/raid1/www/Hosts/bankrupt/TCREUR_Public/171110.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 10, 2017, Vol. 18, No. 224
Headlines
C R O A T I A
AGROKOR DD: Recognizes Debt Claims of HRK41.2 Billion
AGROKOR: Croatian Law Recognized as Insolvency Proceeding in UK
G E O R G I A
GEORGIA: S&P Affirms 'BB-/B' Sovereign Credit Ratings
I R E L A N D
BLACK DIAMOND 2017-2: Moody's Assigns (P)B2 Rating to Cl. F Notes
HARBOURMASTER PRO-RATA 3: Fitch Affirms B Rating on Class B2 Debt
L U X E M B O U R G
BEFESA SA: Moody's Assigns Ba3 CFR, Outlook Positive
N E T H E R L A N D S
NXP BV: Broadcom Unsolicited Offer No Impact on Moody's Ba1 CFR
PLAYA RESORTS: Moody's Hikes CFR to B2, Outlook Stable
P O L A N D
VISTAL GDYNIA: Credit Agricole Demands Payment of PLN2.5 Million
P O R T U G A L
CAIXA ECONOMICA: Moody's Affirms B3 Long-Term Deposit Rating
R O M A N I A
RAIFFEISEN BANK: Moody's Hikes ba2 Baseline Credit Assessment
S P A I N
IM GRUPO: Moody's Affirms Caa2 Rating on Class B Notes
S W E D E N
SAMHALLSBYGGNADSBOLAGET I: Moody's Assigns B1 CFR, Outlook Stable
U K R A I N E
BANK BOGUSLAV: Declared Insolvent by National Bank of Ukraine
U N I T E D K I N G D O M
COLOUR BIDCO: Moody's Assigns (P)B3 Corporate Family Rating
FOUR SEASONS: Terra Firma to Hand Over Ownership to Creditors
MARKETPLACE 2017-1: Moody's Assigns B3 Rating to Cl. E Notes
SNOOZEBOX HOLDINGS: Appoints Administrators, Shares Suspended
TURBO FINANCE 5: Moody's Affirms Ba1 Rating on Class C Notes
X X X X X X X X
* BOOK REVIEW: Lost Prophets -- An Insider's History
*********
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C R O A T I A
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AGROKOR DD: Recognizes Debt Claims of HRK41.2 Billion
-----------------------------------------------------
Igor Ilic at Reuters reports that Croatian food company Agrokor
said on Nov. 9 it recognized debt claims against it worth HRK41.2
billion (US$6.35 billion), adding it disputed an additional
HRK16.5 billion.
According to Reuters, Agrokor, the biggest employer in the
Balkans with around 60,000 staff, is restructuring under a state-
appointed crisis manager and has until July 2018 to achieve a
final settlement with creditors to avoid bankruptcy.
Its owner Ivica Todoric, who was detained and released on bail in
London on Nov. 7, and 14 other people are being investigated over
Agrokor's problems, Reuters discloses.
Agrokor's creditors include bondholders, local and foreign banks
as well as suppliers, Reuters states. The biggest single debt,
around EUR1.1 billion, is held by Russia's Sberbank, Reuters
notes.
Sberbank's claim remains disputable because it had launched legal
proceedings against Agrokor companies in other countries,
including Serbia and Bosnia, to get part of the debt repaid,
Reuters says.
Crisis manager Ante Ramljak said that if Sberbank withdraws these
legal proceedings its debt could be recognized by Agrokor's
crisis management, Reuters relates.
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.
AGROKOR: Croatian Law Recognized as Insolvency Proceeding in UK
---------------------------------------------------------------
Luca Casiraghi, Jasmina Kuzmanovic and Jeremy Hodges at Bloomberg
News report that a London judge accepted Agrokor d.d.'s request
to recognize Croatian legislation as insolvency proceeding in the
U.K., helping the company defuse the risk of arbitration in
Britain.
Judge Paul Matthews ruled on Nov. 9 that the extraordinary
administration governing the overhaul of Croatia's largest
company satisfies the requirements under the Cross Border
Insolvency Regulations, Bloomberg relates. The request for
recognition has been opposed in court by Sberbank PJSC, Agrokor's
largest creditor, Bloomberg notes.
According to Bloomberg, the judge's decision blocks Sberbank's
filing for arbitration in London, through which the Moscow-based
bank sought to recover EUR1.1 billion (US$1.3 billion) invested
in Agrokor.
Sberbank and Agrokor fell out earlier this year after the
Croatian government took over the management of the company and
struck a deal with hedge funds and smaller bank lenders to obtain
new financing, Bloomberg recounts.
The Croatian government blocked debt payments after taking
control of Zagreb-based Agrokor in April under a special law
designed to deal with the failure of a company that generates
sales equal to about 15% of the nation's gross domestic product.
The retailer and foodmaker's debt is estimated at least
EUR6 billion, Bloomberg relays.
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.
=============
G E O R G I A
=============
GEORGIA: S&P Affirms 'BB-/B' Sovereign Credit Ratings
-----------------------------------------------------
On Nov. 3, 2017, S&P Global Ratings affirmed its long- and short-
term foreign and local currency sovereign credit ratings on the
Government of Georgia at 'BB-/B'. The outlook is stable.
OUTLOOK
S&P said, "The stable outlook reflects our expectation that net
general government debt levels will stabilize at around 40% of
GDP, and that Georgia's large current account deficits will be
financed overwhelmingly by net foreign direct investment (FDI),
implying a steady net external debt position as a percentage
of GDP (albeit at high levels) over the next 12 months.
"We could raise the ratings if growth materially exceeds our
current forecasts or if we see significant improvements in the
effectiveness of monetary policy that provide authorities a wider
arsenal of tools to smoothen cyclical economic shocks. The latter
could be the case if the authorities' initiatives for the
development of domestic capital markets yield results exceeding
our present expectations while dollarization of the financial
sector -- currently posing an impediment to achieving greater
monetary flexibility -- reduces.
"We could lower the ratings if Georgia's external performance
deteriorated over the next 12 months, in contrast to our current
forecasts. We could also lower the ratings if fiscal performance
weakened materially."
RATIONALE
The sovereign credit ratings on Georgia remain supported by the
country's relatively strong institutional arrangements in a
regional comparison, and the projected contained levels of net
general government debt, forecast at close to 40% of GDP until
end-2020. The ratings are primarily constrained by income levels-
-which, at $3,900, remain low in a global comparison--and balance
of payments vulnerabilities, including Georgia's import
dependence, high current account deficits, and sizable external
debt. S&P also believes that the ratings remain constrained by
the limited monetary policy flexibility, owing to Georgia's
shallow domestic capital markets and high levels of
dollarization.
Institutional and Economic Profile: Strengthening growth
underpinned by improving foreign trade conditions
-- S&P expects Georgia's growth to strengthen, underpinned by
better economic conditions in key trade partners.
-- Economic performance should also be supported by sizable FDI
inflows in the tourism, transportation, and logistics sectors.
-- Although shortcomings remain, Georgia's institutional
arrangements are among the strongest in the region.
Georgia's growth continued to strengthen through January to June
2017. This is primarily underpinned by a favorable regional
backdrop with trade partner countries' economic performance and
currencies stabilizing. This includes Russia, which receives a
sizable 10% of Georgia's goods exports. Over the first six months
of the year, U.S. dollar-denominated exports of goods and
services were up 20% in year-on-year terms while inbound money
transfers increased by 17%. S&P has revised its 2017 headline
growth forecast upwards to 4.5% from 3.5% previously.
Further on, growth will average close to 4% over 2018-2020. This
forecast is underpinned by several factors:
-- A continued stronger net export performance owing to cyclical
recovery in some of Georgia's key trading partners;
-- Better consumption performance underpinned by moderating
inflation levels and a more stable lari exchange rate; and
-- A substantial FDI pipeline.
Strong net FDI inflows have historically supported Georgia's
economic performance and we expect inflows will continue over the
next four years. They are primarily concentrated in the
transport, logistics, and tourism sectors. Large projects include
the completion of the gas pipeline (which will bring Azeri gas
from the Caspian sea to Turkey) as well as the construction of
the large Anaklia port, which is expected to enhance trade on the
China-Europe route.
S&P said, "As in the past, we expect the authorities will remain
focused on diversification, structural reforms, and sustainable
public finances. This has been the case historically despite some
considerable challenges, including a brief war with Russia in
2008 and the transition of power in 2012.
"We believe the recent April 2017 signing of an Extended Fund
Facility (EFF) agreement with the International Monetary Fund
(IMF) should support the continuation of prudent macroeconomic
policies over the next three years. The EFF is closely linked to
the government's so-called four point plan, which targets
improvements in revenue collection and optimization of current
spending to create extra space for investments; strengthening the
financial sector; improvements in education; and governance
reforms.
"Nevertheless, we expect Georgia's per capita income levels will
remain modest throughout our four-year forecast horizon, largely
reflecting the country's narrow economic base and the prevalence
of exports of low value-added goods. In the agricultural sector,
which employs a substantial part of Georgia's population,
productivity levels remain comparatively low, dragging on
Georgia's average per capita GDP. This continues to constrain the
sovereign ratings. In our view, most of the benefits from strong
FDI inflows and the authorities' efforts to diversify the economy
will likely be only felt over the longer term.
"Following last year's strong showing in the parliamentary
elections, the Georgian Dream party controls a constitutional
majority. Indicative of a strong mandate, we believe this could
speed up the implementation of the aforementioned reforms.
However, there are also downside risks stemming from attempts to
centralize power, making Georgian Dream's incumbent position more
secure.
"In our view, institutions in Georgia are still comparatively
young with a short track record, making them more susceptible to
potential outside influence. To that end, we note the 2015
proposals (later dropped) to remove the financial supervision
mandate from the central bank, the National Bank of Georgia
(NBG), and the October 2017 adoption of the constitutional
amendments despite the earlier veto by the president. Concerns
over the amendments have been consistently highlighted by several
domestic parties and the Venice Commission, as they could make
the political system less pluralistic and disproportionally
benefit the government in office.
"Still, despite a number shortcomings, we believe Georgia's
institutional settings are among the strongest in the region,
with several established precedents of power transfer and the
existence of a degree of checks and balances between various
government bodies. We also note the broad operational
independence of the NBG. We expect the aforementioned
arrangements to remain throughout the four-year forecast period.
"We continue to see risks from regional geopolitical
developments. The status of South Ossetia and Abkhazia will
likely remain a source of continued disputes between Georgia and
Russia. Russia has continued to build stronger ties with the two
territories, as highlighted by the recent partial integration of
the South Ossetian military in the Russian army, the
establishment of a customs post in Abkhazia, as well as regular
visits to the territories by senior Russian government officials.
We do not, however, expect a material escalation and anticipate
the conflict will largely remain frozen over the medium term.
Positively, bilateral relations between the two countries in
other areas have been improving in recent years."
Flexibility and Performance Profile: A funded IMF program should
mitigate balance of payments risks and anchor fiscal policy
-- Balance of payments risks remain elevated and constrain the
sovereign ratings.
-- An EFF arrangement in place with the IMF should partly
mitigate these risks and help keep public finances in order.
-- Monetary policy flexibility still remains constrained owing
to the low level of development of local currency capital markets
and high levels of dollarization.
Georgia's weak external position remains one of the primary
constraints on the ratings. The country's external current
account deficit has remained persistently wide and reached an
eight-year high in 2016 of 13% of GDP. This has taken place
against the background of still weak export and remittances
performance.
S&P said, "Positively, we believe external risks are partly
mitigated by a substantial portion of accumulated foreign debt
pertaining to the public sector and benefiting from favorable
terms and long repayment periods. They are also mitigated by the
funding structure of the country's external gap in recent years.
Although current account deficits will remain substantial over
2017-2020, they primarily reflect sizable net FDI inflows in the
transport, logistics, and tourism sectors. In fact, we expect
that over 2017-2020, net FDI will finance 75% of the cumulative
current account deficit. Consequently, we believe large headline
current account deficits somewhat overestimate Georgia's external
risks, which would have been more pronounced if the deficits were
financed by debt instead."
That said, there are still significant vulnerabilities.
Specifically, while a hypothetical sizable reduction in FDI
inflows may not necessarily lead to a disorderly adjustment
involving an abrupt depreciation of the lari (due to a
simultaneous corresponding contraction in FDI-related imports),
it will likely have implications for Georgia's growth and
employment. The accumulated stock of inward FDI also remains
substantial at about 170% of the country's generated current
account receipts, exposing the sovereign to risks should foreign
investors decide to leave, for example, due to changes in the
business environment or a deterioration in Georgia's economic
outlook.
S&P said, "We expect Georgia's fiscal performance to remain
similar to recent historical trends. After a temporary widening
last year, we anticipate headline deficits will fall back,
averaging 2.5% of GDP until end-2020. Under the four point reform
plan, the authorities aim to increase revenue intake and optimize
current spending to create more space for public-financed capital
expenditure.
This is also the focus of the EFF arrangement with the IMF, which
we believe should more broadly act as an anchor keeping public
finances in order.
"We consider that budget deficits could widen if Georgia's growth
trajectory is derailed. Moreover, the public balance sheet
remains exposed to foreign exchange risk, given that around 80%
of government debt is in foreign currency. Consequently, several
factors largely outside of the government's control could raise
the leverage level in the event of the lari exchange rate
weakening. These include a weaker-than-projected trading partner
growth or an increase in regional geopolitical tensions, for
example, due to a deterioration of relations between Georgia and
Russia or a worsening domestic political environment in Turkey.
"Given our base-case expectation of a relatively modest
depreciation of the lari over 2018-2020, we believe the annual
rise in general government debt will slightly exceed the headline
annual deficit. Overall, gross leverage will remain broadly
stable with general government debt at about 44% of GDP over the
next three years. We currently consider that the contingent
fiscal liabilities stemming from the public enterprises and the
domestic banking system are limited.
"In our view, the ratings on Georgia also remain constrained by
the limited flexibility of the NBG's monetary policy. In
particular, we believe the shallow domestic capital markets, as
well as relatively high resident deposit and loan dollarization,
hamper the NBG's ability to influence domestic monetary
conditions through local currency liquidity. Nevertheless, we
think there is potential for Georgia's monetary policy
effectiveness to improve given the authorities' extensive focus
on de-dollarization, promotion of local currency debt capital
markets, and enhanced liquidity provision to the domestic banking
system.
"We consider that the more flexible exchange rate arrangement
maintained by the central bank has largely facilitated Georgia's
speedy adjustment to the evolving external environment. The NBG
has not attempted to systematically defend a certain exchange
rate level, resulting in NBG's foreign exchange (FX) reserves
remaining fairly stable in the past few years, unlike some other
regional sovereigns that have attempted to defend more rigid FX
regimes. We project NBG's FX reserves will increase to the
targeted level of about US$3.5 billion by 2020 (from the current
US$3.0 billion, equivalent to 20% of GDP), underpinned by the
funding extended under the EFF.
"In our view, the Georgian banking system has remained more
resilient than those of other regional economies over the past
two years. Nonperforming loans have largely remained unchanged
(at 7%-8% in 2014-2017) against the background of local currency
depreciation, even though a substantial proportion of loans are
in foreign currency.
"However, we continue to see a number of risks. Domestic credit
has expanded at an average pace of close to 20% over the past
four years and we expect this trend to broadly continue. Although
at 60% of GDP private sector leverage is comparatively modest in
Georgia, it has been consistently rising. For more details on
banking sector risks see "Banking Industry Country Risk
Assessment: Georgia," published on Aug. 7, 2017 on
RatingsDirect."
In accordance with S&P's relevant policies and procedures, the
Rating Committee was composed of analysts that are qualified to
vote in the committee, with sufficient experience to convey the
appropriate level of knowledge and understanding of the
methodology applicable (see 'Related Criteria And Research'). At
the onset of the committee, the chair confirmed that the
information provided to the Rating Committee by the primary
analyst had been distributed in a timely manner and was
sufficient for Committee members to make an informed decision.
After the primary analyst gave opening remarks and explained the
recommendation, the Committee discussed key rating factors and
critical issues in accordance with the relevant criteria.
Qualitative and quantitative risk factors were considered and
discussed, looking at track-record and forecasts.
The committee agreed that all key rating factors were unchanged.
The chair ensured every voting member was given the opportunity
to articulate his/her opinion. The chair or designee reviewed the
draft report to ensure consistency with the Committee decision.
The views and the decision of the rating committee are summarized
in the above rationale and outlook. The weighting of all rating
factors is described in the methodology used in this rating
action (see 'Related Criteria And Research').
RATINGS LIST
Rating
To From
Georgia (Government of)
Sovereign Credit Rating
Foreign and Local Currency BB-/Stable/B BB-/Stable/B
Transfer & Convertibility Assessment BB+ BB+
Senior Unsecured
Foreign Currency BB- BB-
Commercial Paper
Local Currency B B
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I R E L A N D
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BLACK DIAMOND 2017-2: Moody's Assigns (P)B2 Rating to Cl. F Notes
-----------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to
nine classes of notes (the "Notes") to be issued by Black Diamond
CLO 2017-2 Designated Activity Company ("Black Diamond CLO" or
the "Issuer"):
-- EUR142,000,000 Class A-1 Senior Secured Floating Rate Notes
due 2032, Assigned (P)Aaa (sf)
-- USD55,800,000 Class A-2 Senior Secured Floating Rate Notes
due 2032, Assigned (P)Aaa (sf)
-- EUR30,000,000 Class A-3 Senior Secured Fixed Rate Notes due
2032, Assigned (P)Aaa (sf)
-- USD15,000,000 Class A-4 Senior Secured Fixed Rate Notes due
2032, Assigned (P)Aaa (sf)
-- EUR56,000,000 Class B Senior Secured Floating Rate Notes due
2032, Assigned (P)Aa2 (sf)
-- EUR30,900,000 Class C Senior Secured Deferrable Floating Rate
Notes due 2032, Assigned (P)A2 (sf)
-- EUR23,000,000 Class D Senior Secured Deferrable Floating Rate
Notes due 2032, Assigned (P)Baa2 (sf)
-- EUR18,000,000 Class E Senior Secured Deferrable Floating Rate
Notes due 2032, Assigned (P)Ba2 (sf)
-- EUR12,100,000 Class F Senior Secured Deferrable Floating Rate
Notes due 2032, Assigned (P)B2 (sf)
RATINGS RATIONALE
Moody's provisional rating of the Notes addresses the expected
loss posed to noteholders. The rating reflects the risks due to
defaults on the underlying portfolio of assets, the transaction's
legal structure, and the characteristics of the underlying
assets.
Black Diamond CLO is a managed cash flow CLO. The issued notes
are collateralized primarily by broadly syndicated first lien
senior secured corporate loans. At least 90% of the portfolio
must consist of senior secured loans, senior secured bonds and
eligible investments, and up to 10% of the portfolio may consist
of second lien loans, unsecured loans, mezzanine obligations and
high yield bonds.
Black Diamond CLO 2017-2 Advisor, L.L.C. (the "Manager") manages
the CLO. It directs the selection, acquisition, and disposition
of collateral on behalf of the Issuer. After the reinvestment
period, which ends in January 2022, the Manager may reinvest
unscheduled principal payments and proceeds from sales of credit
risk and credit improved obligations, subject to certain
restrictions.
In addition to the nine classes of notes rated by Moody's, the
Issuer will issue EUR21.5m and USD23.6m of subordinated notes
which will not be rated.
The transaction incorporates interest and par coverage tests
which, if triggered, divert interest and principal proceeds to
pay down the notes in order of seniority.
Loss and Cash Flow Analysis:
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in August 2017.
The cash flow model evaluates all default scenarios that are then
weighted considering the probabilities of the binomial
distribution assumed for the portfolio default rate. In each
default scenario, the corresponding loss for each class of notes
is calculated given the incoming cash flows from the assets and
the outgoing payments to third parties and noteholders.
Therefore, the expected loss or EL for each tranche is the sum
product of (i) the probability of occurrence of each default
scenario and (ii) the loss derived from the cash flow model in
each default scenario for each tranche. As such, Moody's
encompasses the assessment of stressed scenarios.
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and the weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. For modeling
purposes, Moody's used the following base-case assumptions:
Performing par and principal proceeds balance: EUR400,000,000
Diversity Score: 40
Weighted Average Rating Factor (WARF): 2800
Weighted Average Spread (WAS): 3.85%
Weighted Average Coupon EUR: 6.00%
Weighted Average Coupon USD: 7.00%
Weighted Average Recovery Rate (WARR): 44.5%
Weighted Average Life (WAL): 8.5 years
As part of the base case, Moody's has addressed the potential
exposure to obligors domiciled in countries with local currency
country risk ceiling (LCC) of A1 or below. As per the portfolio
constraints, exposures to countries with a LCC of A1 or below
cannot exceed 10%, with exposures to countries with a LCC of Baa1
to Baa3 further limited to 5%. Exposures to countries with a LCC
below Baa3 is prohibited. As a worst case scenario, a maximum 5%
of the pool would be domiciled in countries with LCC of Baa1 to
Baa3. The remainder of the pool will be domiciled in countries
which currently have a LCC of Aa3 and above. Given this portfolio
composition, the model was run with different target par amounts
depending on the target rating of each class of notes as further
described in the methodology. The portfolio haircuts are a
function of the exposure size to peripheral countries and the
target ratings of the rated notes and amount to 0.75% for the
Class A notes, 0.50% for the Class B notes, 0.375% for the Class
C notes and 0% for Classes D, E and F.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's
Global Approach to Rating Collateralized Loan Obligations"
published in August 2017.
Factors that would lead to an upgrade or downgrade of the
ratings:
The performance of the Notes is subject to uncertainty. The
performance of the Notes is sensitive to the performance of the
underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the Notes.
Stress Scenarios:
Together with the set of modeling assumptions above, Moody's
conducted an additional sensitivity analysis, which was a
component in determining the provisional rating assigned to the
rated Notes. This sensitivity analysis includes increased default
probability relative to the base case.
Below is a summary of the impact of an increase in default
probability (expressed in terms of WARF level) on the Notes
(shown in terms of the number of notch difference versus the
current model output, whereby a negative difference corresponds
to higher expected losses), assuming that all other factors are
held equal:
Percentage Change in WARF -- increase of 15% (from 2800 to 3220)
Rating Impact in Rating Notches
Class A Senior Secured Floating Rate Notes: 0
Class B Senior Secured Floating Rate Notes: -1
Class C Senior Secured Deferrable Floating Rate Notes: -1
Class D Senior Secured Deferrable Floating Rate Notes: -1
Class E Senior Secured Deferrable Floating Rate Notes: 0
Class F Senior Secured Deferrable Floating Rate Notes: 0
Percentage Change in WARF -- increase of 30% (from 2775 to 3640)
Rating Impact in Rating Notches
Class A Senior Secured Floating Rate Notes: 0
Class B Senior Secured Floating Rate Notes: -2
Class C Senior Secured Deferrable Floating Rate Notes: -3
Class D Senior Secured Deferrable Floating Rate Notes: -3
Class E Senior Secured Deferrable Floating Rate Notes: -1
Class F Senior Secured Deferrable Floating Rate Notes: 0
HARBOURMASTER PRO-RATA 3: Fitch Affirms B Rating on Class B2 Debt
-----------------------------------------------------------------
Fitch Ratings has upgraded three tranches of Harbourmaster Pro-
Rata 3 CLO and affirmed the others, as follows:
Class A2: upgraded to at 'AAAsf' from 'AA+sf'; Outlook Stable
Class A3: affirmed at 'A+sf'; Outlook Stable
Class A4: upgraded to 'BBB+sf' from 'BBBsf'; Outlook Stable
Class B1: affirmed at 'BB+sf'; Outlook Stable
Class B2: affirmed at 'Bsf'; Outlook Stable
Class S4: upgraded to 'BBB+sf' from 'BBBsf'; Outlook Stable
KEY RATING DRIVERS
The rating action reflects the increase in credit enhancement
(CE) across the capital structure due to the transaction's
deleveraging since November 2016. This has offset portfolio
concentration (the number of obligors has decreased to 32 from 67
in November 2016) and unhedged FX exposure (3.4% unhedged USD
exposure and 7.5% unhedged GBP exposure)
The class A1-VF notes have paid down by EUR156.8 million since
November 2016 and have been paid in full.
The class A2 notes have paid down by EUR64.8 million since
November 2016 and the upgrade reflects the significant increase
in CE (increased to 82.9% from 45.6% at last review) as a result
of continued asset amortisation and repayment in full of class
A1-VF notes.
Fitch has affirmed the class A3 notes despite the increase in CE.
As the portfolio deleverages, the transaction is becoming more
exposed to obligor concentration. The top ten obligors currently
represent 59%, compared with 33% a year ago. As per its criteria,
Fitch decided not to upgrade this note due to excessive obligor
concentration.
Fitch has upgraded the class A4 and S4 notes and affirmed the
class B1 notes considering the increased CE (CE of class A4 notes
has increased to 35.4% from 18.4% at last review; CE of class B1
notes has increased to 23.3% from 11.6% at last review). Class S4
is combination note and the recommended rating approach is to
link the rating of the note to the rating of the component that
covers the rated balance, which is class A4.
The affirmation of the class B2 notes reflects that, although it
is exposed to portfolio concentration risk, this can be offset by
portfolio prepayment.
The portfolio credit quality has remained stable overall, except
WARR has decreased to 65% versus 70.7% at last review. All
portfolio profile tests, portfolio quality tests and coverage
tests are passing. The transaction is scheduled to mature in
September 2023 and the portfolio's weighted average life (WAL)
has decreased to 3.44 years from 4.3 years one year ago.
RATING SENSITIVITIES
A 25% increase in the obligor default probability would lead to a
downgrade of one notch for the class A3 and B2 notes.
A 25% reduction in expected recovery rates would lead to a
downgrade by two notches for the class A4 and B1 notes, and by
one notch for class B2 notes.
===================
L U X E M B O U R G
===================
BEFESA SA: Moody's Assigns Ba3 CFR, Outlook Positive
----------------------------------------------------
Moody's Investors Service assigned a Ba3 corporate family rating
(CFR) and a Ba3-PD probability of default rating (PDR) to Befesa
S.A., the ultimate parent company of the Befesa group (Befesa).
Concurrently, Moody's assigned a provisional (P)Ba3 rating to the
proposed EUR526 million senior secured Term Loan B, a provisional
(P)Ba3 rating to the proposed EUR75 million senior secured
revolving credit facility, and a provisional (P)Ba3 rating to the
proposed EUR35 million senior secured guarantee line, all to be
issued by Befesa S.A. The outlook on the ratings is positive.
Moody's issues provisional ratings in advance of the final sale
of securities and these ratings reflect Moody's preliminary
credit opinion regarding the transaction only. Upon a conclusive
review of the final documentation, as well as the final terms of
the transaction, Moody's will endeavour to assign definitive
ratings to the new contemplated notes. A definitive rating may
differ from a provisional rating.
RATINGS RATIONALE
The assignment of the Ba3 rating follows the successful
completion of the Initial Public Offering (IPO) where the private
equity owner (Triton) sold around 48.3% of its shares (assuming
full exercise of the greenshoe option), remaining nonetheless a
significant shareholder of the newly listed company. The proposed
new debt instruments will be used to refinance the existing debt
owed by Befesa Holding S.a.r.l., a subsidiary of Befesa S.A.
Following the redemption, Moody's expect to withdraw the
corporate family ratings and instrument ratings related to Befesa
Holding S.a.r.l.
"Befesa's IPO is credit positive because it improves Befesa's
access to capital markets and removes uncertainty about the
future ownership. In addition, the proposed debt refinancing will
reduce interest cost and improve cash flows considerably" says
Matthias Heck, Vice President - Senior Analyst and Moody's Lead
Analyst for Befesa. Moreover, the rating agency expects that
Befesa's increased transparency as a listed company will likely
strengthen its governance arrangements.
As part of the transaction, Befesa expects to refinance all its
existing outstanding debt by issuing a new EUR526 million Term
Loan B and a new EUR75 million revolving credit facility. The new
capital structure will be further supported by a new EUR35
million guarantee line. Although the refinancing will not affect
the gross debt load, it results in significantly lower interest
costs and debt service. Thanks to a substantially improved
operating performance supported by favorable price environment
for zinc and aluminum, Moody's expects the adjusted debt/EBITDA
ratio to reach 3.5x as of end-December 2017, a level commensurate
with a Ba3 rating.
The Ba3 corporate family rating (CFR) is supported by the group's
solid business profile, characterised by leading market positions
in niches of the recycling industry, which is protected by market
entry barriers relating to (i) significant replacement costs,
(ii) favourable environmental regulation that favours recycling
of hazardous wastes over landfilling in most European and certain
developing countries (such as South Korea and Turkey) and (iii)
proprietary technological know-how. Historic operating
performance has been sound with limited volatility of
profitability, despite significant exposure to volatile metal
prices, in particular Zinc and Aluminum.
The rating also reflects Befesa's significant exposure to zinc
price movements. The company has hedged approximately 70% of its
zinc equivalent volumes until including the first half of 2020
with, however, the remaining output being sensitive to volatile
market prices. The rating is also somewhat constrained by the
company's relatively small size and scale.
RATING OUTLOOK
The positive outlook on the ratings reflects the ongoing
favorable market environment, especially in terms of zinc prices,
as well as expected gradual further de-leveraging on the back of
EBITDA growth in 2018 and 2019.
WHAT COULD CHANGE THE RATING UP/DOWN
The ratings could be upgraded if Befesa would demonstrate its
ability to (1) reduce its Moody's adjusted leverage well below
3.5x debt/EBITDA through the cycle; (2) further build a track
record of meaningful free cash flow (FCF) generation as evidenced
by a FCF/debt consistently above 5% and (3) maintain a solid
liquidity.
As evidenced by the positive outlook, there is currently no
negative pressure on the ratings. However, the ratings could be
downgraded if (1) the leverage would deteriorate to a level
higher than 4.0x debt/EBITDA as adjusted by Moody's or (2) the
FCF would turn negative.
STRUCTURAL CONSIDERATIONS
The EUR526 million term loan B and the EUR75 million revolving
credit facility are rated in line with the CFR. The instruments
are senior secured, rank pari-passu and are subject to a
springing covenant. As Moody's views the coverage of the assets
pledged as security (share pledges on subsidiaries) to be
limited, the rating agency assumed the facilities to be unsecured
in its waterfall analysis.
The principal methodology used in these ratings was Steel
Industry published in September 2017.
COMPANY PROFILE
Befesa S.A. is a Luxembourg based holding company, which owns
100% of Befesa Holding S.a.r.l., a company specialising in the
integral management and recycling of industrial wastes through
its two divisions steel dust recycling services and aluminum salt
slags services. The group is present in 11 countries with a focus
on Europe. In 2016, the group generated revenues of EUR612
million. Befesa S.A. is listed on the Frankfurt Stock Exchange
and had a market capitalization of approximately EUR1.1 billion
on November 6, 2017. Befesa's main shareholder are funds managed
by Triton Capital Partners (51.7%), with the remainder of 48.3%
being free float.
=====================
N E T H E R L A N D S
=====================
NXP BV: Broadcom Unsolicited Offer No Impact on Moody's Ba1 CFR
---------------------------------------------------------------
Moody's Investors Service said that Broadcom Limited's (Broadcom
Cayman Finance Ltd., Baa2 stable) unsolicited offer to acquire
Qualcomm Inc. "Qualcomm" (A1 stable) for $70 per share ($60 in
cash and $10 in Broadcom stock) for an enterprise value of
approximately $130 billion does not currently affect the ratings
of NXP B.V. ("NXP") and NXP's publicly-traded parent, NXP
Semiconductors N.V.'s ("NXP Semiconductors").
Qualcomm's board of directors has acknowledged the unsolicited
offer and is in the process of reviewing the offer. Aside from
the initial unsolicited dollar amount, the deal structure remains
unknown and will likely evolve, and at this stage there is
significant uncertainty that the unsolicited offer will lead to
an agreement. Consequently, the Ba1 Corporate Family Rating of
NXP and the Ba2 senior unsecured rating of NXP Semiconductors,
remain under review for upgrade for now. The ratings of NXP and
NXP Semiconductor had been placed on review for upgrade on
October 27, 2016 following Qualcomm's announcement of its planned
acquisition of NXP Semiconductors.
Given the scope of Broadcom and Qualcomm's operations,
overlapping product areas such as in radio frequency and
filtering, ongoing intellectual property disputes between
Qualcomm, its customers, and various regulatory bodies, as well
as Broadcom's current non-US based domicile (notwithstanding its
recent, publicly stated intention to re-domicile into the US),
regulatory approval may prove challenging.
Notwithstanding the strong strategic benefits of the proposed
combination of Broadcom and Qualcomm, Moody's views the proposed
combination as credit negative. Should the transaction be
completed on the proposed terms, Qualcomm's ratings could be
downgraded multiple notches, reflecting the significantly higher
financial leverage. If Qualcomm completes the acquisition of NXP
and Broadcom completes the acquisition of Qualcomm, NXP's ratings
will be dependent on Broadcom's rating upon closing of the
Qualcomm acquisition, the ranking of NXP's existing debt in the
capital structure of Broadcom, and the nature of Broadcom's
support of NXP's debt.
NXP existing Ba1 CFR reflects NXP's leadership position in
automotive semiconductors and consistent free cash flow ("FCF")
generation due to NXP's fab-lite manufacturing model. The rating
also reflects the large exposure to cyclical end markets,
including the automobile market (about 40% of revenues as of the
last fiscal year) and the communications infrastructure end
market (about 10%), and to the mobile phone market (about 25%),
which is subject to short product life cycles. Excluding any
impact from the Qualcomm or Broadcom transactions, Moody's
expects that that through the combination of debt reduction and
EBITDA growth, debt to EBITDA (Moody's adjusted) will decline
toward the lower 2x level during 2018.
NXP Semiconductors B.V. is the publicly-traded owner of NXP B.V.
("NXP"). NXP, based in Eindhoven, Netherlands, makes high
performance mixed signal integrated circuits and discrete
semiconductors used in a wide range of applications, including
automotive, identification, wireless infrastructure, lighting,
industrial, mobile, consumer and computing.
PLAYA RESORTS: Moody's Hikes CFR to B2, Outlook Stable
------------------------------------------------------
Moody's Investors Service upgraded Playa Resorts Holding B.V.
(Playa) corporate family rating (CFR) to B2 from B3. At the same
time, Moody's affirmed Playa's senior secured ratings at B2 and
its senior unsecured ratings at Caa1. Additionally, Moody's also
affirmed B2 rating to Playa's proposed $ 380 million add-on to
its first lien senior secured term loan due 2024. The outlook of
all the ratings is stable.
The following rating was upgraded:
Issuer: Playa Resorts Holding B.V.
LT Corporate Family Rating upgraded to B2 from B3
The following ratings were affirmed:
$375mm GLOBAL NOTES due 2020 at Caa1
$50mm GLOBAL NOTES due 2020 add-on at Caa1
$100mm SR SEC REVOLVING CREDIT FACILITY due 2022 at B2
$530mm (plus the $380mm add-on) SR SEC TERM LOAN due 2024 at B2
The outlook is stable
RATINGS RATIONALE
"The upgrade reflects a sustained improvement in Playa's credit
profile following the conclusion of its reconversion plan in the
end of 2015. As a result, execution risk has significantly
reduced and Playa's cash generation has strengthen" said Sandra
Beltr†n, a Moody's AVP-Analyst. Playa plans to accelerate its
growth path over the next few years, which will involve heavy
capital investments towards 2019. Still, given its strong cash
position and solid cash generation from existing assets, Moody's
expects Playa to be able to maintain an adequate credit profile
during that period.
Playa's B2 corporate family rating continues to reflect the
company's small operating scale relative to global industry peers
and its low geographic and segment diversification, which makes
it vulnerable to economic cycles. Also constraining the ratings
are the company's high leverage and operation in a highly
cyclical industry with intense competition. Execution still pose
a risk to Playa, given its current growth plan.
Conversely, Playa's ratings consider its improved credit profile
following a two-year reconversion plan. The ratings also
incorporate the good quality of the properties in Playa's
portfolio, its experienced senior management team, and Hyatt
Hotels Corporation's (Baa2 stable) participation as a
shareholder. The access to Hyatt's widely recognized brand name,
distribution channels, and loyalty program are a positive for
Playa's positioning strategy and growth, given Hyatt's track
record in the lodging industry. As well, the ratings consider
Playa's strong liquidity that supports its expansion without
threatening its plan to reduce leverage.
Playa started operations in 2013, in the midst of a strong
reconversion plan including the closing of important assets, such
as the Hyatt Ziva Cancun and Hyatt Ziva and Zilara Rose Hall in
Jamaica. During this period, execution risk remained high and
cash generation was weak. However, at the end of 2015, Playa
concluded its reconversion plan. Therefore, 2016 was the first
year Playa operated at full capacity, with positive implications
for its credit profile.
Since then, Playa has taken additional measures to support growth
and improve its capital structure, being the most relevant a
business combination closed in March 2017. Through the
transaction, Playa merged with Pace Holdings, a special-purpose
acquisition company sponsored by an affiliate of TPG. The
combined entity is publicly listed, trading on NASDAQ under the
ticker "PLYA."
Playa has good liquidity. The transaction with Pace added $500
million to Playa's balance sheet, out of which $346 million were
used to redeem preferred shares and $100 million were kept in
cash. Also during that time, Playa signed a new senior secured
term loan maturing 2024, amounting to $530 million. Proceeds were
used to prepay $115 million of its 8% global notes and $363
million senior secured term loan maturing in 2019.
The proposed $380 million add-on to its term loan will repay the
existing $360 million global notes due 2020. Once the transaction
is completed, virtually all of Playa's debt will be represented
by the first lien senior secured term loan due 2024, amounting
$909 million.
Although refinancing risk will remain low in the upcoming years,
a strong investment program will continue to pressure Playa's
cash generation towards 2019. For the remainder of 2017, Playa
will need to spend some $ 40 million related with the
reconversion of two four star hotels in Quintana Roo into the
Panama Jack brand. But the most relevant project is the
development of a Hyatt complex in the Dominican Republic (Cap
Cana) expected to open until 2019. Investments related with the
Cap Cana Hyatt will be around $109 million in 2017, $117 million
in 2018 and $20 million in 2019. Although sizeable, Moody's
expects Playa to be able to fund this expansion capex and other
cash needs, with internal cash generation and cash on hand of
$137 million. During this timeframe, cash from operation should
range $100 million annually.
Structural Considerations
The rating of Playa's secured term loan and revolving credit
facility are in line with the company's B2 corporate family
rating (CFR), reflecting Moody's expectation that going forward,
all of Playa's debt will be first lien senior secured. Therefore,
despite the collateral package, expected loss of rated debt will
be in line with expected loss considered within the CFR. Playa's
senior unsecured notes continue to be rated Caa1, two notches
below the CFR, reflecting high expected loss relative to the
secured debt.
The stable rating outlook reflects Moody's expectation that, now
that the company has concluded its brand conversion and
repositioning plan, it will be able to achieve its projected
growth while improving its operating and credit metrics. The
outlook also considers that ongoing expansion plan does not risk
improvements in credit profile due to a strong liquidity profile.
Playa's ratings could be upgraded should debt/EBITDA be
maintained below 4.5x while maintaining EBITA/interest expense
above 2.5x and EBITA margins above 15%.
The ratings could be downgraded if the company's projected growth
plan is hampered, for example, by a weak macroeconomic
environment, such that its profitability or credit metrics
deteriorate with interest expense approach 1.25x or leverage
(adj. debt/ EBITDA) remaining above 5.5 times without room for
improvement.
The principal methodology used in these ratings was Business and
Consumer Service Industry published in October 2016.
Playa Hotels & Resorts N.V. (Playa) is a leading owner, operator
and developer of all-inclusive resorts in prime beachfront
locations in popular vacation destinations in Mexico and the
Caribbean. Playa owns a portfolio consisting of 13 resorts
(6,130-rooms) located in Mexico, the Dominican Republic and
Jamaica. Playa owns and manages Hyatt Zilara and Hyatt Ziva
Cancun, Hyatt Zilara and Hyatt Ziva Rose Hall Jamaica, Hyatt Ziva
Puerto Vallarta and Hyatt Ziva Los Cabos. The company also owns
and operates three resorts under Playa's brands, as well as five
resorts in Mexico and the Dominican Republic that are managed by
a third party. In March 2017, Playa closed a merger of its
predecessor, Playa Hotels & Resorts B.V. and Pace Holdings Corp.,
an entity that was formed as a special purpose acquisition
company. After the transaction, Playa became a publicly listed
entity in the NASDAQ under the ticker PLYA. Public float is
45.4%, Farallon Capital Management holds 27.7%, Hyatt 11% and
other Playa's legacy investors 7.8%. The balance 8.1% is in hand
of TPG.
===========
P O L A N D
===========
VISTAL GDYNIA: Credit Agricole Demands Payment of PLN2.5 Million
----------------------------------------------------------------
Reuters reports that Credit Agricole Bank Polska has called on
Vistal Gdynia SA to pay PLN2.5 million.
As reported by the Troubled Company Reporter-Europe on Oct. 6,
2017, Reuters related that Vistal Gdynia filed for bankruptcy.
According to Reuters, the company said it is in talks with
business partners to solve the difficult situation of its group.
Vistal Gdynia SA is based in Poland.
===============
P O R T U G A L
===============
CAIXA ECONOMICA: Moody's Affirms B3 Long-Term Deposit Rating
------------------------------------------------------------
Moody's Investors Service has affirmed Portugal's Caixa Economica
Montepio Geral, caixa economica bancaria, S.A.'s (Montepio) long-
term deposit and senior unsecured program ratings at B3 and
(P)B3, respectively. At the same time, the rating agency has also
affirmed (1) the bank's baseline credit assessment (BCA) and
adjusted BCA of caa1; (2) its dated subordinated program ratings
of (P)Caa2; (3) its junior subordinated program ratings of
(P)Caa3; and (4) its long-term Counterparty Risk Assessment (CR
Assessment) of B1(cr). The outlook on the bank's long-term
deposit ratings has been changed to developing from negative.
Montepio's Not Prime short-term deposit and (P)Not Prime program
ratings and its short-term CRA of Not Prime(cr) were unaffected
by rating action.
The rating action reflects Montepio's overall credit profile,
namely the mild improvements in its credit fundamentals as a
result of the implementation of its 2016-2018 strategic plan and
the EUR250 million capital increase fully subscribed by its
parent Montepio Geral Associacao Mutualista (MGAM) in June 2017.
Despite these improvements, Moody's notes that the bank's risk
absorption capacity remains weak on the face of the bank's still
significant asset quality challenges.
The developing outlook on the bank's long-term deposit ratings
reflects Moody's expectations that Montepio's strategic plan will
continue to have a positive impact on the bank's creditworthiness
over the outlook period, but also the adverse effect on the
bank's ratings that could stem from changes in the liabilities
structure.
RATINGS RATIONALE
-- RATIONALE FOR AFFIRMING THE BCA
The affirmation of Montepio's BCA and adjusted BCA at caa1
reflects the bank's improved although still weak credit profile,
notably in terms asset risk, capital and profitability.
At end-September 2017, Montepio had a Moody's estimated non-
performing loan (NPL) ratio of around 19%. Moreover, the bank
also has other problematic exposures such as real estate assets
which if included raise the bank's non-performing assets ratio
(NPAs; NPLs plus real estate assets) to around 26%.
Moody's notes positively that the bank has recently securitised
an EUR580 million NPL portfolio (including both on- and off-
balance sheet exposures), which will have a positive impact of
around 200 basis points on the bank's NPL ratio. The rating
agency acknowledges that this securitisation has laid the
groundwork for similar transactions in the near future, which
could help the bank to offload more of its high volume of
problematic exposures.
On June 30, 2017, Montepio announced that it had concluded an
EUR250 million capital increase, to which its parent MGAM fully
subscribed. As a result of this capital increase and the bank's
deleveraging efforts, Montepio reported a phased-in common equity
Tier 1 (CET1) ratio of 13.0% at end-September 2017 and a total
capital ratio of 13.2%, up from 10.4% and 11.0% a year earlier,
respectively. These strengthened capital levels have allowed the
bank to comply with regulatory capital requirements, which have
not been publicly disclosed. The bank's fully-loaded CET1 ratio
stood at 11.4% as of the same date.
Despite this enhanced solvency level, Moody's notes that
Montepio's loss-absorption capacity remains weak when measured as
the ratio of NPAs to balance-sheet cushions. The rating agency
estimates that this ratio stood at around 135% as of the end of
September 2017. This is mainly the result of Montepio's high
stock of problematic assets and low coverage levels, which stood
at a Moody's estimated 44% for NPLs and 33% for NPAs.
Montepio's profitability also improved as a result of the
implementation of the bank's three-year strategic plan, which
includes staff reduction, resizing of the branch network and
upgrade of IT processes. Montepio returned to profits in 2017,
although Moody's notes that these profits partially rely on the
generation of extraordinary trading gains and that the capacity
of the bank to generate recurring earnings is still limited.
-- RATIONALE FOR AFFIRMING THE LONG-TERM DEPOSIT AND SENIOR
UNSECURED PROGRAM RATINGS AND FOR THE DEVELOPING OUTLOOK
The affirmation of Montepio's long-term deposits and senior
unsecured programme ratings at B3 and (P)B3, respectively,
reflects: (1) the affirmation of the bank's BCA and adjusted BCA
at caa1; (2) a one-notch uplift from the rating agency's Advanced
Loss Given Failure (LGF) Analysis; and (3) Moody's assessment of
a low probability of government support.
The developing outlook on Montepio's long-term deposit ratings is
reflecting positively Moody's expectation that the bank's
strategic plan will continue to improve its credit fundamentals.
In particular, the rating agency expects further reduction in the
stock of NPAs that will alleviate the pressure on the bank's
solvency levels, as well as a continuous improvement in
profitability metrics.
Conversely, the developing outlook is also reflecting the
potential for ratings pressures provided the recovery of
Montepio's credit profile is taking longer than anticipated in
combination with an evolving liability structure that offers less
protection for senior creditors due to lower cushions of
liabilities subordinated to their claims. Indeed, Moody's expects
a reduction in the stock of bail-in-able senior and subordinated
debt over the next 12-18 months due to the large amount of
wholesale bonds maturing during this period. This could result in
a higher loss-given-failure for deposits and senior unsecured
debt, absent more favourable changes to the liability structure.
Over the outlook horizon, Moody's will assess the liability
profile of Montepio along with its near-term funding plan as well
as the bank's performance and progress towards achieving its
strategic targets.
-- RATIONALE FOR AFFIRMING THE CR ASSESSMENT
As part of rating action, Moody's has also affirmed the long-term
CR Assessment of Montepio at B1(cr), three notches above the
adjusted BCA of caa1.
The CR Assessment is driven by the bank's caa1 adjusted BCA, low
likelihood of systemic support and by the cushion against default
provided by subordinated instruments to the senior obligations
represented by the CR Assessment.
WHAT COULD CHANGE THE RATINGS UP/DOWN
Upward pressure on Montepio's standalone BCA could be driven by
clear evidence that the bank's risk-absorption capacity is
improving, along with a sustainable recovery in the bank's asset
risk profile and recurring earnings.
Downward pressure could be exerted on Montepio's BCA if: (1) the
bank fails to improve its risk-absorption capacity due to
continued asset quality weakening and/or additional provisioning
efforts in excess of its capital generation capacity; and/or (2)
the bank's liquidity profile deteriorates further.
In addition, any change to the BCA would also be likely to affect
debt and deposit ratings, as they are linked to the standalone
BCA. Montepio's senior unsecured programme and deposit ratings
could also change as a result of changes in the loss-given-
failure faced by these securities.
LIST OF AFFECTED RATINGS
Issuer: Caixa Economica Montepio Geral, caixa economica bancaria,
S.A.
Affirmations:
-- Adjusted Baseline Credit Assessment, affirmed caa1
-- Baseline Credit Assessment, affirmed caa1
-- Long-term Bank Deposits, affirmed B3, outlook changed to
Developing from Negative
-- Long-term Counterparty Risk Assessment, affirmed B1(cr)
-- Senior Unsecured Medium-Term Note Program, affirmed (P)B3
-- Subordinate Medium-Term Note Program, affirmed (P)Caa2
-- Junior Subordinate Medium-Term Note Program, affirmed (P)Caa3
Outlook Action:
-- Outlook changed to Developing from Negative
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks
published in September 2017.
=============
R O M A N I A
=============
RAIFFEISEN BANK: Moody's Hikes ba2 Baseline Credit Assessment
-------------------------------------------------------------
Moody's Investors Service has upgraded Raiffeisen Bank SA's long-
term and short-term local-currency deposit ratings to Baa2/Prime-
2 from Baa3/Prime-3. The bank's Baa3/Prime-3 long-term and short-
term foreign-currency deposit ratings, constrained by the
respective country ceiling for Romania, were affirmed. The
outlook on Raiffeisen Bank SA's long-term deposit ratings remains
stable. Concurrently, the rating agency has upgraded the bank's
baseline credit assessment (BCA) to ba2 from ba3 and its adjusted
BCA to ba1 from ba2. The bank's long-term and short-term
Baa2(cr)/Prime-2(cr) Counterparty Risk Assessments (CRA) were
affirmed.
RATINGS RATIONALE
UPGRADE OF THE LONG-TERM LOCAL CURRENCY DEPOSIT RATING
According to Moody's, the upgrade of Raiffeisen Bank SA's local-
currency deposit ratings was driven by a combination of the
upgrade of the bank's BCA to ba2 from ba3 and the upgrade of
Raiffeisen Bank SA's parent Raiffeisen Bank International AG's
(RBI LT bank deposits A3 stable; BCA ba1) BCA to ba1 from ba2.
Consequently, Raiffeisen Bank SA's Baa2 long-term local-currency
deposits ratings incorporate (1) its ba2 BCA, (2) the rating
agency's unchanged high affiliate support assumption from RBI,
resulting in a one-notch rating uplift and a higher adjusted BCA
of ba1 from ba2 previously; and (3) maintaining two notches of
rating uplift from Moody's Advanced Loss Given Failure (LGF)
analysis.
The upgrade of Raiffeisen Bank SA's BCA reflects Moody's
expectation that the benign economic conditions in Romania will
support improvements in the bank's asset quality and maintaining
adequate capitalisation, good profitability and stable funding.
Raiffeisen Bank SA's non-performing loans (NPL) ratio was broadly
stable at 8.0% in June 2017 versus 8.1% in December 2016,
according to the financial disclosures of RBI. The bank's asset
quality is significantly stronger than the average for the
Romanian banking system -- 10% NPL ratio in December 2016.
Raiffeisen Bank SA's NPL coverage ratio of 72.4% in June 2017 is
adequate and was little changed from December 2016.The bank's net
income rose by 62% in H1 2017 from the same period of 2016, which
translated into a return on assets (RoA) of 1.48% (0.93% in H1
2016). This improvement was mainly due to a nearly three-fold
reduction in loan loss provisions, whilst revenues remained
stable.
Raiffeisen Bank SA reported a Tier 1 ratio (excludes retained
earnings for the year) of 14.09% as of end-June 2017, little
changed from 13.9% as of year-end 2015, reflecting a substantial
dividend payment in the amount of 73% and 40% of profits in 2015
and 2016, respectively, and rising risk-weighted assets on the
back of strong loan book growth. The bank remains fully deposit
funded, with a loan-to-deposit ratio of 74.9% at end-June 2017
(83.7% at end-June 2016), as growth in customer deposits outpaced
growth in loans.
The stable outlook on Raiffeisen Bank SA's long-term deposit
rating reflects Moody's expectation that upward and downward
rating pressures will be balanced over the next 12-18 months.
RATIONALE FOR THE AFFIRMATION OF THE CRA
Moody's has also affirmed Raiffeisen Bank SA's long- and short-
term CRAs of Baa2(cr)/Prime-2(cr), two notches above the adjusted
BCA of ba1 (from three notches above the previous adjusted BCA of
ba2). CRAs are typically capped at the level of government debt
rating plus one additional notch unless the bank's adjusted BCA
is higher than the government debt rating.
Consequently, Raiffeisen Bank SA's long-term CRA of Baa2(cr) is
capped at that level, one notch higher than the Romanian
government's (Baa3 stable) debt rating.
-- WHAT COULD MOVE THE RATINGS UP/DOWN
An upgrade of Raiffeisen Bank SA's local-currency deposit ratings
could be prompted by (1) a higher BCA, in combination with (2) a
strengthening of its parent RBI's ba1 BCA, and/or (3) an increase
in uplift resulting from Moody's LGF analysis. The bank's Baa3
foreign-currency deposit rating is constrained by the respective
country ceiling for Romania and will be upgraded if the ceiling
is raised. Raiffeisen Bank SA's BCA could be upgraded in the
event of a further material improvement in asset quality,
capitalisation and profitability.
A downgrade of Raiffeisen Bank SA's local-currency deposit
ratings could be triggered by (1) a downgrade of its BCA; (2) a
downgrade of RBI's BCA that would eliminate parental support
uplift; and/or (3) a reduction in rating uplift as a result of
Moody's LGF analysis. The bank's Baa3 foreign-currency deposit
rating will not be affected by a one-notch downgrade of the local
currency deposit rating, because it is rated one notch lower due
to the sovereign ceiling constraint.
Raiffeisen Bank SA's BCA could experience downward pressure as a
result of substantial weakening in its profitability, erosion of
its capital base and/or increase in asset risk.
LIST OF AFFECTED CREDIT RATINGS
Issuer: Raiffeisen Bank SA
Upgrades:
-- LT Bank Deposits (Local Currency), Upgraded to Baa2 from
Baa3, Outlook Remains Stable
-- ST Bank Deposits (Local Currency), Upgraded to P-2 from P-3
-- Adjusted Baseline Credit Assessment, Upgraded to ba1 from ba2
-- Baseline Credit Assessment, Upgraded to ba2 from ba3
Affirmations:
-- LT Bank Deposits (Foreign Currency), Affirmed Baa3, Outlook
Remains Stable
-- ST Bank Deposits (Foreign Currency), Affirmed P-3
-- LT Counterparty Risk Assessment, Affirmed Baa2(cr)
-- ST Counterparty Risk Assessment, Affirmed P-2(cr)
Outlook Actions:
-- Outlook, Remains Stable
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks
published in September 2017.
=========
S P A I N
=========
IM GRUPO: Moody's Affirms Caa2 Rating on Class B Notes
------------------------------------------------------
Moody's Investors Service announced that it has taken rating
actions on the following classes of notes:
Issuer: IM Grupo Banco Popular Empresas VII, FT
-- EUR1825M Class A Notes, Upgraded to A1 (sf); previously on
Jul 27, 2017 Upgraded to A2 (sf) and Remained On Review for
Possible Upgrade
-- EUR675M Class B Notes, Affirmed Caa2 (sf); previously on Jun
15, 2017 Affirmed Caa2 (sf)
Issuer: IM GRUPO BANCO POPULAR LEASING 3, FT
-- EUR880M Class A Notes, Upgraded to A1 (sf); previously on Jul
27, 2017 A2 (sf) Placed Under Review for Possible Upgrade
-- EUR220M Class B Notes, Affirmed Caa2 (sf); previously on May
17, 2017 Definitive Rating Assigned Caa2 (sf)
The rating actions conclude the review of the Class A notes whose
ratings were placed on review for upgrade on July 27, 2017
following Moody's revised approach to assessing counterparty
risks in structured finance transactions
(http://www.moodys.com/viewresearchdoc.aspx?docid=PR_369760).
IM Grupo Banco Popular Empresas VII, FT is a revolving cash
securitisation of loans originated by Banco Popular Espanol, S.A.
("Banco Popular") and Banco Pastor S.A.U., both entities
belonging to Grupo Banco Popular. The portfolio consist of
unsecured loans extended to small and medium-sized enterprises
(SME) and self-employed individuals located in Spain. IM GRUPO
BANCO POPULAR LEASING 3, FT is a cash securitization of lease
receivables granted by Banco Popular and Banco Pastor, S.A. to
corporates, SMEs and self-employed individuals also located in
Spain.
RATINGS RATIONALE
The rating actions are prompted by the confirmation of Banco
Popular's deposit rating at Baa3. Banco Popular acts as the
issuer account bank in both transactions
(http://www.moodys.com/viewresearchdoc.aspx?docid=PR_374678).
Moody's reassessed the default probability of the transactions'
account bank provider by referencing the bank's deposit rating.
The ratings of the notes are constrained by the issuer account
bank exposure in accordance with Moody's updated approach in
assessing the risk posed by the linkage to the issuer account
bank as part of the consolidated methodology to evaluating
counterparty risks in structured finance transactions published
in July 2017
(http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_1038135).
Revision of key collateral assumption
The performance of IM Grupo Banco Popular Empresas VII, FT has
been stable with overall cumulative defaults at just 0.01% and
90+ delinquencies at 1.22%. As part of the analysis, Moody's
maintained default probability assumption at 8% and fixed
recovery rate of 35%. These assumptions together with portfolio
credit enhancement of 21% result in coefficient of variation of
50%.
The performance of IM GRUPO BANCO POPULAR LEASING 3, FT has also
been stable with zero overall cumulative defaults and just 0.06%
90+ delinquencies. Moody's maintained default probability
assumption at 11.2% and fixed recovery rate of 35%. These
assumptions together with portfolio credit enhancement of 21%
result in coefficient of variation of 35.6%.
Principal Methodology:
The principal methodology used in rating IM GRUPO BANCO POPULAR
LEASING 3, FT was "Moody's Approach to Rating ABS Backed by
Equipment Leases and Loans" published in December 2015. The
principal methodology used in rating IM Grupo Banco Popular
Empresas VII, FT was "Moody's Global Approach to Rating SME
Balance Sheet Securitizations" published in August 2017.
Factors that would lead to an upgrade or downgrade of the
ratings:
Factors or circumstances that could lead to an upgrade of the
ratings include: (1) performance of the underlying collateral
that is better than Moody's expected, (2) deleveraging of the
capital structure, (3) improvements in the credit quality of the
transaction counterparties, and (4) reduction in sovereign risk.
Factors or circumstances that could lead to a downgrade of the
ratings include: (1) performance of the underlying collateral
that is worse than Moody's expected, (2) deterioration in the
notes' available credit enhancement, (3) deterioration in the
credit quality of the transaction counterparties, and (4) an
increase in sovereign risk.
===========
S W E D E N
===========
SAMHALLSBYGGNADSBOLAGET I: Moody's Assigns B1 CFR, Outlook Stable
-----------------------------------------------------------------
Moody's Investors Service has assigned a first-time B1 corporate
family rating to Samhallsbyggnadsbolaget i Norden AB, a
Stockholm-based real estate company. The outlook on the rating is
Stable.
"SBB's B1 rating reflects its midsized property portfolio of low
risk community services and residential properties in Sweden and
Norway, reflecting the company's focus on rental income from
regulated markets or activities that are, in one way or another,
funded by the government," says Daniel Harlid, a Moody's
Assistant Vice President -- Analyst and also Lead Analyst for
SBB.
RATINGS RATIONALE
The B1 corporate family rating assigned to
Samhallsbyggnadsbolaget i Norden AB (SBB) reflects the company's
(1) high share of low-risk revenue derived from residential
properties in Sweden, community service properties (CSPs), as
well as offices in Sweden and Norway; (2) high share of revenue
generated from public tenants (over 30%); (3) diversified tenant
base and property portfolio, with almost full occupancy; (4) long
lease maturity profile, with an average lease length of seven
years; (5) good deal-sourcing capabilities, leading to a medium-
sized portfolio of SEK22.1 billion as of the third quarter of
2017, only after 20 months since the creation of SBB; and (6)
expected positive free cash flow, which will fund capital
spending.
The rating also reflects the following challenges: (1) repayment
of debt due in the next six months contingent on the rollout of
debt; (2) a low unencumbered asset ratio of 11%; (3) residential
and community service properties located in small cities and less
liquid real estate markets than metropolitan areas; (4) elevated
leverage, with gross debt/total assets and annualized net
debt/EBITDA of 62.5% and 14.2x, respectively, in the late stage
of the property cycle; (5) deleveraging resting somewhat on the
ability to generate value and cash flow from building rights; (6)
very short track record of SBB in terms of property management,
as well as access to funding, although top management team has
long experience in real estate.
SBB is a listed Swedish real estate company, controlled by
current CEO and founder Ph.D. Ilija Batljan. The portfolio
consist of residential (25%), community services (42%) and other
(33%) properties in Sweden (68%) and Norway (32%). The strategy
is to be exposed to rental income from either regulated markets
or activities that are funded by Nordic governments.
RATIONALE FOR STABLE OUTLOOK
The stable outlook reflects Moody's expectations that the company
will be able to refinance bank debt and bonds maturing in the
next six months and that this refinancing will be completed in a
timely fashion. The outlook also reflects Moody's expectations
that effective leverage will hover around 60% in the next 12
months. Furthermore, the stable outlook is anchored in Moody's
understanding that the company will focus on the management of
the existing portfolio, with only minor acquisitions being
considered.
FACTORS THAT COULD LEAD TO AN UPGRADE
SBB is well positioned in the B1 rating category. Given the low
risk of its property portfolio, leverage of 60% could be
associated with a higher rating. However, the B1 reflects the
early stage development of the company. An upgrade would require:
* Stronger liquidity, including committed multi-year bank
facilities
* Successful refinancing of debt maturities, therefore
establishing a track record in the bank and bond markets
* A longer track record under the stated strategy of focusing on
residential properties and CSPs in cities with strong demand
fundamentals
FACTORS THAT COULD LEAD TO A DOWNGRADE
* Failure to increase committed bank lines or roll over bank debt
and refinance bonds coming due
* Leverage increasing toward 65%-70% because of either debt-
funded acquisitions or weakening of market fundamentals,
resulting in falling property values
* EBITDA/fixed charges below 1.7x
* Any major changes in the composition of the portfolio, which
could lead to a higher risk property portfolio
The principal methodology used in this rating was Global Rating
Methodology for REITs and Other Commercial Property Firms
published in July 2010.
=============
U K R A I N E
=============
BANK BOGUSLAV: Declared Insolvent by National Bank of Ukraine
-------------------------------------------------------------
UNIAN reports that the National Bank of Ukraine has classified
Bank Boguslav JSC as insolvent since it failed to reach the
target volume of the charter and regulatory capital as of Nov. 1
when the bank needed additional capitalization following the
diagnostics results, according to the regulator's website.
===========================
U N I T E D K I N G D O M
===========================
COLOUR BIDCO: Moody's Assigns (P)B3 Corporate Family Rating
-----------------------------------------------------------
Moody's Investors Service has assigned a (P)B3 corporate family
rating (CFR) to Colour Bidco Limited (NGA UK), the top entity in
NGA UK's restricted group. The action follows the launch of
syndication for GBP 300 million senior secured first lien
facilities (of which GBP 260 million would be drawn at closing),
which will be used to fund the acquisition of NGA UK by financial
investor Bain Capital (unrated). The balance of funding for the
acquisition price will be contributed by Bain in the form of
equity.
The new rating assignment mainly reflects the following factors:
-- High forecast leverage of 6.8x at closing and slow
deleveraging prospects
-- Geographic concentration in the UK and low product
diversification
-- Large SaaS and recurring revenue base of around 80% owing to
high switching costs
-- Leading market position in UK payroll and HR software and
services, with high profitability
Concurrently, Moody's has assigned (P)B3 ratings to the proposed
new 7-year GBP 260 million senior secured first lien term loan B
and pari passu ranking 6-year GBP 40 million revolving credit
facility (RCF), which shall be borrowed by Colour Bidco Limited.
The outlook on all ratings is stable.
Moody's issues provisional ratings in advance of the final sale
of securities and these ratings reflect Moody's preliminary
credit opinion regarding the transaction only. Upon closing and
settlement of the proposed debt and equity transactions, Moody's
will endeavour to assign definitive ratings. A definitive rating
may differ from a provisional rating.
RATINGS RATIONALE
NGA UK's (P)B3 CFR is primarily constrained by (1) the high
forecast Moody's adjusted leverage of 6.8x at closing (8.2x
before the capitalisation of software development costs and 5.9x
excluding the pension liability) and the slow pace of expected
deleveraging, which hinges on EBITDA growth, (2) the geographic
revenue concentration in the UK and the lack of product
diversification away from a single platform focused on payroll
and core HR software, (3) relatively low free cash flow/debt in
the range of 3-4%, and (4) risks that the separation process from
NGA HR will take longer or result in additional costs.
However, NGA UK's credit quality is supported by (1) its leading
position in the niche market for payroll and HR software and
services in the UK, (2) high switching costs for the group's
products, resulting in retention rates of 90% and recurring
revenues of around 80%, and (3) its high Moody's adjusted EBITDA
margin of 33% and adequate liquidity.
"NGA UK's credit quality is particularly constrained by its very
high leverage in the context of its concentrated business profile
and a less benign macroeconomic environment in the UK. The pace
of degearing will be slow and solely reliant on earnings growth,
in the absence of material mandatory debt amortisation" says
Frederic Duranson, a Moody's Analyst and lead analyst for NGA UK.
"Residual uncertainty about the costs required to run the group
on a standalone basis could also lead to leverage remaining
around 6.5x by the end of April 2019 ("fiscal 2019"). The high
debt burden and pension contributions will result in a relatively
low free cash flow/debt ratio of below 5% in the next 18 months"
Mr Duranson adds.
Moody's forecasts that NGA UK's leverage (measured by Moody's
adjusted gross debt to EBITDA after the capitalisation of
software development costs and including certain pro-forma
adjustments), will not be materially below 6.5x 12 to 18 months
after close. The group will benefit from the positive effect of
operating leverage owing to total revenue growth in the range of
2-3% per annum. In addition, EBITDA growth will come from cost
reduction initiatives such as further staff offshoring to India.
As a result, Moody's anticipates an EBITDA margin expansion of up
to 150 bps in the next few years.
Moody's expects that NGA UK will be able to generate positive
free cash flow (FCF) in the next couple of years, in the range of
GBP 10-15 million per annum (before one-off separation costs),
resulting in FCF/debt of 3% to 4%. Cash flow generation will be
supported by the absence of working capital needs, owing to
widespread advance billing within the group, and low capex spend
(including the capitalisation of software development costs), at
approximately 7% of revenues, reflecting its asset-light model.
Conversely, free cash flow in the 12 months following close will
be reduced by one-off separation costs (around GBP 4-5 million)
whilst NGA UK will have to contribute approximately GBP 5 million
per annum to its defined benefit pension schemes.
NGA UK's customers are generally risk-averse and loyal because
payroll is a critical task, for which track record of
successfully and timely incorporating legislative changes in
products and services is key. Concerns over data integration and
security and staff retraining needs also help maintain retention
rates of around 90%. Flagship product ResourceLink's retention
rates in the mid-90s are in line with the peer group of European
enterprise software vendors but the overall group's retention
rates are somewhat lower than the peer group average because of
attrition stemming from migration away from NGA UK's legacy
platforms. Although it continues to be a drag on revenues, its
adverse effect is reducing.
The group still benefits from a high predictability of revenues,
based on contractually recurring income of around 80% of
revenues, which is above European enterprise software vendors'
average in the 60-70% range. The group's recurring revenues
primarily include income streams related to multi-year contracts
for software rental and maintenance (of which approximately half
is delivered via the cloud) as well as outsourcing services.
NGA UK's credit profile also benefits from its leading position
in niche HR and payroll software applications and outsourcing
services for customers with more than 500 employees. Management
claim the top share, albeit in a relatively fragmented market,
materially ahead of global specialist Automatic Data Processing,
Inc. (ADP, Aa3 stable) and local competitors MidlandHR (unrated)
and SD Worx (unrated). The ongoing transition towards software-
as-a-service (SaaS) offerings and the much larger availability of
modules than are currently used by customers provide for the main
growth opportunity in the mid-market.
Moody's views NGA UK's liquidity profile as adequate. It will be
chiefly supported by positive free cash flow generation and
availability under the new 6-year GBP 40 million RCF. The
transaction is not expected to leave any cash on balance sheet at
closing, whereas it will likely coincide with the time of the
year when liquidity is at its tightest owing to working capital
needs. As a result, the group may have to make some drawings
under the RCF but Moody's anticipates that it would be able to
repay them by the end of fiscal Q1 2019.
The senior secured first lien term loans and RCF are the only
financial debt instruments in the capital structure, hence they
are rated in line with the CFR.
RATIONALE FOR STABLE OUTLOOK
The stable outlook on NGA UK's ratings assumes (1) a reported
standalone EBITDA level of at least GBP 48 million in the context
of the current capital structure and no material increase in
Moody's adjusted leverage from the closing level, (2) positive
free cash flow generation as well as adequate liquidity, and (3)
no material debt-funded acquisitions or shareholder
distributions.
WHAT COULD CHANGE THE RATING UP/DOWN
NGA UK is well-positioned within the rating category and there
could be upward rating pressure (following provision of audited
accounts) should NGA UK (1) degear such that Moody's adjusted
gross debt to EBITDA fell towards 6.0x, (2) raise FCF to debt to
at least 5% on a sustainable basis, and (3) maintain an adequate
liquidity profile.
Conversely, NGA UK's ratings could come under negative pressure
if the criteria for a stable outlook were not to be met, in
particular if FCF became negative on a sustainable basis or the
group's liquidity position deteriorated.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Software
Industry published in December 2015.
NGA UK, based in England, provides payroll and HR software, as
well as outsourcing services underpinned by its proprietary
software, to private and public sector clients in the UK and
Ireland. In the fiscal year ended April 2017 ('fiscal 2017'), the
group had GBP 138 million of revenue and GBP 47.6 million of pro-
forma adjusted EBITDA. NGA UK is being carved out of NGA HR
(unrated) after financial investor Bain Capital (unrated) agreed
to acquire the UK business in October 2017.
FOUR SEASONS: Terra Firma to Hand Over Ownership to Creditors
-------------------------------------------------------------
Ben Marlow at The Telegraph reports that Guy Hands has decided to
hand over the keys to care home operator Four Seasons,
crystallizing a massive GBP450 million loss on the disastrous
deal.
The dramatic change of heart has been prompted by a rival offer
from the company's biggest lender, The Telegraph relays.
H/2 Capital, an American hedge fund, has offered to pump in
GBP135 million as part of a complex financial restructuring that
will also see Four Seasons' debt pile almost halved, The
Telegraph says. Terra Firma was promising no fresh cash and
borrowings would have remained much higher, The Telegraph states.
Terra Firma, as cited by The Telegraph, said: "We stand ready to
transfer our interest to the creditors as part of this
restructuring."
H/2 will become the biggest shareholder, and hand lenders a
greater slice of equity, double what Terra Firma was offering,
The Telegraph discloses.
According to The Telegraph, sources close to the talks now expect
Four Seasons' management, led by chairman Robbie Barr, to
recommend H/2's offer.
MARKETPLACE 2017-1: Moody's Assigns B3 Rating to Cl. E Notes
-------------------------------------------------------------
Moody's Investors Service has assigned the following definitive
ratings to notes issued by Marketplace Originated Consumer Assets
2017-1 PLC ("Moca 2017-1"):
-- GBP172.80 million Class A Asset Backed Notes due December
2027, Definitive Rating Assigned Aa3 (sf)
-- GBP8.64 million Class B Asset Backed Notes due December 2027,
Definitive Rating Assigned A3 (sf)
-- GBP8.64 million Class C Asset Backed Notes due December 2027,
Definitive Rating Assigned Baa3 (sf)
-- GBP8.64 million Class D Asset Backed Notes due December 2027,
Definitive Rating Assigned Ba3 (sf)
-- GBP6.48 million Class E Asset Backed Notes due December 2027,
Definitive Rating Assigned B3 (sf)
The GBP10.80 million Class Z Asset Backed Notes due December
2027, the GBP6.48 million Class X Notes due December 2027 and the
GBP4.61 million subordinated loan will not be rated.
RATINGS RATIONALE
The definitive rating assignments reflect the transaction's
structure as a static cash securitisation of unsecured consumer
loans, originated through a marketplace lending online platform
in the UK. Zopa Limited ("Zopa") (not rated) operates the
platform and manages the underwriting process. P2P Global
Investments PLC (not rated) was the seller of the securitised
loan portfolio. The platform provider, Zopa, also acts as the
servicer of the portfolio. Target Servicing Limited (not rated)
has been appointed as back-up servicer of the transaction.
The definitive securitised portfolio as of October 31, 2017
consists of unsecured consumer loans to UK private borrowers.
According to the borrowers' classification (not verified by the
platform provider) the loans are mainly used to finance cars
(31.5%), for debt consolidation (37.7%) and for home improvements
(20.7%). The portfolio consists of 31,246 contracts with a
weighted average seasoning of 5.73 months and a maximum loan term
of five years. Most borrowers are employed full-time (88.10%) and
the average outstanding loan balance (including capitalised fees)
is GBP6,928.
According to Moody's, the transaction benefits from: (i) a
granular portfolio originated through the Zopa marketplace
lending platform, (ii) a static structure that does not allow the
issuer to buy additional receivables after closing, (iii)
continuous portfolio amortization from day one, (iv) an
independent cash manager and liquidity provided through two
reserve funds, (v) an appointed back-up servicer at closing, and
(vi) credit enhancement provided through subordination of the
notes, reserve funds and excess spread.
Moody's notes that the transaction may be negatively impacted by:
(i) misalignment of interest between the platform provider Zopa
and investors who finance the loans, (ii) the fact that Zopa does
not retain a direct economic interest in the securitized
portfolio, (iii) the limited historical data that does not cover
a full economic cycle, (iv) a higher fraud risk due to the online
origination process, (v) an unrated servicer with limited
financial strength, and (vi) the regulatory uncertainty due to
the still developing regulation for the marketplace lending
segment.
Moody's analysis focused, amongst other factors, on (i)
historical performance data, (ii) the loan-by-loan data for the
securitised portfolio including internal and external credit
scores, (iii) the credit enhancement provided by subordination,
the reserve fund and excess spread, (iv) the liquidity support
available in the transaction by way of principal to pay interest
and the liquidity reserve for the most senior outstanding Class
of notes, and (v) the appointment of the back-up servicer at
closing.
MAIN MODEL ASSUMPTIONS
Moody's determined the portfolio lifetime expected defaults of
7.0%, expected recoveries of 10% and Aaa portfolio credit
enhancement ("PCE") of 32.5% related to the loan portfolio. The
expected defaults and recoveries capture Moody's expectations of
performance considering the current economic outlook, while the
PCE captures the loss Moody's expect the portfolio to suffer in
the event of a severe recession scenario. Expected defaults and
PCE are parameters used by Moody's to calibrate its lognormal
portfolio default distribution curve and to associate a
probability with each potential future default scenario in the
ABSROM cash flow model to rate Consumer ABS.
Portfolio expected defaults of 7.0% are higher than the EMEA
consumer loan average and are based on Moody's assessment of the
lifetime expectation for the pool taking into account (i) limited
historical performance data of the loan book of the originator,
(ii) benchmark transactions, (iii) the current economic
uncertainty in the UK, and (iv) a rather new originator with a
new business concept compared to classical loan origination.
Portfolio expected recoveries of 10% are lower than the EMEA
consumer loan average for unsecured consumer loans and are based
on Moody's assessment of the lifetime expectation for the pool
taking into account (i) the limited strength and experience of
the servicer (ii) historical performance of the loan book of the
originator, and (iii) benchmark transactions.
The Aaa PCE of 32.5% is higher than the EMEA consumer loan
average and is based on Moody's assessment of the pool taking
into account the relative ranking of the platform provider to
originator peers in the EMEA consumer loan market. The PCE level
of 32.5% results in an implied coefficient of variation ("CoV")
of 40.5%.
METHODOLOGY
The principal methodology used in these ratings was "Moody's
Approach to Rating Consumer Loan-Backed ABS" published in
September 2015.
The ratings address the expected loss posed to investors by the
legal final maturity of the notes. In Moody's opinion, the
structure allows for timely payment of interest on the Class A
notes and the ultimate payment of interest and principal at par
on the Class A to E notes, on or before the legal final maturity.
Moody's ratings address only the credit risks associated with the
transaction. Other non-credit risks have not been addressed but
may have a significant effect on yield to investors.
Provisional ratings were assigned on October 16, 2017.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE
RATINGS:
Significantly better-than-expected performance of the securitised
portfolio would lead to an upgrade of the ratings, all else being
equal.
Factors that may cause a downgrade of the rated notes include:
(i) a decline of the performance of the pool beyond Moody's
expectations, (ii) a significant deterioration of the credit
profile of the servicer, or (iii) unexpected, negative changes in
the regulatory or market environment of the marketplace lending
segment.
LOSS AND CASH FLOW ANALYSIS:
Moody's used its cash flow model Moody's ABSROM as part of its
quantitative analysis of the transaction. Moody's ABSROM model
enables users to model various features of a standard European
ABS transaction - including the specifics of the loss
distribution of the assets, their portfolio amortisation profile
and yield. On the liability side of the ABS structure
subordination and reserve fund.
STRESS SCENARIOS:
In rating consumer loan ABS, default rate and recovery rate are
two key inputs that determine the transaction cash flows in the
cash flow model. Parameter sensitivities for this transaction
have been tested in the following manner: Moody's tested six
scenarios derived from a combination of mean default rate: 7.0%
(base case), 8.0% (base case + 1.0%), 9.0% (base case + 2.0%) and
recovery rate: 10.0% (base case), 5.0% (base case - 5%) and 0.0%
(base case -- 10%). The model output results for the Class A
notes under these scenarios vary from Aa3 (sf) (base case) to A1
(sf) assuming the mean default rate is 8.0% and the recovery rate
is 0%, all else being equal. Parameter sensitivities provide a
quantitative/model indicated calculation of the number of notches
that a Moody's rated structured finance security may vary if
certain input parameters used in the initial rating process
differed. The analysis assumes that the deal has not aged. It is
not intended to measure how the rating of the security might
migrate over time, but rather how the initial model output for
the Class A notes might have differed if the two parameters
within a given sector that have the greatest impact were varied.
Model output results for the Class B to E notes are shown in the
new issue report for this securitisation.
SNOOZEBOX HOLDINGS: Appoints Administrators, Shares Suspended
-------------------------------------------------------------
The Board of Snoozebox Holdings plc (the "Company") (AIM: ZZZ) on
Nov. 8 announced the appointment of administrators.
Further to the announcement made earlier on Nov. 8, the Directors
have appointed Jeremy Willmont --
jeremy.willmont@moorestephens.com -- and Neville Side --
neville.side@moorestephens.com -- of Moore Stephens LLP as
administrators to the Company and to its main trading subsidiary
Snoozebox Limited (the "Subsidiary").
Any enquiries regarding the Company and Subsidiary or their
administration should be directed to
Neville.Side@moorestephens.com. The telephone number is 0207 334
9191.
The Company's ordinary shares remain suspended from trading on
AIM pending clarification of its financial position.
Snoozebox Holdings plc is a provider of transportable
accommodation solutions.
TURBO FINANCE 5: Moody's Affirms Ba1 Rating on Class C Notes
------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of Class B
notes in Turbo Finance 5 plc. The rating action reflects (1)
better than expected collateral performance and (2) the increased
levels of credit enhancement for the affected notes.
Issuer: Turbo Finance 5 plc
-- GBP371.6M Class A Notes, Affirmed Aaa (sf); previously on Sep
23, 2014 Definitive Rating Assigned Aaa (sf)
-- GBP37.7M Class B Notes, Upgraded to Aaa (sf); previously on
Jan 27, 2017 Upgraded to Aa1 (sf)
-- GBP10.69M Class C Notes, Affirmed Ba1 (sf); previously on Jan
27, 2017 Affirmed Ba1 (sf)
Moody's affirmed the ratings of the Class A and C notes that had
sufficient credit enhancement to maintain current rating.
RATINGS RATIONALE
The rating action is prompted by deal deleveraging resulting in
an increase in credit enhancement for the affected tranches.
Revision of Key Collateral Assumptions:
As part of the rating action, Moody's reassessed its default
probability and recovery rate assumptions for the portfolio
reflecting the collateral performance to date.
The performance of the transactions has continued to be stable
since issuance. Total delinquencies are at low level, with 60
days plus arrears currently standing at 0.85% of current pool
balance. Cumulative defaults currently stand at 2.87% of original
pool balance.
The current default probability is 4% of the current portfolio
balance, translating into a lower DP assumption of 3.1% of
original balance compared to an initial assumption of 4%. Moody's
left unchanged the fixed recovery rate of 45% and the portfolio
credit enhancement of 15%.
Increase/Decrease in Available Credit Enhancement:
Sequential amortization led to the increase in the credit
enhancement available for Class B from 3.80% to 19.7% since
closing.
This credit enhancement takes the form of subordination and a
fully funded reserve fund of GBP 2.1 million.
The principal methodology used in these ratings was "Moody's
Global Approach to Rating Auto Loan- and Lease-Backed ABS"
published in October 2016.
Factors that would lead to an upgrade or downgrade of the
ratings:
Factors or circumstances that could lead to an upgrade of the
ratings include (1) performance of the underlying collateral that
is better than Moody's expected, (2) deleveraging of the capital
structure and (3) improvements in the credit quality of the
transaction counterparties and (4) a decrease in sovereign risk.
Factors or circumstances that could lead to a downgrade of the
ratings include (1) an increase in sovereign risk (2) performance
of the underlying collateral that is worse than Moody's expected,
(3) deterioration in the notes' available credit enhancement and
(4) deterioration in the credit quality of the transaction
counterparties.
===============
X X X X X X X X
===============
* BOOK REVIEW: Lost Prophets -- An Insider's History
----------------------------------------------------
Author: Alfred L. Malabre, Jr.
Publisher: Beard Books
Softcover: 256 pages
List Price: $34.95
Review by Henry Berry
Order your personal copy today at
http://is.gd/KNTLyr
Alfred Malabre's personal perspective on the U.S. economy over
the past four decades is firmly grounded in his experience and
knowledge. Economics Editor of The Wall Street Journal from 1969
to 1993 and author of its weekly "Outlook" column, Malabre was in
a singular position to follow the U.S. economy in recent decades,
have access to the major academic and political figures
responsible for economic affairs, and get behind the crucial
economic stories of the day. He brings to this critical overview
of the economy both a lively, often provocative, commentary on
the picture of the turns of the economy. To this he adds sharp
analysis and cogent explanation.
In general, Malabre does not put much stock in economists. "In
sum, the profession's record in the half century since Keynes and
White sat down at Bretton Woods [after World War II] provokes
dismay." Following this sour note, he refers to the belief of a
noted fellow economist that the Nobel Prize in this field should
be discontinued. In doing so, he also points out that the Nobel
for economics was not one originally endowed by Alfred Nobel, but
was one added at a later date funded by the central bank of
Sweden apparently in an effort to give the profession of
economists the prestige and notice of medicine, science,
literature and other Nobel categories.
Malabre's view of economists is widespread, although rarely
expressed in economic circles. It derives from the plain fact
that modern economists, even hugely influential ones such as John
Meynard Keynes, are wrong as many times as they are right. Their
economic theories have proved incomplete or shortsighted, if not
basically wrong-headed. For example, Malabre thinks of the
leading economist Milton Friedman and his "monetarist colleagues"
as "super salespeople, successfully merchandising.an economic
medicine that promised far more than it could deliver" from about
the 1960s through the Reagan years of the 1980s. But the author
not only cites how the economy has again and again disproved the
theories and exposed the irrelevance of wrong-headedness of the
policy recommendations of the most influential economists of the
day. Malabre also lays out abundant economic data and describes
contemporary marketplace and social activities to show how the
economy performs almost independently of the best analyses and
ideas of economists.
Malabre does not engage in his critiques of noted economists and
prevailing economic ideas of recent decades as an end in itself.
What emerges in all of his consistent, clear-eyed, unideological
analysis and commentary is his own broad, seasoned view of
economics-namely, the predominance of the business cycle. He
compares this with human nature, which is after all the substance
of economics often overlooked by professional and academic
economists with their focus on monetary policy, exchange rates,
inflation, and such. "The business cycle, like human nature, is
here to stay" is the lesson Malabre aims to impart to readers
interested in understanding the fundamental, abiding nature of
economics. In Lost Prophets, in language that is accessible and
jargon-free, this author, who has observed, written about, and
explained economics from all angles for several decades,
persuasively makes this point.
In addition to holding a top position at The Wall Street Journal,
Malabre is also the author of the books, Understanding the New
Economy and Beyond Our Means, which received the George S. Eccles
Prize from the Columbia Business School as the best economics
book of 1987.
*********
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
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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-
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Marites O. Claro, Rousel Elaine T. Fernandez, Joy A. Agravante,
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Editors.
Copyright 2017. All rights reserved. ISSN 1529-2754.
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