/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/170926.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, September 26, 2017, Vol. 18, No. 191 Headlines G E R M A N Y AIR BERLIN: IAG CEO Confirms Bid for Part of Airline AIR BERLIN: To Continue Sale Negotiations with Lufthansa, easyJet AIR BERLIN: Court Rejects Insolvency Petition Against Niki Unit AIR BERLIN: Sale Proceeds Expected to Cover Government Loan THYSSENKRUPP AG: Moody's Changes Outlook on Ba2 CFR to Developing I R E L A N D ARMADA EURO I: Moody's Assigns B2(sf) Rating to Class F Notes L U X E M B O U R G PINNACLE HOLDCO: Moody's Cuts CFR to Caa3, Outlook Remains Neg. N E T H E R L A N D S E-MAC PROGRAM: Moody's Hikes Rating on Class B Notes to Caa2 MUNDA CLO I: Moody's Affirms Caa3 Rating on Class E Sr. Notes R U S S I A B&N BANK: Bank of Russia Implements Measures to Improve Stability ENEL RUSSIA: Moody's Affirms Ba3 CFR, Revises Outlook to Stable OTKRITIE BANK: To Repay Central Bank Debt Via Interbank Borrowing U K R A I N E UKRGAZ-ENERGO: Court Opens Bankruptcy Case Over UAH580.6MM Debt U N I T E D K I N G D O M HBOS PLC: Ex-Directors to Face Court Questioning Over Rescue Deal ********* ============= G E R M A N Y ============= AIR BERLIN: IAG CEO Confirms Bid for Part of Airline ---------------------------------------------------- Victoria Bryan at Reuters reports that British Airways parent IAG put in a bid for part of insolvent German airline Air Berlin but expects it will go mainly to Lufthansa. "We put in a binding bid for part of Air Berlin, but I don't think it comes as any surprise that Lufthansa is going to get it," Reuters quotes IAG CEO Willie Walsh as saying at the World Routes conference. "From every angle, it looks like it was designed to facilitate Lufthansa but we'll wait and see. We haven't heard anything official yet." According to Reuters, a source has said a large part of Air Berlin's assets look set to go to Lufthansa, which is bidding around EUR200 million (US$238 million) for units including leisure airline Niki and regional carrier LGW. 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: To Continue Sale Negotiations with Lufthansa, easyJet ----------------------------------------------------------------- Air Berlin PLC on Sept. 21 disclosed that the preliminary creditors' committees appointed by the local district court of Berlin-Charlottenburg in respect of Air Berlin PLC and Air Berlin PLC & Co. Luftverkehrs KG, which both are currently subject to preliminary debtor-in-possession insolvency proceedings, have decided on the basis of the offers for the acquisition of the Air Berlin group or business units of the Air Berlin group that, with respect to the disposal of the air transport activities, negotiations shall be continued with a selected number of bidders until October 12, 2017; partial disposals shall also be considered. Further, authority was granted to conclude one or more agreements with one or more of these bidders. The selected bidders comprise Deutsche Lufthansa AG and easyJet Airline Company Limited. With respect to the other business units of the Air Berlin group the sales negotiations with further bidders will be continued. As the selection of the bidders and the conclusion of transactions require the consent of the Board of Directors of Air Berlin PLC, the Board of Directors was set to deliberate on the offers of the bidders yesterday, September 25, 2017. 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: Court Rejects Insolvency Petition Against Niki Unit --------------------------------------------------------------- Victoria Bryan at Reuters reports that Air Berlin's Austria-based unit Niki said a court has rejected an insolvency petition brought against it by an Austrian tour operator, adding that its flight operations are continuing. "The Korneuburg regional court confirmed the legal opinion of Niki and has rejected the insolvency petition as unfounded," Reuters quotes Niki as saying in a statement on Sept. 22. The Austrian tour operator had applied for insolvency proceedings against Niki last week, saying it was owed money, Reuters relates. Niki said it had paid all the bills owed, Reuters 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. AIR BERLIN: Sale Proceeds Expected to Cover Government Loan ----------------------------------------------------------- Elisabeth Behrmann at Bloomberg News, citing Bild, reports that the sale of insolvent Air Berlin is set to comfortably cover a federal government loan of EUR150 million to keep the struggling carrier afloat. According to Bloomberg, the creditor committee expects proceeds of EUR250 million-EU350 million. Lufthansa and EasyJet continue to haggle over landing rights, 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. THYSSENKRUPP AG: Moody's Changes Outlook on Ba2 CFR to Developing ----------------------------------------------------------------- Moody's Investors Service has changed to developing from stable the outlook on the Ba2 corporate family rating (CFR) and Ba2-PD probability of default rating (PDR) of German steel producer thyssenkrupp AG (tk). At the same time, Moody's has affirmed these ratings. Concurrently, the senior unsecured debt of thyssenkrupp AG was affirmed at Ba2, including the (P)Ba2 programme rating. Moody's has also affirmed the short-term ratings of tk at NP/(P)NP. The outlook on all ratings has been changed to developing. "Moody's decision to revise the outlook on thyssenkrupp's ratings to developing reflects the uncertainty with respect to the potential credit impact, be it weighing more positively or more negatively, that its recently announced decision to form a joint venture with Tata Steel will have on the company," says Gianmarco Migliavacca, a Vice President - Senior Credit Officer at Moody's. "With the deal being at a very early stage, Moody's will wait to see what the financing, liquidity and governance arrangements, as well as the dividend policy, of the new entity are and how these may affect thyssenkrupp's credit profile," adds Mr. Migliavacca. RATINGS RATIONALE -- REVISION OF OUTLOOK TO DEVELOPING The rating action reflects the importance for the future strategic and financial developments of tk of its announcement on 20 September 2017 of a memorandum of understanding signed with Tata Steel Ltd. (Tata, Ba3 negative) to form a 50/50 joint venture (the JV) combining their European steel activities. This deal is at its very early stage, with signing and possible closing scheduled in 2018 subject to due diligence by both parties and antitrust approvals. The assignment of a developing outlook to tk's ratings reflects Moody's preliminary assessment that a possible closing of the deal next year (1) is sufficiently material that it may affect the rating, and (2) could have either a net positive or net negative impact. The range of factors the rating agency will need to consider includes (1) the financing and liquidity arrangements to support the new JV, including confirmation of financial liabilities at the new entity being ring-fenced, (2) business plan of the new entity, to assess whether it has potential to pay dividends to its parents, or on the contrary there are risks that parents may need to inject capital into the JV; (3) final governance arrangements, also to confirm justification for the equity accounting treatment of the 50% stake in the JV as already indicated by management; and (4) the implied valuation of tk's Steel Europe based on the final terms of the deal, and relative accounting implications, to be able to quantify the expected uplift in tk's equity book value resulting from the crystallization of the value of its 50% stake in the JV. As the deal progresses and Moody's receives more granular information on key aspects, the rating agency will be in a better position to assess whether the impact is weighing more positively or more negatively rating pressure, as either outcome is potentially contemplated when assigning a developing outlook. The potential deconsolidation of Steel Europe from tk's accounts would eliminate a main source of volatility and cyclicality in its business and earnings profile, and improve its average profitability, because Steel Europe's operating profitability has historically been much lower than the profitability of the capital goods businesses, which would become the future earning drivers for tk. Becoming a pure capital goods industrial player would address two main credit weaknesses Moody's identified for tk's credit profile, its high cyclicality and low operating profitability, which are both tied to its large exposure to steel. However, potentially weaker credit metrics pro-forma for the planned deconsolidation of tk's Steel Europe business would be a negative credit and rating driver. This is particularly true if the announced transfer to the JV of around EUR3.6 billion of pension liabilities, which Moody's to a large extent adjusts as debt, is not enough to compensate for the deconsolidation of Steel Europe's EBITDA. Steel Europe's earnings peaked at nearly EUR900 million in the 12-month period to June 2017. Based on Moody's preliminary pro-forma calculations, the 2016 adjusted gross debt/EBITDA of tk pro-forma for the steel deconsolidation would be close to 6x, assuming tk's pro-forma adjusted 2016 gross debt of around EUR12 billion remaining after the deconsolidation of Steel Europe's pension liabilities, and an adjusted pro-forma EBITDA of around EUR2.0 billion. The resulting pro-forma ratio is higher than the level of 5.5x the rating agency has set as one of the triggers for a possible downgrade, and is also much higher than the actual adjusted leverage ratio of around 5.2x at the end of September 2016. However, the projected pro-forma leverage, as well as other pro- forma metrics the rating agency will need to calculate, may be better or worse than the current preliminary estimates based on many future developments which will become clearer as the deal progresses towards its closing. -- AFFIRMATION OF Ba2 CFR The affirmation of the Ba2 CFR continues to reflect (1) thyssenkrupp's solid business profile, with well diversified global revenue streams; (2) ongoing progress made to reduce costs, supported by the gains from the efficiency and restructuring programme 'impact'; (3) the company's consistently high level of cash on the balance sheet of approximately EUR4 billion on average over the last three years; (4) solid liquidity profile; and (5) low reported financial debt of approximately EUR8.3 billion at the end of June 2017, resulting in a non- adjusted gross leverage of 3x. These positive factors are counterbalanced by (1) a Moody's adjusted gross leverage of 5.2x at the end of tk's FY2015-16, which is high for the current rating category but which Moody's expects to decrease towards 5x by the end of this fiscal year; (2) the low profitability at group level with Moody's adjusted EBIT margin of 3.3% at the end of 2016; and (3) the company being consistently free cash flow negative since 2013 on a Moody's adjusted basis. WHAT COULD CHANGE THE RATINGS UP/DOWN Positive rating pressure could be considered if (1) tk's adjusted EBIT margin reaches and stays above 5%; (2) its liquidity remains strong and tk is able to maintain its considerable cash cushion; (3) Moody's adjusted gross debt/EBITDA decreases towards 4x; and (4) Cash Flow from Operation (CFO) - dividend / debt trends towards 15%. Conversely, factors that could lead to a possible downgrade are (1) tk's adjusted gross debt/EBITDA rising above 5.5x on a sustained basis; (2) its CFO - dividend / debt ratio falling to below 10% on a consistent basis, and (3) adjusted EBIT to interest consistently lower than 2x. The principal methodology used in these ratings was Steel Industry published in September 2017. Germany based thyssenkrupp AG (tk) is a diversified industrial conglomerate operating in about 78 countries. For FYE September 2016, thyssenkrupp reported revenue of EUR39.3 billion and EBITDA of EUR2.4 billion resulting in a 6.2% margin. The company is engaged in steel manufacturing and steel related services through the operations of Steel Europe and Materials Services business areas, and in capital goods manufacturing through the operations of Elevator Technology, Industrial Solutions and Components Technology business areas. Steel and steel related services represented 54% of total sales at the end of FY September 2016, while capital goods activities accounted for 51%. However, in terms of profitability and EBIT contribution, the capital goods businesses represented the largest share of it with 79% of 2016 adjusted EBIT (excluding loss in corporate segment) coming from these activities. In FY2016-17 the share of Steel and steel related services decreased further due to the sale of tk Steel Americas in September 2017. thyssenkrupp shareholding structure has been relatively stable over the last four years. As of September 30, 2016 the Alfried Krupp von Bohlen und Halbach Foundation is holding 23.03% of the voting rights in thyssenkrupp AG, while Cevian Capital hold 15%. ============= I R E L A N D ============= ARMADA EURO I: Moody's Assigns B2(sf) Rating to Class F Notes ------------------------------------------------------------- Moody's Investors Service has assigned definitive ratings to six classes of debts issued by Armada Euro CLO I Designated Activity Company: -- EUR211,000,000 Class A Senior Secured Floating Rate Notes due 2030, Definitive Rating Assigned Aaa (sf) -- EUR49,200,000 Class B Senior Secured Floating Rate Notes due 2030, Definitive Rating Assigned Aa2 (sf) -- EUR24,100,000 Class C Senior Secured Deferrable Floating Rate Notes due 2030, Definitive Rating Assigned A2 (sf) -- EUR16,000,000 Class D Senior Secured Deferrable Floating Rate Notes due 2030, Definitive Rating Assigned Baa2 (sf) -- EUR23,200,000 Class E Senior Secured Deferrable Floating Rate Notes due 2030, Definitive Rating Assigned Ba2 (sf) -- EUR10,200,000 Class F Senior Secured Deferrable Floating Rate Notes due 2030, Definitive Rating Assigned B2 (sf) RATINGS RATIONALE Moody's definitive ratings of the rated notes address the expected loss posed to noteholders by the legal final maturity of the notes in 2030. The definitive 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, Brigade Capital Europe Management LLP ("Brigade Europe") has sufficient experience and operational capacity and is capable of managing this CLO. Armada Euro CLO is a managed cash flow CLO. At least 90% of the portfolio must consist of senior secured loans and senior secured bonds and up to 10% of the portfolio may consist of unsecured senior loans, second-lien loans, mezzanine obligations and high yield bonds. 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. Brigade Europe 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 issued EUR34,500,000 of subordinated notes which will not be rated. The transaction incorporates interest and par coverage tests which, if triggered, divert interest and principal proceeds to pay down the notes in order of seniority. Factors that would lead to an upgrade or downgrade of the ratings: The rated notes' performance is subject to uncertainty. The notes' performance is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. Brigade Europe's investment decisions and management of the transaction will also affect the notes' performance. Loss and Cash Flow Analysis: Moody's modelled 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 August 2017. The cash flow model evaluates all default scenarios that are then weighted considering the probabilities of the binomial distribution assumed for the portfolio default rate. In each default scenario, the corresponding loss for each class of notes is calculated given the incoming cash flows from the assets and the outgoing payments to third parties and noteholders. Therefore, the expected loss or EL for each tranche is the sum product of (i) the probability of occurrence of each default scenario and (ii) the loss derived from the cash flow model in each default scenario for each tranche. As such, Moody's encompasses the assessment of stressed scenarios. Moody's used the following base-case modelling assumptions: Par Amount: EUR360,000,000 Diversity Score: 38 Weighted Average Rating Factor (WARF): 2775 Weighted Average Spread (WAS): 3.50% Weighted Average Coupon (WAC): 5.5% Weighted Average Recovery Rate (WARR): 44% Weighted Average Life (WAL): 8 years Stress Scenarios: Together with the set of modelling assumptions above, Moody's conducted additional sensitivity analysis, which was an important component in determining the definitive 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 due 2030: 0 Class B Senior Secured Floating Rate Notes due 2030: -2 Class C Senior Secured Deferrable Floating Rate Notes due 2030: - 2 Class D Senior Secured Deferrable Floating Rate Notes due 2030: - 2 Class E Senior Secured Deferrable Floating Rate Notes due 2030: - 1 Class F Senior Secured Deferrable Floating Rate Notes due 2030: - 0 Percentage Change in WARF: WARF +30% (to 3608 from 2775) Ratings Impact in Rating Notches: Class A Senior Secured Floating Rate Notes due 2030: -1 Class B Senior Secured Floating Rate Notes due 2030: -3 Class C Senior Secured Deferrable Floating Rate Notes due 2030: - 4 Class D Senior Secured Deferrable Floating Rate Notes due 2030: - 2 Class E Senior Secured Deferrable Floating Rate Notes due 2030: - 2 Class F Senior Secured Deferrable Floating Rate Notes due 2030: - 2 Further details regarding Moody's analysis of this transaction may be found in the upcoming new issue report, available soon on Moodys.com. Methodology Underlying the Rating Action: The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in August 2017. =================== L U X E M B O U R G =================== PINNACLE HOLDCO: Moody's Cuts CFR to Caa3, Outlook Remains Neg. --------------------------------------------------------------- Moody's Investors Service has downgraded Pinnacle Holdco S.a.r.l.'s Corporate Family Rating ("CFR") to Caa3, from Caa1, its Probability of Default Rating ("PDR") to Caa3-PD, and the facility ratings on its first- and second-lien debt to Caa2 (LGD3) and Ca (LGD6), respectively. The rating outlook remains negative. RATINGS RATIONALE The two-notch downgrade, to a CFR of Caa3, reflects Paradigm's deteriorating liquidity position, which Moody's views as having a high probability of being exhausted by year-end 2017. Also, without intervention from the company's sponsor in the form of an equity cure, there is a high likelihood of a minimum-EBITDA covenant breach by as soon as its next measurement date, for the period ended September 30th, 2017. As of June 30th, Paradigm had slightly below $10 million of cash and $10 million of availability under a $25 million revolver, and Moody's expects the company to generate negative free cash flow of around $20 million for the second half of 2017. The downgrade has been prompted by the impact the energy industry's prolonged depressed operating environment has had on Paradigm, whose revenues Moody's expects will fall again in 2017, by as much as 15% (after having dropped 22% in 2016), with critical implications for liquidity. Paradigm's narrow focus on geophysical oil and gas software has been problematic in a weak pricing environment like the current one, since energy prices are crucial for Paradigm's customers' cash flow and, in turn, their ability to fund exploration and development. Management's largely successful attempts during 2015 and 2016 to keep costs in line have at this point been overwhelmed by the steep and prolonged drops in revenue, leading to the current critical operating and liquidity challenges. The nearly 25% drop in absolute EBITDA that Moody's expects in 2017 will push Moody's adjusted debt-to-EBITDA leverage to well into teen multiples by late in the year. The negative outlook reflects the high probability of a near-term covenant breach as well as the unsustainability of Paradigm's current liquidity and capital structure. The ratings could be upgraded in the event that an equity infusion would be ample enough not only to allow the company to avoid an imminent covenant breach but also to provide it with liquidity to sustain operations long enough to be salvaged by an improvement in energy markets. The ratings could be downgraded in the absence of the aforementioned conditions, leading Moody's to expect a restructuring. The following actions were taken: Issuer: Pinnacle Holdco S.a.r.l Corporate Family Rating, Downgraded to Caa3, from Caa1 Probability of Default Rating, Downgraded Caa3-PD, from Caa1-PD $365 million (outstanding) senior secured, first-lien bank credit facilities, maturing July 2018 and 2019, Downgraded to Caa2 (LGD3), from B3 (LGD3) $95 million senior secured, second lien term loan, maturing July 2020, Downgraded to Ca (LGD6), from Caa3 (LGD6) Outlook remains Negative Pinnacle Holdco S.a.r.l is the holding company and debt issuing entity set up, in mid-2012, by private equity firms Apax Partners and JMI Equity to acquire Paradigm, Ltd. ("Paradigm"), a multi- national provider of specialized sub-surface analytics software for the oil and gas industry's exploration and extraction efforts. Moody's projects Paradigm's 2017 revenues at about $128 million, a fifteen percent decline from 2016. The principal methodology used in these ratings was Software Industry published in December 2015. ===================== N E T H E R L A N D S ===================== E-MAC PROGRAM: Moody's Hikes Rating on Class B Notes to Caa2 ------------------------------------------------------------ Moody's Investors Service has downgraded the rating of the Class A notes and has upgraded the rating of the Class B notes in E-MAC Program B.V. / Compartment NL 2007-NHG V. The rating action reflects the reduction of excess spread for both the Class A and Class B notes, together with a correction to the capital structure in Moody's cash flow modelling, impacting Class B notes only. -- EUR250M Class A Notes, Downgraded to A1 (sf); previously on Nov 22, 2016 Upgraded to Aa3 (sf) -- EUR3M Class B Notes, Upgraded to Caa2 (sf); previously on Nov 22, 2016 Affirmed Caa3 (sf) RATINGS RATIONALE The rating action for E-MAC Program B.V. / Compartment NL 2007-NHG V reflects the reduction of excess spread. The weighted average coupon of the mortgage pool decreased from 4.83% in July 2014 to 4.76% in July 2017. In the last three quarters, the absolute amount of interest proceeds after payments under hedging arrangements was negative, resulting in drawings on the reserve account which now stands below its EUR4 million target amount. The reduction of the available excess spread in this transaction has a negative impact on the model results for both the Class A notes and the Class B notes. In addition, the rating action reflects a correction to the capital structure in Moody's cash flow model. In November 2016, the balance of the reserve fund increased by EUR2.1 million to the amended target level of EUR4 million. The amendment of the reserve account resulted in an increased credit enhancement for the notes in E-MAC Program B.V. / Compartment NL 2007-NHG V. The increased credit enhancement for the Class B notes was not reflected in Moody's analysis. The correction to cash flow model has a positive impact on the model result for the Class B notes. Moody's took into consideration the appointment of N.V. Bank Nederlandse Gemeenten (Aaa(cr)/P-1(cr)) as new swap counterparty of the E-MAC Program B.V. / Compartment NL 2007-NHG V. The principal methodology used in these ratings was "Moody's Approach to Rating RMBS Using the MILAN Framework" published in September 2017. The analysis undertaken by Moody's at the initial assignment of these ratings for RMBS securities may focus on aspects that become less relevant or typically remain unchanged during the surveillance stage. Factors that would lead to an upgrade or downgrade of the ratings: Factors or circumstances that could lead to an upgrade of the ratings include (1) performance of the underlying collateral that is better than Moody's expected, (2) deleveraging of the capital structure and (3) improvements in the credit quality of the transaction counterparties. Factors or circumstances that could lead to a downgrade of the ratings include (1) an increase in sovereign risk (2) performance of the underlying collateral that is worse than Moody's expected, (3) deterioration in the notes' available credit enhancement and (4) deterioration in the credit quality of the transaction counterparties. MUNDA CLO I: Moody's Affirms Caa3 Rating on Class E Sr. Notes ------------------------------------------------------------- Moody's Investors Service announced that it has taken rating actions on the following classes of notes issued by Munda CLO I B.V.: -- EUR243.95M (current balance EUR36.86M) Class A-1 Senior Secured Floating Rate Notes due 2024, Affirmed Aaa (sf); previously on Oct 6, 2016 Affirmed Aaa (sf) -- EUR200M (current balance EUR30.22M) Class A-2 Senior Secured Delayed Draw Floating Rate Notes due 2024, Affirmed Aaa (sf); previously on Oct 6, 2016 Affirmed Aaa (sf) -- EUR61.75M Class B Senior Secured Floating Rate Notes due 2024, Upgraded to Aaa (sf); previously on Oct 6, 2016 Upgraded to Aa2 (sf) -- EUR27.3M Class C Senior Secured Deferrable Floating Rate Notes due 2024, Upgraded to A2 (sf); previously on Oct 6, 2016 Affirmed Baa2 (sf) -- EUR27.95M Class D Senior Secured Deferrable Floating Rate Notes due 2024, Affirmed B1 (sf); previously on Oct 6, 2016 Downgraded to B1 (sf) -- EUR27.3M (current balance EUR21.66M) Class E Senior Secured Deferrable Floating Rate Notes due 2024, Affirmed Caa3 (sf); previously on Oct 6, 2016 Downgraded to Caa3 (sf) Munda CLO I B.V., issued in December 2007, is a collateralised loan obligation (CLO) backed by a portfolio of mostly high-yield senior secured European loans managed by Cohen & Company Financial Limited. The transaction's reinvestment period ended in January 2014. RATINGS RATIONALE According to Moody's, the upgrades of the Class B and Class C notes are the result of deleveraging of the Class A notes following amortisation of the portfolio and an improvement in the credit quality of the portfolio since the last rating action in October 2016. Classes A-1 and A-2 notes have paid down by a total of approximately EUR88.9 million (c 20% of combined closing balances) on the January 2017 and July 2017 payment dates, as a result of which over-collateralisation (OC) ratios of senior classes of rated notes have increased. As per the trustee report dated August 2017, Class A/B, and Class C OC ratios are reported at 159.50% and 131.61% compared to September 2016 levels of 140.06% and 124.45% respectively. The credit quality has improved as reflected in the improvement in the average credit rating of the portfolio (measured by the weighted average rating factor, or WARF) and a decrease in the proportion of securities from issuers with ratings of Caa1 or lower. According to the trustee report dated August 2017, WARF improved to 2107 from 2749 in September 2016. Securities with ratings of Caa1 or lower currently make up approximately 6.2% of the underlying portfolio compared to 15.1% in September 2016. The key model inputs Moody's uses in its analysis, such as par, weighted average rating factor, diversity score and the weighted average recovery rate, are based on its published methodology and could differ from the trustee's reported numbers. In its base case, Moody's analysed the underlying collateral pool as having a performing par and principal proceeds of EUR191.58 million, defaulted par of EUR17.32 million, a weighted average default probability of 12.64% (consistent with a WARF of 2020 over a weighted average life of 4.26 years), a weighted average recovery rate upon default of 38.73% for a Aaa liability target rating, a diversity score of 15 and a weighted average spread of 3.01%. The default probability derives from the credit quality of the collateral pool and Moody's expectation of the remaining life of the collateral pool. The estimated average recovery rate on future defaults is based primarily on the seniority of the assets in the collateral pool. Moody's generally applies recovery rates for CLO securities as published in "Moody's Approach to Rating SF CDOs". In some cases, alternative recovery assumptions may be considered based on the specifics of the analysis of the CLO transaction. In each case, historical and market performance and a collateral manager's latitude to trade collateral are also relevant factors. Moody's incorporates these default and recovery characteristics of the collateral pool into its cash flow model analysis, subjecting them to stresses as a function of the target rating of each CLO liability it is analysing. Moody's notes that the September 2017 trustee report was published at the time it was completing its analysis of the August 2017 data. Key portfolio metrics such as WARF, diversity score, weighted average spread and life, and OC ratios exhibit little or no change between these dates. Of the incremental EUR6.94 million of principal proceeds reported in September 2017, EUR5 million was a scheduled payment which had been incorporated in Moody's model runs, and the residual EUR1.94 million prepayment has no material impact on Moody's analysis. Methodology Underlying the Rating Action The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in August 2017. Factors that would lead to an upgrade or downgrade of the ratings: In addition to the base-case analysis, Moody's conducted sensitivity analyses on the key parameters for the rated notes, for which it assumed a lower weighted average recovery rate for the portfolio. Moody's ran a model in which it reduced the weighted average recovery rate by 5%; the model generated outputs that were unchanged for Classes A-1, A-2 and E, and within one to two notches of the base-case results for Classes B, C, and D. This transaction is subject to a high level of macroeconomic uncertainty, which could negatively affect the ratings on the note, in light of uncertainty about credit conditions in the general economy. CLO notes' performance may also be impacted either positively or negatively by 1) the manager's investment strategy and behaviour and 2) divergence in the legal interpretation of CDO documentation by different transactional parties because of embedded ambiguities. Additional uncertainty about performance is due to the following: 1) Portfolio amortisation: The main source of uncertainty in this transaction is the pace of amortisation of the underlying portfolio, which can vary significantly depending on market conditions and have a significant impact on the notes' ratings. Amortisation could accelerate as a consequence of high loan prepayment levels or collateral sales by the collateral manager or be delayed by an increase in loan amend-and-extend restructurings. Fast amortisation would usually benefit the ratings of the notes beginning with the notes having the highest prepayment priority. 2) Recoveries on defaulted assets: Market value fluctuations in trustee-reported defaulted assets and those Moody's assumes have defaulted can result in volatility in the deal's over- collateralisation levels. Further, the timing of recoveries and the manager's decision whether to work out or sell defaulted assets can also result in additional uncertainty. Moody's analysed defaulted recoveries assuming the lower of the market price or the recovery rate to account for potential volatility in market prices. Recoveries higher than Moody's expectations would have a positive impact on the notes' ratings. 3) Around 6% of the collateral pool consists of debt obligations whose credit quality Moody's has assessed by using credit estimates. As part of its base case, Moody's has stressed large concentrations of single obligors bearing a credit estimate as described in "Updated Approach to the Usage of Credit Estimates in Rated Transactions," published in October 2009 and available at http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_120461. In addition to the quantitative factors that Moody's explicitly modelled, qualitative factors are part of the rating committee's considerations. These qualitative factors include the structural protections in the transaction, its recent performance given the market environment, the legal environment, specific documentation features, the collateral manager's track record and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, can influence the final rating decision. =========== R U S S I A =========== B&N BANK: Bank of Russia Implements Measures to Improve Stability ----------------------------------------------------------------- The Bank of Russia decided to implement a number of measures aimed at improving the financial stability of Moscow-based Public Joint-stock Company B&N Bank and Moscow-based Joint-stock Company Rost Bank, according to the press service of the Central Bank of Russia. As part of these measures, the Bank of Russia will act as a key investor, with the funding coming from the Banking Sector Consolidation Fund. The measures aimed at improving the Banks' financial stability are being implemented in cooperation with the Banks' current owners and executives, which is set to secure the continuity of their operations in the banking sector, as well as, moving forward, make all necessary arrangements towards the Banks' operational development in the future. PJSC B&N Bank, JSC Rost Bank and their subsidiaries (Moscow-based JSC B&N Bank Digital and Yekaterinburg-based JSC URALPRIVATBANK) continue to operate in the ordinary course of its business, meeting their obligations and conducting new transactions. The Bank of Russia will provide financial support to the banks and guarantee the continuity of its operations. No moratorium on payments under creditors' claims is introduced. No bail-in option will be applied. According to its Order No. OD-2723, dated September 20, 2017, and pursuant to Articles 189.25, 189.26, 189.31 of Federal Law No.127-FZ, dated October 26, 2002, the Bank of Russia appointed a provisional administration to manage PJSC B&N Bank. According to its Order No. OD-2724, dated September 20, 2017, and pursuant to Articles 189.25, 189.26, 189.31 of Federal Law No. 127-FZ, dated October 26, 2002, the Bank of Russia appointed a provisional administration to manage JSC Rost Bank. The provisional administrations are composed of Bank of Russia officers and employees of the Banking Sector Consolidation Fund management company (LLC UK FKBS). PJSC B&N Bank was established on March 6, 1991; it is an important credit institution ranked 8th by assets. The Bank includes 12 branches, 1 representative office and over 400 structural divisions. ENEL RUSSIA: Moody's Affirms Ba3 CFR, Revises Outlook to Stable --------------------------------------------------------------- Moody's Investors Service has affirmed the long-term Ba3 corporate family rating and the Ba3-PD probability of default rating of Enel Russia, PJSC (Enel Russia) and changed the outlook to stable from negative. RATINGS RATIONALE RATIONALE FOR RATING AFFIRMATION AND OUTLOOK CHANGE The outlook change to stable factors in Enel Russia's progress in restoring financial flexibility against the background of a modestly improving domestic macroeconomic environment. Notwithstanding residual risks to profitability from generation overcapacity, Moody's estimates that the company should nevertheless be able to carry out its strategic plan while maintaining a financial profile consistent with guidance for the Ba3 rating. The outlook change also takes account of the planned shift in the company's generation mix, through the sale of its 3.8GW coal plant, Reftinskaya, and the construction of 291MW of wind capacity. Although there remains uncertainty around the timing and proceeds from any potential sale, Moody's expects that the transaction would be managed such as to maintain a broadly unchanged capital structure. The stable outlook factors in a gradually improving macroeconomic environment in Russia; electricity demand in Price Zone I rose by 4.2% year on year in 1H2017, driven in part by a 1.6% rise in GDP, and low temperatures. Moody's forecast is for GDP growth in Russia of 1.5% in 2017 and 2018, following two years of recession. This should be supportive of regional power demand, although any positive impact on wholesale power and capacity prices will continue to be moderated by the system's substantial overcapacity, especially in the Urals, where two of Enel Russia's plants are located. In the first half of 2017, Enel Russia grew EBITDA by more than 40% to RUB 8.7 billion, reflecting the combination of contractually higher capacity revenues, and lower costs. Moody's considers the group is well positioned to achieve its RUB15.8 billion EBITDA target for the year, extending its recovery in 2016 when it generated EBITDA of RUB 13.9 billion. Although net debt rose a little in the period to RUB 21.3 billion at end-June, Moody's estimates that 2017 funds from operations (FFO)/debt should nevertheless be in the mid-30s in percentage terms, compared with 39.7% in 2016. The Ba3 rating takes account of the uncertainty around the current sale process of Reftinskaya, its 3.8GW coal plant located in the Urals. It is currently unclear whether a sale will materialize and at what price. Although a sale would reduce the company's installed capacity by 40%, the rating affirmation reflects Moody's expectation that any sale proceeds will be allocated in such a way as to maintain the company's solid financial profile. Moody's also factors in the planned construction of 291 GW of wind capacity at Azov and Murmansk over 2018-21, at an estimated cost of EUR405 million, which implies additional execution risk, although this should be mitigated by its association with Enel Green Power S.p.A., a fellow subsidiary of Enel S.p.A. (Enel Baa2 stable). Enel Russia's Ba3 rating takes account of: (1) the company's improving operational performance, and solid financial profile; and (2) the operational support and access to liquidity it derives from its position in the Enel Group. At the same time, the rating factors in: (1) the small size of the company; (2) the risks associated with operating in a power market characterized by overcapacity and exposed to political intervention; (3) uncertainty around the Reftinskaya sale outcome; and (4) the execution risk implied by the future investment in renewables. The stable outlook reflects Moody's expectation that the company (1) will allocate any potential proceeds from the sale of Reftinskaya such as to maintain a broadly unchanged capital structure; and (2) maintain a financial profile which is consistent with guidance for the Ba3 rating, including FFO/debt comfortably above 30%. WHAT COULD MOVE THE RATING UP/DOWN A rating upgrade is unlikely in the next 12-18 months, pending resolution of the Reftinskaya sale process, and greater clarity over the planned wind farm construction. The rating could be downgraded if the company's financial profile was to weaken such that FFO/debt declined below 30% on a sustainable basis - whether because of: (1) a deterioration in the operating environment resulting from a reversal in Russia's improving growth trajectory; (2) a negative shift in the developing regulatory and market framework; (3) a substantial dividend distribution; or (4) a weakening liquidity position. The principal methodology used in these ratings was Unregulated Utilities and Unregulated Power Companies published in May 2017. Enel Russia, PJSC is a wholesale thermal power generation business in Russia, with installed capacity of 9.4GW. In the half year to June 2017, the company reported consolidated revenues of RUB 34.8 billion and EBITDA of RUB 8.7 billion. OTKRITIE BANK: To Repay Central Bank Debt Via Interbank Borrowing ----------------------------------------------------------------- Elena Fabrichnaya at Reuters reports that the Russian Central Bank said on Sept. 22 it expected troubled lender Otkritie to pay back the debt it owed to the regulator by borrowing on the interbank market. According to Reuters, the central bank said in a monthly report on banking sector liquidity Otkritie owed the central bank RUR1 trillion (US$17.38 billion) as of the end of August. The report said the lender borrowed two thirds of the money through repurchase agreement operations -- known as repo -- with the central bank, Reuters relates. The central bank, as cited by Reuters, said Otkritie had to borrow via repo after it suffered an outflow of clients' deposits and struggled to borrow on the interbank market after a rating downgrade. Otkritie is one of Russia's largest private listed banks. ============= U K R A I N E ============= UKRGAZ-ENERGO: Court Opens Bankruptcy Case Over UAH580.6MM Debt --------------------------------------------------------------- Interfax-Ukraine reports that Kyiv's business court on Sept. 6 opened a bankruptcy case against private joint-stock company UkrGaz-Energo. According to Interfax-Ukraine, the case was opened under a claim of public joint-stock company Ukrtransgaz seeking to collect UAH580.561 million from UkrGaz-Energo. The court prohibited distributions to creditors and appointed arbitration manager Andriy Priadko UkrGaz-Energo's property manager, Interfax-Ukraine discloses. UkrGaz-Energo was created in February 2006 pursuant to the Russian-Ukrainian agreements on the organization of a new scheme of gas supplies to Ukraine achieved in Moscow on January 4, 2006, Interfax-Ukraine recounts. UkrGaz-Energo is based in Kyiv, Ukraine. =========================== U N I T E D K I N G D O M =========================== HBOS PLC: Ex-Directors to Face Court Questioning Over Rescue Deal ----------------------------------------------------------------- Iain Withers at The Telegraph reports that the former finance chief of Lloyds Bank, Tim Tookey, is expected to face the longest grilling of five former directors in a High Court case over the group's deal to rescue Halifax Bank of Scotland (HBOS) at the height of the financial crisis. Around 6,000 shareholders are suing Lloyds and key ex-bosses -- including former chief executive Eric Daniels and former chairman Sir Victor Blank -- for more than GBP600 million in compensation as they believe Lloyds misled them by not disclosing the parlous state of HBOS before its 2008 takeover, The Telegraph discloses. The total sum being claimed is higher than previously thought, having grown as expert testimony gathered by the claimants indicated greater alleged losses than the figure of around GBP400 million previously thought, The Telegraph notes. The case is scheduled to kick off in early October, although it could be delayed due to a recent change of judge, The Telegraph states. The claimants include 5,700 private shareholders and more than 300 institutional investors represented by law firm Harcus Sinclair UK, The Telegraph discloses. The case is listed for 14 weeks, The Telegraph says. According to a draft timetable for the case, seen by The Telegraph, Mr. Tookey will be cross-examined for up to six days. He was CFO of Lloyds from 2008 to 2012 and is currently finance boss of Old Mutual Wealth, The Telegraph relays. It is understood Mr. Tookey is set to face the most intense questioning as he oversaw the financials of the HBOS deal, according to The Telegraph. Mr. Daniels and Sir Victor are each expected to be questioned for up to four days and two days respectively, The Telegraph states. Mr. Daniels -- who has defended the HBOS deal down the years for "not costing the taxpayer a bomb" in more bailouts -- has held a number of top roles since leaving Lloyds in 2011, including at StormHarbour, CVC Capital Partners and Russell Reynolds, The Telegraph discloses. The claimants' arguments are expected to focus on whether the HBOS tie-up was in the best interests of shareholders, and whether documents issued to investors in support of the deal were misleading, The Telegraph states. Lloyds in its defence is expected to argue disclosure went beyond what was required and, even if it was deficient, would not have changed the vote, which went 95% in favor, The Telegraph notes. The claimants held less than 5% of Lloyds shares at the time, The Telegraph recounts. ********* 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 * * *