/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/171103.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 Friday, November 3, 2017, Vol. 18, No. 219 Headlines C R O A T I A AGROKOR DD: Serbia Sets Up Team to Monitor Impact of Collapse C Z E C H R E P U B L I C RESIDOMO S R O: S&P Assigns 'BB-' CCR, Outlook Stable G E R M A N Y AIR BERLIN: Germany Expects EUR150MM Loan to Be Repaid in Full G R E E C E * GREECE: Mulls EUR29.7-Bil Debt Swap to Boost Bond Liquidity I T A L Y CARTASI SPA: S&P Affirms BB- Counterparty Credit Rating LAZIO: Moody's Assigns Ba2 Issuer Rating, Outlook Stable K A Z A K H S T A N KASPI BANK: Moody's Affirms B1 Long-Term Deposit Ratings L U X E M B O U R G INVESTCORP SA: Fitch Affirms B Short-Term IDR, Outlook Positive N E T H E R L A N D S CONSTELLIUM NV: Moody's Affirms B3 CFR, Outlook Stable CREDIT EUROPE: Fitch Puts BB- IDR on Rating Watch Positive VIVAT NV: Fitch Rates Subordinated Notes BB(EXP) P O R T U G A L DOURO MORTGAGES NO.1: Fitch Puts BB+ Note Rating on Watch Neg. DOURO MORTGAGES NO. 1: S&P Affirms BB+ Rating on Class B Notes R U S S I A ALFA-BANK: Moody's Hikes LT Deposit Rating to Ba1, Outlook Stable PROMTRAKTOR OAO: EGM to Discuss Bankruptcy Application S P A I N GAS NATURAL: Fitch Hikes Rating on EUR110MM Pref. Shares to BB+ GENERALITAT DE CATALUNYA: Moody's Affirms Ba3 Debt Ratings S W E D E N SSAB AB: S&P Raises CCR to 'BB-' on Strengthened Credit Metrics U K R A I N E CB PRIVATBANK: Fitch Raises Long-Term IDR to B-, Outlook Stable U N I T E D K I N G D O M IRON MOUNTAIN: Moody's Rates GBP400MM New Senior Notes Ba3 RANGERS FOOTBALL: Oldco Creditors to Get Less Than 4 Pence RESIDENTIAL SEC 05-2: S&P Affirms B- Rating on Class E1c Notes UNIQUE PUB: Fitch Affirms B+ Rating on Class M Notes * UK: Number of Firms in "Significant Distress" Soars in 2016 * David Manson to Join Paul Hastings' London Office X X X X X X X X * EMEA Cos. at Highest Default Risk Continue to Fall in Q3 2017 * BOOK REVIEW: Oil Business in Latin America: The Early Years ********* ============= C R O A T I A ============= AGROKOR DD: Serbia Sets Up Team to Monitor Impact of Collapse ------------------------------------------------------------- Misha Savic and Gordana Filipovic at Bloomberg News report that Serbian Premier Ana Brnabic will chair a special team comprising ministers of justice, trade, finance, economy, agriculture, and central bank governor, to monitor and analyze market impact of Croatia's Agrokor and its units in Serbia. According to Bloomberg, the team seeks to prevent "possible damaging consequences on the Serbian market". About Agrokor DD Founded in 1976 and based in Zagreb, Crotia, Agrokor DD is the biggest food producer and retailer in the Balkans, employing almost 60,000 people across the region with annual revenue of some HRK50 billion (US$7 billion). On April 10, 2017, the Zagreb Commercial Court allowed the initiation of the procedure for extraordinary administration over Agrokor and some of its affiliated or subsidiary companies. This comes on the heels of an April 7, 2017 proposal submitted by the management board of Agrokor Group for the administration proceedings for the Company pursuant to the Law of Extraordinary Administration for Companies with Systemic Importance for the Republic of Croatia. Mr. Ante Ramljak was simultaneously appointed extraordinary commissioner/trustee for Agrokor on April 10. In May 2017, Agrokor dd, in close cooperation with its advisors, established that as of March 31, 2017, it had total liabilities of HRK40.409 billion. The company racked up debts during a rapid expansion, notably in Croatia, Slovenia, Bosnia and Serbia, a Reuters report noted. On June 2, 2017, Moody's Investors Service downgraded Agrokor D.D.'s corporate family rating (CFR) to Ca from Caa2 and the probability of default rating (PDR) to D-PD from Ca-PD. The outlook on the company's ratings remains negative. Moody's also downgraded the senior unsecured rating assigned to the notes issued by Agrokor due in 2019 and 2020 to C from Caa2. The rating actions reflect Agrokor's decision not to pay the coupon scheduled on May 1, 2017 on its EUR300 million notes due May 2019 at the end of the 30-day grace period. It also factors in Moody's understanding that the company is not paying interest on any of the debt in place prior to Agrokor's decision in April 2017 to file for restructuring under Croatia's law for the Extraordinary Administration for Companies with Systemic Importance. On June 8, 2017, Agrokor's Agrarian Administration signed an agreement on a financial arrangement agreement worth EUR480 million, including EUR80 million of loans granted to Agrokor by domestic banks in April. In addition to this amount, additional buffers are also provided with additional EUR50 million of potential refinancing credit. The total loan arrangement amounts to EUR1,060 million, of which a new debt totaling EUR530 million and the remainder is intended to refinance old debt. =========================== C Z E C H R E P U B L I C =========================== RESIDOMO S R O: S&P Assigns 'BB-' CCR, Outlook Stable ----------------------------------------------------- S&P Global Ratings assigned its 'BB-' long-term corporate credit rating to Czech property investment company RESIDOMO s.r.o. The outlook is stable. S&P also assigned a 'BB-' issue rating to the EUR680 million senior secured notes. The rating reflects RESIDOMO's limited portfolio size, average asset quality, geographic concentration, and relatively substantial leverage. These factors are somewhat offset by RESIDOMO being one of the largest residential property companies in Central and Eastern Europe, its resilient presence in a fragmented market, stable operating margins, and improving occupancy rates. RESIDOMO's financial risk profile is underpinned by stable recurring cash flows and sound EBITDA interest coverage, but offset by relatively high adjusted debt. After the refinancing transactions, the company's EBITDA interest coverage ratio will likely exceed 2.0x in 2018-2019, much improved from the 1.3x reported at year-end 2016 and a key rating factor. Additionally, after Czech koruna (CZK) 4.65 billion (EUR178 million) of the shareholder loan was repaid by the proceeds of the new bond, S&P classified the remaining CZK1.4 billion (EUR53 million) shareholder loan as equity and therefore exclude it from our leverage ratio calculations. S&P said, "We believe RESIDOMO's ultimate shareholders, Blackstone and Round Hill Capital, which we consider financial sponsors, are committed to the company and have no plans for divestment or dividends in the medium term. Their financial policy targets a loan-to-value (LTV) ratio of about 55% in two to three years and EBITDA interest coverage comfortably above 2.0x at all times. "Our base-case assumptions for RESIDOMO have not changed materially since we assigned the preliminary corporate credit rating. We continue to expect moderate revenue growth of about 2.8%-3.0% reflecting increasing rents for pre-liberalization units and positive indexations for others, a gradual decline in the percentage of pre-liberalization units, and stable macroeconomic trends. We anticipate relative stable EBITDA margins and capex of about CZK620 million in 2017 and CZK500 million in 2018. "Leverage is high, with adjusted debt-to-debt plus equity expected at 75% post-transaction, improving to only about 70% over the next 12-18 months. However, we expect the LTV ratio will strengthen to slightly below 60% from 60%-62% over that period. The discrepancy between the two ratios mainly relates to CZK4.7 billion of deferred tax liabilities linked to a onetime revaluation of properties on conversion from Czech generally accepted accounting principles to International Financial Reporting Standards in 2011. "The stable outlook incorporates our expectation of increasing revenues from the residential property portfolio, improving occupancy rates, and stable operating performance. These positive factors stem from healthy macroeconomic trends and RESIDOMO's efforts to reduce the share of previously regulated apartments to about 30% of the portfolio in the next two-to-three years, from 42.8% as of June 30, 2017. We believe RESIDOMO should be able to maintain EBITDA interest coverage ratios higher than 1.8x and a debt-to-debt plus equity ratio of about 70% (excluding deferred tax liabilities). We expect an LTV of 60%-62% at the transaction's close, gradually improving to slightly below 60% over the next 12-18 months." An upgrade would depend on RESIDOMO's ability to reduce leverage and bring debt to debt plus equity (excluding deferred tax liabilities) to about 65%, representing an LTV ratio of approximately 55%, with EBITDA interest coverage ratios staying comfortably above 2.0x. S&P said, "We could lower the rating if we see a prolonged decline in operating stability, for example due to decreasing occupancy rates or an inability to reduce the share of pre- deregulation rents. We would also consider a downgrade if RESIDOMO's EBITDA interest coverage stayed below 1.3x and debt to debt plus equity (excluding deferred tax liabilities) did not decrease to about 70% or the LTV ratio to about 60%." ============= G E R M A N Y ============= AIR BERLIN: Germany Expects EUR150MM Loan to Be Repaid in Full -------------------------------------------------------------- Alexander Huebner and Gernot Heller at Reuters report that the German government has said it still expects the EUR150 million (US$175 million) loan granted to Air Berlin to be repaid in full, after a court opened formal insolvency proceedings against the carrier on Nov. 1. The loan granted in August had kept Air Berlin planes in the air while administrators held talks with prospective buyers of the airline's assets, Reuters recounts. "The loan of EUR150 million will be repaid from the proceeds of asset sales," Reuters quotes a spokeswoman for the economy ministry as saying on Nov. 2. According to Reuters, following the formal opening of the insolvency proceedings on Nov. 1, Air Berlin quoted its administrator as saying its assets were not expected to be sufficient to satisfy the "existing priority claims" beyond the costs for the insolvency proceedings. But a person familiar with the matter said the government loan was secured against the expected proceeds from the asset sales, meaning it would be repaid first, Reuters relates. 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. =========== G R E E C E =========== * GREECE: Mulls EUR29.7-Bil Debt Swap to Boost Bond Liquidity ------------------------------------------------------------- Sotiris Nikas and Christos Ziotis at Bloomberg News report that the Greek government is planning an unprecedented debt swap worth EUR29.7 billion (US$34.5 billion) aimed at boosting the liquidity of its paper and easing the sale of new bonds in the future. Under a project that could be launched in mid November, the government plans to swap 20 bonds issued after a restructuring of Greek debt held by private investors in 2012 with as many as five new fixed-coupon bonds, Bloomberg relays, citing two senior bankers with knowledge of the swap plan. The maturities of the new bonds may be the same as for the existing notes, which range from 2023 to 2042, Bloomberg states. "The move aims to address the current illiquidity of the Greek bond market," Bloomberg quotes analysts at Pantelakis Securities SA in Athens as saying. It will also "establish a decent yield curve, thus facilitating the country's return to public debt markets." The move comes as Greece prepares for life after the end of its current bailout program in August 2018, Bloomberg notes. The debt swap is a step toward the country's full return to markets required to avoid a new bailout program, Bloomberg discloses. According to Bloomberg, a government official said Greece plans to tap the bond market in 2018 to raise at least EUR6 billion to create an adequate buffer to honor debt obligations. ========= I T A L Y ========= CARTASI SPA: S&P Affirms BB- Counterparty Credit Rating ------------------------------------------------------- S&P Global Ratings said that it took the following rating actions: -- Raised the long-term and short-term issuer credit ratings to 'BBB/A-2' from 'BBB-/A-3' on Intesa Sanpaolo SpA (Intesa Sanpaolo) and its core subsidiaries Banca IMI SpA (Banca IMI) and Fideuram-Intesa Sanpaolo Private Banking SpA (Fideuram- ISPB), Mediobanca SpA (Mediobanca), Banca Nazionale del Lavoro SpA (BNL), and Dexia Crediop SpA (Dexia Crediop). The outlooks are stable. -- Raised the long-term and short-term issuer credit ratings to 'BBB/A-2' from 'BBB-/A-3' on UniCredit SpA (UniCredit) and its core subsidiary UniCredit Leasing (UCL). The outlook on UniCredit is stable, while that on UCL is negative. -- Raised the long-term and short-term issuer credit ratings on FCA Bank SpA (FCA Bank) to 'BBB/A-2' from 'BBB-/A-3'. The outlook is stable. -- Raised the long-term and short-term counterparty credit rating on the government-related entity (GRE) MedioCredito Centrale (MedioCredito) to 'BBB-/A-3' from 'BB/B', and removed it from CreditWatch with developing implications. The outlook is stable. -- Raised the long-term issuer credit rating on Banca Popolare dell'Alto Adige - Volksbank SpA(BPAA) to 'BB+' from 'BB' and affirmed the 'B' short-term rating. The outlook is stable. -- Raised the long-term issuer credit rating on The Bank Of New York Mellon S.A./N.V. (Italian Branch) to 'A+' from 'A' and affirmed the 'A-1' short-term rating. The outlook is stable. -- Affirmed the 'BBB-/A-3' long- and short-term issuer credit ratings on Credito Emiliano SpA (Credem), UBI Banca SpA (UBI), and GRE Istituto per il Credito Sportivo (ICS), with a stable outlook. -- Affirmed the 'BB/B' long- and short-term issuer credit ratings on Iccrea Banca SpA (IB) and its core subsidiary Iccrea BancaImpresa SpA (IBI). The outlook is stable. -- Affirmed the 'BB-/B' long- and short-term issuer credit ratings on Istituto Centrale delle Banche Popolari Italiane (ICBPI) with stable outlook. S&P also affirmed its 'B/B' long- and short-term ratings on its non-operating holding company (NOHC) Mercury BondCo PLC and maintained the negative outlook. S&P said, "The positive rating actions mostly reflect the Republic of Italy's enhanced creditworthiness and our view that Italian banks now face lower economic risks. (See "Italy Upgraded To 'BBB/A-2' On Firming Economic Recovery; Outlook Stable," published Oct. 27, 2017, on RatingsDirect.) "We expect the economic recovery in Italy, which started in 2015, will gather momentum, with cumulative GDP growth of about 4% a year in 2017-2019. This will be supported by rising investment and steady employment growth as well as by an expansionary monetary policy. This will also reinforce the recovery of private sector creditworthiness in the coming quarters, particularly that of domestic corporations, in our view. More favorable economic conditions could also support Italian banks' ongoing efforts to reduce their large stock of nonperforming exposures (NPEs; defined as the sum of bad loans, unlikely to pay and past due loans over 90 days), accumulated during the recession that occurred between 2008 and 2015. "We expect that the amount of NPEs will gradually decrease to around 13%-14% in 2019 versus the 18.7% we estimate as of June 2017, also benefiting from the banks' plans to sell of portion of those problematic assets. Our NPE forecast assumes up to EUR90 billion-EUR100 billion sales of NPEs (around one-third of the existing stock) in 2017-2019, and that the new inflows will remain manageable, in line with what we observed in the past 12 months. "Despite the above-mentioned improvements, we think Italian banks still face higher economic risks than most peers. This is because the high NPE stock will weigh on banks' balance sheets and profitability for a few years. It could also represent a tail risk for banks if economic conditions were to deteriorate again. Moreover, the substantial amount of time needed for creditors in Italy to recover collateral and settle lawsuits--due to the less effective insolvency and foreclosure procedures and judicial system--is likely to remain an obstacle to a more material reduction of the stock than we currently envisage. "We also expect Italian banks' profitability to moderately improve over the next couple years, driven by lower loan loss provisions and operating expenses. However, a few factors will continue to impede most banks from reaching satisfactory returns, in line with the cost of capital. Firstly, low interest rates and a fairly competitive operating environment will likely constrain banks' net interest income at their currently modest levels despite some credit expansion and the positive effect of the European Central Bank's (ECB) TLTRO II on the banks' cost of funding. Secondly, credit losses will continue to absorb a larger portion of Italian banks' earnings than for most international peers. We anticipate credit losses will gradually decrease to around 100 basis points (bps) on customer loans in 2017 and to 80bps in the following two years compared with an average of 200bps in 2016. Thirdly, operating expenses are still too high, in our opinion, particularly compared with the banks' revenues, with an average cost to income ratio still exceeding 60%. This also reflects some fragmentation in the banking sector and the lack of economies of scale for several institutions. We expect Italian banks' average cost-to-income ratio to decrease below 60% in 2019, although remaining above that of comparable banking sectors in Europe. "As a result of lower economic risks, we have revised upward our anchor -- the starting point for assigning issuer credit ratings to banks operating in Italy -- to 'bbb-' from 'bb+'. For geographically diversified institutions such as Unicredit SpA and FCA Bank SpA, we have revised the anchor to 'bbb' from 'bbb-'. "Improved economic risk in Italy also results in lower unexpected losses in a stress scenario. This leads us to apply lower weightings to Italian exposures in our risk-adjusted capital (RAC) calculation. For instance, the risk weighting that we apply for corporations in Italy -- representing the largest chunk of Italian bank exposures -- has reduced to 121% from 142%. Given the banks' large holding on Italian government bonds, our capital ratios for Italian banks also benefit from the sovereign enhanced creditworthiness. "Therefore, to reflect these positive developments, we have revised upward the forecast on RAC of all the Italian banks we rate, with an average impact of about 70bps, supporting our assessment on the solvency for all the institutions. "The capital strengthening contributed to our upgrade of UniCredit. We now expect UniCredit's RAC ratio to sustainably exceed 7% in 2019, also benefiting from increasing internal capital generation. In addition, we anticipate UniCredit will continue to make progress in the workout of its large legacy large stock of NPEs in Italy. Compared with other large diversified international peers, however, UniCredit is likely to show weaker asset quality metrics over the next two years, in our opinion. "Our upgrade of Mediobanca, BNL, Dexia Crediop, Intesa Sanpaolo, and its core subsidiaries, Banca IMI and Fideuram-ISPB, chiefly reflects the upgrade of Italy, given that the ratings on the banks were capped at the sovereign rating level. "Our upgrade of FCA Bank reflects our view that the more supportive economic environment enhances the bank's creditworthiness. In addition, we factor in our view of stronger integration within Credit Agricole SA group (CASA). "For BPAA, the upgrade reflects our view that a more supportive economy will facilitate the improvement of BPAA's asset quality, which we already captured in our positive outlook in our previous review. In particular, the stronger economy will likely accelerate the workout of BPAA's legacy NPE portfolio. We are therefore factoring into our rating that BPAA's asset quality will remain better than most domestic peers' in the next couple of years. "Unlike the other upgrades, the action on MedioCredito primarily reflects our view that the government will most likely provide the bank with extraordinary support in case of need, following the completion of the acquisition by Invitalia, a government- related agency whose mission is ultimately to support the development and increase the competitiveness of the country, particularly of the Southern Italian regions. Therefore, we now anticipate that MedioCredito will steadily increase its focus toward small and midsize enterprises and develop solid synergies with Invitalia. This is in order to intensify the funding to the south of Italy either in the form of direct lending and higher usage of guarantee and government incentives. "We now see higher alignment between the government's mission and MedioCredito's strategic focus. At the same time, we think that the bank's funding profile is constrained by its material reliance on short- and medium-term interbank funding sources, with an average maturity of 18 months. This exposes the bank to some refinancing risks at stand-alone basis, in our view. "The affirmation of the ratings on ICS mainly reflects our view of the bank' sound capital position, evidenced by a RAC ratio of 48% at end-2016, which we expect to remain at the current high level over the next two years. We consider, however, that ICS' asset quality is weaker than that of higher-rated domestic peers due to its large stock of NPEs and the significant single-name concentration in its loan book. "Our upgrade of The Bank Of New York Mellon S.A./N.V. (Italian Branch) follows the same action on Italy and the core integration of The Bank Of New York Mellon S.A./N.V. (AA-/Stable/A-1+) in its group. For most Italian banks, the outlooks are stable. UniCredit SpA S&P said, "The stable outlook reflects our expectation that UniCredit Group will be able to preserve its solvency, maintaining its RAC ratio comfortably above 7% in 2019. We also factor in our view that UniCredit will be able to achieve its business plan target to reduce the gross NPE stock to around EUR44 billion in 2019 from an estimated EUR61 billion as of June 2016, maintain NPE coverage ratio above 52%, while preserving the good quality of the new loan production. The stable outlook also mirrors that on Italy as we are unlikely to rate the bank above the sovereign. This is because we consider that, in the event of a sovereign default in Italy, UniCredit would be unlikely to pass the sovereign stress test scenario given the bank's substantial Italian exposure. "We could consider a positive rating action if we upgraded Italy and assessed that the bank's stand-alone credit profile (SACP) had improved. More specifically, we could take this action if we concluded that Unicredit would be able to (i) reduce its stock of NPEs to a level close to higher rated large diversified international peers; and (ii)improve its profitability to a level comparable to peers with recurring return on equity (ROE) sustainably above 9% in 2019, while preserving its solvency. "We could also consider an upgrade providing that we raised the rating on Italy, if we anticipated UniCredit were likely to issue enough additional loss-absorbing capacity (ALAC)-eligible instruments to reach a level in excess of 5% of the estimated S&P Global Ratings-adjusted risk-weighted assets over the next two- to-three years. "Conversely, a downgrade of Italy would most likely trigger a similar action on UniCredit. We could consider a downgrade if we anticipated that UniCredit would not be able to maintain its RAC above 7% and we perceived that its asset quality were not improving in line with our expectations over the next two years." UNICREDIT LEASING S&P said, "The negative outlook takes into account that we could lower the rating on UCL by one or more notches in the next 18-24 months if we considered that its core strategic importance to the UniCredit group had declined, and if the parent company's commitment to support its subsidiary in case of need were likely to diminish. Specifically, if UniCredit finally decided to dispose of a significant portion of its ownership stake in its leasing subsidiary, we could lower the ratings by more than one notch. "We could revise the outlook to stable if we believed that UCL would remain within the perimeter of the group and UniCredit would remain likely to provide extraordinary and ongoing support to UCL under any circumstances, if needed." INTESA SANPAOLO/BANCA IMI S&P said, "The stable outlook on Intesa Sanpaolo and its core subsidiary Banca IMI, reflects our expectations that Intesa's leading market position in Italy in commercial banking and wealth management, well-diversified revenue sources, strong efficiency, and prudent management will continue to support the bank's outperformance to other domestic banks. "We could raise the ratings on Intesa Sanpaolo if we raised our long-term sovereign ratings on Italy and if, at the same time, we anticipated that either (i) our solvency measure--the forecast RAC ratio of Intesa were likely to increase above 7% in the following two years or (ii) Intesa were able to issue more ALAC- eligible instruments than we currently anticipate, thus resulting in the bank reaching an ALAC buffer above 5% of the estimated S&P Global Ratings-adjusted risk-weighted assets. "As we do not envisage any significant pressure on Intesa's SACP at this stage, we could lower the ratings on Intesa if we lowered the long-term rating on Italy as we believe it is unlikely that the bank will continue to fulfil its obligations in a timely manner in the event of an Italian sovereign default, given its domestic concentration." FIDEURAM-INTESA SANPAOLO PRIVATE BANKING The stable outlook on Fideuram ISPB mirrors that on its parent, Intesa Sanpaolo, and on S&P's long-term rating on Italy. As Fideuram ISPB is a core entity within the group, a rating action on Intesa Sanpaolo (either positive or negative) would trigger a similar rating action on Fideuram ISPB. MEDIOBANCA S&P said, "The stable outlook reflects our expectation that Mediobanca's asset quality will continue to outperform the Italian financial system average, in line with its track record, while preserving its sound capitalization in the next 24 months. We expect its RAC ratio to remain around 8% over the same period. "We could raise the rating on Mediobanca if we raised the ratings on Italy and, at the same time, we considered that Mediobanca's capitalization materially strengthened, leading our measure of the bank's RAC ratio to increase above 10%; or if Italian operating environment improved, ultimately resulting in a strengthening of bank's creditworthiness and, therefore, leading to a higher anchor for the bank. "We could lower the ratings if we lowered our rating on Italy, as we believe it is unlikely that Mediobanca will continue to fulfil its obligations in a timely manner in the event of an Italian sovereign default, given its domestic concentration. Although appears unlikely at this stage, we could also lower the ratings on Mediobanca if we anticipated that the bank's superior asset quality had deteriorated or if we anticipated that it could not maintain its RAC ratio sustainably above 7%, most likely due to material expansion of the bank's business not sustained by internal capital generation. UBI BANCA S&P said, "Our outlook on UBI is stable. This reflects our expectation that the bank will be able to improve its RAC ratio before adjustments to 5.5%-6.0% over the next two years thanks to increasing internal capital generation. It also reflects our view that UBI's NPE ratio will gradually decline, remaining slightly below the domestic average in the next 24 months. "We could raise the ratings on UBI if the bank accelerated its NPE reduction and its NPE coverage converged more closely with international standards without affecting its capital position. This could occur if its net NPEs to total-adjusted capital converged toward 50%-40%, compared with 110% as of June 2017, more in line with what we expect for higher rated peers. "Although unlikely at this stage, we would downgrade UBI if we saw its combined capital and risk profile worsening. This could be due to unanticipated risks emerging from the three acquired banks, leading UBI's financial profile to deteriorate and its RAC ratio to decrease below 5%." ICCREA S&P said, "The stable outlook on IB and its core subsidiary IBI reflects our view that after the consolidation of 154 local cooperative banks (Banche di Credito Cooperativo; BCCs), the resulting group would be able to maintain a strong liquidity position, limited reliance on wholesale funding, and maintain a RAC ratio sustainably above 5%, while preserving their solid market position in the next 12 months. "An upgrade could follow a strengthening of the group's combined solvency and risk profiles. For example, this could happen if we expected the RAC ratio to increase comfortably above 7% or the asset quality to improve to a level more akin to the rest of the domestic sector. In addition, as a result of the sector reform, we would also need to observe the following in the new group: Significant tightening of the relationship between individual BCCs and the holding companies, with effective risk-sharing system among members; Better efficiency; and Improved corporate governance, enabling the central body and the BCCs to operate as a single group in the market. We could lower the ratings on IB if, following the BCCs integration, the group's capitalization declined over the next 12 months, leading to a RAC ratio below 5.0%, without a material improvement in asset quality. Similarly, this could happen if the group's funding and liquidity profile deteriorated to the level of domestic peers, or if the group failed to agree on a joint strategy that enabled strong risk governance and reaping of cost synergies." FCA BANK S&P said, "The stable outlook mirrors that on Italy. As we consider FCA Bank to be a strategically important subsidiary for CASA--its 50% owner--uplift for group support for these types of entities under our criteria cannot lead to the subsidiary being rated above its sovereign. This is because we think that potential extraordinary support from CASA could not extend to a level sufficient to allow FCA Bank to withstand a stress scenario associated with a hypothetical sovereign default. We anticipate that FCA Bank will likely maintain strong capitalization as indicated by its RAC ratio at about 10.6% at end-2016, as we expect that the bank's internal capital generation to be sufficient to sustain growth. "We could upgrade FCA Bank in the next 12-24 months if we upgraded Italy and if, at the same time, we perceived a stronger creditworthiness of the owner of the remaining 50%--Fiat Chrysler Automobiles--indicating diminishing downside risks for FCA Bank's business profile and reputation. "We could lower the ratings if we lowered the rating on Italy or, although not our base case, if we anticipated that extraordinary support from CASA would materially diminish." CREDEM S&P said, "The stable outlook on Credem reflects our opinion that the bank's superior asset quality and resilient profitability will allow it to preserve its solvency position in the next 24 months. We anticipate that Credem's profitability will continue to benefit from lower credit losses than those of its peers. We forecast that the bank's retained earnings will likely allow it to maintain capitalization in line with our current assessment and our RAC ratio of 5.5%-6.0% by end-2019. "We could consider an upgrade if we anticipated that the bank's RAC ratio had improved above the 7% threshold due to higher-than- expected internal capital generation. We could also upgrade Credem if the bank succeeded in improving its recurring ROE sustainably above 9% over the next two years, while continuing to maintain much better asset quality metrics than Italian banks' average. "We could lower the ratings on Credem if we anticipated that the bank's RAC ratio would not remain sustainably above 5.0% in the next 24 months due to higher-than-expected credit growth or insufficient organic capital generation. BNL S&P said, "The stable outlook on BNL mirrors that on Italy and reflects our view that BNL will maintain its core status within the French banking group BNP Paribas. "Our ratings on BNL are constrained by the rating on its country of domicile. "We would therefore expect any positive or negative rating action on the long-term sovereign credit rating on Italy to result in a similar action on the ratings on BNL." DEXIA CREDIOP The stable outlook on Dexia Crediop mirrors that on its parent company Dexia Credit Local. Because the ratings on Dexia Crediop are aligned with those on its parent, a positive rating action on Dexia Crediop would hinge on an upgrade of its parent and, at the same time, a similar rating action on the sovereign rating on Italy. S&P said, "Conversely, we could downgrade our ratings on Dexia Crediop if we took a negative action either on its parent or on Italy. ICS S&P said, "The stable outlook on ICS factors in our view that the bank will preserve its very strong capital base over the next 24 months on the back of contained loan growth and stable organic capital generation. "We could consider raising the ratings if we observed a reduction in ICS's NPE ratio, which was at around 19.5% as of year-end 2016, to level comparable with the domestic average, which we estimate at around 13% by end-2019. In addition to the NPE reduction, a positive action would also stem from the bank's ability to materially diminish the existing single-name concentration in its loan book, while other factors underlying the bank's creditworthiness remain unchanged. Although we do not envisage any significant downward pressure on ICS's SACP at this stage, we might consider a downgrade if its funding and liquidity profiles weakened." BANCA POPOLARE DELL'ALTO ADIGE-VOLKSBANK S&P said, "The stable outlook reflects our expectation that BPAA will be able to maintain a better asset quality than the Italian system average while preserving its capitalization. Specifically, we expect BPAA's NPE ratio will decrease below 10% in 2019 compared with around 15% as of June 2016, and its RAC will stay comfortably above 5% over the next 12 months. "We could lower the rating if we anticipated that BPAA's asset quality is unlikely to progress in line with our expectations, to a point that we no longer consider it as better than domestic peers. "We could raise the ratings on BPAA if the bank built up sufficient capital to increase its RAC ratio in 2019 above 7.0% from 5.9%, while keeping all the drivers of its creditworthiness unchanged." ISTITUTO CENTRALE DELLE BANCHE POPOLARI AND MERCURY BONDCO. S&P said, "Centrale delle Banche Popolari Italiane SpA (ICBPI), and its core subsidiary CartaSi SpA, mainly reflects our view that the ratings already incorporate most of the risks we see for ICBPI's performance over the next 12 months. "In particular, it factors in our expectations that ICBPI's RAC ratio will sustainably remain above 5% in 2018 and that the regulator will eventually prevent excessive dividend distribution to the NOHC, Mercury BondCo PLC. "We could consider upgrading ICBPI if we anticipated that the double leverage at the holding company level--calculated as the overall investment in subsidiaries as a percentage of the group's equity value--would materially diminish, or if we expected ICBPI to increase its RAC ratio sustainably above 7% over the next two years. "Consequently, we could lower the ratings on ICBPI if we expected ICBPI's solvency to significantly deteriorate, and its projected RAC ratio to fall below 5%. "The negative outlook on Mercury BondCo reflects our view that we could lower the rating on Mercury BondCo over the next 12 months if we no longer expected the double leverage to decrease by around 220% from the estimated current 240% in the coming years. This could occur if the flow of dividends from subsidiaries was lower than expected or if the group made additional acquisitions that were mainly financed through new debt. In this case, we would most likely widen the notching differential between the group credit profile and our rating on Mercury BondCo. "We might revise the outlook on Mercury BondCo to stable if we were more confident that its double leverage would gradually contract in line with our expectations, and the outlook on ICBPI remained stable. MEDIOCREDITO S&P said, "The stable outlook reflects our expectation that the Italian government will provide Mediocredito with extraordinary support, if needed, and the bank's capitalization will remain sound. Specifically, we expect that internal capital generation will be sufficient to maintain its RAC ratio above 10% in the next 12-24 months from 15.9% at end-2016, despite the capital reduction of EUR160 million embedded in the acquisition agreement between Poste Italiane and Invitalia. "We could lower the ratings if we lowered our rating on Italy or if we anticipated that Mediocredito would not be able to preserve its current capitalization or if we perceived that the expected alignment between government mission and the bank strategy would not materialize. "Although unlikely at this stage, we could raise the rating on Mediocredito if we raised our rating on Italy and we saw significant reduction of concentration of the bank's loan book." THE BANK OF NEW YORK MELLON S.A./N.V. (ITALIAN BRANCH) The outlook on The Bank Of New York Mellon S.A./N.V. (Italian Branch) mirrors the outlook on Italy. Any action on S&P's foreign currency rating on the sovereign would translate into a rating action in the same direction on the Italian branch. BICRA SNAPSHOT ITALY To From Group: 5 6 Anchor: bbb- bb+ Economic risk: 6 7 Economic resilience: Intermediate Risk High Risk Economic Imbalance: High Risk High Risk Credit Risk in the economy:High Risk High Risk Industry Risk: 5 5 Institutional Framework: Intermediate Risk Intermediate Risk Competitive Dynamics: Intermediate Risk Intermediate Risk Systemwide Funding: High Risk High Risk BICRA--Banking industry country risk assessment. Ratings List Upgraded To From Banca Nazionale del Lavoro SpA Counterparty Credit Rating BBB/Stable/A-2 BBB-/Stable/A-3 Fideuram - Intesa Sanpaolo Private Banking SpA Banca IMI SpA Intesa Sanpaolo SpA Counterparty Credit Rating BBB/Stable/A-2 BBB-/Stable/A-3 Banca Popolare dell'Alto Adige Counterparty Credit Rating BB+/Stable/B BB/Positive/B Bank of New York Mellon S.A./N.V. (Italian Branch) Counterparty Credit Rating A+/Stable/A-1 A/Stable/A-1 Dexia Crediop SpA Counterparty Credit Rating BBB/Stable/A-2 BBB-/Stable/A-3 Senior Unsecured BBB BBB- FCA Bank SpA Counterparty Credit Rating BBB/Stable/A-2 BBB-/Stable/A-3 Senior Unsecured BBB BBB- Intesa Sanpaolo SpA Senior Unsecured BBB BBB- Senior Unsecured BBBp BBB-p Subordinated BB+ BB Junior Subordinated BB- B+ Junior Subordinated BB BB- Intesa Sanpaolo Bank Ireland PLC Senior Unsecured BBB BBB- Short-Term Debt A-2 A-3 Intesa Sanpaolo Bank Luxembourg S.A. Senior Unsecured BBB BBB- Short-Term Debt A-2 A-3 Mediobanca SpA Counterparty Credit Rating BBB/Stable/A-2 BBB-/Stable/A-3 Mediobanca SpA Senior Unsecured BBB BBB- Senior Unsecured BBBp BBB-p Subordinated BB+ BB MB Funding Lux S.A. Senior Secured BBB BBB- Mediobanca International (Luxembourg) S.A. Senior Unsecured BBB BBB- UniCredit Leasing SpA Counterparty Credit Rating BBB/Negative/A-2 BBB-/Negative/A-3 UniCredit SpA Counterparty Credit Rating BBB/Stable/A-2 BBB-/Stable/A-3 UniCredit SpA Senior Unsecured BBB BBB- Senior Unsecured BBBp BBB-p Subordinated BB+ BB Junior Subordinated BB- B+ Junior Subordinated BB BB- UniCredit Bank Ireland PLC Senior Unsecured BBB BBB- UniCredit Luxembourg Finance S.A. Subordinated BB+ BB UniCredito Italiano Capital Trust III Preferred Stock BB- B+ UniCredito Italiano Capital Trust IV Preferred Stock BB- B+ Unicredit International Bank (Luxembourg) S.A. Senior Unsecured BBB BBB- Junior Subordinated BB- B+ MedioCredito Centrale SpA Counterparty Credit Rating BBB-/Stable/A-3 BB/Watch Dev/B Ratings Affirmed UBI Banca SpA Counterparty Credit Rating BBB-/Stable/A-3 Senior Unsecured BBB- Subordinated BB Credito Emiliano SpA Counterparty Credit Rating BBB-/Stable/A-3 Iccrea Banca SpA Iccrea BancaImpresa SpA Counterparty Credit Rating BB/Stable/B Iccrea Banca SpA Senior Unsecured BB Subordinated B Istituto Centrale delle Banche Popolari Italiane SpA CartaSi SpA Counterparty Credit Rating BB-/Stable/B Mercury BondCo PLC Counterparty Credit Rating B/Negative/B Senior Secured B Istituto per il Credito Sportivo Counterparty Credit Rating BBB-/Stable/A-3 Note: Not all rating actions are included in the above. LAZIO: Moody's Assigns Ba2 Issuer Rating, Outlook Stable -------------------------------------------------------- Moody's Investors Service assigned issuer ratings of Ba2 to the Region of Lazio. The rating outlook is stable. The Region of Lazio's Ba2 issuer ratings reflect the region's large and wealthy economic base, its improved liquidity position and the current administration's commitment to fiscal consolidation. At the same time, the rating also accounts for its high level of indebtedness and weak budgetary flexibility. RATINGS RATIONALE The regional administration has a strong focus to fiscal consolidation and Moody's expects the financial consolidation trend to continue and to fully absorb the regional deficit by 2019. Indeed, the cumulated regional deficit has reduced by 72.6% to EUR3.4 billion (or 22% of operating revenues) in 2016 from EUR12.3 billion (or 93% of operating revenues) in 2012. In 2016 (pre-closed figures), Lazio has continued to reach the annual break-even (as ruled by Law 190/2014). Lazio accounts for more than 10% of Italy's GDP and shows solid macroeconomic indicators, as reflected by a GDP per capita around 22% above the national average. Consequently, Moody's notes that Lazio's tax base -- whether individuals or corporates -- has thus far responded adequately to tax increases introduced by the region to cover healthcare deficits, as reflected by good tax collection rates. Lazio's debt is still very high: net direct and indirect debt correspond to 140% of revenues. Service cost remains high at 8% of operating revenues in 2016, slightly higher than the 7% registered in 2012, although the debt level has doubled over the period. Recent debt renegotiations have helped the region to avoid debt service growth and the liquidity position has improved in the past two years. In addition, the budget is tight, burdened by a large but declining accumulated budgetary imbalance. Lazio has progressively reduced its operating healthcare deficits to about EUR136 million (pre-closed figures) in FY2016, down from EUR670 million in FY2013, indicating that the regional administration remains committed to balancing its healthcare accounts over the next two years. However, the liquidity position is improving, although it is still weak: cash at YE has improved to a moderately low level of EUR568 million in 2016 (or 3.7% of operating revenues) from a very low EUR54 million in 2014 (or 0.4% of operating revenues). RATING OUTLOOK The reduction of the deficit and unpaid commercial bills, coupled with an improvement of liquidity, contribute to the stable outlook. FACTORS THAT COULD LEAD TO AN UPGRADE Continuous improvement in the liquidity position over the next year, as well as a structural reduction of debt levels, could exert upward pressure on the rating. An upgrade of Italy's sovereign rating would likely lead to an upgrade of Lazio's rating. FACTORS THAT COULD LEAD TO A DOWNGRADE A higher than expected increase in debt levels and heightened liquidity pressure may lead to a downgrade. The assignment of a new class of rating (the "issuer rating") required the publication of this credit rating actions on a date that deviates from the previously scheduled release date in the sovereign release calendar, published on www.moodys.com. The specific economic indicators, as required by EU regulation, are not available for this entity. The following national economic indicators are relevant to the sovereign rating, which was used as an input to this credit rating action. Sovereign Issuer: Italy, Government of GDP per capita (PPP basis, US$): 36,403 (2016 Actual) (also known as Per Capita Income) Real GDP growth (% change): 0.9% (2016 Actual) (also known as GDP Growth) Inflation Rate (CPI, % change Dec/Dec): 0.5% (2016 Actual) Gen. Gov. Financial Balance/GDP: -2.5% (2016 Actual) (also known as Fiscal Balance) Current Account Balance/GDP: 2.7% (2016 Actual) (also known as External Balance) External debt/GDP: [not available] Level of economic development: Very High level of economic resilience Default history: No default events (on bonds or loans) have been recorded since 1983. On October 27, 2017, a rating committee was called to discuss the rating of the Lazio, Region of. The main points raised during the discussion were: The issuer's economic fundamentals, including its economic strength, have not materially changed. The issuer's institutional strength/ framework, have not materially changed. The issuer's governance and/or management, have not materially changed. The issuer's fiscal or financial strength, including its debt profile, has not materially changed. The systemic risk in which the issuer operates has not materially changed. The issuer's susceptibility to event risks has not materially changed. The principal methodology used in these ratings was Regional and Local Governments published in June 2017. The weighting of all rating factors is described in the methodology used in this credit rating action, if applicable. =================== K A Z A K H S T A N =================== KASPI BANK: Moody's Affirms B1 Long-Term Deposit Ratings -------------------------------------------------------- Moody's Investors Service has affirmed Kaspi Bank JSC's (Kaspi Bank) global scale ratings: the long-term local and foreign- currency deposit ratings at B1, long-term local currency senior unsecured Medium Term Notes (MTN) program at (P)B2, long-term local currency subordinate debt at B3, as well as subordinate MTN program at (P)B3. The outlook on the global scale long-term deposit ratings has been revised to positive from negative. The bank's Baseline Credit Assessment (BCA) and adjusted BCA have been affirmed at b2 and the Counterparty Risk Assessment (CRA) at Ba3(cr)/NP(cr) has also been affirmed. Moody's incorporates a moderate probability of government support into the bank's deposit ratings, which results in a one-notch uplift above the bank's BCA. In addition, Moody's Investors Service has upgraded the national scale long-term deposit rating to Baa2.kz from Baa3.kz. RATINGS RATIONALE Moody's rating action with the change of the outlook to positive reflects improving asset quality indicators with decreased credit costs, improved coverage of problem loans by reserves and strengthening profitability metrics. Additionally, Kaspi Bank maintains high capital buffer and ample liquidity cushion. At the same time, the bank's ratings remain constrained by high reliance on risky consumer finance segment and FX mismatches, which require relatively costly hedging. Kaspi Bank's asset quality indicators showed a positive trend. Annualized cost of risk reduced to 6% in H1 2017, down from the peak of 9.4% in 2016 amid stabilizing operating environment and renewed lending growth. Problem loans (all past due corporate loans plus retail loans overdue more than 90 days) plus net charge-offs decreased to 10.9% of gross loans as of H1 2017 from 20.6% as H1 2016. Loan loss reserves coverage of problem loans was restored to the level of 2014 and amounted to a sufficient 128.3% as of June 30, 2017. After the loan book contraction in 2015-2016 Kaspi Bank renewed its lending activity in 2017, primarily among the existing clientele with good credit history. Moody's forecasts that asset quality metrics will be stable in the next 12 months with credit costs averaging at 6%. Kaspi Bank improved its profitability with the reported return on average assets (RoAA) at 3.3% in the first half of 2017, up from 0.4% in 2016 (1.4% in 2015). Strong bottom-line financial results were underpinned by lowered credit costs, sound fees and commissions income and recovery in net interest margin (NIM). Net fees and commissions income represents a stable earnings source, comprising the largest share of the bank's net revenues (67% in H1 2017) and covers more than 100% of operating expenses. Moody's expects the positive trend in bank's profitability to continue in the next 12 months, supported by the growth in business volumes. Kaspi Bank maintains solid capital buffer with reported regulatory Tier 1 and total capital adequacy ratio (CAR) of 11.9% and 18.4%, respectively, as of September 1, 2017, which are much higher than the regulatory thresholds. This serves as a cushion against potential credit losses. Moody's believes that Tangible Common Equity (TCE) to risk-weighted assets will not fall below 14% in the next 12 months (15.7% as of June 30, 2017), even factoring in planned loans growth and dividends payout. GOVERNMENT SUPPORT Moody's incorporates one notch of government support uplift into Kaspi Bank's deposit ratings, given Moody's assessment of a moderate probability of government support for the bank's deposit holders. This assessment primarily reflects Kazakhstan government's historical track record of ensuring resolution for its largest banks, whereby public funds are injected predominantly to bail-out depositors. As of September 1, 2017, Kaspi Bank's systemic importance to Kazakhstan's banking system is supported by its 10% market share in retail deposits and 5.6% in total banking system assets. WHAT COULD MOVE THE RATINGS UP/DOWN Kaspi Bank's ratings could be upgraded in case of (1) a sustained trend in asset quality indicators, despite bank's active loan growth in the consumer segment, (2) further improvement in profitability metrics up to pre-crisis levels and/or (3) reduction in FX risks. The revision of the outlook back to stable could occur if (1) the bank fails to sustain its credit costs at the expected level amid rapid loan growth, (2) profitability worsens and capital adequacy decreases below Moody's current expectations, and (3) the government propensity and ability to provide support in case of stress significantly weakens. LIST OF AFFECTED RATINGS Issuer: Kaspi Bank JSC Upgrades: -- NSR LT Bank Deposits, Upgraded to Baa2.kz from Baa3.kz Affirmations: -- LT Bank Deposits, Affirmed B1, Outlook Changed To Positive From Negative -- ST Bank Deposits, Affirmed NP -- Subordinate, Affirmed B3 -- Senior Unsecured MTN Program, Affirmed (P)B2 -- Subordinate MTN Program, Affirmed (P)B3 -- Adjusted Baseline Credit Assessment, Affirmed b2 -- Baseline Credit Assessment, Affirmed b2 -- LT Counterparty Risk Assessment, Affirmed Ba3(cr) -- ST Counterparty Risk Assessment, Affirmed NP(cr) Outlook Actions: -- Outlook, Changed To Positive From Negative PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Banks published in September 2017. Moody's National Scale Credit Ratings (NSRs) are intended as relative measures of creditworthiness among debt issues and issuers within a country, enabling market participants to better differentiate relative risks. NSRs differ from Moody's global scale credit ratings in that they are not globally comparable with the full universe of Moody's rated entities, but only with NSRs for other rated debt issues and issuers within the same country. NSRs are designated by a ".nn" country modifier signifying the relevant country, as in ".za" for South Africa. For further information on Moody's approach to national scale credit ratings, please refer to Moody's Credit rating Methodology published in May 2016 entitled "Mapping National Scale Ratings from Global Scale Ratings". While NSRs have no inherent absolute meaning in terms of default risk or expected loss, a historical probability of default consistent with a given NSR can be inferred from the GSR to which it maps back at that particular point in time. For information on the historical default rates associated with different global scale rating categories over different investment horizons. =================== L U X E M B O U R G =================== INVESTCORP SA: Fitch Affirms B Short-Term IDR, Outlook Positive --------------------------------------------------------------- Fitch Ratings has affirmed Investcorp Bank B.S.C.'s (Investcorp) Long-Term Issuer Default Rating (IDR) at 'BB' and Viability Rating at 'bb'. The Rating Outlook remains Positive. KEY RATING DRIVERS - VIABILITY RATING, IDRs, SUPPORT RATING, SUPPORT RATING FLOOR AND SENIOR UNSECURED DEBT The rating affirmations reflect the company's strong client franchise and high degree of brand name recognition in the Gulf, supported by its solid investment track record and long-term relationships in the region. The ratings also reflect Investcorp's funding strategy, which incorporates the use of long-dated debt to fund its co-investment portfolio. Fitch believes this strategy reduces the impact of refinancing and liquidity risk inherent in Investcorp's business model of originating and syndicating alternative investments. At the same time, Investcorp's regulatory framework as a bank and designation as a domestic systemically important bank (D-SIB) by the Central Bank of Bahrain, add additional levels of risk management, capital and liquidity requirements that other alternative investment managers (IMs) are not subject to. Rating constraints include the following: -- Meaningful balance sheet co-investments in private equity, hedge funds, real estate and collateralized loan obligations (CLOs), which are subject to valuation volatility; -- Increased potential earnings volatility and placement risk relative to peers, given that transactions are primarily originated and placed with investors on a deal-by-deal basis as opposed to raising dedicated funds with a pre-determined investment period; -- Fitch also notes potential growth/execution risks associated with Investcorp's strategy to more than double assets under management (AUM) to $50 billion in the medium term though both organic and inorganic growth. The Positive Rating Outlook primarily reflects the potential franchise and earnings benefits that may accrue to Investcorp as a result of the strategic partnership with Mubadala Development Co. (Mubadala), a sovereign-wealth fund of Abu Dhabi. In March 2017, Mubadala completed its 20% stake purchase of Investcorp, which follows Investcorp's 9.99% ownership stake sale to another Gulf-based institution in 2015. Fitch views these transactions positively, as they may give Investcorp additional credibility with, and expanded access to, potential Gulf-based investors as well as a potentially more stable equity base. In March 2017, Investcorp closed its acquisition of the debt and CLO management business of UK-based 3i Group PLC (3i) for $316 million and renamed the business Investcorp Credit Management (ICM). The deal added $10.8 billion in AUM, expanded Investcorp's product offering into credit and is expected to add approximately $50 million, annually, in stable management fee revenue to the firm. The deal was funded entirely through cash on the balance sheet, which Fitch viewed favorably. Still, the acquired co- investment assets and on-going CLO risk retention requirements do increase Investcorp's balance sheet risk exposure. As part of its growth strategy, Investcorp has increased its fundraising capabilities with the addition of client-facing resources to help drive fundraising in the Gulf and, more recently, in Europe and Asia. However, in FY17, fundraising largely kept pace with distributions and redemptions. At June, 30 2017, AUM (excluding $10.8 billion from the acquired 3i business) had declined approximately $300 million, to $10.5 billion, year over year driven by net redemptions in hedge funds, partially offset by increased real estate AUM and flat private equity AUM. Fitch believes organic AUM growth over the Outlook Horizon would indicate benefits accruing to the firm from its influential strategic shareholders and fundraising initiatives. In FY17, Investcorp's Fitch-estimated fee-related EBITDA (FEBITDA) margin, which excludes more volatile performance fees, improved to 32% (from 30% in FY16) which is at the low end of Fitch's 'a' category quantitative benchmark range of 30% to 50% for alternative investment managers. Fitch notes that a significant portion of Investcorp's fee-earnings are based on activity fees earned from transactional activities including initial acquisition, add-ons, subsequent placement, and eventual investment exit. Activity fees are dependent on the firm's ability to transact in the marketplace and can be volatile. Given Investcorp's banking status, Fitch used the 'Global Bank Rating Criteria' dated Nov. 25, 2016 to help inform its assessment of certain aspects of Investcorp's credit profile, such as operating environment (and in particular, the regulatory framework), capitalization and leverage, and funding and liquidity. For the fiscal-year ended June 30, 2017 (FYE17) Fitch believes Investcorp maintained good liquidity, capitalization and funding profiles. At FYE17, balance sheet cash and other liquid assets of $562 million (up from $410 million a year prior) was more than sufficient to cover all outstanding debt maturing through December 2021. In addition, Investcorp had $426 million of undrawn capacity on committed revolving facilities at FYE17. Capital levels remained strong with a reported Total Capital Ratio of 31.7% at FYE17; well in excess of the Central Bank of Bahrain's minimum requirement of 12.5%. Leverage, as measured by Fitch Core Capital (FCC) / FCC-Adjusted Risk-Weighted Assets, was 24.9% at FYE17, within Fitch's 'a' category quantitative benchmark range of >19% for banks with a 'bbb' rated operating environment. For funding, Investcorp relies on a mix of secured and unsecured wholesale funding sources, supplemented with deposit funding given its status as a bank. At FYE17, the company remained within its targeted co-investment to long-term capital (long-term debt, deferred fees and total equity) ratio of 1.0x or lower, at a ratio of 0.7x, which Fitch views as appropriate. At FYE17, balance sheet co-investments increased to $1.1 billion (from $1.0 billion a year prior) with an increase in CLO retention exposure from ICM more than offsetting lower hedge fund co-investments. Interest coverage as measured by Adjusted EBITDA (which excludes asset based income) over interest expense was 2.7x for the trailing twelve months ended June 30, 2017 (FY17) which Fitch considers adequate for the rating category. Investcorp's 'BB' Long-Term IDR is equalized with its 'bb' Viability Rating based on Fitch's view of limited likelihood of sovereign support. This is reflected in the Support Rating of '5' and the Support Rating Floor of 'No Floor'. The Support Rating of '5' and the Support Rating Floor of 'No Floor' reflect Fitch's view that there is no reasonable assumption that sovereign support will be forthcoming to Investcorp given the lack of a support track record and the fact that much of Investcorp's activities are conducted outside of Bahrain. The affirmation of Investcorp's 'B' Short-Term IDR maintains the mapping relationship between long-term and short-term IDRs as outlined in Fitch's Global Bank Rating Criteria. The senior unsecured debt rating is equalized with Investcorp's Long-Term IDR reflecting the expectation for average recovery prospects for the debt class. RATING SENSITIVITIES - IDRs, VIABILITY RATINGS, AND SENIOR UNSECURED DEBT Fitch believes Investcorp's ratings upside is likely limited to the 'BB' category over the intermediate term due to the potential earnings volatility associated with the company's business model and balance sheet co-investment exposure. The company's deal-by- deal business model could be a profitability constraint in a period of investment origination and/or placement activity weakness, while elevated co-investment exposure introduces balance sheet risk in the event of investment losses. Post- origination placement may also introduce balance sheet risk in the event Investcorp is unable to place originated investments with clients. Fitch views a one-notch upgrade as achievable over the 12 to 24 month Outlook horizon provided that Investcorp is able to leverage its strategic partnerships and expanded fundraising platform to grow AUM organically, while maintaining its strong capitalization, co-investment funding and liquidity positions. An increase in the proportion of recurring management fee income (which represented 32% of total revenues in FY17) and strengthened interest coverage would also be viewed positively. If Investcorp is unable to demonstrate material accretive benefits to AUM growth and fee income resulting from the strategic Mubadala investment or the expanded fundraising platform over the Outlook Horizon, the Outlook could be revised to Stable. Should Investcorp be unable to generate sufficient fee earnings to cover interest expense, experience material AUM declines in core private equity, real estate and CLO businesses or experience integration issues associated with recent acquisitions, the ratings could be negatively impacted. Materially increased balance sheet co-investment not funded by equity, increased leverage appetite, or reduced liquidity resources would also be viewed negatively. The senior unsecured debt rating is equalized with Investcorp's IDRs and therefore, would be expected to move in tandem with any changes to Investcorp's IDRs. Although not envisioned by Fitch, were Investcorp to experience an increase in secured debt as a percentage of total debt, this could result in the unsecured debt rating being notched below Investcorp's Long-Term IDR. SUPPORT RATING AND SUPPORT RATING FLOOR Investcorp's Support Rating and Support Rating Floor are sensitive to changes in Fitch's assumptions regarding the likelihood of extraordinary sovereign support to be extended to Investcorp, which Fitch views as unlikely. Fitch has affirmed the following ratings: Investcorp Bank B.S.C. -- Long-Term IDR at 'BB'; -- Short-Term IDR at 'B'; -- Viability Rating at 'bb'; -- Support Rating at '5'; -- Support Rating Floor at 'NF'. Investcorp S.A. -- Long-Term IDR at 'BB'; -- Short-Term IDR at 'B'; -- Senior unsecured debt at 'BB'. Investcorp Capital Ltd. -- Long-Term IDR at 'BB'; -- Short-Term IDR at 'B'; -- Senior unsecured debt at 'BB'. The Rating Outlook is Positive. ===================== N E T H E R L A N D S ===================== CONSTELLIUM NV: Moody's Affirms B3 CFR, Outlook Stable ------------------------------------------------------ Moody's Investors Service has affirmed the B3 Corporate family rating (CFR) and B3-PD Probability of Default Rating (PDR) of Netherland-based aluminum products manufacturer Constellium N.V. (Constellium). Concurrently, Moody's has assigned a (P)B3 rating to the new EUR781 million equivalent senior unsecured notes due 2026 (the 'New Unsecured Notes') the company intends to issue, whose proceeds will be used, together with new equity proceeds of c. US$ 265 million from the sale of 22 million of shares (assuming the share price at market close on 27 October 2017) and existing cash for c. EUR20 million, to redeem in full the 7.875% senior secured notes due 2021 (the 'Tendered Secured Notes'), the 8% senior unsecured notes due 2023 and the 7% senior unsecured notes due 2023 (together, the 'Tendered Unsecured Notes'). Once the transaction is closed, the rating agency will withdraw the B2 rating of the Tendered Secured Notes and the Caa1 rating of the Tendered Unsecured Notes. Ratings of existing notes remain unchanged. The outlook is stable on all ratings. The rating on the New Unsecured Notes is provisional at (P)B3, as it is based on the review of draft documentation and remains subject to the final outcome of the refinancing transaction announced by Constellium. Upon conclusive review of the final documentation and terms of the refinancing transaction, Moody's will assign a definitive rating to the New Unsecured Notes. A definitive rating may differ from a provisional rating. Besides, Moody's expects that if the transaction closes in line with the contemplated terms, the Caa1 ratings of the existing and not tendered unsecured notes would be upgraded by one notch from Caa1 to B3. "The assignment of a (P)B3 rating to Constellium's New Senior Unsecured Notes reflects the pro-forma debt structure for the announced transaction, where the only secured notes outstanding will be repaid in full and as a result almost all debt will rank pari-passu on a senior unsecured basis. The only secured debt pro-forma for the new capital structure will be the revolving and ABL facilities, whose drawn amount is projected to be modest. The limited amount of more senior ranking secured debt would lead to the equalization of the ratings of the senior unsecured notes at the B3 CFR level post deal closing, according to Moody's Loss Given Default methodology" says Gianmarco Migliavacca, a Vice President-Senior Credit Officer at Moody's and lead analyst for Constellium. RATINGS RATIONALE The affirmation of Constellium's B3 CFR reflects Constellium's (1) diversified product mix and strong market share in high value added aluminium rolled and extruded products; (2) large operational footprint with 22 production facilities mainly located in North America and Europe; (3) good volume visibility in the near to medium-term owing to multi-year contracts; (4) stable albeit modest profitability and cash flow of its can sheet and rigid packaging parts, which represented nearly 50% of the company's 2016 revenues; and (5) adequate liquidity profile, supported by c. EUR280 million of cash on balance sheet pro-forma for the transaction plus c. EUR250 million of undrawn committed facilities at the end of September 2017. The rating is however constrained by Constellium's (1) highly leveraged capital structure, with an adjusted gross debt/EBITDA projected at the end of 2017 and pro-forma for the transaction at c. 7.3x, lower than the 8.9x at the end of 2016, but still high; and (2) negative free cash flow (FCF) generation for the rest of 2017 and in 2018 due to high capital expenditures (capex) expected over this period. The rating also reflects Constellium's exposure to cyclical end markets such as automotive, its high capex requirements to finalise the body in white multi-year programme and two automotive structures' greenfield plants in North America, as well as a relatively modest operating profitability, with a consolidated adjusted EBIT margin of 5.5% at the end of June 2017. These negatives are partially offset by the progress made by the company in the last nine months to strengthen its liquidity position, reduce negative FCF and deleverage. Moody's estimates that the cash burn will be between EUR55 and 60 million in 2017, versus negative FCF of c. EUR400m in 2016, due to higher volume- driven EBITDA, lower capex and working capital requirements compared to last year. Pro-forma for the transaction, FCF should become positive only in 2019 at c. EUR40 million, driven by higher EBITDA and lower interest expenses. Adjusted gross leverage should also fall to slightly below 6.5x by end of 2019, from 7.3x expected for 2017. Such improvement will be mainly driven by projected EBITDA growth in 2018 and 2019, consistently with management public commitment to increase EBITDA at high single digit rate year-on-year over the next two years. Liquidity needs should progressively moderate as Moody's expects Constellium's FCF to become slightly positive in 2019. The absence of meaningful debt maturities until 2021 and the headroom under the committed factoring and ABL facilities should provide further cushion to absorb fluctuations in working capital associated with the ramp-up of new production lines and with the seasonality of the packaging business. The recently committed EUR100 million French inventory facility due 2019 and US$300 million US ABL facility due 2022 with a US$200m committed accordion feature, both signed in Q2 2017, provide further comfort to Moody's adequate liquidity assessment for Constellium. This is in spite of large transaction related fees and costs at over EUR80 million which the rating agency anticipates the company would need to pay later this year, including breakage premia to fully redeem the tendered notes. OUTLOOK The stable outlook reflects Moody's expectation that the liquidity position of the company will remain adequate, the pace of cash burn will be progressively decelerating and a gradual deleveraging will be taking place towards a level more commensurate for the B3 rating at around 6.5x by 2019. The outlook also assumes a stable operating environment in the company's main end user markets and a smooth ramp-up process for the new capacity due to come on-stream in the next couple of years. WHAT COULD CHANGE THE RATING UP Positive rating pressure could be considered if credit metrics improve on a sustained basis, particularly with reference to (1) cash flow from operation (CFO)/Debt recovering towards 15%; (2) the company's EBIT margin exceeding 5%; and (3) Moody's-adjusted gross leverage trending to 6.0x or lower. An upgrade would also require liquidity to remain at least adequate. WHAT COULD CHANGE THE RATING DOWN The ratings would come under downward pressure if (1) CFO/Debt falls below 5% on a sustainable basis and FCF remains significantly negative beyond 2018; (2) EBIT to interest falls below 1.0x; (3) Moody's-adjusted gross leverage remains sustainably above 8.0x; and (4) the company's liquidity deteriorates. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Steel Industry published in September 2017. Headquartered in the Netherlands, Constellium is a global leader in the design and manufacturing of innovative and high value- added aluminum products for a broad range of applications dedicated primarily to aerospace, automotive and packaging markets. At the end of 2016, Constellium reported revenues of EUR4.74 billion and a company adjusted EBITDA of EUR377 million. Constellium operates 22 manufacturing sites in Europe, North America and China. Since May 2013, Constellium is listed on the New York Stock Exchange and NYSE Euronext market. Its shareholding is divided between Banque Publique d'Invetissement (BPI, 13%), the management (2.0%) and free float (85%). CREDIT EUROPE: Fitch Puts BB- IDR on Rating Watch Positive ---------------------------------------------------------- Fitch Ratings has placed Credit Europe Bank N.V.'s (CEB) Long- Term Issuer Default Rating (IDR) of 'BB-' and Viability Rating of 'bb-' on Rating Watch Positive (RWP). Fitch has simultaneously placed the Support Rating of '4' of CEB's Russian subsidiary Credit Europe Bank (CEBR) on Rating Watch Negative (RWN). The rating actions follow the announcement by CEB on Oct. 26, that it is in the process of transferring ownership of CEBR to a different entity within its ultimate shareholder's group. Fitch do not expect the transaction to have an immediate impact on CEB's financial metrics. However, Fitch believe that the spin-off will ultimately be positive for CEB's credit profile through reduced volatility of earnings and asset quality, and a lower risk asset mix. The spin-off will likely moderately increase CEB's single name concentration and exposure to unreserved non- performing loans (NPLs), but the RWP reflects Fitch expectation that CEB will be able to gradually manage both down. CEBR's ratings are unaffected apart from its Support Rating by this review because Fitch believe the spin-off has a limited immediate effect on CEBR's credit profile. KEY RATING DRIVERS CEB's IDRS AND VR CEB's ratings reflect the bank's high exposure to volatile operating environments and cyclical industries inherent to its business model. They also reflect a niche but established trade finance franchise, adequate funding and liquidity and strengthened capitalisation. The latter provides a buffer against CEB's deteriorated asset quality, which is a rating weakness. CEB's business is concentrated in emerging economies. At end-June 2017, exposures to Russia, Turkey and Romania represented 29%, 22% and 16% of gross loans, respectively. Following the spin-off, Fitch estimate that CEB's loan book exposure to developed markets will increase to about 40% from 30% at end-June 2017, and the share of developed markets in the total credit exposure will be close to 50%. Fitch understand that CEB will keep a 10% stake in CEBR and may continue to extend loans to corporate borrowers in Russia, but Fitch expect this will be on a small scale, with a limited impact on CEB's overall risk profile. Fitch expect CEB to continue growing its corporate loan book in western Europe by targeting local operations of large Turkish corporates, and to maintain its niche franchise in trade and commodity finance. Fitch expects that the spin-off transaction will be structured in a way that will not affect CEB's capital ratios. This will be achieved through a reduction of risk-weighted assets (RWAs) and a USD75 million Tier 1 injection before end-2017 (of which USD25 million will be in the form of common equity). At end-June 2017, CEB's Fitch core capital (FCC)/RWA ratio was 14.1%, up from 13.3% at end-2016 and 12.2% at end-2015. Leverage is low in the European context, with tangible common equity/tangible assets of 11.4%. Exposure to unreserved NPLs has increased but remains moderate at 24% of end-June 2017 FCC. Fitch's assessment of CEB's capitalisation takes into account the bank's high sector and single name concentrations (the 20 largest borrowers accounted for almost half of corporate loans/almost 2x FCC at end-June 2017). High concentrations are mitigated by the bank's hands-on approach to managing corporate customers. As a result of the spin-off, single name concentration will likely increase even further as the absolute amount of CEB's equity will fall. However, Fitch expect the concentration will be managed down closer to the current level over time. NPLs are elevated, at 7.6% of gross loans at end-June 2017 (7.0% at end-2016). The ratio has been pushed up by CEB's shrinking loan book, and the deterioration of the bank's legacy mortgage loan book in Romania over the last 18 months. The better- performing Turkish loan book and exposures to developed markets somewhat offset these pressures. CEB's sizeable portfolio of sub- standard loans (5.1% of gross loans at end-June 2017) also represents a risk for the bank, although the absolute amount of NPLs plus substandard loans has been declining over the last few years. Fitch estimate that CEB's NPL ratio will remain almost unchanged as a result of CEBR's spin-off. However, Fitch expect the volatility of problem loans and loan impairment charges to reduce over the longer term. CEB stopped issuing mortgage loans in Romania in 2008 but amortisation has been slow. Net exposure stood at 0.35x FCC at end-June 2017, roughly equally split between loans denominated in euros and Swiss francs. The deterioration was mainly driven by changes in local legislation introduced in 2016 (the debt discharge law and the Swiss franc loan conversion initiative). Fitch believe that legislative risks have largely abated, and do not expect to see further NPL inflows in this part of CEB's loan book. However, the workout of the existing NPLs will likely be slow due to the length of court procedures. Profitability has recently been weak, with operating profit/risk- weighted assets of about 0.6% in 2016-1H17. Fitch expect revenue generation and pre-impairment profitability to be further dampened by the spin-off. This should be partly offset by the reduction of CEB's expensive Tier 2 debt component (USD400 million bearing 8% interest rate will be replaced with USD150 million of new Tier 2 debt). Fitch expect CEB's wholesale banking business in western Europe to remain the main profit generator for the bank. Granular deposits are CEB's main funding source, and most are collected in the Netherlands and Germany (46% of non-equity liabilities at end-June 2017, 56% pro-forma after the spin-off). The majority of deposits are covered by the Dutch deposit guarantee, which contributes to funding stability. Liquidity is acceptable, with high-quality liquid assets (cash, central bank deposits and securities that can be pledged with central banks) amounting to 9% of total assets at end-June 2017. CEB's SUPPORT RATING AND SUPPORT RATING FLOOR CEB's Support Rating of '5' and Support Rating Floor of 'No Floor' reflect Fitch's view that senior creditors cannot rely on receiving full extraordinary support from the sovereign if CEB becomes non-viable. This reflects the bank's lack of systemic importance in the Netherlands, as well as the recent implementation of the EU's Bank Recovery and Resolution Directive and the Single Resolution Mechanism. These provide a framework for resolving banks which is likely to require senior creditors participating in losses, if necessary, instead or ahead of a bank receiving sovereign support. Similarly, support from the bank's private shareholder, although possible, cannot be reliably assessed. CEB's SUBORDINATED DEBT CEB's Tier 2 subordinated debt is rated one notch below the banks' VR, reflecting below-average recovery prospects for this type of debt. CEBR's SUPPORT RATING Fitch has placed CEBR's Support Rating of '4' on RWN following CEB's announcement that it is planning to transfer ownership of CEBR to a different entity within Fiba Group. Fitch cannot reliably assess the ability of Fiba Group to provide extraordinary support to CEBR in case of need. RATING SENSITIVITIES CEB's IDRS AND VR Fitch expects to resolve the RWP on CEB's Long-Term IDR and VR in the next six months. Fitch expect to upgrade the Long-Term IDR and the VR by one notch to 'BB' and 'bb', respectively, once the bank receives necessary regulatory approvals for the spin-off. If the spin-off does not go through, Fitch will likely remove the RWP and affirm CEB's Long-Term IDR at 'BB-' with a Stable Outlook, and its VR at 'bb-'. CEB's SUPPORT RATING AND SUPPORT RATING FLOOR An upgrade of the Support Rating and upward revision of the Support Rating Floor would be contingent on a positive change in the Netherlands' propensity to support its banks and a significant increase in CEB's systemic importance. While not impossible, this is highly unlikely in Fitch's view. CEB's SUBORDINATED DEBT CEB's subordinated debt rating is sensitive to changes in CEB's VR. CEBR's SUPPORT RATING CEBR's Support Rating is likely to be downgraded to '5' after the completion of the spin-off. If the spin-off is cancelled, the Support Rating is likely to be affirmed. The rating actions are: Credit Europe Bank NV Long-Term IDR: 'BB-' placed on RWP Short-Term IDR: affirmed at 'B' Viability Rating: 'bb-' placed on RWP Support Rating: affirmed at '5' Support Rating Floor: affirmed at 'No Floor' Subordinated debt: 'B+'/'B+(exp)' placed on RWP Credit Europe Bank Long-Term IDR: unaffected at 'BB-'/Stable Outlook Short-Term IDR: unaffected at 'B' Viability Rating: unaffected at 'bb-' Support Rating: '4' placed on RWN Senior unsecured debt: unaffected at 'BB-' VIVAT NV: Fitch Rates Subordinated Notes BB(EXP) ------------------------------------------------ Fitch Ratings has assigned VIVAT NV's (VIVAT) subordinated notes an expected 'BB(EXP)' rating. The final rating is contingent on the receipt of final documents conforming to information already received. The notes are rated three notches below VIVAT's 'BBB' Issuer Default Rating (IDR) to reflect their subordination and loss absorption features, in line with Fitch's notching criteria. KEY RATING DRIVERS The proposed Tier 2 notes will be undated with a first call date after five years from issue. The issue will rank pari passu and without any preference among themselves with all other outstanding dated or undated subordinated obligations of VIVAT. The notes will include mandatory interest deferral features that would be triggered if VIVAT is unable to meet the applicable solvency capital requirement (or minimum capital requirement), as defined in the Solvency II directive. In addition, the notes will also include an optional interest deferral clause. VIVAT will use the net proceeds to repay the group's existing subordinated debt issued to Anbang Insurance Group Co. Ltd. Any remaining proceeds will be used for general corporate purposes. Fitch expects to apply a baseline recovery assumption of 'poor' to the proposed notes, reflecting the level of subordination, and Fitch assessment of 'moderate' non-performance risk due to the notes' mandatory interest and redemption deferral features. As a result, the rating will be notched down three times from the IDR, comprising two notches for recovery prospects and one notch for non-performance risk. In perpetual form the optional interest deferral feature does not constitute any additional non- performance risk relative to the mandatory interest deferral features. According to Fitch's methodology, the expected issue would be classified as 100% capital due to regulatory override within Fitch's risk-based capital assessment, and 100% debt for the agency's financial-leverage calculations. The issue is not expected to lead to a material change in Fitch assessment of VIVAT's financial leverage as proceeds will largely be used for refinancing purposes. RATING SENSITIVITIES The notes' ratings are subject to the same sensitivities that may affect VIVAT's Long-Term IDR (for more details, see 'Fitch revises VIVAT's Outlook to Negative, Affirms Ratings' dated June 20, 2017 at www.fitchratings.com). Fitch currently rates VIVAT: - VIVAT NV IDR 'BBB'; Outlook Negative - Core insurance entities REAAL Schadeverzekeringen NV, and SRLEV NV Insurer Financial Strength Ratings 'BBB+'; Outlook Negative =============== P O R T U G A L =============== DOURO MORTGAGES NO.1: Fitch Puts BB+ Note Rating on Watch Neg. ------------------------------------------------------------- Fitch Ratings has revised the Rating Watch on Douro Mortgages No.1 (Douro 1), Douro Mortgages No.2 (Douro 2) and Douro Mortgages No.3 (Douro 3) to Negative from Evolving. This rating action follows the ratings being placed on Rating Watch Evolving (RWE) on October 5, 2017. The transactions are securitisations of seasoned Portuguese residential mortgages originated by Banco BPI, S.A. KEY RATING DRIVERS Provisioning Mechanism Fitch is of the opinion that not all defaulted loans may have been adequately provisioned for on the transactions' principal deficiency ledgers. This is based on the reported difference between the outstanding note balance and the non-defaulted asset balance, which according to Fitch's interpretation of the transaction documents, should be smaller. Fitch has therefore placed the notes on Rating Watch Negative (RWN) while it further investigates the impact of this discrepancy with the servicer. The transactions provision for defaults on a staggered basis, when loans are between 12 months and 36 months in arrears. This can be beneficial as repossession activity can be lengthy, but it can also give rise to periods where there is a mismatch between the non-defaulted balance of the pool and outstanding note balance. Limited Credit Enhancement (CE) Build-up The transactions have been amortising on a pro-rata basis, hence CE build up has been limited since closing. For Douro 1 any future increase in CE is expected to be minimal, given the non- amortising reserve fund and no mandatory switch to sequential payments. The switch back to sequential payment trigger is envisaged in Douro 2 and 3, but sequential pay is not expected to occur in the near future. Furthermore, Douro 2 and Douro 3's reserve funds are amortising but are close to the documented floors. According to its recently published European RMBS Rating Criteria, Fitch bases its calculation of CE and projection of future recoveries on the amounts of outstanding defaults as reported in the loan level data, made available by the European Data Warehouse. The loan-level data indicates smaller outstanding default balances compared with what Fitch previously inferred from the defaulted and recovered amounts published in the aggregated servicer reports. Reduced Performance Adjustment Factor (PAF) Floor Fitch reduced the PAF floor to 0.5 as all three transactions; i) closed more than seven years ago; ii) have indexed CLTVs are less than 50%; and iii) the portfolios have withstood significant economic stress. Fitch notes that all three portfolios have had a significant number of substitutions and repurchases. However, Fitch maintain the view these were mainly driven by commercial reasons. Furthermore the majority of originations in the pool are dated prior to the crisis, so Fitch believe that the originator has not been supporting the transactions' performance. RATING SENSITIVITIES Fitch will further investigate the impact of the discrepancy in order to resolve the RWN. This may lead to a downgrade of the notes. Douro 3 currently has limited scope for permitted variations where loan spreads could compress or loan maturity dates extended. As the pool amortises the scope for such variations could potentially increase. As such, Fitch may apply more conservative assumptions to its current cash flow modelling approach. DATA ADEQUACY Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pools and the transactions. The findings were reflected in this analysis by placing all rating on RWN for the reasons described above. 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 and together with the assumptions referred to above, 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. - Loan-by-loan data provided by European Data Warehouse as at 31 August 2017 for Douro 1, 30 June 2017 for Douro 2 and 31 July for Douro 3. - Transaction reporting provided by Banco BPI as at 31 August 2017 for Douro 1, 30 June 2017 for Douro 2 and 31 July for Douro 3. - Transaction reporting provided by Citibank as at 21 September 2017 for Douro 1, 21 July 2017 for Douro 2 and 21 August for Douro 3. - Discussions and updates provided by Banco BPI as at 26 October 2017. MODELS EMEA Cash Flow Model. ResiEMEA. Fitch has placed the following ratings on RWN: Sagres, STC S.A. / Douro Mortgages No. 1: Class A (ISIN XS0236179270): 'A+sf'; Rating Watch revised to Negative from RWE Class B (ISIN XS0236179601): 'Asf'; Rating Watch revised to Negative from RWE Class C (ISIN XS0236180104): 'BBBsf'; Rating Watch revised to Negative from RWE Class D (ISIN XS0236180443): 'BB+sf'; Rating Watch revised to Negative from RWE Sagres, STC S.A. / Douro Mortgages No. 2: Class A1 (ISIN XS0269341334): 'Asf'; Rating Watch revised to Negative from RWE Class A2 (ISIN XS0269341680): 'Asf'; Rating Watch revised to Negative from RWE Class B (ISIN XS0269343389): 'BBBsf'; Rating Watch revised to Negative from RWE Class C (ISIN XS0269343892): 'BB+sf'; Rating Watch revised to Negative from RWE Class D (ISIN XS0269344197): 'BB-sf'; Rating Watch revised to Negative from RWE Sagres, STC S.A. / Douro Mortgages No. 3: Class A (ISIN XS0311833833) 'BBB+sf'; Rating Watch revised to Negative from RWE Class B (ISIN XS0311834211) 'BB+sf'; Rating Watch revised to Negative from RWE Class C (ISIN XS0311835374) 'BBsf'; Rating Watch revised to Negative from RWE Class D (ISIN XS0311836349) 'Bsf'; Rating Watch revised to Negative from RWE DOURO MORTGAGES NO. 1: S&P Affirms BB+ Rating on Class B Notes -------------------------------------------------------------- S&P Global Ratings raised and removed from CreditWatch positive its credit ratings on SAGRES STC - Douro Mortgages No.1's and SAGRES STC - Douro Mortgages No.3's class A notes. At the same time, S&P has affirmed and removed from CreditWatch positive its rating on Douro Mortgages No. 1's class B notes. S&P said, "On Oct 10, 2017, we placed on CreditWatch positive our ratings on Douro Mortgages No. 1's class A and B notes and Douro Mortgages No. 3's class A notes following our Sept. 15, 2017 raising of our unsolicited foreign currency long-term sovereign rating on the Republic of Portugal (see "Ratings On Portugal Raised to 'BBB-/A-3' On Strong Economic And Budgetary Performance; Outlook Stable" and "Ratings On 27 Tranches in 20 Portuguese RMBS Transactions Placed On CreditWatch Positive Following Sovereign Upgrade"). "The rating actions follow our credit and cash flow analysis of the most recent transaction information that we have received as part of our surveillance review cycle. Our analysis reflects the application of our European residential loans criteria, our current counterparty criteria, and our structured finance ratings above the sovereign (RAS) criteria (see "Methodology And Assumptions: Assessing Pools Of European Residential Loans," published on Aug. 4, 2017, "Counterparty Risk Framework Methodology And Assumptions," published on June 25, 2013, and "Ratings Above The Sovereign - Structured Finance: Methodology And Assumptions," published on Aug. 8, 2016)." The swap counterparty for these transactions, Banco BPI, S.A. (Cayman Islands Branch; BBB-/Stable/A-3), did not take remedial actions in line with the swap agreements when previously becoming an ineligible counterparty. S&P said, "In our analysis of the class A and B notes in Douro Mortgages No. 1 and the class A notes in Douro Mortgages No. 3, it do not give credit to this swap. Consequently, our ratings on these notes continue to be delinked from our rating on the swap provider." These transactions comprise loans that benefit from a government subsidy with regards to mortgage interest payments. S&P said, "In order to account for the risk of a sovereign default, which would affect the performance of the transactions, we have incorporated cash flow stresses on such subsidies at rating levels above the sovereign rating on the Republic of Portugal. For rating levels up to four notches above the rating on the sovereign, we assume that 75% of subsidized interest is lost in the first 18 months of our recessionary period. For rating levels greater than four notches above the rating on the sovereign, we assume that 100% of subsidized interest is lost in the first 18 months of our recessionary period. "Following our Sept. 15, 2017 upgrade of Portugal, we have performed our RAS analysis on those tranches that are capped by the rating of the sovereign: the class A and B notes in Douro Mortgages No. 1 and the class A notes in Douro Mortgages No. 3. "Under our RAS criteria, we applied a hypothetical sovereign default stress test to determine whether a tranche has sufficient credit and structural support to withstand a sovereign default and so repay timely interest and principal by legal final maturity. "Our RAS criteria designate the country risk sensitivity for residential mortgage-backed securities (RMBS) as moderate. Under our RAS criteria, these transactions' notes can therefore be rated four notches above the sovereign rating, if they have sufficient credit enhancement to pass a minimum of a severe stress. "As part of our credit and cash flow analysis, we have also considered that Douro Mortgages No. 1's notes have been amortizing pro-rata since December 2007, and Douro Mortgages No. 3's notes since May 2010. "Under our RAS criteria, the class A notes in Douro Mortgages No. 1 and Douro Mortgages No. 3 are now able to achieve higher ratings than those currently assigned. We have therefore raised and removed from CreditWatch positive our ratings on the class A notes in Douro Mortgages No. 1 and Douro Mortgages No. 3. "Our credit and cash flow analysis indicates that the available credit enhancement for Douro Mortgages No. 1's class B notes is commensurate with the currently assigned rating. We have therefore affirmed and removed from CreditWatch positive our 'BB+ (sf)' rating on this class of notes. All other classes of notes in both transactions remain unaffected by today's rating actions." Douro Mortgages No. 1 and 3 are Portuguese RMBS transactions, which closed in November 2005 and July 2007. They securitize first-ranking mortgage loans originated by Banco BPI for the acquisition of residential properties in Portugal. RATINGS LIST Class Rating To From Ratings Raised And Removed From CreditWatch Positive SAGRES STC - Douro Mortgages No.1 EUR1.509 Billion Mortgage- Backed Floating-Rate Securitisation Notes A A (sf) A- (sf)/Watch Pos SAGRES STC - Douro Mortgages No.3 EUR1.515 Billion Mortgage- Backed Floating-Rate Securitisation Notes And Floating-Rate Securitisation Notes A BBB+ (sf) BBB (sf)/Watch Pos Rating Affirmed And Removed From CreditWatch Positive SAGRES STC - Douro Mortgages No.1 EUR1.509 Billion Mortgage- Backed Floating-Rate Securitisation Notes B BB+ (sf) BB+ (sf)/Watch Pos =========== R U S S I A =========== ALFA-BANK: Moody's Hikes LT Deposit Rating to Ba1, Outlook Stable ----------------------------------------------------------------- Moody's Investors Service has upgraded to Ba1 from Ba2 Alfa- Bank's local-currency long-term deposit rating and local- and foreign-currency senior unsecured debt ratings. At the same time, Moody's affirmed the bank's Ba2 foreign-currency deposit ratings that are constrained by the foreign-currency deposit ceiling of Russia. The outlook on these ratings remains stable. Concurrently, Moody's affirmed Alfa-Bank's baseline credit assessment (BCA)/adjusted BCA of ba2, subordinated debt ratings of B1 (hyb)/B2 (hyb), the bank's CR Assessments of Ba1(cr)/Not Prime(cr), and short-term deposit ratings of Not Prime. The rating action is triggered by reassessed government support assumptions that now provide a one-notch rating uplift for the bank's deposit and senior unsecured debt ratings from the adjusted BCA of ba2. RATINGS RATIONALE The upgrade of Alfa Bank's long-term local-currency deposit and local- and foreign-currency senior unsecured debt ratings to Ba1 from Ba2 reflects Moody's view that the probability of the bank's senior debt and deposits benefiting from support of the Central Bank of Russia (CBR) should it be needed is now high. The CBR has recently introduced and tested its newly-designed toolkit to provide extraordinary support to large privately-owned banks via its Banking Sector Consolidation Fund (BSCF). This results in one notch of uplift to the bank's senior unsecured debt and deposit ratings from its BCA of ba2. The affirmation of BCA/adjusted BCA at ba2 reflects the bank's strong solvency and liquidity metrics as well as expectations that the bank's business model will remain resilient and the bank will continue to generate profits despite possible headwinds associated with the bank's high single-name credit risk concentrations, particularly foreign- currency denominated exposures provided to borrowers from the commercial real estate and development segment. As of June 30, 2017, Alfa-Bank reported problem loans at 9.2% of gross loans, a decline from the peak level of 12.7% reported at year-end 2015. As the negative pressure stemming from the build- up of new problem loans largely eased while the successful work- outs of legacy problems helped to reduce non-performing assets, credit costs bottomed to 1.31% in 2016 and further positively reversed to 0.45% in the first half of 2017. Lower funding costs also helped the bank to substantially improve its profitability metrics. In 2016 Alfa bank reported 1.53% return on average assets with a further increase to 2.2% (annualised ratio) in H1 2017. Moody's expect the bank to report strong pre-provision earnings in the coming years, that would enable it to successfully deal with possible loan impairments. Apart from strong recurring earnings, the bank consistently reports strong capital cushion, as reflected in its 15.8% Tangible Common Equity % Risk Weighted Assets ratio as of June 30, 2017. In addition to healthy solvency metrics, Alfa-Bank also reports strong (compared to its local peers) liquidity profile owing to its granulated deposit base, that was recently growing, and a large liquidity cushion (includes cash and cash equivalents, liquid securities and short-term deposits with banks) at 28% of total assets as of June 30, 2017. WHAT COULD MOVE THE RATINGS UP / DOWN A sovereign rating upgrade could lead to an upgrade of Alfa- Bank's long-term ratings, provided there is no deterioration in the bank's financial profile. An upgrade in the bank's BCA, resulting, for example, from a reduction in single-name concentrations in the loan book combined with lower foreign- currency lending, could also exert an upward rating pressure. Conversely, the ratings could be downgraded in case of a sharp deterioration in the operating environment that could hamper Alfa-Banks financial metrics, or a reduction in key credit metrics notably solvency or liquidity. Moody's might also downgrade the bank's long-term ratings that benefit form government support uplift, if the government capacity or willingness to provide support weakens. LIST OF AFFECTED RATINGS Issuer: Alfa-Bank Upgrades: -- LT Bank Deposit (Local Currency), Upgraded to Ba1 from Ba2, Outlook Remains Stable -- Senior Unsecured Regular Bond/Debenture, Upgraded to Ba1 from Ba2, Outlook Remains Stable -- BACKED Senior Unsecured Regular Bond/Debenture, Upgraded to Ba1 from Ba2, Outlook Remains Stable Affirmations: -- LT Bank Deposit (Foreign Currency), Affirmed Ba2, Outlook Remains Stable -- ST Bank Deposits, Affirmed NP -- Subordinate, Affirmed B1(hyb)/ B2(hyb) -- BACKED Subordinate, Affirmed Ba3 -- Adjusted Baseline Credit Assessment, Affirmed ba2 -- Baseline Credit Assessment, Affirmed ba2 -- LT Counterparty Risk Assessment, Affirmed Ba1(cr) -- ST Counterparty Risk Assessment, Affirmed NP(cr) Outlook Actions: -- Outlook, Remains Stable PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Banks published in September 2017. PROMTRAKTOR OAO: EGM to Discuss Bankruptcy Application ------------------------------------------------------ Reuters reports that Promtraktor OAO's extraordinary general meeting will discuss an application to arbitration court to declare company's bankruptcy. Promtraktor OAO was founded in 1996 in Russia. The Company's line of business includes manufacturing mining machinery. ========= S P A I N ========= GAS NATURAL: Fitch Hikes Rating on EUR110MM Pref. Shares to BB+ --------------------------------------------------------------- Fitch Ratings has affirmed Gas Natural SDG, S.A.'s Long-Term Issuer Default Rating (IDR) at 'BBB+' with a Negative Outlook. Fitch have also upgraded the outstanding EUR110 million 2005 preference shares' rating to 'BB+' from 'BB'. The rating affirmation is supported by Gas Natural's integrated strong business profile in gas and electricity, largely regulated, and its solid geographical diversification. It also takes into account the recent EUR2.5 billion agreed divestments of 20% of its Spanish gas distribution grids and 100% of its Italian business. The Negative Outlook reflects Fitch expectations of negative free cash flows and financial leverage being above Fitch negative rating guideline in 2017 and 2018, notwithstanding the expected proceeds from the disposals of EUR2.5 billion. In Fitch view, Gas Natural could maintain the current 'BBB+' rating level if the business plan update to be potentially released in 2018 shows a robust reduction in leverage from the current peak (Fitch forecasts 4.6x in 2017), and structurally neutral to positive free cash flows after 2018. KEY RATING DRIVERS Weak Recent Performance: Gas Natural reported weak earnings in 2016 and 1H17 driven by the challenging conditions in the liberalised generation and supply businesses. The weak operational performance, coupled with an ambitious capex plan and onerous dividend policy, has been the main driver of a peak in leverage. Fitch project EBITDA to be below management's guidance of EUR4.7 billion for 2017. Leverage Above Guideline: Fitch estimate that Gas Natural's funds from operations (FFO) adjusted net leverage will be substantially above Fitch negative rating guideline of 4.0x in 2017. It will then improve, but not by enough to meet the guideline in 2018 (4.3x). For 2018, Fitch forecast some recovery for the liberalised businesses supported by higher gas volumes traded and normalised weather conditions, although EBITDA will be below EUR 5.0 billion, according to Fitch projections. Fitch anticipate better results in terms of coverage metrics (comfortably above Fitch negative guideline from 2018) due to the lower financial expenses as a result of the liability management actions taken. Portfolio Reshuffling: Gas Natural recently agreed to sell a 20% stake in the Spanish gas distribution grid and 100% of its Italian businesses (networks and supply). The two deals will bring EUR1 billion cash (or EUR0.7 billion net of associated debt) in 2017 and EUR1.5 billion in 2018, respectively. Fitch final assessment of the impact of these transactions will depend on the allocation of the proceeds between increased capex, debt deleveraging and returns to shareholders. Modest Effect on Cash Flow: Fitch see the Italian transaction as aligned with the company's strategy and expect a moderate negative cash-flow impact for the two combined (around EUR100 million from higher dividends paid to minority interests in Spain and around EUR80 million EBITDA from deconsolidation in Italy). Fitch expect the company's business mix and geographical diversification to improve across the business plan (rating case: from 72% regulated or quasi regulated in 2016 (ex-Electricaribe) to 77% in 2020) thanks to ongoing investments in Latin American networks and renewables. Limited Visibility Beyond 2018: Fitch see the "ambitions" included in current business plan as somewhat outdated in light of the changed scenario since 2015 (when the plan was initially built) and Gas Natural's evolving business and financial profile (ie deconsolidation of Electricaribe, agreed major disposals and 917MW of renewable capacity awarded in the Spanish auctions in 2017). Fitch expect the updated business plan to provide insight on the business mix, the structure of the free cash flows and the leverage pattern in future, which in combination will materially impact the company's rating. Bottom for Spanish Generation in 2017: In 2016 electricity generation and supply in Spain was affected by pool price volatility and a low thermal gap (negative for CCGTs). In 1H17 the situation was exacerbated by the combination of abnormal weather conditions (limited rain and low winds), an increase in commodity prices, high pool prices and inability to pass generation costs onto final customers. Fitch expect that the situation will revert from 2018 with normalised weather conditions and gradual improvement in supply margins. In addition, recently awarded renewables capacity will improve the company's fleet diversification by fuel. Electricity generation and supply in Spain made up 14% of EBITDA in 2016 (9% in 1H17). Low Gas Supply Margins: The gas supply business including LNG supplies continues to be challenged by thinner margins, partly due to lower gas prices and a reduced gas price differential between Europe and Asia. In addition to the commodities challenge, there is an element of changing market dynamics due to current gas market oversupply (mainly due to US shale gas but also due to weaker global demand) that is putting additional pressure on margins. New Gas Procurement Conditions: Low margins are partially offset by new gas volumes and increased fleet flexibility after 2018. In addition, around 50% of the procurement gas contracts will be reviewed in 2018 in a positive price context. Gas Supply (not including gas infrastructures) made up 11% of EBITDA in 2016. 2005 Outstanding Preference Shares Upgraded: Fitch upgraded the EUR110 million outstanding 2005 preference shares to 'BB+' from 'BB', due to the full redemption of senior ranked 2003 preference shares that were rated 'BB+' by Fitch. The notch differential between the two issues was related to the 2005 preference shares' subordination relative to the previous issuance in 2003. Fitch see the constraining factor removed, and have thus upgraded the instrument. DERIVATION SUMMARY The company has a strong business profile, integrated in gas and electricity, and with geographical diversification in Latin America. Around 60% of its EBITDA (ex-Electrocaribe) is derived from regulated activities (gas and electricity distribution grids), with an additional 12% of quasi-regulated and long-term contracted activities. This is similar to equally rated peers Iberdrola (BBB+/Stable) and Enel (BBB+/Stable), and better than EDP (BBB-/Stable), its closest peers. Fitch sees Iberdrola and Enel's debt capacity as slightly higher than Gas Natural's (guideline for downgrade to 'BBB' at 4.5x compared with 4.0x for Gas Natural), mainly due to the greater scale, stronger economic environment and better competitive positioning in renewables of Iberdrola and Enel. Gas Natural's exposure to the gas supply segment affected by thinner margins and current gas market oversupply is seen as riskier, although this is in line with that of Engie (A/Stable). Similarly to Iberdrola and Enel, Gas Naturals could benefit from uplift to the senior unsecured rating, reflecting above-average recovery prospect assumptions, but is constrained by the sovereign rating. KEY ASSUMPTIONS Fitch's key assumptions within Fitch rating case for the issuer include: - execution of the sale agreements for the 20% sale of the Spanish gas distribution grids (2018) and 100% of the Italian business (2017); - cash proceeds largely used for a combination of capex step-up and debt deleverage; - EBITDA CAGR of around 3% for 2016-2020; - 2017 expected EBITDA is below company's guidance of EUR4.7 billion, given worse than expected Spanish electricity generation and poor supply business performance; - increasing dividends paid to minorities to around EUR300 million per year (not including around EUR60 million of interest cost from Hybrids that the company reports as minority interests); - gas tariff deficit regulatory receivables sale in Spain for around EUR320 million in 2017; - new debt issued at 100bp over the average cost of debt at end- 2016; - annual capex of EUR2.6 billion on average up to 2018 and slightly above EUR3 billion for 2019 -2020, including gas tanker investments and Fitch assumption of cash sales proceeds partially reinvested from 2019; - dividends in accordance with the company's current strategic plan based on a 70% payout ratio and EUR1 per share floor announced by the company in March 2016, with this policy remaining in place until 2020; - depreciation of all Latin American currencies against the dollar and the euro. RATING SENSITIVITIES Future Developments That May, Individually or Collectively, Lead to Positive Rating Action The Outlook is Negative and Fitch therefore do not expect an upgrade. Future developments that may nevertheless lead to positive rating action (revision of Outlook to Stable) include: - expected FFO adjusted net leverage approaching 4.0x, coupled with FFO fixed charge cover above 4.5x and the projected FCF returning structurally to positive territory. Future Developments That May, Individually or Collectively, Lead to Negative Rating Action - FFO adjusted net leverage above 4.0x and FFO fixed charge coverage below 4.5x on sustained basis and failure to generate positive FCF within this business plan. - Substantial deterioration of the operating environment or further government measures substantially reducing cash flows. - Substantial decrease in the share of regulated and quasi- regulated EBITDA leading to lower cash-flow visibility. LIQUIDITY Healthy Liquidity: As of 30 June 2017 Gas Natural had EUR1.4 billion of available cash and cash equivalents and EUR7.2 billion of undrawn committed banking facilities. It has EUR4.8 billion of maturities in the next 24 months, while Fitch expects Gas Natural's FCF to be negative EUR1.4 billion up until June 2019. This liquidity position is enough to cover debt maturities over the next 24 months. In addition, Fitch expect the company to cash in EUR2.5 billion of already agreed divestments. FULL LIST OF RATING ACTIONS Gas Natural SDG, S.A. Long-Term IDR affirmed at 'BBB+', Outlook Negative Short-Term IDR affirmed at 'F2' Gas Natural Fenosa Finance BV Senior unsecured rating affirmed at 'BBB+' Euro commercial paper programme rating affirmed at 'F2' Subordinated hybrid capital securities' rating affirmed at 'BBB-' Gas Natural Capital Markets, S.A. Senior unsecured rating affirmed at 'BBB+' Union Fenosa Preferentes, S.A. Subordinated debt rating upgraded to 'BB+' from 'BB' GENERALITAT DE CATALUNYA: Moody's Affirms Ba3 Debt Ratings ---------------------------------------------------------- Moody's Investors Service has affirmed the Generalitat de Catalunya's long-term issuer and debt ratings of Ba3 and short- term rating of NP. The region's rating outlook remains negative. Moody's decision to affirm the region's ratings reflects Moody's view that the central government's reinforced control over the region following the invocation of Article 155 of the Spanish constitution by the central government compensates for the increased idiosyncratic risks, in particular the rapidly deteriorating business climate in the region. RATINGS RATIONALE RATIONALE FOR THE AFFIRMATION The affirmation of the Ba3 long-term issuer and debt ratings reflects the high extraordinary support received from the central government to date via the "Fondo de Liquidez Autonomico" (FLA) and Moody's expectation that support would continue to be forthcoming. This was confirmed on 28 September when the central government, as part of the FLA, approved EUR1.97 billion to cover the region's financing needs for the last quarter of the year. Since 16 September, the central government temporarily took control of the region's treasury, ensuring that payments will be made to creditors, suppliers and civil servants. With the invocation of Article 155 until at least the next regional elections on 21 December, the central government further extends its control of the region. As a result, it now has the ability to manage the region's revenue, expenditure, treasury and financial policy, which leads Moody's to believe that debt service payments will be covered by the central government. In 2017, Catalonia has received a total of EUR7.3 billion from the FLA to cover all its financing needs, including long-term debt redemptions with national and international financial institutions on bonds and bank loans, the annual deficit and the region's commercial debt obligations. Moody's has lowered the region's baseline credit assessment (BCA) to caa2 from caa1 to reflect the deterioration in the standalone credit profile of the region. The change in the BCA reflects increasing political tensions between the region and the central government after Catalunya's unilateral declaration of independence on 27 October. The escalation in political tensions, which followed the illegal independence referendum held on 1 October, led around 1,500 companies to move their headquarters out of the region. Moody's believes that the political instability will negatively affect the region's economy, in particular foreign investor sentiment and the tourism sector, and add pressure to the region's already weak finances. While the region's financial performance improved in 2016, it remains fundamentally weak, as evidenced by negative gross operating balance (-4%), high financing deficit (-9%) and very high debt burden (net direct and indirect debt to operating revenue was 300% in 2016). In Moody's view, the region's rapidly deteriorating economic environment anticipated in Q4 2017 and in 2018 will jeopardize Catalunya's financial recovery as it will impact negatively on regional tax receipts in 2017 and 2018, in particular property transfer taxes. RATIONALE FOR THE NEGATIVE OUTLOOK The negative outlook reflects persistent political uncertainties and negative repercussions on the regional economy. While the central government has convened regional elections on 21 December 2017, there is uncertainty around the outcome given the very tense political climate in the region. In addition, the negative outlook reflects possible implementation challenges of Article 155, which has never been implemented before. WHAT COULD CHANGE THE RATINGS UP/DOWN Given the negative outlook, an upgrade to the region's rating is unlikely in the next 12 to 18 months. In contrast, the ratings could be downgraded if Moody's sees significant challenges over the effective implementation of Article 155. Although unlikely, any lessening of government support towards the region would prompt a downgrade. A material change in Moody's view of susceptibility to event risk required the publication of this credit rating action on a date that deviates from the previously scheduled release date in the sovereign release calendar, published on www.moodys.com. The specific economic indicators, as required by EU regulation, are not available for Catalunya, Generalitat de. The following national economic indicators are relevant to the sovereign rating, which was used as an input to this credit rating action. Sovereign Issuer: Spain, Government of GDP per capita (PPP basis, US$): 36,347 (2016 Actual) (also known as Per Capita Income) Real GDP growth (% change): 3.3% (2016 Actual) (also known as GDP Growth) Inflation Rate (CPI, % change Dec/Dec): 1.6% (2016 Actual) Gen. Gov. Financial Balance/GDP: -4.5% (2016 Actual) (also known as Fiscal Balance) Current Account Balance/GDP: 1.9% (2016 Actual) (also known as External Balance) External debt/GDP: [not available] Level of economic development: High level of economic resilience Default history: No default events (on bonds or loans) have been recorded since 1983. On October 30, 2017, a rating committee was called to discuss the rating of the Catalunya, Generalitat de. The main points raised during the discussion were: The systemic risk in which the issuer operates has not materially changed. Other views raised included: The issuer's economic fundamentals, including its economic strength, have materially decreased. LIST OF AFFECTED RATINGS Outlook Actions: Issuer: Catalunya, Generalitat de -- Outlook, Remains Negative Affirmations: Issuer: Catalunya, Generalitat de -- Issuer Rating, Affirmed Ba3 -- Senior Unsecured Commercial Paper, Affirmed NP -- Senior Unsecured Medium-Term Note Program, Affirmed (P)NP -- Senior Unsecured Medium-Term Note Program, Affirmed (P)Ba3 -- Senior Unsecured Regular Bond/Debenture, Affirmed Ba3 The principal methodology used in these ratings was Regional and Local Governments published in June 2017. The weighting of all rating factors is described in the methodology used in this credit rating action, if applicable. =========== S W E D E N =========== SSAB AB: S&P Raises CCR to 'BB-' on Strengthened Credit Metrics --------------------------------------------------------------- S&P Global Ratings raised its long-term corporate credit rating on Swedish steelmaker SSAB AB to 'BB-' from 'B+'. At the same time, S&P affirmed the 'B' short-term corporate credit rating. The outlook is stable. S&P said, "We also raised our issue rating on SSAB's senior unsecured debt to 'BB-' from 'B+'. The recovery rating on this debt is unchanged at '3' indicating our expectation of meaningful recovery (50%-70%; rounded estimate: 55%) in the event of a payment default. "The upgrade follows strong results reported for the first nine months of 2017 and reflects our view that SSAB has made good progress in debt and cost reduction amid improved steel market conditions in Europe and the U.S. following the introduction of import duties, notably on steel from China. "It also reflects that we expect SSAB to continue to work toward its net debt reduction target of Swedish krone (SEK) 10 billion (EUR1,028 million) by the end of 2017. We expect it to repay another SEK4.5 billion of debt in 2017 and 2018 using existing cash and short-term deposits. We anticipate 2017 full-year EBITDA of above SEK7.5 billion (versus SEK5.2 billion in 2016 and SEK6 billion for the first nine months of 2017). "We continue to view favorably SSAB's 30% net debt-to-equity target, compared with the reported ratio of 27% on Sept. 30, 2017. The company has generated positive discretionary cash flow over the past three years, helped in 2016 by positive working capital movements and no dividend payment. We expect positive discretionary cash flow to continue in 2017, supported by higher earnings, continued low capex, and no dividend payment. "The stable outlook reflects our expectation that leverage should continue to decline in 2017 on the back of a supportive industry environment and positive discretionary cash flow generation. We expect debt to EBITDA to be at the low end of the 3x-4x range (2.9x for the 12 months to Sept. 30, 2017) that we see as supportive for the 'BB-' rating through the cycle. Also, FFO to debt should be at the high end of the 20%-30% range (27.5% for the 12 months to Sept. 30, 2017). We view positively the improved market conditions in Europe and the U.S., helped by antidumping measures taken by the relevant authorities. "Although not expected over the next 12 months, we could lower the ratings if steel market conditions deteriorated sharply, so that adjusted debt to EBITDA increased to above 4x or FFO to debt fell below 20%, or if the currently strong liquidity position weakened. "We could consider a higher rating if SSAB were to continue deleveraging (including a reduction in gross debt), with debt to EBTIDA comfortably in the 2x-3x range and FFO to debt of 30%-45% consistently over a cycle. Upside could also be driven by improvement in company's operating margins and overall competitive position in the coming years." ============= U K R A I N E ============= CB PRIVATBANK: Fitch Raises Long-Term IDR to B-, Outlook Stable --------------------------------------------------------------- Fitch Ratings has upgraded the Long-Term Foreign Currency Issuer Default Rating (IDR) of PJSC CB PrivatBank (Privat) to 'B-' from 'RD' (Restricted Default). The Outlook on the Long-Term IDR is Stable. Fitch has also upgraded the bank's Viability Rating (VR) to 'b-' from 'f'. KEY RATING DRIVERS IDRS, VR, NATIONAL RATING The upgrade of the Long-Term Foreign Currency IDR reflects the upgrade of Privat's VR to 'b-' from 'f'. The upgrade of the Long-Term Local Currency IDR to 'B-' from 'CCC' is also driven by the upgrade of the VR. The Local Currency IDR, which had been on Rating Watch Evolving (RWE), was not downgraded to 'RD' prior to the upgrade, as Fitch understands there has been no bail-in of third-party local currency obligations of the bank. The upgrade of Privat's National Long-Term Rating to 'AA-(ukr)' from 'BB(ukr)' reflects the upgrade of the IDRs. The National rating is one notch lower than that of two other Fitch-rated state-owned Ukrainian banks, Oschadbank and Ukreximbank, which are each also rated 'B-/Stable', as Fitch views both Privat's stand-alone credit profile and the reliability of government support as somewhat weaker than for the two peers. The upgrade of Privat's VR reflects the stabilisation of the bank's credit profile following rehabilitation procedures implemented by the authorities after its nationalisation, reduced refinancing risks after the bail-in of senior unsecured debt and improved liquidity position. However, the VR also factors in the bank's modest capitalisation, even after the completion of the remaining rehabilitation procedures planned in 4Q17, and weak pre-impairment profitability. Net loans fell to a low 19% of total assets at end-1H17 from over 70% at end-3Q16 as a result of large loan loss provisions created after nationalisation. Other assets were mostly government securities, mainly received as capital injection since December 2016 (47% of assets), cash and placements with western banks (14%), and foreclosed real estate (9%). Holdings of state securities were equivalent to approximately 3.3x of Fitch Core Capital (FCC) at end-7M17. Non-performing loans (NPLs) comprised 88% of gross loans at end- 1H17 and largely included a stock of legacy exposures issued to parties related to the former shareholders of the bank. These were 91% covered by specific reserves and the bank targets increasing coverage closer to 100% by end-2017. Foreclosed real estate, net of reserves, should decrease to about 25% of forecast end-2017 FCC after further provisioning of these assets in 4Q17. Other loans (64% of net loans, 12% of assets) largely comprised retail credit card exposures. Vintages suggest decent performance of recent credit card generations. Therefore, Fitch do not expect significant inflow of losses from this portfolio; coverage of retail NPLs by specific reserves was a high 91% at end-1H17. Privat's regulatory total capital adequacy ratio (CAR) was 15.9% at end-7M17 after capital injection totalling UAH150 billion (equal to 60% of end-7M17 assets). An additional planned equity injection of UAH16 billion in November 2017 should enable the CAR to stay slightly above the minimum 10% level after the bank creates additional provisions of UAH29 billion on NPLs and foreclosed real estate in 4Q17. Potential risks to capital may arise from litigation claims of the bailed-in senior creditors of the bank, which held USD390 million of debt, equal to about 45% of forecast end-2017 FCC. Cash-based recurring pre-impairment operating profitability (ie net of unpaid accruals and FX revaluation result) was weak in 1H17 (equal to about 0.4% of assets) after being negative in 2016. The pre-impairment operating result is expected to remain weak in 2H17 and 2018 due to the high cost of funding and the high share of relatively low-yielding securities, while new lending is limited. It will take the bank time to originate higher-yielding assets (loans) and reduce deposit rates, which are necessary steps to achieve a reasonable level of profitability. Privat is hedged from devaluation risks, although exposed to hryvnia appreciation, as its regulatory open currency position (OCP) is long (150% of capital at end-7M17) given the treatment of dollar-linked sovereign bonds as USD exposures. However, the bank reports a large short OCP in IFRS accounts (over 300% of capital) as these sovereign bonds are treated as Ukrainian hryvnia assets in IFRS. Privat is predominantly customer-funded. Deposits accounted for 91% of liabilities at end-1H17, with 80% of these coming from retail customers. Retail deposits are largely foreign currency- denominated and short-term (up to one year), and may show volatility during times of stress. About 6% of funding is represented by UAH-denominated stabilisation loan from the National Bank of Ukraine (NBU). External funding is now just 1% of liabilities (after the debt bail-in) and comprises credit facilities from foreign banks. Liquidity in foreign currency (about USD0.8 billion at end-July 2017) has improved as a result of the gradual purchase of FX on the market, and provides reasonable coverage of the bank's FX- retail funding (USD3.5 billion). Stabilised deposit trends and limited external repayments lower immediate risks to FX liquidity. Liquidity in local currency is underpinned by a large volume of government bonds, which the bank may sell or refinance with the NBU. SUPPORT RATING AND SUPPORT RATING FLOOR The support rating of '5' and Support Rating Floor of 'B-' reflects Fitch's view that the authorities will likely have a high propensity to support the bank given the state ownership, particularly in local currency. Privat is 100% owned by the government of Ukraine through the Ministry of Finance. The view on support also reflects Privat's systemic importance, given its 36% market share in retail deposits, the large capital support made available by the government post-nationalisation and the limited non-deposit liabilities remaining at the bank. The ability to provide support to the bank in case of need, in particular in foreign currency, is viewed as limited given the sovereign's 'B-' Long-Term Foreign-Currency IDR, and the country's still weak external finances. Fitch views the state ownership of Privat as non-strategic given that it arose from rescue, rather than policy objectives. However, Fitch believe the potential full or partial privatisation of the bank is unlikely to happen in the near term. RATING SENSITIVITIES The bank's IDRs, VR, SRF would likely all be downgraded in case of a downgrade of the sovereign rating. However, an upgrade of the sovereign would not automatically result in an upgrade of either the bank's VR or the SRF (the latter given the sovereign's non-strategic ownership) and therefore may not impact the IDRs. An upgrade of the bank's VR would require both a sovereign upgrade and a strengthening of the bank's performance and capital. The VR could be downgraded in the case of a sovereign downgrade, the recognition of further asset impairment not adequately offset by capital support from the authorities, or deposit outflows that sharply erode the bank's liquidity, in particular in foreign currency. The rating actions are: Long-Term Foreign Currency IDR: upgraded to 'B-' from 'RD', Outlook Stable Long-Term Local Currency IDR: upgraded to 'B-' from 'CCC', Outlook Stable, off RWE Short-Term Foreign Currency IDR: upgraded to 'B' from 'RD' Viability Rating: upgraded to 'b-' from 'f' Support Rating: affirmed at '5' Support Rating Floor: revised to 'B-' from' NF' National Long-Term Rating upgraded to 'AA-(ukr)' from 'BB(ukr)', outlook Stable, off RWE. =========================== U N I T E D K I N G D O M =========================== IRON MOUNTAIN: Moody's Rates GBP400MM New Senior Notes Ba3 ---------------------------------------------------------- Moody's Investors Service assigned a Ba3 rating to the GBP400 million of new senior notes being issued by Iron Mountain (UK) PLC, a wholly owned, indirect subsidiary of Iron Mountain Incorporated ("Iron Mountain"). Iron Mountain's Ba3 Corporate Family Rating (CFR), the existing ratings for debt at the parent company and its subsidiaries, and stable rating outlook are not affected. The company plans to use the proceeds from the new debt issuance and revolver borrowings to redeem the GBP400 million of 6.125% senior notes at its Iron Mountain Europe PLC subsidiary. RATINGS RATIONALE The proposed refinancing transactions will be leverage neutral and will result in modest interest expense savings. At the end of 3Q 2017, Iron Mountain's leverage increased to 5.7x (Moody's adjusted total debt to EBITDA), from 5.5x at previous quarter, despite EBITDA growth. Iron Mountain's CFR remains weakly positioned in the Ba3 category and reflects its elevated leverage and Moody's expectations for free cash flow deficits through at least 2019. Moody's expects EBITDA growth from a combination of organic revenue growth of about 2%, synergies from the Recall transaction and other acquisitions to drive leverage to below 5x over the next 2 to 3 years. In addition, Moody's believes that periodic equity issuances under Iron Mountain's new $500 million At The Market equity program will modestly alleviate leverage as the company will use the proceeds to expand its data center footprint and adjacent storage business. The Ba3 CFR is supported by Iron Mountain's leading market position in the North America storage and information management market, large base of recurring storage rental revenues and its expanded geographical footprint and scale after the acquisition of Recall. Iron Mountain's strong brand and market share in North America afford the pricing power that supports its strong EBITDA margins. At the same time, the company faces mature demand for its services in developed markets in North America and Western Europe. Iron Mountain (UK)'s new senior notes will be guaranteed on a senior unsecured basis by Iron Mountain and its certain U.S. subsidiaries which account for the majority of its U.S. operations. Because of the guarantees, Moody's considers the new senior notes pari passu in right of payment with Iron Mountain's existing senior unsecured debt and rated the new notes Ba3, equal to the rating for existing senior unsecured obligations at Iron Mountain. The stable outlook reflects Moody's expectations for low single digit organic revenue growth and modest declines in leverage. Moody's could downgrade Iron Mountain's ratings if deterioration in earnings or changes in financial policy lead Moody's to believe that total debt to EBITDA (Moody's adjusted) is unlikely to be reduced to 5x over time. The rating could also be lowered if Iron Mountain's liquidity weakens materially. Conversely, Moody's could upgrade Iron Mountain's ratings if the company maintains stable organic revenue growth and EBITDA margins, and sustains total debt to EBITDA below 4.5x (Moody's adjusted) and retained cash flow to net debt above 10%. Assignments: Issuer: Iron Mountain (UK) PLC -- GTD GBP$400 million senior notes due 2025, Ba3 (LGD3) Iron Mountain is a global provider of information storage and related services. The principal methodology used in these ratings was Business and Consumer Service Industry published in October 2016. RANGERS FOOTBALL: Oldco Creditors to Get Less Than 4 Pence ---------------------------------------------------------- Robert Collins at The Scottish Sun reports that oldco Rangers creditors will be offered less than 4p in the pound. According to The Scottish Sun, The Daily Record claims to have seen documents revealing unsecured creditors have been told "they may get" an interim dividend of just 3.91p in the pound. That has sparked outrage among some who are furious law firms and liquidators have been paid over GBP12 million since the 2012 financial crisis of "oldco" Gers, The Scottish Sun relates. A 2012 list revealed 276 creditors owed as much as GBP134 million, The Scottish Sun discloses. Legal firms -- London laywers Stephenson Harwood and Edinburgh's Brodies solicitors among them -- have pocketed GBP9.2million since the demise of "oldco" Gers, The Scottish Sun states. Meanwhile, over GBP3.3 million has been paid to liquidators BDO, The Scottish Sun notes. About Rangers Football Club Rangers Football Club PLC -- http://www.rangers.premiumtv.co.uk/ -- is a United Kingdom-based company engaged in the operation of a professional football club. RESIDENTIAL SEC 05-2: S&P Affirms B- Rating on Class E1c Notes -------------------------------------------------------------- S&P Global Ratings raised to 'A (sf)' from 'A- (sf)' its credit ratings on Preferred Residential Securities 05-2 PLC's class A2a, A2c, B1a, B1c, C1a, and C1c notes, and to 'BB- (sf)' from 'B (sf)' its rating on the class D1c notes. At the same time, S&P has affirmed its 'B- (sf)' rating on the class E1c notes. S&P said, "The rating actions follow our Oct. 17, 2017 upgrade of Barclays Bank PLC (see "Prospective Barclays Ring-Fenced Entity Assigned Preliminary 'A/A-1' Ratings, Barclays Bank PLC Raised To 'A/A-1'"). We have conducted our credit and cash flow analysis of the transaction using the most recent information that we have received and the application of our relevant criteria (see "Related Criteria")." In the December 2012 investor report, the servicer (Acenden Ltd.) updated how it reports arrears to include amounts outstanding, delinquencies, and other amounts owed. The servicer's definition of other amounts owed include (among other items), arrears of fees, charges, costs, ground rent, and insurance. Delinquencies include principal and interest arrears on the mortgages, based on the borrowers' monthly installments. Amounts outstanding are principal and interest arrears, after payments from borrowers are first allocated to other amounts owed. In this transaction, the servicer first allocates any arrears payments to other amounts owed, then to interest amounts, and subsequently to principal. From a borrowers' perspective, the servicer first allocates any arrears payments to interest and principal amounts, and secondly to other amounts owed. This difference in the servicer's allocation of payments for the transaction and the borrower, results in amounts outstanding being greater than delinquencies. S&P has refined its analysis of these other amounts owed by using the available reported loan-level data. The new approach results in a decrease in both the weighted-average foreclosure frequency (WAFF) and the weighted-average loss severity (WALS) in this transaction. Acenden references the level of amounts outstanding to arrive at the 90+ days arrears. The transaction pays principal sequentially because the 90+ days arrears trigger of 22.5% remains breached. Total delinquencies decreased to 25.3% (as of September 2017), from 26.6% a year earlier. S&P s aid, "However, we have projected arrears in our credit analysis as delinquencies remain higher than our U.K. nonconforming residential mortgage-backed securities (RMBS) index and the transaction has a low pool factor (the outstanding collateral balance as a proportion of the original collateral balance), potentially exposing the transaction to tail-end risk (see "U.K. RMBS Index Report Q2 2017," published on Sept. 12, 2017)." Rating WAFF WALS level (%) (%) AAA 49.00 33.66 AA 43.73 25.96 A 37.24 13.69 BBB 31.93 7.48 BB 25.85 4.24 B 22.79 2.61 S&P said, "Following our November 2011 lowering of our long- and short-term issuer credit ratings (ICRs) on the bank account provider, Barclays Bank (A/Negative/A-1), the documented 'A-1+' downgrade trigger was breached (see "Barclays Bank PLC Ratings Lowered To 'A+/A-1' From 'AA-/A-1+' On Bank Criteria Change; Outlook Stable," published on Nov. 29, 2011). Because no remedy actions were taken following our November 2011 downgrade, our current counterparty criteria cap the maximum potential rating on the notes in this transaction at our 'A' long-term ICR on Barclays Bank (see "Counterparty Risk Framework Methodology And Assumptions," published on June 25, 2013). In accordance with our current counterparty criteria, Barclays Bank can support a maximum potential rating of 'A' (the long-term ICR) in this transaction. "Our credit and cash flow analysis indicates that the available credit enhancement for the class A2a, A2c, B1a, B1c, C1a, C1c, and D1c notes is commensurate with higher ratings than those currently assigned. We have therefore raised to 'A (sf)' from 'A- (sf)' our ratings on the class A2a, A2c, B1a, B1c, C1a, and C1c notes, and to 'BB- (sf)' from 'B (sf)' our rating on the class D1c notes. "At the same time, we consider the available credit enhancement for the class E1c notes to be commensurate with the currently assigned rating. We have therefore affirmed our 'B- (sf)' rating on the class E1c notes." Preferred Residential Securities 05-2 is a securitization of nonconforming U.K. residential mortgages originated by Preferred Mortgages Ltd. RATINGS LIST Class Rating To From Preferred Residential Securities 05-2 PLC EUR125 Million, GBP183.85 Million, $70.5 Million Mortgage- Backed Floating-Rate Notes Ratings Raised A2a A (sf) A- (sf) A2c A (sf) A- (sf) B1a A (sf) A- (sf) B1c A (sf) A- (sf) C1a A (sf) A- (sf) C1c A (sf) A- (sf) D1c BB- (sf) B (sf) Rating Affirmed E1c B- (sf) UNIQUE PUB: Fitch Affirms B+ Rating on Class M Notes ---------------------------------------------------- Fitch Ratings has affirmed Unique Pub Finance plc's (Unique) class A notes at 'BB', class M notes at 'B+' and class N notes at 'B'. The Outlooks are Stable. KEY RATING DRIVERS Unique's leased/tenanted business model hinders the group's ability to adapt to the dynamic and increasingly competitive UK eating and drinking out market. The fully amortising debt, strong liquidity and deferability of the junior notes mitigate covenant weaknesses such as the restricted payment covenant. The class A4 2027 notes suffer concurrent amortisation with the junior and deferrable class M 2024 notes. The ratings reflect the currently low free cash flow debt service cover ratios (FCF DSCR) until 2021 when the class A3 notes are repaid. Structural Decline but Strong Culture - KRD: Industry Profile - Midrange The UK pub sector has a long history, but trading performance has shown significant weakness in the past. The sector has been in structural decline for the past three decades due to demographic shifts, pricing pressure, greater health awareness and the growing presence of competing offerings. Exposure to discretionary spending is high and revenues are therefore linked to the broader economy. Competition is high, including off-trade alternatives, and barriers to entry are low. Despite the on-going contraction, Fitch views the sector as sustainable in the long term, supported by the strong UK pub culture. Sub-KRDs: operating environment - weaker, barriers to entry - midrange, sustainability - midrange. Experienced Operator, Well-Maintained Estate - Revenue Risk (Volume): Stronger Unique is 100% owned by Ei Group (formerly Enterprise Inn PLC), a large and experienced UK pub operator sector with economies of scale but limited use of branding. As the estate is fully leased or tenanted, insight into underlying profitability is weak. Operator replacement would be difficult but possible within a reasonable period of time. Centralised management of the estate and common supply contracts result in close operational ties between the securitised and non-securitised estates. Fitch considers the pubs to be reasonably well-maintained and over 90% of the estate is held on a freehold or long-leasehold basis. In September 2016, the Unique estate was valued at GBP1,730 million and a fairly high average pub value of GBP753,000. Over the past few years management has reinvested disposal proceeds into improving its existing estate. There is no minimum capex covenant, but upkeep is largely contractually outsourced to more than half of tenants on full repair and insuring leases. The secondary market is liquid and there is value in the estate on alternative use such as residential property and mini-supermarkets. Sub-KRDs: financial performance - weaker, company operations - midrange, transparency - weaker, dependence on operator - midrange, asset quality - midrange Strong Liquidity Mitigates Weaknesses: Debt Structure: Class A - Midrange, Class M, N: Weaker The debt is fully amortising but there is some concurrent amortisation between the class A and class M junior tranche and debt service is high until 2024. Positive factors include fully fixed-rate debt, which avoids any floating-rate risk and senior- ranking derivative liabilities. The security package comprises comprehensive first ranking fixed and floating charges over borrower assets. Prepayments and purchases result in debt service being one year ahead, compliance under the restricted payment condition (RPC) calculation, and thus allow cash up-streaming. This is a significant credit negative, although recently lower cash dividends were paid. Structural features include a GBP65 million cash reserve and a tranched liquidity facility of GBP152 million as at June 2017, which decreases over time in line with leverage. In Fitch view, the SPV is not a true orphan SPV as the share capital is owned by a subsidiary of Unique and the majority of its directors are not independent. Sub-KRDs: debt profile: class A - midrange, class M and N - weaker, security package: class A - stronger, class M and N - midrange, structural features - weaker Financial Profile Under the Fitch Rating Case (FRC) the projected FCF DSCRs until 2021 are 1.1x, 1.0x and 0.9x for the class A, M and N notes respectively, in line with the previous year. The same ratios are 1.8x, 1.0x and 1.3x until their respective final legal maturities. The ratios are quoted as the minimum of the either the average or median over the period. PEER GROUP Like Punch Taverns Finance B Limited (Punch B), Unique is linked to the broader UK economic cycle and has a large portfolio of mainly tenanted pubs. Punch B class A notes have comparable projected FCF DSCRs to Unique, and slightly stronger leverage, but the refinance risk, which is unusual in UK WBS, justifies more headroom for the same rating. RATING SENSITIVITIES Future Developments That May, Individually or Collectively, Lead to Negative Rating Action: - Any deterioration of the projected FCF DSCRs below current levels for each class to 1.0x, 0.9x and 0.8x for the class A, M, and N notes respectively until 2021, when the class A3 notes will be amortised. Future Developments That May, Individually or Collectively, Lead to Positive Rating Action: - Forecasted FCF DSCRs consistently above 1.3x, 1.1x and 1.0x for the class A, M and N notes respectively until 2021, when the class A3 notes will be amortised. * UK: Number of Firms in "Significant Distress" Soars in 2016 ------------------------------------------------------------- Jack Torrance at The Telegraph reports that the number of firms in "significant" financial distress has soared to almost half a million in the past year, prompting worries that the anticipated interest rate hike could send thousands to the wall. More than 448,000 companies were in trouble at the end of September, up 27% on last year, The Telegraph relays, citing research by business recovery specialist Begbies Traynor. Julie Palmer -- julie.palmer@begbies-traynor.com -- a partner at Begbies Traynor, said businesses had taken "too many risks after being lulled into a false sense of security" by low interest rates, The Telegraph relates. Fewer businesses failed than expected in the aftermath of the financial crisis, Ms. Palmer told The Telegraph, as banks were happy to let them carry on servicing heavy debts. "But now we are starting to see this churn where we're seeing more signs of significant distress. It's already beginning to come through in terms of increasing business failures and rising insolvency rates, and I think that trend will only continue," The Telegraph, quotes Ms. Palmer as saying. The total figure includes around 250,000 so-called "zombie" businesses with a negative net worth, kept alive by low interest rates and a flexible labor market but unable to invest in growth, The Telegraph discloses. The rise in distressed companies affected every region and sector of the UK economy, but the professional and financial services industries were particularly affected, with respective increases of 42% and 34% over the past year, The Telegraph notes. * David Manson to Join Paul Hastings' London Office --------------------------------------------------- Paul Hastings LLP, a global law firm, on Nov. 2 disclosed that restructuring partner David Manson will be joining the London office. He joins from White & Case where he was a partner. His arrival follows last year's addition of industry leader David Ereira. "David's expertise and relationships will be an asset to our growing London restructuring practice," said Seth Zachary, chair of Paul Hastings. "He has played a major role on some of the most challenging global cross-border restructurings and our lawyers on both sides of the Atlantic are looking forward to working with him." Mr. Manson regularly advises banks, noteholders, funds, insolvency practitioners, and companies on all aspects of domestic and cross-border restructuring transactions, as well as assisting them with as a broad range of finance matters. Paul Hastings has taken a leading role in several of the most high-profile restructurings in the last year, including the complex and innovative restructurings of the Co-operative Bank, Gulf Keystone Petroleum, and Petroceltic. Paul Hastings' leading restructuring and finance practices continue to receive recognition for their work, including being named "Restructuring Team of the Year" at the 2016 British Legal Awards and commended in the Financial Times' Innovative Lawyers Report 2017. The firm was shortlisted for "Restructuring Team of the Year" and "Finance Team of the Year" at The Lawyer Awards 2017, as well as for "Restructuring Team of the Year" at the IFLR Europe Awards 2017, the Legal Business Awards 2017, and the upcoming 2017 British Legal Awards. =============== X X X X X X X X =============== * EMEA Cos. at Highest Default Risk Continue to Fall in Q3 2017 --------------------------------------------------------------- The number of EMEA speculative-grade companies at the highest risk of default (i.e., rated B3 negative and lower) fell for the second consecutive quarter in Q3 2017, dropping to 48 at the end of September from 52 at the end of June, as upgrades outpaced downgrades, says Moody's Investors Service in a report published. "While the positive ratings trend is unlikely to suddenly reverse given the current favourable macroeconomic outlook in Europe, the number of companies at highest default risk could start to rise again if weaker single-B companies perform below expectations," says Matteo Versiglioni, an Analyst at Moody's. There were five upgrades, three downgrades and two withdrawals in Q3 2017. The proportion of B3-PD negative and lower companies, as a percentage of all the speculative-grade companies Moody's rates in the EMEA region, has now fallen to 10.8%, below the 11.9% long-term average. The energy and metals & mining sectors saw two positive rating actions and one withdrawal in Q3, which reduced the number of these companies on the list of companies at highest default risk to 13 from 16 at the end of June. These sectors have the highest proportion of companies on the list relative to other sectors. In the retail sector, the number of companies on the list rose in the last nine months to five from three a year earlier, driven by the weakening performance among the rated UK-based retailers New Look, House of Fraser and BrightHouse Group. The stabilisation of commodity prices and the large number of stable or positive industry sector outlooks in EMEA limit the probability of wide sector-focused downgrades, as happened in the energy and metals & mining sectors in 2015-16. However, given the very high level of companies with stable and positive outlooks, it is reasonable to assume, although not expected in the near term, some rebalancing toward a higher percentage of negative outlooks over time. As such, in the medium term, Moody's expects positive pressure from macroeconomic factors to be balanced by negative actions among single-B rated companies with more aggressive capital structures. The EMEA Liquidity Stress Indicator (LSI) fell to 8.6% at the end of September 2017, from 8.8% in June 2017, and close to its lowest level on record of 8.4% reached in July 2017. The LSI, excluding energy and metals & mining companies, has remained stable at 7.5% since May. Moody's expects the Composite LSI for all sectors to remain at a similar level in the next 12 months, supported by a good liquidity profile as a result of positive operating performances and significant refinancing activities in the last nine months. Moody's report, "B3 negative and lower ratings -- EMEA: Upgrades lead the way in the third quarter," is available on www.moodys.com. * BOOK REVIEW: Oil Business in Latin America: The Early Years ------------------------------------------------------------- Author: John D. Wirth Ed. Publisher: Beard Books Softcover: 282 pages List price: $34.95 Review by Gail Owens Hoelscher Buy a copy for yourself and one for a colleague on-line at http://is.gd/DvFouR This book grew out of a 1981 meeting of the American Historical Society. It highlights the origin and evolution of the stateowned petroleum companies in Argentina, Mexico, Brazil, and Venezuela. Argentina was the first country ever to nationalize its petroleum industry, and soon it was the norm worldwide, with the notable exception of the United States. John Wirth calls this phenomenon "perhaps in our century the oldest and most celebrated of confrontations between powerful private entities and the state." The book consists of five case studies and a conclusion, as follows: * Jersey Standard and the Politics of Latin American Oil Production, 1911-30 (Jonathan C. Brown) * YPF: The Formative Years of Latin America's Pioneer State Oil Company, 1922-39 (Carl E. Solberg) * Setting the Brazilian Agenda, 1936-39 (John Wirth) * Pemex: The Trajectory of National Oil Policy (Esperanza Duran) * The Politics of Energy in Venezuela (Edwin Lieuwen) * The State Companies: A Public Policy Perspective (Alfred H. Saulniers) The authors assess the conditions at the time they were writing, and relate them back to the critical formative years for each of the companies under review. They also examine the four interconnecting roles of a state-run oil industry and distinguish them from those of a private company. First, is the entrepreneurial role of control, management, and exploitation of a nation's oil resources. Second, is production for the private industrial sector at attractive prices. Third, is the integration of plans for military, financial, and development programs into the overall industrial policy planning process. Finally, in some countries is the promotion of social development by subsidizing energy for consumers and by promoting the government's ideas of social and labor policy and labor relations. The author's approach is "conceptual and policy oriented rather than narrative," but they provide a fascinating look at the politics and development of the region. Mr. Brown provides a concise history of the early years of the Standard Oil group and the effects of its 1911 dissolution on its Latin American operations, as well as power struggles with competitors and governments that eventually nationalized most of its activities. Mr. Solberg covers the many years of internal conflict over oil policy in Argentina and YPF's lack of monopoly control over all sectors of the oil industry. Mr. Wirth describes the politics and individuals behind the privatization of Brazil's oil industry leading to the creation of Petrobras in 1953. Mr. Duran notes the wrangling between provinces and central government in the evolution of Pemex, and in other Latin American countries. Mr. Lieuwin discusses the mixed blessing that oil has proven for Venezuela., creating a lopsided economy dependent on the ups and downs of international markets. Mr. Saunders concludes that many of the then-current problems of the state oil companies were rooted in their early and checkered histories." Indeed, he says, "the problems of the past have endured not because the public petroleum companies behaved like the public enterprises they are; they have endured because governments, as public owners, have abdicated their responsibilities to the companies." Jonh D. Wirth is Gildred Professor of Latin American Studies at Standford University. ********* 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 * * *