ISIN): affirmed at 'CCCsf'; Recovery Estimate 40% Hipocat 9 Class A2a (ISIN): upgraded to 'Asf' from 'BBB+sf'; Outlook Stable Class A2b (ISIN): upgraded to 'Asf' from 'BBB+sf'; Outlook Stable Class B (ISIN): upgraded to 'BB+sf' from 'BBsf'; Outlook Stable Class C (ISIN): affirmed at 'CCCsf' '; Recovery Estimate 100% Class D (ISIN): affirmed at 'CCsf'; Recovery Estimate 15% Class E (ISIN): affirmed at 'Csf'; Recovery Estimate 0% Hipocat 10 Class A2 (ISIN): affirmed at 'Bsf'; Outlook Stable Class A3 (ISIN): affirmed at 'Bsf'; Outlook Stable Class B (ISIN): affirmed at 'CCsf' '; Recovery Estimate 10% Class C (ISIN): affirmed at 'CCsf' '; Recovery Estimate 0% Class D (ISIN): affirmed at 'Csf'; Recovery Estimate 0% Hipocat 11 Class A2 (ISIN): affirmed at 'CCCsf'; Recovery Estimate 100% Class A3 (ISIN): affirmed at 'CCCsf'; Recovery Estimate 100% Class B (ISIN): affirmed at 'CCsf' '; Recovery Estimate 0% Class C (ISIN): affirmed at 'CCsf' '; Recovery Estimate 0% Class D (ISIN): affirmed at 'Csf'; Recovery Estimate 0% =========== S W E D E N =========== FASTIGHETS AB: Moody's Rates New EUR350MM Subordinated Notes Ba2 ---------------------------------------------------------------- Moody's Investors Service has changed the outlook to positive from stable and affirmed the Baa3 long term issuer rating of Fastighets AB Balder (Balder). Concurrently, Moody's assigned a Baa3 rating to the proposed EUR500 million unsecured notes and a Ba2 to the proposed issuance of EUR350 million junior subordinated ("hybrid") notes to be issued by Balder. "We have changed the outlook on Balder's long term issuer rating to positive from stable because of the company's improved debt maturity profile and unencumbered asset ratio following recent and planned senior unsecured bond issuances whose proceeds will refinance outstanding short dated secured debt", says Maria Gillholm, Moody's Vice President -- Senior Credit Officer and lead analyst on Balder. Moody's expects the net proceeds from the proposed EUR 500 million senior unsecured notes to be mainly be used for refinancing part of the company's outstanding, shorter-dated secured debt. The bond maturity is not finally decided but will be between 2025-2027. The transaction is credit positive because it will lengthen Balder's average debt maturity to 3.9 years, decrease its average borrowing costs and increase its unencumbered asset ratio to around 65%. The notes will rank pari passu with all other unsecured obligations of the issuer and benefit from a negative pledge limited to secured indebtedness capable of being listed, quoted or traded - bank loans are therefore excluded from the negative pledge. The notes will benefit from (i) a cross default at any subsidiary including debt at its 53.8% owned subsidiary Sato, (ii) a change of control provision and (iii) financial covenants including solvency ratio, interest coverage ratio and secured debt to total assets. The Ba2 rating assigned to the hybrid notes (whose proceeds will be used to repay existing preference shares) is two notches below Balders' long-term issuer rating of Baa3. The two-notch rating differential reflects the deeply subordinated nature of the hybrid debt. The hybrid instrument is senior only to common equity but equal to preferred shares, has no events of default and provides the company with the option to defer coupons on a cumulative basis In Moody's view, the notes have equity-like features to allow them to receive basket "C" treatment, i.e. 50% equity and 50% debt for financial leverage purposes (please refer to Moody's Rating Implementation Guidance "Hybrid Equity Credit" of January 2017). RATINGS RATIONALE Balder's long term issuer rating primarily reflects (i) its excellent tenant diversification resulting from a majority of its revenues coming from rental housing operations, (ii) the excellent quality of its commercial portfolio, (iii) good fixed charge coverage, although sensitive to changes in short term interest rates, (iv) a good level of unencumbered assets, (v) the company's conservative practice to fully retain earnings. Partly offsetting these strengths are Balder's (i) still somewhat elevated leverage which is expected to improve, (ii) reliance on short dated debt albeit reducing pro forma for the announced bond and mitigated by a good track record in rolling over such maturities, (iii) high debt to EBITDA, (iv) still high proportion of secured debt and (iv) the presence of a dominant shareholder potentially limiting the company's ability to raise equity. When fully consolidating SATO into Balder, the consolidated effective leverage, measured as gross debt to total assets, was 53.4% as of June 30, 2017, with fixed charge coverage of 3.3x. When proportionally consolidating SATO, Balder's effective leverage is 53.3% The rating also reflects the structural strengths of Sweden's and Finland's economies, which positively impact on their property markets despite persistent macroeconomic headwinds in Finland and potential risks of overheating in Sweden's residential property markets. RATIONALE FOR THE POSITIVE OUTLOOK The positive outlook reflects Moody's expectations that effective leverage will continue to improve towards 50% and that Balder's reliance on short term funding will reduce over time. The outlook also reflects Moody's stable view on the rental housing sector in Sweden and Finland and the office sector in Sweden. What Could Change the Rating -- Up Moody's could upgrade the rating if effective leverage improves to around 50% and fixed charge cover rises above 3.75x, both on a sustained basis and underpinned by financial policy targets that are consistent with these levels. Moody's has changed its leverage guidance for an upgrade to around 50% from previously towards 45% to reflect an improving debt maturity profile following the recent and planned bond issuance. An upgrade would also be conditional on a further reduction in the company's reliance on short term funding maintenance of stable macroeconomic conditions in Sweden and Finland. What Could Change the Rating - Down Conversely, downward pressure on the rating or outlook could result if effective leverage increased above 55% (53.4% as of June 30, 2017) or fixed charge cover dropped below 2.75x (3.3x as of June 30, 2017), both on a sustainable basis. A material deterioration in the Swedish or Finnish property markets or a meaningful increase in interest rates in Sweden could also create negative rating pressure. The principal methodology used in these ratings was Global Rating Methodology for REITs and Other Commercial Property Firms published in July 2010. ============= U K R A I N E ============= UKRAINE: Moody's Hikes Ratings to Caa2 & Alters Outlook to Pos. --------------------------------------------------------------- Moody's Investors Service has upgraded the government of Ukraine's local and foreign currency issuer and senior unsecured ratings to Caa2 from Caa3, and changed the rating outlook to positive from stable. Consequently, Moody's has upgraded to Caa2 from Caa3 the ratings of Ukraine's nine senior unsecured eurobonds issued in the context of the government's debt exchange operation in November 2015. At the same time, Moody's affirmed the Ca senior unsecured rating of the government's USD3 billion bond sold to Russia in December 2013. The bond is currently in default. Moody's also upgraded the backed long-term foreign-currency issuer rating of Financing of Infrastructural Projects (Fininpro) to Caa2 from Caa3, and changed the rating outlook to positive from stable. Fininpro's debt is fully guaranteed by the Ukrainian government. The upgrade of Ukraine's government ratings to Caa2 from Caa3 is based on the following key drivers: 1. The cumulative impact of structural reforms that, if sustained, are expected to improve government debt dynamics; and 2. The significant strengthening of Ukraine's external position. The rating upgrade was constrained to one notch because Ukraine faces a heavy external debt servicing burden over the next several years that will require additional foreign currency funding beyond what official lenders are likely to provide. Moreover, both domestic politics and geopolitical tensions could disrupt Ukraine's access to private capital markets as well as weaken the currency, with corresponding adverse implications for the government's debt metrics and economic stability. Still, the positive rating outlook captures the momentum of reforms that, if sustained, could lead to further improvements in Ukraine's public and external debt sustainability. Such reform momentum would also support Ukraine's renewed access to global capital markets, which would provide an easier route to refinancing significant external debt payments from 2019 onward. Ukraine could also anticipate those payments through proactive debt management operations. Concurrent with rating action, Moody's has raised the country ceiling for foreign currency bonds to Caa1 from Caa2, whereas the country ceiling for foreign currency deposits has been raised to Caa3 from Ca. The country ceilings for local currency debt and deposits have been raised to Caa1 from Caa2. The short-term foreign currency country ceilings for deposits and bonds remained at Not Prime (NP). Country ceilings generally determine the highest rating that can be assigned to obligations of an issuer resident within a given country. RATING RATIONALE RATIONALE FOR UPGRADING UKRAINE'S ISSUER RATING TO Caa2 FROM Caa3 FIRST RATING DRIVER: STRUCTURAL REFORMS LIKELY TO IMPROVE DEBT DYNAMICS The first driver for the rating upgrade is the impact of structural reforms already undertaken in the natural gas sector, public procurement system, taxation and banking sector and those still to be implemented, including pension reform, which together are expected to improve government debt dynamics. In Moody's view, the current government remains determined to press forward on reforms even though it faces considerable headwinds from powerful vested interests, in particular regarding land reform and privatization. Civil society is also strongly backing reform, especially the government's anti-corruption efforts and the associated strengthening of the judicial and law enforcement systems, where progress is piecemeal but nonetheless crucial if the reform agenda is to succeed in the longer term. Whereas Ukraine's government debt is very high at about 81% of GDP as of the end of 2016, Moody's expects the debt trend to improve against the backdrop of significant consolidation efforts. The introduction of new fiscal rules and medium-term spending ceilings will be incorporated into the 2018 budget plan. On this basis, the rating agency projects primary budget surpluses of about 1% of GDP in the next few years, which would be consistent with a downward trajectory in government debt absent a further substantial weakening of the exchange rate. The most important of the public finance-related changes adopted since the start of the IMF Extended Fund Facility (EFF) in March 2015 was the rapid shift of gas tariffs to a full cost-recovery basis, eliminating the quasi-fiscal deficit of the state-owned gas enterprise Naftogaz, which had heretofore added up to eight percentage points of GDP to the general government's borrowing requirements annually. Tax reforms adopted in connection with the 2017 budget are a significant driver of the robust revenue performance this year. The reforms include the simplification of the tax payment system and the automation of VAT refunds. In addition, revenues were boosted by one-offs such as a significant central bank profit and the seizure of USD1.4 billion from the bank accounts of associates of former President Yanukovych. Still, Moody's forecasts the deficit for the whole year to come in near the budgeted 3% of GDP due to seasonal spending considerations. With respect to Ukraine's pension reform, Moody's expects the respective legislation to be approved at the second reading in September -- potentially freeing up the USD1.9 billion tranche associated with the fourth review of the IMF program. The reform is envisaged to cut in half the current pension deficit to roughly 3% of GDP within a decade. SECOND RATING DRIVER: THE SIGNIFICANT STRENGTHENING OF UKRAINE'S EXTERNAL POSITION The second driver of the rating upgrade reflects Ukraine's significantly strengthened external position. At the time the IMF program was signed in early 2015, Ukraine's central bank had less than USD5 billion in foreign exchange reserves, the external vulnerability indicator (EVI) -- measuring the country's external debt service requirements relative to foreign exchange reserves -- was approaching 700% and Moody's rating on Ukraine was Caa3, anticipating an imminent default, which occurred later that year. Now, the central bank has about USD15 billion in liquid foreign exchange reserves, which covers roughly three months of imports, and the EVI has come down to 200%-250%, which reflects a still high but more manageable level of external vulnerability. The improvement in Ukraine's external position derives mainly from substantial disbursements from IFIs and bilaterals as Ukraine largely complied with reforms specified in the IMF program. In addition, the current account deficit narrowed sharply, initially due to the exchange rate depreciation and recession. More recently, exports have risen strongly, benefitting from a pickup in trading partners' demand and improved competitiveness afforded by the depreciation, but imports have also increased and the current account widened again to roughly 4% of GDP last year, where it is likely to remain assuming adequate capital account financing. In addition, Ukraine's external debt service requirements were eased when the government restructured USD15 billion in official Eurobonds at the end of 2015 -- which Moody's classified as a distressed exchange and hence a default -- and obtained a 4-year grace period on the new bonds. The corporates and banks that had Eurobonds outstanding in 2015 concluded restructurings as well. Also, as the exchange rate stabilized over the last year, excess foreign currency liquidity allowed the central bank to buy USD3 billion in the domestic market. In Moody's opinion, the government's willingness to continue with reforms will support Ukraine's renewed access to the global bond market. The government's return to the private bond market in 2017 is a feature of Ukraine's IMF program that is meant to improve the government's external debt sustainability through credit risk repricing as well as partial early repayments. FACTORS CONSTRAINING UKRAINE'S RATING AT Caa2 The rating upgrade was limited to one notch because Ukraine faces a heavy external debt servicing burden in 2019-21 that will require additional foreign currency funding beyond what official lenders are likely to provide over that period. The debt service for those years includes paying off the first three of the bonds issued in the 2015 debt restructuring. The risk that Ukraine will be unable to achieve a smooth refinancing of these debt obligations due to an unexpected domestic or external financial shock is a key risk, keeping the rating at Caa2 at present. Other factors constraining Ukraine's rating upgrade include domestic politics and geopolitical tensions, either of which could disrupt Ukraine's access to private capital markets as well as weaken the currency, with adverse implications for the government's debt metrics and economic stability. While the conflict in Ukraine's Donbas has not prevented the economy from recovering and local financial markets from normalizing, a potential new escalation could deter investors and undermine Ukraine's economic stability. Domestic politics could also interfere: while the current administration is pursuing reforms, presidential and parliamentary elections are scheduled for March and November 2019, respectively. The political challenges that come with the election calendar add to the uncertainties over Ukraine's ongoing compliance with the IMF program, which is scheduled to end in mid-2019. RATIONALE FOR CHANGING THE RATING OUTLOOK TO POSITIVE FROM STABLE The positive outlook captures the momentum of reforms that, if sustained, could lead to further improvements in Ukraine's public and external debt sustainability. Should the program continue, Ukraine would likely be eligible to receive sizeable additional disbursements from the IMF, other IFIs and bilateral creditors. Such reform momentum could also support more substantial access to global capital markets, facilitating the refinancing and even the prefinancing of large external debt payments over the medium to longer term. WHAT WOULD CHANGE THE RATING UP/DOWN An upgrade of Ukraine's issuer rating would require a further strengthening of the official foreign exchange reserves, meaningfully reducing Ukraine's refinancing risk, and in such a scenario, Ukraine's government rating could be better placed at Caa1 than Caa2. Conversely, Moody's could change Ukraine's rating outlook to stable if the IMF program terminates early, leaving substantive elements of the reform agenda incomplete, which in turn could endanger debt sustainability. Moody's could downgrade Ukraine's issuer rating if the government was unable to strengthen its foreign reserves position and to refinance its external obligations sufficiently to avoid a situation that could lead to a default in 2019 and beyond. GDP per capita (PPP basis, US$): 8,305 (2016 Actual) (also known as Per Capita Income) Real GDP growth (% change): 2.3% (2016 Actual) (also known as GDP Growth) Inflation Rate (CPI, % change Dec/Dec): 12.4% (2016 Actual) Gen. Gov. Financial Balance/GDP: -2.2% (2016 Actual) (also known as Fiscal Balance) Current Account Balance/GDP: -4.1% (2016 Actual) (also known as External Balance) External debt/GDP: 121.7% (2016 Actual) (also known as Foreign Debt) Level of economic development: Very low level of economic resilience Default history: At least one default event (on bonds and/or loans) has been recorded since 1983. On August 23, 2017, a rating committee was called to discuss the rating of the Ukraine, Government of. The main points raised during the discussion were: The issuer's institutional strength/framework, have materially increased. The issuer's governance and/or management, have materially increased. The issuer has become less susceptible to event risks. Strengthening of external position. The principal methodology used in these ratings was Sovereign Bond Ratings published in December 2016. The weighting of all rating factors is described in the methodology used in this credit rating action, if applicable. =========================== U N I T E D K I N G D O M =========================== BHS GROUP: Creditors to Get GBP30MM After Arcadia Settles Claim --------------------------------------------------------------- Mark Vandevelde at The Financial Times reports that BHS creditors will receive GBP30 million after Sir Philip Green's retail empire Arcadia relinquished a claim on the assets of the department store chain whose collapse culminated in thousands of job losses and the billionaire paying GBP363 million to cover the pensions of former workers. According to the FT, people briefed on the situation said the deal with BHS liquidators FRP Advisory ends the prospect of a legal battle surrounding a secured loan that the collapsed chain owed to Sir Phillip's Arcadia Group. Some GBP30 million that had been set aside to cover Arcadia's secured claim will now be released to unsecured creditors, the FT discloses. The loan had remained in place after Sir Philip sold BHS for GBP1 to an acquisition vehicle led by Dominic Chappell, who presided over the retailer's demise just 13 months later, the FT notes. But lawyers for FRP had cast doubt on whether the security was valid, the FT states. FRP Advisory, as cited by the FT, said: "The liquidators of SHB Realisations, formerly BHS, reached an agreement with Arcadia Group in relation to a number of matters, including Arcadia's floating charge dated April 14, 2015. "We can confirm that as part of the agreement, over GBP30 million was released from reserves held in relation to Arcadia's secured claim into the monies available for BHS unsecured creditors and the floating charge is to be released." About BHS BHS Group was a high street retailer offering fashion for the whole family, furniture and home accessories. BHS was put into administration in April 2016 in one of the U.K.'s largest ever corporate failures, according to The Am Law Daily. More than 11,000 jobs were lost and 20,000 pensions (the U.K. equivalent of a 401k) put at risk after it emerged that the company, which had more than 160 stores across the U.K., had a pension deficit of GBP571 million (US$703 million), The Am Law Daily disclosed. Sir Philip Green, a retail magnate with a net worth of more than US$5 billion, has been heavily criticized for his role in the collapse of BHS, The Am Law Daily said. Mr. Green and other shareholders had taken around GBP580 million (US$714 million) out of the business before selling it for just GBP1 (US$1.23), The Am Law Daily noted. Linklaters acted for Green's Arcadia Group on the sale of the company to Retail Acquisitions, which was advised by London-based technology, media and telecoms specialist Olswang, The Am Law Daily added. Weil Gotshal & Manges and DLA then took the lead roles on the administration, acting for the company and administrators Duff & Phelps, respectively, while Jones Day was appointed by the administrators to investigate the actions of the company's former directors, The Am Law Daily related. TURNSTONE MIDCO 2: Fitch Cuts IDR to B- Then Withdraws Rating ------------------------------------------------------------- Fitch Ratings has downgraded Turnstone MidCo 2's (Mydentist) Long-Term Issuer Default Rating (IDR) to 'B-' from 'B'. The Outlook is Stable. Fitch has also downgraded the senior notes issued by IDH Finance PLC to 'B' from 'B+' and Mydentist's super senior revolving credit facility (RCF) to 'BB-' from 'BB'. The Recovery Ratings for the senior notes and the RCF remain at 'RR3' and 'RR1', respectively. Concurrently, Fitch has also withdrawn Mydentist's IDR and instrument ratings for commercial reasons. The downgrade reflects Mydentist's higher leverage and weaker coverage ratios post refinancing to levels more commensurate with a 'B-' rating, following profit margin deterioration and continued units of dental activity (UDA) underperformance. As a result Fitch projects funds from operations (FFO) adjusted net leverage to peak around 8.6x and FFO fixed-charge cover to weaken to 1.4x. The rating, however, remains underpinned by the strengths of the rebranded Mydentist (previously IDH), and its leading market position in the UK's National Health Service (NHS) dental sector, characterised by long-term contracts supporting stable cash generation. KEY RATING DRIVERS Continued UDA Under-Delivery: The ratings reflect decreased (UDA) delivery at 90.4% in FY17 (financial year ended March 2017) compared with 92.4% in FY16 and management's guidance of flat near-term delivery. This was the result of a change in the underlying patient mix and increased NHS scrutiny over delivery, claims and performance benchmarks, which Fitch views as an industry-wide trend to improve the system's value and service. As a result Mydentist's productivity suffered with new management taking active measures to recover UDA performance. This includes increasing the number of dentists, actively managing dentist productivity, and streamlining administration, in addition to increasing the share of private treatments. Margin Deterioration: Fitch expects EBITDA margin to stabilise at 10.5% in FY18 before gradually increasing under assumed low single-digit sales growth and slow recovery in UDA delivery. This follows a decline in EBITDA margins to 10.9% in LTM 1Q FY18, from 11.7% in FY17 and 14.2% in FY16, primarily driven by reduced gross margin as a result of increased usage of locums in dental practices and adverse FX impact on the Dental Directory division, increases in both headcount and living wage, as well as an increasing share of the lower-margin private and Dental Directory businesses in total revenue. Weak Leverage & Financial Flexibility: As a result of a larger amount and the high cost of debt following the recent refinancing and profit deterioration due to UDA underperformance and FX impact, FFO adjusted net leverage increased to 7.9x in FY17 (vs. 6.7x in Fitch prior ratings case projections) and is expected to increase further to 8.6x in FY18 in light of the even weaker operating results in 1Q FY18. FFO fixed charge cover weakened to 1.6x (vs. 2.0x as per prior expectation) and is expected to decrease further to 1.4x in FY18. Fitch views these metrics as commensurate with a 'B-' rating. Elevated Execution Risk: New management has been put in place to tackle the challenges the company is facing. Strategy has been changed to limit acquisitions and focus on productivity of existing practices. There are plans to improve business performance. However, actions will take time to feed into performance. In order to drive growth, capex is still needed to improve facilities to attract privately funded patients. Failure to turn around could compromise the deleveraging profile. UK's Largest Dental Practice: Mydentist is the largest dental corporation in the UK and is almost twice the size of its closest competitor Oasis, now owned by Bupa. The company's dominant market positioning and size make Mydentist an important market participant and provides it with benefits of scale in terms of sourcing, administration, and marketing. DERIVATION SUMMARY Fitch places Mydentist in the hospital & care home subsector of the healthcare sector. It is characterised by limited geographic diversification; however, it has a leading position in the UK dentistry market. It is the largest dental corporation in the UK and is almost twice the size of its closest competitor Bupa. The ratings are also underpinned by NHS contracts, which support Mydentist's defensive business model and stable cash generation. KEY ASSUMPTIONS Fitch's expectations are based on the agency's internally produced, conservative rating-case forecasts. They do not represent the forecasts of rated issuers individually or in aggregate. Key Fitch forecast assumptions are: - Slow recovery in UDA delivery and NHS contract handbacks leading to a decline in NHS revenue for the next two years. - 10% annual growth in the private segment. - Moderate growth in Dental Directory (10% in FY18 and 5% p.a. thereafter). - Growth in group revenue of 1.1% in FY18 and 1.8% in FY19. - EBITDA margin declining to 10.5% in FY18 before slowly recovering towards 11.5% in FY21. - No acquisition of dental practices in FY18 and FY19 as management shifts focus to performance improvement over external growth. RATING SENSITIVITIES Not applicable. LIQUIDITY Satisfactory Liquidity Profile: With no material debt maturity over the next five years post refinancing, Mydentist's liquidity is satisfactory, with GBP12.8 million of readily available cash available at end-June 2017 and GBP100 million of an undrawn committed RCF. ********* 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. Marites O. Claro, Rousel Elaine T. Fernandez, Joy A. Agravante, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2017. 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 Joseph Cardillo at 856-381-8268. * * * End of Transmission * * *