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        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

          Thursday, February 15, 2018, Vol. 19, No. 033


                            Headlines


C R O A T I A

AGROKOR DD: Sberbank May Retain Influence in Drafting Settlement


G E R M A N Y

C. MACKPRANG: Files for Insolvency After Bank Talks Fail
DERO BANK: BaFin Halts Operations Following Debt Surge


I R E L A N D

AVOCA CLO XV: Moody's Assigns (P)B2 Rating to Class F-R Notes
AVOCA CLO XV: Fitch Assigns 'B-(EXP)' Rating to Class F-R Notes
PEMBROKE DYNAMIC: 40 Irish Charities Lose Money After Collapse


K A Z A K H S T A N

ASIACREDIT BANK: S&P Assigns 'B-/B' ICRs, Outlook Stable
CAPITAL BANK: S&P Cuts LT ICR to 'CCC+', On Watch Negative
EXIMBANK KAZAKHSTAN: S&P Cuts Issuer Credit Ratings to 'CCC+/C'


M O L D O V A

ARAGVI HOLDING: S&P Assigns Preliminary 'B-' ICR, Outlook Stable


P O R T U G A L

HAITONG BANK: S&P Alters Outlook to Stable, Affirms 'BB-/B' ICRs


R U S S I A

INTERREGIONAL DISTRIBUTION: S&P Ups ICR to 'BB', Outlook Stable
MORDOVIA REPUBLIC: Fitch Cuts Long-Term IDR to B, Outlook Stable
NOVOSIBIRSK CITY: Fitch Affirms BB Long-Term IDR, Outlook Stable
ORENBURG REGION: Fitch Alters Outlook to Positive, Affirms BB IDR
PHOSAGRO PJSC: Fitch Hikes Long-Term IDR From BB+, Outlook Stable

PIONEER GROUP: S&P Alters Outlook to Pos. & Affirms 'B-' ICR


U K R A I N E

ODESSA CITY: Fitch Assigns B- Long-Term IDR, Outlook Stable


U N I T E D   K I N G D O M

BRIGHTHOUSE GROUP: Moody's Puts Caa2 CFR on Review for Upgrade
CARILLION PLC: Serco Buys 15 Healthcare Contracts at a Discount
COLOUR BIDCO: S&P Puts 'B' Issuer Credit Rating, Outlook Stable
DUKINFIELD PLC: S&P Affirms BB (sf) Rating on Class E-Dfrd Notes
NEW LOOK: S&P Downgrades ICR to 'CCC' on Weakening of Cash Flows


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C R O A T I A
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AGROKOR DD: Sberbank May Retain Influence in Drafting Settlement
----------------------------------------------------------------
Jasmina Kuzmanovic and Luca Casiraghi at Bloomberg News report
that Sberbank PJSC may retain influence in creating a settlement
plan for Agrokor d.d. as tensions among other creditors are
expected to derail a decision-making body from which it has been
excluded, according to people involved in drafting the document.

Sberbank, Agrokor's biggest lender, was in November booted from
the list of creditors eligible for a permanent representative
group because it's suing the retailer, Bloomberg recounts.
However, it still has a seat on the Temporary Creditors' Council,
Bloomberg states.  According to Bloomberg, the people said the
latter will probably end up signing off on the settlement
agreement for the Balkan company.  The settlement then needs to
receive a final approval by at least two-thirds of creditors,
based on the size of their exposure, Bloomberg states.

The government last week urged creditors to agree on the
settlement draft by April 10 and Agrokor on Monday said it's
still committed to doing so, Bloomberg relays.  The people, as
cited by Bloomberg, said that this means there will probably be
no time for creditors, plagued by mutual disagreements, to agree
on representatives in the permanent council.

Sberbank regaining influence in the settlement process would
represent the latest turn in the dispute over its EUR1.1 billion
(US$1.35 billion) claim toward Agrokor, which has at times taken
on geopolitical dimensions in the past year, Bloomberg discloses.
Among other disagreements, Sberbank has sought to block Agrokor
from selling assets outside of Croatia and is disputing the
recognition of local insolvency processes in Slovenia, Serbia,
and the U.K, Bloomberg notes.

Meanwhile, several creditors have challenged others' claims in
court, Bloomberg relates.  Some are seeking to alter the classes
of creditors proposed by the company, Bloomberg relays, citing
the people involved in the talks.  Suppliers have also criticized
the first settlement draft proposed by the company in December,
Bloomberg discloses.

Should creditors fail to agree on representatives in the
Permanent Creditors' Council within 90 days from Feb. 1, when
Agrokor opened nominations, the court will decide on
representatives, Bloomberg says.  That would delay the council's
formation beyond the government's final April 10 deadline,
according to Bloomberg.

                       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.



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G E R M A N Y
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C. MACKPRANG: Files for Insolvency After Bank Talks Fail
--------------------------------------------------------
Agnieszka de Sousa at Bloomberg News reports that Jens Kass, C.
Mackprang's managing director, said in an e-mail the company
filed for insolvency after failing to reach agreement with banks
over future financing.

Trading will continue at the company, Bloomberg notes.

Hamburg-based C. Mackprang was founded in 1878 and trades grains
including malting barley.


DERO BANK: BaFin Halts Operations Following Debt Surge
------------------------------------------------------
Nicholas Comfort at Bloomberg News reports that German financial
markets supervisor BaFin said in a statement on Feb. 8 that
Dero Bank was prohibited with immediate effect from transacting
with clients, making payments and sales because of potential
over-leveraging of balance sheet.

The bank with EUR27 million balance sheet cannot accept payments
unless it is for debt owed to Dero, Bloomberg notes.

According to Bloomberg, the Compensation Scheme of German Private
Banks said in a separate statement that Dero comes under its
statutory deposit guarantee system.



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I R E L A N D
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AVOCA CLO XV: Moody's Assigns (P)B2 Rating to Class F-R Notes
-------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to
eight classes of notes (the "Refinancing Notes") to be issued by
Avoca CLO XV Designated Activity Company ("Avoca CLO XV" or the
"Issuer"):

-- EUR3,000,000 Class X Senior Secured Floating Rate Notes due
    2031, Assigned (P)Aaa (sf)

-- EUR309,500,000 Class A-R Senior Secured Floating Rate Notes
    due 2031, Assigned (P)Aaa (sf)

-- EUR9,000,000 Class B-1R Senior Secured Fixed Rate Notes due
    2031, Assigned (P)Aa2 (sf)

-- EUR44,500,000 Class B-2R Senior Secured Floating Rate Notes
    due 2031, Assigned (P)Aa2 (sf)

-- EUR29,000,000 Class C-R Deferrable Mezzanine Floating Rate
    Notes due 2031, Assigned (P)A2 (sf)

-- EUR26,500,000 Class D-R Deferrable Mezzanine Floating Rate
    Notes due 2031, Assigned (P)Baa2 (sf)

-- EUR34,000,000 Class E-R Deferrable Junior Floating Rate Notes
    due 2031, Assigned (P)Ba2 (sf)

-- EUR13,500,000 Class F-R Deferrable Junior Floating Rate Notes
    due 2031, 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.

The Issuer will issue the Refinancing Notes in connection with
the refinancing of the following classes of notes: Class A Notes,
Class B Notes, Class C Notes, Class D Notes, Class E Notes and
Class F Notes due 2029 (the "Original Notes"), previously issued
on November 05, 2015 (the "Original Closing Date"). On the
Refinancing Date, the Issuer will use the proceeds from the
issuance of the Refinancing Notes to redeem in full its
respective Original Notes.

Avoca CLO XV 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.

KKR Credit Advisors (Ireland) Unlimited Company (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 April 2022, the Manager may
reinvest unscheduled principal payments and proceeds from sales
of credit risk obligations, subject to certain restrictions.

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.

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.

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: EUR500,000,000

Diversity Score: 42

Weighted Average Rating Factor (WARF): 2800

Weighted Average Spread (WAS): 3.40%

Weighted Average Coupon (WAC): 4.50%

Weighted Average Recovery Rate (WARR): 43.0%

Weighted Average Life (WAL): 8.5 years

Moody's has analysed the potential impact associated with
sovereign related risk of peripheral European countries. 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 below A3 further
limited to 5%. Given the current composition of qualifying
countries, Moody's has assumed 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.

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 X Senior Secured Floating Rate Notes: 0

Class A-R Senior Secured Floating Rate Notes: -1

Class B-1R Senior Secured Fixed Rate Notes: -2

Class B-2R Senior Secured Floating Rate Notes: -2

Class C-R Deferrable Mezzanine Floating Rate Notes: -2

Class D-R Deferrable Mezzanine Floating Rate Notes: -2

Class E-R Deferrable Junior Floating Rate Notes: 0

Class F-R Deferrable Junior Floating Rate Notes: 0

Percentage Change in WARF -- increase of 30% (from 2800 to 3640)

Rating Impact in Rating Notches

Class X Senior Secured Floating Rate Notes: 0

Class A-R Senior Secured Floating Rate Notes: -1

Class B-1R Senior Secured Fixed Rate Notes: -3

Class B-2R Senior Secured Floating Rate Notes: -3

Class C-R Deferrable Mezzanine Floating Rate Notes: -4

Class D-R Deferrable Mezzanine Floating Rate Notes: -2

Class E-R Deferrable Junior Floating Rate Notes: -1

Class F-R Deferrable Junior Floating Rate Notes: -2


AVOCA CLO XV: Fitch Assigns 'B-(EXP)' Rating to Class F-R Notes
---------------------------------------------------------------
Fitch Ratings has assigned Avoca CLO XV DAC refinancing notes
expected ratings:

EUR3 million Class X notes: 'AAA(EXP)sf'; Outlook Stable
EUR309.5 million Class A-R notes: 'AAA(EXP)sf'; Outlook Stable
EUR9 million Class B-1R notes: 'AA(EXP)sf'; Outlook Stable
EUR44.5 million Class B-2R notes: 'AA(EXP)sf'; Outlook Stable
EUR29 million Class C-R notes: 'A(EXP)sf'; Outlook Stable
EUR26.5 million Class D-R notes: 'BBB(EXP)sf'; Outlook Stable
EUR34 million Class E-R notes: 'BB(EXP)sf'; Outlook Stable
EUR13.5 million Class F-R notes: 'B-(EXP)sf'; Outlook Stable
EUR24.6 million Class M-1 notes: NR
EUR28.5 million Class M-2 notes: NR

The assignment of final ratings is contingent on the receipt of
final documents conforming to information already reviewed.

Avoca CLO XV DAC is a cash flow collateralised loan obligation
(CLO). Net proceeds from the notes will be used to redeem the old
notes, with a new identified portfolio comprising the existing
portfolio, as modified by sales and purchases conducted by the
manager. The portfolio is managed by KKR Credit Advisors
(Ireland) Unlimited Company (formerly KKR Credit Advisors
(Ireland)). The refinanced CLO envisages a further four-year
reinvestment period and an 8.5-year weighted average life.

KEY RATING DRIVERS

'B'/'B+' Portfolio Credit Quality: Fitch assesses the average
credit quality of obligors to be in the 'B'/'B+' category. The
Fitch-weighted average rating factor (WARF) of the current
portfolio is 31.4.

High Recovery Expectations: At least 90% of the portfolio
comprises senior secured obligations. Fitch views the recovery
prospects for these assets as more favourable than for second-
lien, unsecured and mezzanine assets. The Fitch-weighted average
recovery rate (WARR) of the current portfolio is 68.2%.

Limited Interest Rate Exposure: Up to 5% of the portfolio can be
invested in fixed-rate assets, while fixed-rate liabilities
represent 1.8% of the target par. Fitch modelled both 0% and 5%
fixed-rate buckets and found that the rated notes can withstand
the interest rate mismatch associated with each scenario.

Diversified Asset Portfolio: The covenanted maximum exposure to
the top 10 obligors is 21% of the portfolio balance. This
covenant ensures that the asset portfolio will not be exposed to
excessive obligor concentration.

VARIATIONS FROM CRITERIA

The "Fitch Rating" definition was amended so that assets that are
not expected to be rated by Fitch, but that are rated privately
by the other rating agency rating the liabilities, can be assumed
to be of 'B-' credit quality for up to 10% of the collateral
principal amount. This is a variation from Fitch's criteria,
which require all assets unrated by Fitch and without public
ratings to be treated as 'CCC'. The change was motivated by
Fitch's policy change of no longer providing credit opinions for
EMEA companies over a certain size. Instead Fitch expects to
provide private ratings that would remove the need for the
manager to treat assets under this leg of the "Fitch Rating"
definition.

The amendment has had only a small impact on the ratings. Fitch
has modelled the transaction at the pricing point with 10% of the
'B-' assets with a 'CCC' rating instead, which resulted in a two-
notch downgrade at the 'A' rating level and at most a one-notch
downgrade at other rating levels.

RATING SENSITIVITIES

A 125% default multiplier applied to the portfolio's mean default
rate, and with this increase added to all rating default levels,
would lead to a downgrade of up to two notches for the rated
notes. A 25% reduction in recovery rates would lead to a
downgrade of up to three notches for the rated notes.


PEMBROKE DYNAMIC: 40 Irish Charities Lose Money After Collapse
--------------------------------------------------------------
Aaron Rogan at The Times reports that the Charities Regulator has
said up to 40 Irish charities have lost money after an online
company that collected donations went bust.

A liquidator was appointed two weeks ago after Pembroke Dynamic
Internet Services, which owns the Ammado donation platform,
failed to pay a EUR400,000 debt owed to Revenue, The Times
relates.

Peter Conlon, managing director of the organization, which is
based in Dublin, has been detained by prosecutors in Zurich since
last year after a complaint by the International Committee of the
Red Cross that it had not received donations made through a
platform managed by him, The Times discloses.

According to The Times, last week the High Court was told that
gifts totaling EUR3.8 million made to well-known charities,
including the UNHCR, the Red Cross and Save the Children UK, were
missing.



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K A Z A K H S T A N
===================


ASIACREDIT BANK: S&P Assigns 'B-/B' ICRs, Outlook Stable
--------------------------------------------------------
S&P Global Ratings said that it has assigned its 'B-/B' long- and
short-term issuer credit ratings and 'kzBB-' national scale
rating to Kazakhstan-based JSC AsiaCredit Bank. The outlook on
the long-term issuer credit rating is stable.

The ratings reflect AsiaCredit Bank's narrow franchise and
limited competitive power compared with that of larger banks in
Kazakhstan. S&P said, "Although we believe the bank is likely to
follow a relatively conservative growth strategy, we think its
business model is vulnerable to adverse changes in the operating
environment. We expect the bank will maintain moderate
capitalization, as indicated by our projected risk-adjusted
capital (RAC) ratio of 6.5%-7.0% over the next 12-18 months,
assuming asset growth of 8%-10% and broadly stable portfolio
quality. Credit risk dominates the bank's risk profile, given
high single-name lending concentrations, substantial exposures to
the real estate market, and relatively low provisioning. However,
we consider that the bank currently displays adequate liquidity,
and the maturity of assets and liabilities is well matched.
Nevertheless, like other small Kazakh banks, AsiaCredit Bank is
sensitive to a potential loss of customer confidence and doesn't
have steady access to funding from government-related entities.
We do not incorporate any support from the Kazakh government into
the ratings, due to AsiaCredit Bank's low systemic importance."

S&P considers AsiaCredit Bank's business position to be weak,
given its small size, narrow business focus, and low market share
(only 0.6% of systemwide assets as of Sept. 30, 2017). With total
assets of about Kazakhstani tenge (KZT) 165 billion (about $56.3
million) as of Sept. 30, 2017, AsiaCredit Bank provides
traditional commercial banking services to corporate and retail
clients, with 90% of its loans to companies and 10% to
individuals. Since the end of 2015, the bank has been adjusting
its growth strategy in response to the need for additional
provisions after a period of rapid business expansion. As a
result, its total assets decreased by about 30% by the end of
2017 from their peak in 2015. In addition to changes in external
and market conditions, the bank is also subject to potential
changes of its majority shareholder's strategy. The bank is 99%
owned by Kazakh businessman, Sultan Nurbol, who also owns other
businesses of a similar size in nonfinancial sectors. S&P views
as positive the stability of the bank's management team, which
has adjusted to operational challenges and enabled the bank's
compliance with regulatory requirements, despite significant
pressures on asset quality and liquidity over the past few years.

S&P said, "We regard AsiaCredit Bank's capital and earnings as
moderate, and project the RAC ratio at 6.5%-7.0% over the next
two years. We anticipate an 8%-10% increase in lending over the
medium term, mainly to retail customers (primarily mortgage
loans) and small and midsize enterprises under various government
programs, segments that could bring higher margins than corporate
lending activities. As a result, we assume in our base case that
the bank can slightly improve its net interest margin to 3.7%-
3.8% over the next two years from 3.5% in 2017, with
corresponding net income of about KZT600 million in 2018 and
about KZT900 million in 2019, and no dividends to shareholders.
At the same time, we see a risk that the bank could accelerate
lending growth or resume dividend payments, which could reduce
earnings retention and lead to lower capital adequacy ratios than
in our base case. Also, we consider that the bank might face
higher credit costs than the currently expected 0.8%-1.0%.
However, we think its current capitalization provides a
sufficient buffer against these potential downsides, and that the
RAC ratio is unlikely to drop below 5% over the next two years."

AsiaCredit Bank's moderate risk position reflects its high
single-name credit concentrations, rather low provisioning
levels, and substantial direct and indirect exposure to the local
property sector. The 20 largest borrowers accounted for 53% of
the loan book or 228% of total adjusted capital as of Sept. 30,
2017, which is broadly in line with concentrations at similarly
rated Kazakh peers. Loans to real estate and construction
companies accounted for approximately 15% of total loans, and
mortgage loans 6%. Nonperforming assets represented 8.8% of total
loans on Sept. 30, 2017, and S&P expects they will increase to
about 9%-10% in the next two years. Yet the loan-loss coverage
ratio was only at about 58% on that date, which is at the lower
end of those observed in Kazakhstan's banking sector. However,
some of the risks related to low provisioning are covered by the
collateral securing loans (mainly real estate).

S&P said, "We also note a substantial discrepancy between accrued
and received interest in the bank's accounts under International
Financial Reporting Standards: For 2016, only 62% of interest
accrued on the income statement was reflected in the cash flow
statement. We think this might indicate potential challenges for
the bank in collecting future interest income.

"AsiaCredit Bank's funding is average and its liquidity is
adequate, in our opinion. The bank is predominantly funded by
customer deposits (about 65% of funding as of Sept. 30, 2017),
with long-term financing from various government-led financing
programs for entrepreneurship support (about 12% of funding).
After certain government-related entities withdrew deposits early
this year, AsiaCredit Bank shifted its funding strategy toward
non-government-related corporate entities and retail depositors.

"We view as positive that the bank was able to use its excess
liquidity to manage the significant reduction of customer
deposits without relying on assistance from the National Bank of
Kazakhstan. In our view, the bank's funding base has now
stabilized, and we do not expect large withdrawals in the
future."

The bank's maturity profile appears to be well balanced. As of
Sept. 30, 2017, the stable funding ratio was about 120%; and
broad liquid assets covered short-term wholesale funding needs by
4x, which is better than the peer average. On the other hand,
funding concentrations are high, with the 20 largest depositors
contributing 46% of total customer deposits and 25% of total
liabilities as of Sept. 30, 2017. S&P therefore considers the
bank's funding profile to be confidence sensitive and more
vulnerable than that of larger, better-diversified banks.

S&P said, "The stable outlook reflects our expectation that
AsiaCredit Bank will likely be able to demonstrate moderate asset
growth while maintaining its current loan book quality and
capitalization over the next 12-18 months.

"We could lower the ratings if loan growth substantially exceeded
our current forecasts and was not supported by the capital base,
resulting in the RAC ratio falling below 5%. A negative rating
action could also follow a period of substantial pressure on the
bank's funding or liquidity profile."

A positive rating action is highly unlikely at this stage because
it would require a considerable improvement of the bank's
business position and the operating environment in Kazakhstan.


CAPITAL BANK: S&P Cuts LT ICR to 'CCC+', On Watch Negative
----------------------------------------------------------
S&P Global Ratings said it lowered its long- and short-term
issuer credit ratings on Capital Bank Kazakhstan JSC (CBK) to
'CCC+/C' from 'B-/B' and the national scale rating to 'kzB-' from
'kzB+'. S&P placed the long-term issuer credit rating and the
national scale rating on CreditWatch with negative implications.

S&P said, "The downgrade reflects our view that the viability of
CBK's operations in the Kazakh banking sector are uncertain and
hinge on the bank's ability to secure stable funding sources, and
generate new, profitable business on a sustained basis.

"The CreditWatch placement reflects our uncertainty regarding the
bank's ability to assemble sufficient liquid assets in order to
repay its Kazakhstan tenge (KZT) 26.5 billion loan (about $82
million on Feb. 9, 2018) to National Bank of Kazakhstan (NBK) by
March 31, 2018.

"The rating actions also reflect our concerns regarding the
likelihood of potential customer deposit outflows, which could
deplete the bank's KZT7 billion-KZT8 billion in liquid assets
(about 15% of total assets), following NBK's loan repayment at
end-March 2018. This could result in CBK breaching regulatory
liquidity coefficients.

"In addition, we have doubts about CBK's ability to build and
sustain a more stable deposit base over the long run without
shareholder or regulator support."

The bank's weak market position and brand name recognition, along
with its limited distribution network, make it difficult to
attract retail deposits and leave the bank with rollover risk for
its deposits from cash-rich government-related entities (GREs)
and the funding from NBK. S&P said, "We understand that the
bank's management plans to attract deposits from these GREs, and
note that such funding sources remain highly confidence sensitive
for small Kazakh banks. In 2017, CBK lost a significant part of
its GRE deposits, or about 35% of its total customer deposits,
amid depositors' flight to quality after two small Kazakh banks
defaulted in late 2016-early 2017. We are seeing this trend
continue, with CBK losing another 13% of its deposit base in
January 2018. We cannot exclude that funding pressures might
continue over the next 12-18 months, and this is the key risk for
the ratings, in our view. We think that if CBK is unable to
attract and retain GRE and other corporate depositors over the
next 12-18 months, its funding, liquidity, and overall viability
as a bank are at risk."

Another challenge CBK faces is its ability to generate new,
profitable business. The bank's lending is tied to the fortunes
of its majority shareholder, Mr. Shadiev, whose business partners
are active in state infrastructure construction projects. These
projects accounted for a significant part of CBK's total loans at
year-end 2017. In 2017, the bank's gross loans contracted by 18%,
contrasting with 6% growth in the Kazakh banking sector,
excluding Kazkommertsbank and Bank RBK. This was because the
state focused its attention on construction of the Expo 2017, in
which CBK did not participate, to the detriment of other
infrastructure projects. As a result, the bank's return on assets
was a mere 0.3% and largely supported by a reduction in loan loss
provisioning. S&P understands that CBK aims to resume lending to
state infrastructure projects in 2018, although S&P does not
anticipate active lending growth over the next 12 months and
expect that there will be lingering funding bottlenecks.

S&P also understand that CBK's merger with Tengri Bank, planned
for early 2018, has been put on hold indefinitely.

S&P said, "Although CBK's interest margins still compare
adequately with those of domestic peers, we forecast the bank
will be loss-making or show only a break-even result over the
next two years, assuming average cost of risk for the system at
3.0%-3.5%. The bank's ratio of cash interest received to accrued
interest, which was 69% for 2017, supports our credit losses
projections and suggests a significant proportion of potential
nonperforming loans.

"We expect to resolve the CreditWatch within the next three
months, once we have a better understanding of CBK's ability to
boost liquid assets in order to repay NBK's funding due by end-
March 2018, and the bank's ability to build and sustain a stable
deposit base and business over the next 12-18 months."

S&P might consider lowering the ratings on CBK if one or more of
the following occurs and leads it to conclude that the bank will
not able to honor its obligations in full and on time:

-- S&P sees substantial fund outflows further squeezing the
    bank's liquidity cushion; The shareholders' ability or
    willingness to provide ongoing support diminishes; or

-- The bank doesn't comply with regulatory liquidity ratios,
    although S&P does not rule out some regulatory forbearance.

S&P would consider affirming the ratings if CBK secures
sufficient funding sources with limited risk of outflows,
enabling the bank to maintain adequate liquidity. This is also
contingent upon CBK's ability to generate new profitable business
in a sustained manner.


EXIMBANK KAZAKHSTAN: S&P Cuts Issuer Credit Ratings to 'CCC+/C'
---------------------------------------------------------------
S&P Global Ratings lowered its long- and short-term issuer credit
ratings on Eximbank Kazakhstan JSC (KazEximbank) to 'CCC+/C' from
'B-/B'. We also lowered our Kazakh national scale rating on the
bank to 'kzB-' from 'kzB+'. We subsequently placed all ratings on
CreditWatch with developing implications.

The downgrade reflects S&P's view that KazEximbank's business
model and longer-term viability in the Kazakh banking sector are
questionable. S&P thinks that KazEximbank's franchise is
increasingly dependent on:

-- The ability and willingness of its shareholders to support
    the bank;

-- The ability of the bank to address its problem loans; and

-- The ability of the bank to improve its maturity profile and
    the stability of its funding base via securing government-
    related and shareholder-related funding.

The vulnerability of KazEximbank's asset quality and its funding
and liquidity profile led us to revise down our assessment of the
bank's stand-alone credit profile (SACP) to 'ccc+' from 'b-' and,
in turn, lower the issuer credit rating to 'CCC+' from 'B-'. In
our opinion, the bank's reliance on favorable business,
financial, and economic conditions to meet its financial
commitments makes the bank susceptible to negative internal or
external developments. Although KazEximbank may not face a credit
or payment crisis in the coming 12 months, we assume that the
bank might not be able to meet its financial commitments in the
long term in the absence of extraordinary shareholder support.
Financial distress could materialize through the following
scenarios:

-- Large deposit withdrawals in the near future, leading to the
    breach of liquidity coefficients; or

-- Greater pressure from the regulator to recognize restructured
    loans as nonperforming loans (NPLs) and create substantial
    additional provisions, triggering the breach of regulatory c
    capital adequacy ratios.

The events over the past 13 months in the Kazakh banking sector
have revealed the credit weaknesses of smaller players, while
larger banks have benefited from some government support. The
defaults of KazInvestBank, Delta Bank, and Bank RBK were related
to very weak asset quality that was not reported properly in the
financial accounts prior to the default. S&P thinks that the
regulator has toughened its stance toward banks with problems
assets in 2017, and it now requires banks to create additional
regulatory provisions to be deducted from regulatory capital. At
the same time, the National Bank of Kazakhstan (NBK) offered
larger Kazakh banks that had capital of more than Kazakhstani
tenge (KZT) 45 billion financial support in form of 15-year
subordinated loans at below-market rates. This also benefited
banks' capitalization in terms of one-time capital gains.
However, S&P considers unlikely that such support would be
available for KazEximbank, due to its small size and no
particular role in the Kazakh banking sector.

KazEximbank is part of the financial industrial group Central-
Asian Power Energy Company (CAPEC), which is 93% owned by
Alexander Klebanov, Sergey Kan, and Erkin Amirkhanov. CAPEC, with
about 15,000 employees, is a vertically integrated power-
generating holding company that provides electricity in North
Kazakhstan. Similarly, KazEximbank's business is concentrated in
the energy sector. We estimate that about one-third of the bank's
loans are to companies that supply equipment or provide services
to CAPEC. The bank's funding is dependent on shareholders'
deposits, which accounted for about one-half of its deposits as
of end-2017.

S&P said, "In our view, KazEximbank's non-energy related loan
portfolio is of poor quality. In addition, non-shareholder and
non-government-related funding is very limited.

"We estimate that about one-third of the bank's total loans (or
one-half of its loans not related to the energy sector) are
problem loans, although the bank reported NPLs of less than 1% as
of end 2017. Our estimate is based on the bank's reported 56% of
restructured loans and 33% interest income received in cash
compared with interest income accrued in 2017. These indicators
are the weakest among rated Kazakh banks, which report on average
about 20% restructured loans and 70%-80% of interest income
received in cash. Additionally, interest income received in cash
versus accrued decreased to 33% in 2017 from 50% in 2016, which
makes us believe that the portfolio quality is deteriorating. We
note that this is not reflected in the bank's reported NPL
numbers, however. We believe that poor asset quality is a
longstanding problem at the bank.

"As such, we believe that the bank's provisions of KZT13 billion
(15% of total loans) are insufficient to absorb potential large
losses. The NBK mandated KazEximbank to create sizable additional
regulatory provisions over the next five years. In our view, if
the bank was required create these provisions immediately, it
would face a capital shortfall and would not be compliant with
the capital adequacy requirements. Moreover, if the bank had not
recognized net interest income not received in cash as accrued
income, it would have been loss-making over the past four years."

KazEximbank is considering selling to investors a large portfolio
of restructured loans, mainly investment projects in the energy
and real estate sectors, among others. The bank's shareholders
are currently negotiating the terms of the possible transaction.
S&P is not certain that the bank will complete this deal in the
next three months, but S&P believes that, if carried out, it
would clean up KazEximbank's loan portfolio and provide
considerable capital support.

S&P said, "In our view, the shareholders have not been proactive
in injecting capital sufficient to cover additional provisions.
Also, they withdrew a large deposit from the bank in late 2016 to
fund their other activities, which materially undermined the
bank's funding and liquidity.

"We note that the bank has accumulated KZT13 billion in liquid
assets to be able to repay the NBK funding due May 2018. If the
bank does not manage to refinance or extend the NBK loan, we
believe the bank will repay it in full and on time. If needed to
repay NBK funding, the bank's shareholders claimed that they
would provide KazEximbank with a KZT8 billion deposit with the
term over two years. We will not factor this additional funding
in our base-case forecast until we see tangible evidence that
such support has been provided.

"We are uncertain whether KazEximbank will be able to replace
NBK's funding with longer-term sources at maturity. If NBK's
funding is rolled over for another six months to a year, the
concerns related to the sustainability of KazEximbank's liquidity
position will persist."

In addition, KazEximbank needs to roll over deposits from
government-related entities (GREs) that are due in the next six
months. Although KazEximbank rolled over some of its GRE deposits
in 2017, the volume of GRE deposits, unrelated to the
shareholders, has markedly decreased. Over the past 15 months S&P
has observed GRE depositors shift to larger higher-rated banks
from smaller lower-rated banks in Kazakhstan.

The CreditWatch developing reflects the uncertainty regarding the
bank's ability to clean up its loan portfolio and replace NBK's
funding with longer-term sources. S&P expects to resolve the
CreditWatch within 90 days, which coincides with the maturity of
the NBK funding.

The resolution of the CreditWatch placement will hinge on the
bank's ability to:

-- Address its weak asset quality by selling a large portfolio
    of restructured loans, provided that the bank sustains
    acceptable capitalization levels after creating these
    additional provisions and replaces NBK's funding with longer-
    term sources; and

-- Sustainably maintain liquid assets at peer levels of above
    10% of total assets.

A negative rating action will follow if the bank's liquid assets
decline below the regulatory minimum, the bank breaches the
regulatory capital adequacy ratios, or the bank is unable to
repay its liabilities in full and on time.


=============
M O L D O V A
=============


ARAGVI HOLDING: S&P Assigns Preliminary 'B-' ICR, Outlook Stable
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary 'B-' long-term issuer
credit rating to Moldova-based trader and crusher of sunflower
seeds and oil, along with other agri-commodities, Aragvi Holding
International Ltd. (TransOil). The outlook is stable.

S&P said, "At the same time, we assigned our preliminary 'B-'
issue rating to the group's proposed senior unsecured U.S.-dollar
denominated Eurobond, maturing in five years.

"The final ratings will depend on our receipt and satisfactory
review of all final transaction documentation. Accordingly, the
preliminary ratings should not be construed as evidence of final
ratings. If S&P Global Ratings does not receive final
documentation within a reasonable timeframe, or if final
documentation departs from materials reviewed, we reserve the
right to withdraw or revise our ratings.

"The preliminary ratings mainly reflect our assessment of the
group's vulnerable business risk profile, reflecting the high
risk of exposure to a small geographic area for the sourcing of
agriculture commodities, balanced with the industry's strong
barriers to entry."

TransOil is the biggest originator of Moldovan grains and, over
the years, it has strengthened its dominant position mainly
through a nationwide infrastructure network well spread across
the country. The group enjoys a large network of silos (13) and
crushing facilities (2), and it has its own fleet of railcars (75
owned and up to 300 leased) and two port terminals on the Danube
River (one in Moldova, which is the only port with access to
international waters in the country, and the other in Ukraine).
This network enables the group to run its origination operations
efficiently. The group is the only sizable sunflower seed crusher
in Moldova, complementing its trading operations and its
infrastructure and logistics operations.

S&P said, "The preliminary ratings also incorporate our view that
TransOil is largely exposed to one single country, Moldova, which
we view as having a highly risky corporate environment, and it
has limited surface of arable land compared with large
agricultural regions in Europe. Moreover, we consider that the
group's current creditworthiness is constrained somewhat byits
sourcing capabilities, which are only in Moldova, a small country
that is much more exposed to volatility of volumes harvested than
its neighbors, Ukraine and Romania. We take into account,
however, TransOil's nationwide infrastructure network, which
clearly acts as natural barrier to entry, preventing the entrance
of new players in Moldova. Also, this efficient infrastructure
network constitutes the arm of its trading operation. TransOil's
trading model is different from the largest global agricultural
trading firms (ADM, Bunge, Cargill, and Louis-Dreyfus), because
it mainly involves few physical commodities, on a very small
scale and sourced only within one country--Moldova representing
more than 85%. Therefore, the concentration of its agricultural
footprint is much more important, and represents the main
characteristic clearly constraining our business assessment under
our trading criteria. The group's trading business model allows
it to quickly lock up margin (maximum three days of open
position), and we consider that the group's value at risk is not
substantial. We consider TransOil's operating model as less risky
than strategies developed sometimes by larger traders, notably
because TransOil trades only physical commodities, which are much
less volatile than non-physical ones. Complex trading operations
would usually imply building large trading positions and
monitoring them on a daily basis through quite sophisticated
tools backed by a dedicated team and a strong know-how in
derivatives and financial markets.

"Nevertheless, we consider that the progress Moldovan farmers
have made through pre-crop financing somewhat exposes the group
to significant counterparty risk. These advances granted to
Moldova's farmers in to order start planting their crops could
translate into material losses, in our view, if the country were
to face a very poor harvest.

"We understand that the purpose of the bond issuance is to
replace the majority of the pre-export financing facilities and
other secured credit lines, allowing the group to strengthen and
lengthen its debt portfolio and to reduce its dependence on
short-term debt financing. We also understand the group intends
to use the proceeds to purchase inventory to load up new capacity
in its Romanian crushing plant, which it plans to operate in the
second half of 2018, following the notes' issuance. Our
preliminary issue rating is currently contingent on the
successful placement of this long-term debt instrument, without
which, in our view, TransOil may not be able to successfully ramp
up its Romanian crushing operation or increase the utilization
rate of its Moldovan plants.

"The group's financial metrics take into account specific
adjustments on readily marketable inventory, thanks to our
spectrum of analysis (trading company criteria), which allows us
to net them against gross debt to a certain extent. The group
generated positive free cash flow in 2017, but it might turn
negative in 2018 due to the increasing interest burden following
the proposed bond issuance and the higher amount of operating
lease engagements, but mainly due to the large working capital
outflow stemming from the sizable inventory build-up for the
group's crushing operation. The group's debt service coverage
ratio (EBITDA interest coverage) is in line with the current
preliminary ratings, at more than 2x following the transaction.
That said, TransOil's annual cash flow generation is affected by
very high intrayear working capital requirements, historically
covered by short-term pre-export facility lines. We consider
that, following the issue of the Eurobond, the group will rely
substantially less on short-term debt. Moreover, we view
positively that TransOil captures more than 90% of its cash flow
in hard currency, enabling it to cover debt-servicing with
limited risk of currency mismatch.

"The stable outlook on TransOil primarily reflects our view that
the group will post solid operating performance, enabling it to
start its deleveraging process after the proposed Eurobond
issuance. We assume that the group will maintain its EBITDA
interest coverage sustainably above 2x while avoiding liquidity
pressure in the next 12 months.

"We could downgrade TransOil in the event of a very poor harvest
in Moldova, which would reduce volume throughput at its
facilities or result in large decrease in volumes originated
throughout its efficient infrastructure network, translating into
pronounced liquidity deterioration.

"A positive rating action on TransOil would be contingent on
acceleration of organic growth, ahead of our current base case,
such that capacity utilization improves materially, combined with
a successful ramp-up of the new Romanian facility, spurring
significant free operating cash flow generation and in turn,
reducing sustainably and substantially its leverage ratio. A more
diversified sourcing beyond the group's domestic borders could
also strengthen TransOil's business risk profile."


===============
P O R T U G A L
===============


HAITONG BANK: S&P Alters Outlook to Stable, Affirms 'BB-/B' ICRs
----------------------------------------------------------------
S&P Global Ratings revised its outlook on Portugal-based Haitong
Bank S.A. to stable from negative. S&P also affirmed its 'BB-/B'
long- and short-term issuer credit ratings on Haitong Bank.

S&P said, "The outlook revision reflects our view that Haitong
Bank has recognized that its previous strategy was too ambitious.
Consequently, it has redesigned a scaled-down business plan that
recognizes its limited global scale. The bank has also
restructured its top management team to execute the strategy,
which includes closer integration within the Haitong group. Its
parent, China-based Haitong Securities Co. Ltd., has demonstrated
its commitment to the bank through a sizable capital injection.
Meanwhile, the bank has simplified its operating structure to
lighten its cost base and has reduced its high stock of legacy
nonperforming exposures (NPEs).

"We consider Haitong Bank's revised business strategy to be more
realistic than the over-ambitious strategy initially laid out
after its acquisition. The bank intends to build on its parent's
commercial relationships, focusing on merger and acquisition,
advisory, and bridge corporate financing to Chinese corporates
expanding abroad. Haitong Bank also intends to play a
distribution role for Chinese issuers in Europe, the Middle East,
and Africa, and in Latin-America. To a lesser extent, it aims to
provide asset management services to Chinese investors. The bank
has therefore decided to discontinue its market and brokerage
operations. A new top management team has been appointed to lead
the transformation process. Haitong Bank also accomplished a
significant restructuring in 2017 to simplify its business
structure and improve recurrent profitability. Nonetheless,
fierce competition in the investment banking market globally will
remain a substantial barrier, hindering Haitong Bank in the
pursuit of its goals.

"Throughout 2017, the bank's financial profile has improved,
primarily owing to the EUR339 million capital injection from its
parent, which demonstrates its commitment to expand outside
China. However, since we anticipate that the bank will remain
loss-making in 2018 and will only be close to break-even by end-
2019, we expect that our risk-adjusted capital (RAC) ratio will
likely drop to about 5.5%-6.0% by end-2019, from the 6.6%
estimated at end-2017."

Haitong Bank has made some progress in reducing its large stock
of NPEs. These have declined by 40% to about EUR280 million--
primarily through write-offs and market-sales--bringing its NPE
ratio to 37% of gross loans at end-2017. Nonetheless, the stock
of problematic exposures remains sizable and we expect it to
decline only gradually going forward.

The NPE portfolio is, like the rest of the loan book, highly
concentrated in a few names. The existing loan book is
concentrated in activities in run-off, with leveraged and project
finance accounting for over 65% of the loan portfolio at end-
2017. Management aims to gradually shift toward shorter-dated
bridge financing. The bank no longer contemplates taking on risks
originated by others, as it did in the past. Future exposure
could thus be weighted toward Chinese corporates expanding
abroad. Given the already-high indebtedness of the Chinese
corporate sector, this could itself pose some risks.

Haitong Bank remains strategically important to its parent. S&P
said, "Our rating analysis therefore incorporates the likelihood
of receiving extraordinary parent support; the ratings on Haitong
Bank receive three notches of uplift above the SACP.
Additionally, our assessment of Haitong Bank's stand-alone
creditworthiness also benefits from the financial support in the
form of funding and capital that the parent has already
provided." The bank has benefited from capital support of around
EUR850 million including the acquisition in 2015. Funding support
is in the form of parent guarantees of EUR750 million on a five-
year loan provided by a syndicate of Chinese banks. This parental
reliance has been critical given that other funding sources could
be less readily available or might be unaffordable.

S&P said, "The stable outlook on Haitong Bank reflects our view
that its ratings are unlikely to change over the next 12 months.
Delivering on its new strategy will be difficult and, even if
successful, we would not expect the bank's financial profile to
significantly strengthen. We anticipate that Haitong Bank will
remain loss-making over the next two years, and this weighs on
our estimated RAC ratio. We also expect that its stock of NPEs
will remain high, and will represent about 30% of its exposure at
end-2018.

"We could raise the ratings if we see evidence that Haitong Bank
is delivering on its strategic goals, strengthening its financial
profile, and proving sustainably profitable. Alternatively, we
could raise the ratings on Haitong Bank if it became a more
important subsidiary for the group. That said, we consider the
latter to be largely contingent on the new strategy proving
successful.

"Conversely, we could lower the ratings on Haitong Bank if
management fails to deliver on its strategic refocus, fails to
strengthen its financial profile, faces a renewed need to
restructure, or the parent's future commitment is called into
question."


===========
R U S S I A
===========


INTERREGIONAL DISTRIBUTION: S&P Ups ICR to 'BB', Outlook Stable
---------------------------------------------------------------
S&P Global Ratings raised its issuer credit ratings on the
Russian electricity distribution companies Interregional
Distribution Grid Company of Centre, Public Joint-Stock Company
(IDGC of Centre) and Moscow United Electric Grid Co. PJSC (MOESK)
to 'BB' from 'BB-'. The outlooks on these ratings are stable. S&P
affirmed the 'B' short-term issuer credit rating on IDGC of
Centre.

S&P said, "At the same time, we affirmed our 'BB+' issuer credit
ratings on Rosseti PJSC and its transmission subsidiary Federal
Grid Co. of the Unified Energy System (FGC). The outlooks on
these ratings are positive. We also affirmed the 'B' short-term
issuer credit rating on Rosseti.

"The upgrades of IDGC of Centre and MOESK reflect our expectation
of support from their parent, government-controlled electricity
transmission and distribution holding Rosseti, given their
moderately strategic status in the Rosseti group. We believe that
Rosseti has built a record of solid operations as a consolidated
group with strengthening mechanisms of intragroup coordination
and support.

"We now believe that Rosseti has gained sufficient autonomy and
financial capacity, and will likely transfer state support it
receives to its subsidiaries. We do not believe that IDGC of
Centre or MOESK is likely to be sold. We think both subsidiaries
are reasonably successful in their core activities and would
likely receive support from Rosseti if they fell into financial
difficulty.

"Despite their small size, local focus, and limited visibility in
the overall Russian context, we believe that the Rosseti group is
likely to support IDGC of Centre and MOESK in cases of stress,
and that government support to the Rosseti group will to some
degree benefit the operating subsidiaries. As a result, our
ratings on IDGC of Centre and MOESK now include one notch of
uplift above our 'bb-' assessment of the companies' stand-alone
credit profiles (SACP).

"Our affirmations of the ratings on Rosseti and its subsidiary
FGC are based on the companies' solid stand-alone fundamentals.
The affirmations also reflect the relatively stable nature of
regulated electricity transmission and distribution business, in
which long-term tariffs are designed to cover operating and
capital expenses (capex). Furthermore, we consider that the
practical implementation of regulation may lack consistency and
predictability and is not fully insulated from political
intervention. In our view, it could result in tariff deficits or
temporarily stranded assets, and affect return on capital.

"We continue to assess FGC's SACP at 'bb+'. We expect funds from
operations (FFO) to debt of 25%-35% in 2017-2020, profitable
monopoly operations, and some uncertainty related to continuing
large strategic capex projects. We view FGC as a highly strategic
part of the Rosseti group, because it is highly unlikely to be
sold or transferred, operates in the core line of business,
provides a material share of the group's EBITDA, and demonstrates
adequate capitalization. At the same time, we recognize that FGC
is relatively autonomous, with separate operating and strategic
management, as well as its own risk management, disclosure, and
funding. Under the shareholder agreement between the Russian
government and Rosseti, the Russian government retains its
ability to support FGC directly if needed and requires Rosseti to
act in line with the government's orders as regards FGC's
shareholders' meetings and board meetings.

"Our assessment of Rosseti's SACP remains unchanged at 'bb',
reflecting our expectation of FFO to debt of 30%-35% in 2017-
2020, thanks to favorable tariff increases in 2017. We also see
the potential for increasing dividends and a complex holding
structure. Rosseti receives dividends from its larger and
stronger subsidiaries (such as FGC) and can use them to support
weaker group entities and for other group-level purposes, such as
investments, parent-level dividends, or debt service.

"In our view, the Russian government is mostly focused on
Rosseti's and FGC's operations and capex, which may not
necessarily be immediately affected in case of financial stress.
We note that the Russian government has been reducing its
financial support for strategic capex projects led by various
government-related entities (GREs), and we expect most strategic
capex for Rosseti and FGC to be funded from internally generated
cash flows. The government also continues to pressure GREs for
higher dividends.

"We understand that FGC has increased its dividends to 50% of
adjusted net income since 2017, and Rosseti has recently revised
its dividend policy to increase its payout to 50% of net income
after adjustments for various noncash items and support to
subsidiaries."

Still, Rosseti and FGC provide critical infrastructure services
and are majority controlled by the government with no
privatization plans. The government closely monitors the
companies' capex and strategy and regulates their tariffs. S&P
said, "We now assess the likelihood of extraordinary government
support to both Rosseti and FGC as high, versus very high before.
Our rating on Rosseti continues to include one notch of uplift
for our expectation of extraordinary state support, and our
rating on FGC is currently the same as our assessment of its
SACP, because its SACP is already at the same level as the 'BB+'
foreign currency sovereign rating on Russia."

OUTLOOK

Rosseti PJSC

S&P said, "The positive outlook on Rosseti reflects the positive
outlook on the sovereign and our expectation of a high likelihood
of extraordinary government support. On a stand-alone basis, we
expect Rosseti to report an EBITDA margin of about 30%, FFO to
debt of about 30%-35%, debt to EBITDA of 2.0x-2.3x, negative
discretionary cash flow (DCF) due to high capex and potentially
increasing dividends, and a manageable debt maturity profile. In
our base-case scenario, we do not include any material changes to
the group's consolidated perimeter and, therefore, to our
assessment of the likelihood of extraordinary government
support."

Upside scenario

S&P said, "We may upgrade Rosseti if we upgrade Russia. Even if
we revise our assessment of Rosseti's SACP up to 'bb+', however,
we do not expect to rate Rosseti above the sovereign, because 1)
the company's SACP does not exceed the rating on the sovereign;
2) its business is domestically focused; and 3) its link with the
government is very strong, implying risks of negative government
interference in a sovereign stress scenario. We see an upward
revision of the SACP as unlikely, given our expectations of still
materially negative DCF, risks of potential dividend pressures,
and the complex group structure, with Rosseti's access to cash
flows generated by FGC, its largest transmission subsidiary,
constrained by the shareholder agreement with the Russian
government. Any upside to the SACP would also require no major
changes in the group's consolidated perimeter or the government's
policy with regard to Rosseti."

Downside scenario

S&P said, "We would likely revise the outlook to stable if we
revised our outlook on the sovereign to stable. Our expectation
of a high likelihood of state support creates some protection
against weakening stand-alone performance. Even if our assessment
of the SACP were to deteriorate to 'bb-' owing to weaker
financial performance (for example, if capex, dividends, or
working capital outlays are significantly above our current
expectations), it would not affect the rating. To trigger a
negative rating action, our assessment of the SACP would need to
move to the 'b' category, which we view as very unlikely at this
stage. Downside could also stem from a material weakening of
government support, greater privatization risk, weaker government
involvement in the group's activities, loss of control over key
assets (in particular FGC), or if a significant leverage increase
or liquidity disruption (such as due to currently unexpected bank
failures or sanction pressures) were not offset by government
support. These are not our base-case scenarios, however."

Federal Grid Co. of the Unified Energy System

S&P said, "The positive outlook on FGC reflects that on Russia
and our expectation of a high likelihood of extraordinary state
support. Our base-case scenario implies FFO to debt of 25%-35%,
negative DCF on large capex projects, and dividends at 50% of
adjusted net income."

Upside scenario

S&P said, "We would likely raise our ratings on FGC if we raised
our foreign currency rating on Russia. Our 'bb+' assessment of
FGC's SACP is based on our base-case forecasts, which demonstrate
S&P Global Ratings-adjusted FFO to debt of 25%-35%. We may revise
our assessment of the company's SACP upward to 'bbb-' if FFO to
debt rises above 40%, which we see as unlikely over 2017-2019,
due to high capex and sizable dividends. A higher SACP would
depend on developments regarding the company's strategic capex,
including more details regarding execution, the scope of works,
funding, and compensation for this investment. Even if we were to
revise up the SACP, we would not expect to rate FGC above the
long-term foreign currency rating on Russia, given the full
exposure of FGC's operations to country risk in Russia, its very
strong links with the government, and the consequent risks of
negative sovereign intervention."

Downside scenario

S&P said, "We would revise the outlook to stable if we revise the
outlook on Russia to stable. Assuming no change to our
expectation of the high likelihood of extraordinary state
support, a one-notch downgrade of FGC would require a downward
revision of the SACP by three notches to 'b+', which is very
unlikely in our view."

Interregional Distribution Grid Company of Centre, Public Joint-
Stock Company

S&P said, "The stable outlook on IDGC of Centre reflects our
expectation that the company will demonstrate stable performance
in the coming 12 months. We anticipate that its financial policy
regarding dividends and liquidity management will remain prudent.
We expect that IDGC of Centre will maintain FFO to debt of around
25% and FFO cash interest coverage ratios of about 3x-4x, and
adequate liquidity. The stable outlook also assumes no weakening
in Rosseti's credit quality or its policy to support
subsidiaries."

Downside scenario

S&P could downgrade IDGC of Centre if its leverage increased
significantly as a result of higher dividends, inflated capex, or
a sharp decline in EBITDA, leading to FFO to debt decreasing
below 12% and FFO cash interest coverage below 2x. Downward
rating pressure might also arise if the company started to rely
excessively on short-term financing or its liquidity deteriorated
to less-than-adequate levels.

Upside scenario

S&P said, "We could raise our rating on IDGC of Centre if we were
to raise our rating on Rosseti and revise up our assessment of
IDGC of Centre's SACP to 'bb'." This could happen if its FFO cash
interest coverage ratio stayed sustainably above 4x while the
FFO-to-debt ratio remained comfortably at about 25%.

Moscow United Electric Grid Co. PJSC

S&P said, "The stable outlook on MOESK reflects our expectation
that the company will gradually improve its credit measures. We
expect that the group will maintain FFO to debt above 20% and FFO
cash interest coverage of about 3x-4x. We also expect that the
company's financial policy regarding dividends and liquidity
management will remain prudent, with liquidity being at least
adequate. The stable outlook also assumes no weakening in
Rosseti's credit quality or its policy of support for
subsidiaries."

Downside scenario

S&P could downgrade MOESK if it observed a more aggressive
financial policy or if regulatory actions resulted in higher-
than-expected debt at MOESK. Specifically, this could happen if
the company's FFO to debt were to decrease below 12% and FFO cash
interest coverage dropped below 2x. Downward rating pressure
might also arise if the company started to rely excessively on
short-term financing, if its liquidity deteriorated to less-than-
adequate levels, or if its profitability decreased considerably,
weakening its financial metrics.

Upside scenario

S&P said, "We could raise our rating on MOESK if we were to raise
our rating on Rosseti and revise up our assessment of MOESK's
SACP to 'bb'." This could happen if MOESK's FFO cash interest
coverage stayed sustainably above 4x while the FFO-to-debt ratio
remained at about 25% or above.


MORDOVIA REPUBLIC: Fitch Cuts Long-Term IDR to B, Outlook Stable
----------------------------------------------------------------
Fitch Ratings has downgraded the Russian Mordovia Republic's
Long-Term Foreign- and Local-Currency Issuer Default Ratings
(IDRs) to 'B' from 'B+' and affirmed the Short-Term Foreign-
Currency IDR at 'B'. The Outlooks on the Long-Term IDRs are
Stable. The republic's senior unsecured debt ratings have been
also downgraded to 'B' from 'B+'.

The downgrade reflects the material deterioration of the region's
budgetary performance and sharp growth of direct risk in 2017,
far above Fitch expectations. The Stable Outlook reflects Fitch
expectation that the region will narrow the deficit upon
completion of large construction projects, which should reduce
debt growth over the medium term.

KEY RATING DRIVERS

The downgrade reflects the following key rating drivers and their
relative weights:

HIGH

High Debt Burden
The republic's debt has sharply increased and reached RUB48.2
billion by end-2017 (end-2016: RUB38.6 billion). This corresponds
to 158% of estimated current revenue in 2017 (2016: 121%), which
is above Fitch's previous forecast. The large debt growth
resulted from an extreme budget deficit, which accounted for
27.5% of estimated total revenue in 2017. The region has
historically recorded a high deficit, averaging 15.7% in 2013-
2016 with a peak of 26% in 2015, as it undertakes huge capital
expenditure related to the upcoming FIFA world football
championship in 2018. A substantial amount of construction is
funded by budget loans.

Mordovia is among the most indebted of the Russian regions rated
by Fitch. The high debt burden is somewhat mitigated by the
material proportion of low-cost budget loans (end-2017: 63%), but
the debt servicing pressure on the budget is tangible. Annual
debt servicing (interest payments and principal) comprised about
a quarter of the region's current revenue in 2015-2017.

At end-2017, Mordovia participated in the federal restructuring
programme, which lengthened the maturity of RUB21.6 billion
budget loans granted to the region to seven years. This
moderately reduced its immediate refinancing needs. The
refinancing pressure will increase in 2020-2024, when the bulk of
budget loans are due, and in Fitch's view, the extension of loans
granting from the federal budget is uncertain. Consequently, the
region may have to refinance most of maturing budget loans with
market debt. This would expose the region to material refinancing
risk and the volatility of market interest rates.

Weak Fiscal Performance
Mordovia's preliminary 2017 financial results are below Fitch's
expectations. The operating balance weakened below zero (2016:
6.9% of operating revenue) and the deficit widened to an
exceptional 27.5% of total revenue (2016: 10.6%). The weak
performance was driven by negative dynamic in tax revenue
collection (-2.4% yoy) and current transfers (-10.4% yoy) upon
maintenance of capital expenditure at above 20% of total
expenditure.

Fitch projects the republic's fiscal performance will remain weak
in 2018-2020 despite an expected annual 5% restoration of tax
revenue and higher transfers from the federal government. Under
Fitch rating case scenario, the operating margin will account for
2%-3% and the current balance will stay in negative territory.
The region's financial flexibility is low, in Fitch's view, which
stems from its modest tax base and rigid operating expenditure.
The scheduled increase in salaries for public employees and the
upcoming sport event could put additional pressure on opex. Over
the medium term, maintenance of the constructed sports facilities
could also fuel budget expenditure.

Fitch expects that Mordovia will continue to record deficit over
the medium term unless it receives additional support from the
federal government. However, the deficit will likely narrow due
to completion of intensive investment projects. Fitch rating case
scenario assumes the deficit at about 13% in 2018 and about 7% in
2019-2020.

MEDIUM

Weak Budget Management
Fitch notes that the reliability of the republic's forecasts has
deteriorated. This is evident from the region's financial
performance in 2017, which was much weaker than the budget and
resulted in exceptionally high debt burden, being far above the
forecast presented to us by management in 2H17. The lower budget
execution in tax revenue was not sufficiently accompanied by
spending cuts; hence, the republic's budget deficit widened to
RUB9.6 billion in 2017 (2016: RUB3.9 billion) in comparison with
budgeted RUB2.3 billion.

LOW
Growing but Weak Economy
According to the region's preliminary data, Mordovia's GRP grew
4.6% in 2017 (2016: 4.4%), which outpaced the national trend. The
growth was supported by developing processing industries,
agricultural sector and FIFA championship-related construction.
Nevertheless, Fitch expect that the republic's wealth metrics
will remain low with GRP per capita being 70%-75% of the national
median (2015: 71%). This is the reason for the region's modest
tax capacity and its high reliance on regular current transfers
from the federal budget, which contributes about 30% of
Mordovia's operating revenue.

Evolving Institutional Framework
Russia's institutional framework for sub-nationals is a
constraining factor on the region's ratings. Frequent changes in
the allocation of revenue sources and in the assignment of
expenditure responsibilities between the tiers of government
hampers the forecasting ability of local and regional governments
in Russia. The republic's budgetary performance, in particular,
is reliable on support provided by the state.

RATING SENSITIVITIES

Continuous material growth of direct risk and inability to
restore operating balance to sustainably positive values, would
lead to a downgrade.

Reduction of direct risk to 120% of current revenue along with a
sustainably positive current balance, could lead to an upgrade.

KEY ASSUMPTIONS

The republic will continue to have reasonable access to domestic
financial markets to enable it to refinance maturing debt.

Mordovia will continue to receive support from the federal
government over the medium term.


NOVOSIBIRSK CITY: Fitch Affirms BB Long-Term IDR, Outlook Stable
----------------------------------------------------------------
Fitch Ratings has affirmed the Russian City of Novosibirsk's
Long-Term Foreign and Local Currency Issuer Default Ratings
(IDRs) at 'BB' with Stable Outlooks and Short-Term Foreign
Currency IDR at 'B'. Novosibirsk's senior debt has been affirmed
at long-term 'BB'.

The affirmation reflects Fitch's expectation that the city will
continue to record a stable positive current balance, while
direct risk remains manageable despite a gradual increase in
absolute terms.

KEY RATING DRIVERS

The 'BB' rating reflects Novosibirsk's still moderate direct risk
with a smooth maturity profile, stable budgetary performance and
the city's diversified economy. The ratings also factor in the
limited budget flexibility of the city and Russia's weak
institutional framework.

According to Fitch's rating case scenario Novosibirsk should
continue to record stable fiscal performance, with an operating
margin close to 7% in 2018-2020, which will be sufficient to
cover 1.5x annual interest payment. The city's operating
performance is backed by steady growth of personal income tax,
which accounts for about two-thirds of the city's tax revenue.

According to preliminary data, the city's operating margin
declined to 6.3% in 2017 from a sound 8.6% in 2016, as a RUB0.8
billion tranche of current transfer received from the regional
budget in 2016 was expensed last year.

Novosibirsk's fiscal flexibility remains limited as the city is
receiving regular transfers from Novosibirsk Region (BBB-
/Stable). Current transfers are largely earmarked for specific
expenditure, including the region's mandated responsibilities,
and accounted for about 40% of the city's operating revenue in
2016-2017.

Fitch projects the city's direct risk to total around RUB21
billion by end-2018 (2017: RUB19.2 billion), driven by fiscal
deficit, which Fitch expect to total about 5% of total revenue
(2017: 7%). Market debt growth will drive interest expenses and
add pressure to the current margin, which Fitch forecast to
remain in low single-digits. Fitch rating case scenario forecasts
direct risk to reach 65% of current revenue by end-2020 (2017:
56.6%), remaining within the 'BB' rating range.

Novosibirsk demonstrates sophisticated debt management and unlike
its Russian peers, the city does not rely on short-term funding.
The city's primary source of borrowing is amortising domestic
bonds (59% of direct risk) with up to 10-year maturity followed
by revolving lines of credit from local banks with maturity of up
to six years (29%). The remaining 12% are loans from the
Novosibirsk Region. This leads to a weighted average life of debt
of about four years and smooths the city's annual refinancing
needs.

With a population of about 1.6 million inhabitants, the city is
the capital of Novosibirsk Region and is the largest metropolitan
area of Siberian Federal District. The city's economy is
diversified, with a well-developed processing industry and
service sector. The sound economic performance of local companies
supports Novosibirsk's fiscal capacity, with tax revenue
accounting for 48.4% of operating revenue in 2017. Fitch
forecasts national GDP will continue to see moderate growth in
2018, which should support Novosibirsk's economic and budgetary
performance.

The city's credit profile remains constrained by the weak
institutional framework for local and regional governments (LRGs)
in Russia. Russia's institutional framework for LRGs has a
shorter record of stable development than many international
peers. The predictability of Russian LRGs' budgetary policy is
hampered by the frequent reallocation of revenue and expenditure
responsibilities among government tiers.

RATING SENSITIVITIES

Restoring the operating margin to above 10% on a sustained basis
and maintaining direct risk below 60% of current revenue with a
debt maturity profile corresponding to the direct risk payback
ratio could lead to an upgrade.

Deterioration of the budgetary performance, leading to an
inability to cover interest expenditure with the city's operating
balance, and direct risk increasing to above 70% of current
revenue would lead to a downgrade.


ORENBURG REGION: Fitch Alters Outlook to Positive, Affirms BB IDR
-----------------------------------------------------------------
Fitch Ratings has revised the Outlook on Russian Orenburg
Region's Long-Term Foreign- and Local-Currency Issuer Default
Ratings (IDRs) to Positive from Stable and affirmed the IDRs at
'BB'. Fitch has also affirmed the region's Short-Term Foreign-
Currency IDR at 'B' and its outstanding senior unsecured domestic
bonds at 'BB'.

The revision of the Outlook to Positive reflects the decline of
direct risk accompanied by an improved debt structure and a
lengthened maturity profile, which outperformed Fitch's
expectations; consolidation of operating performance and the
agency's view that the region will maintain these metrics over
the medium term.

KEY RATING DRIVERS

The Outlook revision reflects the following rating drivers and
their relative weights:

HIGH

Sound Debt Metrics
Fitch expects the region's direct risk will remain moderate, and
not exceed 40% of current revenue over the medium term. In 2017,
direct risk slightly declined in both absolute and relative terms
and stood at RUB27 billion (2016: RUB27.4 billion), corresponding
to 37.7% of estimated current revenue (2016: 39%). The direct
risk to current balance ratio of 3.6 years in 2017 was below the
Fitch-estimated weighted average life of debt at 5.1 years as of
1 January 2018. Orenburg's direct risk is equally split between
domestic bonds and low-cost budget loans.

In contrast with most domestic peers, refinancing pressure for
Orenburg region is limited over the medium term as its debt
maturity profile differs favourably from most Russian regions. In
2018-2020 the region needs to refinance 23% of direct risk, while
maturities due in 2018 total RUB2.6 billion (10% of the risk), of
which RUB2.1 billion is amortising domestic bonds and the
remainder is budget loans. This is comfortably covered by RUB8
billion of undrawn committed bank lines. The region also has
access to RUB5.5 billion of short-term standby credit lines (0.1%
annual interest rate) from the Treasury of Russia.

Like the majority of Russian regions, Orenburg participates in
the budget loans restructuring programme initiated by the federal
government at the end of 2017. According to the programme, the
maturity of RUB6 billion budget loans granted to the region in
2015-2017 have been prolonged until 2024, with most repayments to
be made close to the end of maturity. This will help save on
interest payments and free the region from needing to borrow from
market for repayment of these loans in the medium term. At the
same time, management does not expect any new budget loans from
the federal government in 2018-2020.

Consolidated Operating Performance
Fitch expects the region will continue to demonstrate a sound
budgetary performance over the medium term. The operating balance
will be around 10% of operating revenue in 2018-2020 supported by
moderate growth of both taxes and current transfers and effective
cost control management. According to preliminary data, the
operating margin accounted for 12.7% in 2017 (2016: 16.3%). The
slight deterioration of the operating margin was caused by modest
2.5% tax revenue growth due to reallocation of 1pp of corporate
income tax proceeds (CIT) to the federal budget and lower CIT
proceeds from the consolidated group of taxpayers. CIT is the
region's major tax, contributing more than 40% of tax revenue and
exposing the region's tax base to volatility.

According to Fitch's rating case scenario, the budget will be
close to balance in 2018-2020, which is also the aim of the
regional government. In 2016-2017, the budget balance before debt
hovered around zero. The region has no large-scale investment
projects in the pipeline, and capex will focus mostly on roads
repair and modernisation of social infrastructure, which will
limit the region's funding needs. Fitch projects capital
expenditure at 12%-13% of total spending in 2018-2020, which is
slightly below its historical average of 16% in 2015-2017.

MEDIUM

Concentrated Economy
Orenburg's economy is dominated by oil and gas companies, which
provide a sustainable tax base. However, the concentration in a
particular sector exposes the region to potential changes in the
fiscal regime, business cycles or price fluctuations. According
to preliminary data, the regional economy contracted 0.8% yoy in
2017 mostly due to a continuous decline in oil and gas
extraction. According to the regional government, the expected
stabilisation of Orenburg's oil and gas output will support
regional GRP, which will grow 1.0%-1.4% annually in 2018-2020.
Fitch projects Russian GDP will grow 2.0% annually in 2018-2019.

LOW

Prudent Management
The region's management follows a prudent and coherent budgetary
policy and strictly monitors the dynamics of operating
expenditure. This is evident from the sound fiscal performance
amid some tax revenue volatility. The region's debt policy is
reasonable, which has resulted in a moderate volume of debt,
smooth maturity profile and limited refinancing pressure.

Evolving Institutional Framework
The region's credit profile remains constrained by the weak
institutional framework for Russian local and regional
governments (LRGs), which has a shorter record of stable
development than many of its international peers. Weak
institutions lead to lower predictability of Russian LRGs'
budgetary policies, which are subject to the federal government's
continuous reallocation of revenue and expenditure
responsibilities within government tiers.

RATING SENSITIVITIES

The ratings could be positively affected by a sustained debt
payback ratio of about four years and direct risk remaining below
40% of current revenue.


PHOSAGRO PJSC: Fitch Hikes Long-Term IDR From BB+, Outlook Stable
-----------------------------------------------------------------
Fitch Ratings has upgraded PJSC PhosAgro's Long-Term Foreign-
Currency Issuer Default Rating (IDR) and senior unsecured rating
to 'BBB-' from 'BB+'. The Outlook for the long-term ratings is
Stable.

The upgrade follows Fitch assessment of PhosAgro's improving
business profile, ie, an expansion of both nitrogen and phosphate
fertiliser output by over 50% since 2012. This expansion has been
achieved through efficient capex that has not been to the
detriment of the financial profile. PhosAgro's leading cost
position has also shown its resilience to the current market
trough in fertiliser prices. Fitch assume a broadly flat
rouble/dollar exchange rate, which should support PhosAgro's
margins at over 30%.

The IDR is also underpinned by the company's global cost
leadership and significant market presence in phosphates and its
coherent track record on dividends and capex whilst maintaining a
financial profile in line with the rating. PhosAgro's ratings are
moderately impacted by the operating environment.

KEY RATING DRIVERS

Business Growth Ahead of Market: PhosAgro's output across its
nitrogen and phosphate fertiliser products has increased by over
50% over the past five years. The nitrogen segment expansion was
behind the 2015-2016 capex peak and culminated in the ammonia and
urea plant capacity launched in 2017. The phosphates segment grew
as well, primarily due to expanding complex fertiliser capacity
and debottlenecking initiatives. Both segments expanded well
ahead of their respective markets, while efficient investments
allowed an increase in the company's scale without compromising
its financial profile, despite difficult market conditions.

Fertiliser Price Pressure Manageable: Fitch expect prices for
diammonium phosphate (DAP), the most popular phosphate fertiliser
globally, to remain high in 1H18 due to a temporary peak in
ammonia and sulphur input prices, before declining to the level
of the 2016 lows in 2H18-2019 as Ma'aden's and OCP S.A.'s (BBB-
/Negative) additional capacity ramps up. Fitch see a gradual DAP
price recovery after 2019 in the low single digits, once demand
absorbs new increases in capacity and Chinese efforts to close
smaller, polluting DAP plants start outweighing Middle East
supply pressures.

Fitch expect urea pricing to be broadly flat in 2018 and
marginally up from 2019 as China progresses with closures of
higher-cost anthracite-based urea capacity in 2018-2019 and urea
capacity additions from gas-rich regions across the globe
moderate from 2019-2020. Fitch expect urea to remain volatile in
the short term, but Fitch see higher gas and coal prices as
supporting factors behind its longer-term trend.

Resilience Throughout Market Volatility: PhosAgro's profile has
remained strong during the market volatility as its phosphate
cost leadership, further enhanced by the rouble depreciation
since 2H14, allows it to generate substantial operating cash
flows. PhosAgro's ability to switch nearly a half of its DAP
capacity to complex (NPK) fertilisers is also adding to its
flexibility to switch between two different, albeit correlated,
fertiliser markets. OCP and The Mosaic Company (Mosaic, BBB-
/Stable) both faced market volatility with leverage above 4x
during 2016-2017, but PhosAgro's adherence to moderate organic
growth and its low-cost position allowed it to keep leverage at
around 2x.

Flexibility in Financial Policies: Management has a set of public
financial targets including 1x net debt/EBITDA. The company
deviated from the target in 2016-2017 when fertiliser prices were
under pressure, as a temporary capex peak overlapped with the
issuer's unwillingness to reduce the dividend payout ratio to the
lower end of the 30%-50% range. Fitch reiterate Fitch
expectations that after 2017 capex moderation will allow PhosAgro
to continue its deleveraging towards the target, but the balance
between the priorities of debtholders and shareholders remains
key for achieving the leverage target over the medium term.

Dividend policy (up to 50% of profits) and capex policy (up to
50% of EBITDA) typically translate into neutral free cash-flow
generation and provide leverage stability assuming broadly stable
fertiliser and exchange rates. In the past fertiliser price and
FX volatility led to temporary deviations from the company's
commitment to reduce leverage. Remedial measures such as a
temporary dividend and/or a capex cut would become critical to
the company's ability to revert to the targeted leverage level
within a reasonable period.

DERIVATION SUMMARY

PhosAgro's IDR reflects the strong operational cash-flow
generation, which largely covers capex and dividends, as well as
operations in the lower part of the global phosphate fertilisers
cost curve. PhosAgro's global phosphate peers include OCP S.A.
(BBB-/Negative) and The Mosaic Company (BBB-/Stable). Both are
leveraged at over 4x on low fertiliser pricing and are expected
by Fitch to deleverage to below 4x over the rating horizon as
OCP's capex moderates and Mosaic deleverages after its operations
are rationalised and dividends are cut.

PhosAgro's Russian peers include EuroChem Group AG (EuroChem,
BB/Negative) and Uralkali PJSC (BB-/Negative), both on Negative
Outlook. EuroChem is facing low and volatile fertiliser prices
and Fitch expects it to reduce leverage after its 2017 capex peak
as its potash projects come online. Uralkali's 2015-2016 share
buybacks, amidst low fertiliser pricing, are driving its Negative
Outlook. The ability to generate positive free cash flow and
reduce absolute debt in a depressed price environment is of major
importance in the current market.

No Country Ceiling or parent/subsidiary aspects impact the
rating. Operating Environment influence has a moderate impact on
these ratings.

KEY ASSUMPTIONS

Fitch's Key Assumptions Within Fitch Rating Case for the Issuer
- Fertiliser prices in line with Fitch's fertiliser price deck
- USD/RUB forecast at 61 in 2018 and 60 thereafter
- Dividend payout ratio at 40% over the next three years
- Positive FCF leading to debt reduction and FFO adjusted net
   leverage moving gradually towards 1.5x after 2017

RATING SENSITIVITIES

Developments That May, Individually or Collectively, Lead to
Positive Rating Action
Fitch do not anticipate any further positive action for the
company given its operating and financial profile

Developments That May, Individually or Collectively, Lead to
Negative Rating Action
- Significantly negative FCF leading to FFO adjusted net
   leverage sustainably above 2.0x
- EBITDAR margin sustainably below 20%

LIQUIDITY

Healthy Liquidity: PhosAgro's end-3Q17 liquidity is manageable
with short-term bank debt of RUB4 billion covered by its RUB6
billion in cash. Its RUB29 billion LPNs due in February 2018 are
likely to be refinanced with the prospective LPNs. Fitch
expectations of positive free cash-flow generation in 2018 add
comfort to the issuer's liquidity level.

FULL LIST OF RATING ACTIONS

PJSC PhosAgro
- Foreign-Currency Long-Term IDR: upgraded to 'BBB-' from 'BB+';
   Outlook Stable;
- Foreign-Currency Short-Term IDR: upgraded to 'F3' from 'B';
- Local-Currency Long-Term IDR: upgraded to 'BBB-' from 'BB+';
   Outlook Stable;
- Senior unsecured rating: upgraded to 'BBB-' from 'BB+'.

PhosAgro Bond Funding Designated Activity Company
- Senior unsecured rating: upgraded to 'BBB-' from 'BB+'.


PIONEER GROUP: S&P Alters Outlook to Pos. & Affirms 'B-' ICR
------------------------------------------------------------
S&P Global Ratings revised its outlook on Russia-based
residential real estate developer Pioneer Group CJSC to positive
from stable. S&P affirmed its 'B-' long-term issuer credit rating
on the company.

S&P said, "The outlook revision reflects our view that we could
upgrade Pioneer if the company's scale and profitability
improvements exceed our current expectations. The company has
continued to expand its development portfolio, which now consists
of 2 million square meters of residential projects in Moscow city
and St. Petersburg, on the back of land acquisitions and new
projects in the design and construction phase. Contracted sales
in 2017 exceeded 140 thousand square meters and Russian ruble
(RUB) 21 billion (about $370 million), and we expect they will
substantially increase on the back of newly launched projects
Life-Kutuzovsky and Life-Botanical Garden 2 as well two other
large projects, including one near the Varshavskaya metro station
in Moscow city. We expect Pioneer's market share will increase,
supported by an attractive offering of residential projects in
favorable locations in Moscow city. We believe there is sound
demand for high-quality residences in Moscow city, despite
continued oversupply in the market."

Pioneer obtained a five-year RUB19 billion credit line from
Sberbank to finance its Life-Kutuzovsky project, which increased
its availability under undrawn long-term lines to RUB22 billion
and lowered its effective cost of debt to less than 13%.
Additionally, Pioneer has repaid RUB5 billion in bonds, which had
put options and maturities in 2018. S&P said, "As a result, we
consider that Pioneer's liquidity has improved, and now assess it
as adequate compared with less than adequate previously. Pioneer
is currently less reliant on presales and market conditions to
complete its development projects, in our view. Most of the
company's liquidity uses represent temporary working capital
swings, which will materialize only if demand for comfort-class
residential property declines materially. Still, we perceive some
execution risks associated with this rapid expansion and the
company's plans to increase margins through cost optimization and
product-mix improvements."

Pioneer's business risk profile is, in our opinion, constrained
by the inherent volatility and long operating cycle of the
property development industry and by Russia's high country risk,
due to the lack of administrative transparency and
predictability. S&P said, "Russia's macroeconomic environment
remains weak, in our view, with sluggish demand for residential
real estate but with some signs of recovery. Although there is
structural demand for new homes in Russia, demand remains highly
correlated with GDP growth. We project Russia's GDP will increase
by 1.6%-1.8% in 2017-2018--which compares with the 0.2% decline
in 2016 and 2.8% decline in 2015."

The Moscow city residential market, within the boundaries of the
city ring road, remains one of Russia's most attractive markets,
attracting affluent buyers from across the country. At the same
time, over the past several years, the Moscow residential real
estate market has suffered from oversupply because of abundant
new supply coming from the redevelopment of industrial zones.
Moreover, the municipal government has launched a program to
demolish old mid-rise apartment blocks and replace them with new
high-rise ones, which might exacerbate oversupply in the medium
to long term.

At the same time, a positive trend supporting demand is
increasing mortgage affordability. On the back of a marked
slowdown in inflation and a decline in key policy rates, mortgage
interest rates also declined to pre-crisis levels. Additionally,
owing to nominal price declines of housing properties,
affordability has risen. Another positive trend in the Moscow
market is the shift from the secondary to the primary market,
supporting sales of residential developers. Real estate
developers acknowledged the new pricing reality relatively
quickly, while individual sellers in the secondary market were
more reluctant to adjust prices as they were still fixed on U.S.
dollar-denominated prices, which suffered a 50% decline due to
50% ruble devaluation in 2014-2015.

S&P said, "We believe that Pioneer's financial risk profile is
constrained by its still-high interest expense, however now we
expect interest coverage will exceed 3x in 2018-2019, as a result
of decreasing interest rates. We believe the company's capacity
to repay debt is constrained by the very high volatility in its
cash flow generation and its investments in land bank. Our
assessment of financial risk also reflects the multiyear
volatility of working capital, which is specific to developers
and homebuilders, due to the capital-intensive business and
length of projects. Pioneer's financial policy targets a net
leverage ratio of 3.5x, which is broadly comparable with maximum
ratios targeted by other Russian developers. We also note the
company's relatively spread out debt maturity profile, with a
weighted average debt maturity of 3.45 years.

"We assess Pioneer's management and governance as weak,
reflecting its private ownership, with limited checks and
balances in the corporate governance structure regarding its
strategy and financial policy.

"The positive outlook on Pioneer reflects our view of a one-in-
three likelihood that we could upgraded the company if its
increases in scale and profitability are stronger than we
currently expect, despite challenges presented by oversupply in
the Moscow housing market. Our opinion incorporates Pioneer's
plans to launch a number of new projects in its core markets of
Moscow and St. Petersburg, which might lead to a change in the
company's operating fundamentals. The outlook also factors in our
expectation that Pioneer will likely maintain a ratio of EBITDA
to interest in the 3.0x-4.0x range, supported by better credit
market conditions in Russia and the company's progress in
reducing its cost of funding.

"We could take a positive rating action on Pioneer if it manages
to maintain adequate liquidity as well as materially improve the
scale and profitability of its operations.

"We could revise outlook to stable if we observed signs of
Pioneer's liquidity deteriorating or if the company's increase in
scale turns out to be more in line with our current forecast. We
could also revise the outlook to stable if changes to the
regulation governing residential development in Russia hurt the
market and lead to financing or operating disruptions. We could
also revise outlook to stable if EBITDA interest coverage remains
below 3x, for example, as result of a more aggressive financial
policy or rising cost of debt."


=============
U K R A I N E
=============


ODESSA CITY: Fitch Assigns B- Long-Term IDR, Outlook Stable
-----------------------------------------------------------
Fitch Ratings has assigned the Ukrainian City of Odessa Long-Term
Foreign- and Local-Currency Issuer Default Ratings (IDRs) of
'B-'. The Outlooks are Stable.

The ratings reflect a weak institutional framework for
subnationals in Ukraine, leading to unpredictable fiscal changes.
Together with the overall weakness of sovereign public finances
in Ukraine, this results in uncertain growth prospects.

Positively, the ratings take into account Fitch's expectations
that the city will maintain its sound operating results over the
medium term. The ratings further take into account Odessa's
expected low direct debt over the medium term, as well as low
contingent liabilities stemming from guarantees issued to
municipal companies.

KEY RATING DRIVERS

The ratings reflect the following key rating drivers and their
relative weights:

HIGH

Fitch views Odessa's ratings as constrained by Ukraine's
sovereign ratings (B-/Stable/B) and the weak institutional
framework governing Ukrainian subnationals. The framework is
characterised by political risks, pressurised by national
elections scheduled for 2019. The challenging reform agenda
arising from Ukraine's IMF programme to secure external funding
has led to frequent changes in the allocation of revenue sources
and spending responsibilities for subnationals. The high
inflation environment and the frequent raises in interest rates
make forecasting subnationals' budgets, debt and investments
challenging.

Fitch projects Odessa's operating margin to remain close to 20%
in 2018-2019, in line with the preliminary 2017 result (20.3%).
It will be supported by expected tax revenue growth, which is the
city's main current revenue source (57% in 2017), outpacing the
inflation rate and current costs control. Odessa management's
financial goal is maintain the operating surplus at a level that
allows it to secure funding for the city's investment needs.

Fitch notes that Odessa's financial performance, although
satisfactory, looks volatile over the medium term. This is due to
continued financial decentralisation resulting in numerous
amendments of budget and tax regulations in Ukraine. In 2015-2017
Odessa's tax revenues nearly doubled in nominal terms. However,
budget revenue growth rate in real terms was much lower as
Ukraine experienced high inflation (24.7% per year on average).

Odessa has large investment needs resulting from all areas of the
city's responsibilities (infrastructure, public transport,
housing, waste management). Fitch assumes that the city will
spend at least 20% of total expenditure for investments, ie
around UAH2.3 billion annually in 2018-2019. Capital expenditure
in 2017 was historically high at UAH3.1 billion. Consequently the
city reported a high budgetary deficit of around 10% of total
revenue, which it covered from cash and new debt.

MEDIUM

Fitch expects Odessa's direct debt to remain low in the medium
term, although it may rise to about 9% of current revenue (UAH900
million) in 2018 from about 6% in 2017 (UAH509 million). The city
is drawing a five-year loan from a local bank. The risk of
interest costs increase is high as Odessa's debt stock is
dominated by floating interest rates. Ukraine's central bank has
raised rates by a total of 350bp in the last weeks in response to
high inflation.

Fitch expects Odessa's net overall risk, including guarantees
issued to municipal companies, to remain low at around 13% of
current revenue in 2018-2019 (2017: about 15%). At end-2017, the
value of these guarantees totalled UAH981 million. The guaranteed
loans were provided by EBRD and IBRD (World Bank Group) in euros
and US dollars with final maturity in 2027-2028. For 2018 the
city plans to provide subsidies of about UAH860 million to its
companies, compared with UAH1.3 billion in 2017. The city injects
capital to fund investments, loans repayments and cover
companies' losses due to low tariffs not covering the costs of
services provided.

The city authorities' main priority is to support the dynamic
growth of the city, by rendering it attractive to investors and
inhabitants. The authorities follow a policy of only smoothly
increasing local tax rates for the city's inhabitants and fees
for public services and strive to increase efficiency in
delivering its services. Odessa's administration is prudent in
its budgetary policy. The city's credit policy foresees medium
and long-term financing from local and international financial
institutions securing smooth repayment schedules. There is good
oversight over the city's companies.

LOW

Odessa is the third-largest city in Ukraine and its key port at
the Black Sea. Besides the maritime and tourist industries the
city is one of the country's key scientific, industrial and
cultural centres. Its economy is diversified across services and
manufacturing. In 2016-2017 Ukraine's economy grew about 2.0%,
following a 9.9% contraction in 2015. Fitch expects Ukraine's GDP
to grow 3.2%-3.7% per year in 2018-2019, which should strengthen
the city's economic prospects. However, the wealth indicators of
Ukraine and Odessa are weak in an international context, with
national GDP per capita of USD2,193 in 2016.

RATING SENSITIVITIES

The city's ratings are constrained by those of the sovereign.
Positive rating action on Ukraine would lead to corresponding
action on Odessa's ratings, provided the city's credit profile
remains unchanged.

A material increase in the city's net overall risk and a
significant deterioration in its financial flexibility, could
lead to negative rating action.


===========================
U N I T E D   K I N G D O M
===========================


BRIGHTHOUSE GROUP: Moody's Puts Caa2 CFR on Review for Upgrade
--------------------------------------------------------------
Moody's Investors Service appended a limited default (LD) to
BrightHouse Group PLC (BrightHouse) Ca-PD probability of default
rating (PDR). Concurrently, Moody's placed BrightHouse's Caa2
Corporate Family Rating (CFR) under review for upgrade. The
outlook has been changed to ratings under review from negative.

The appending of the PDR with a "/LD" designation indicates a
limited default, reflecting the completion of the notes exchange
offer on 2 February 2018 with a loss for existing noteholders.
The "/LD" designation will be removed after three business days,
after which Moody's will withdraw all ratings because the rated
debt is no longer outstanding.

RATINGS RATIONALE

Moody's placed BrightHouse's CFR under review for upgrade to
recognize the improved capital structure of the group and the
five year maturity extension of the financial debt following the
completion of the exchange offer. Moody's has decided to withdraw
the ratings because the rated debt is no longer outstanding.

BrightHouse Group PLC, based in Watford, is a leader in the rent-
to-own market in the United Kingdom, with 283 stores as of
September 30, 2017. For the last twelve months ended September
30, 2017, the company reported revenues of GBP290 million.

PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was Retail
Industry published in October 2015.

LIST OF AFFECTED RATINGS

Issuer: BrightHouse Group PLC

Placed On Review for Upgrade:

-- LT Corporate Family Rating, currently Caa2

-- Probability of Default Rating, currently Ca-PD/LD (appended a
    limited default (LD))

Withdrawals:

-- Senior Secured Regular Bond/Debenture, Withdrawn , previously
    rated Ca

Outlook Actions:

-- Outlook, Changed To Rating Under Review From Negative


CARILLION PLC: Serco Buys 15 Healthcare Contracts at a Discount
---------------------------------------------------------------
Rhiannon Curry at The Telegraph reports that Serco has shaved
almost GBP20 million off the price of 15 healthcare contracts it
is taking over from failed contractor Carillion after revising
the sale agreement in the wake of the company's collapse.

According to The Telegraph, the contracts, which are spread
across 50 NHS sites, will now be transferred to Serco for GBP29.7
million, having been worth GBP47.7 million in December when the
deal was first signed.

Serco said on Feb. 14 that it had signed a new purchase agreement
with the special managers overseeing Carillion's liquidation,
with the lower price reflecting the fact that Serco now thinks
the contracts will require "additional working capital
investment", The Telegraph relates.

As a result of Carillion's liquidation, Serco, as cited by The
Telegraph, said it was forced to re-evaluate "potential
liabilities, indemnities, warranties" associated with the
contracts, making them less valuable.

Just under 1,500 employees work on the contracts being acquired
under the deal, The Telegraph notes.

Headquartered in Wolverhampton, United Kingdom, Carillion plc --
http://www.carillionplc.com/-- is an integrated support services
company.  The Company operates through four business segments:
Support services, Public Private Partnership projects, Middle
East construction services and Construction services (excluding
the Middle East).


COLOUR BIDCO: S&P Puts 'B' Issuer Credit Rating, Outlook Stable
---------------------------------------------------------------
S&P Global Ratings said that it assigned its 'B' long-term issuer
credit rating to Colour Bidco Ltd., the ultimate parent of NGA
UK, a leading provider of payroll and human resources (HR)
software services in the U.K. small and mid-sized enterprise
(SME) market. The outlook is stable.

S&P said, "At the same time, we assigned our 'B' issue rating to
the senior secured term loan due 2024 that Colour Bidco issued.
The recovery rating of '3' indicates our expectation of
meaningful (50%-70%; rounded estimate: 55%) recovery in the event
of a default.

The ratings are in line with the preliminary ratings S&P assigned
on Nov. 8, 2018.

S&P said, "Our rating on Colour Bidco primarily reflects our view
of the company's highly leveraged capital structure following
Bain Capital's planned acquisition of NGA UK through a carve-out
from Northgate Information Solutions Ltd. We take into account
the company's S&P Global Ratings-adjusted leverage of 7.1x debt
to EBITDA and its relatively limited scale and scope in
comparison with peers. However, we also factor in NGA UK's well-
established niche market position in the U.K.'s fragmented
payroll and HR software service market, its good profitability--
with adjusted EBITDA margins of about 31%-32% and solid free
operating cash flow (FOCF) generation, resulting in an adjusted
FOCF-to-debt ratio of above 5%."

NGA UK provides integrated HR information system software, which
is delivered on premise or as software as a service (SaaS), as
well as payroll and business process outsourcing services mainly
in the mid-market (MM) segment in the U.K. and Ireland but also
including a few larger corporates in its client base. Its main
product is "ResourceLink." The company also provides payroll
services and web-based HR assistance for SMEs.

S&P said, "In our view, the company's business risk profile is
primarily constrained by NGA UK's small scale compared with that
of rated peers and limited geographic diversity, since it
operates only in the U.K. and Ireland. In fiscal year 2017 (ended
April 30), NGA UK generated about GBP138 million of revenues and
about GBP50 million of EBITDA. The business risk profile is
further constrained by its narrow specialization on HR and
payroll products, where the market is very competitive and
fragmented with only modest entry barriers, in our view. While
NGA UK's payroll software solutions are critical to customers'
operations, in our opinion, they are arguably not as embedded in
customers' IT strategy as software supporting revenue generation,
for instance." NGA UK's customer base also exhibits some customer
concentration because the 10-largest customers accounted for
about 25% of revenues in fiscal 2017.

This is partly offset by NGA UK's solid EBITDA margins of higher
than 30% and good cash conversion. The business risk profile
further benefits from a leading position in the HR and payroll
services in the U.K. According to management, NGA UK held
approximately 19% market share for its MM segment in fiscal 2017,
which is twice the market share of the second player in this
segment, and about 8% for its small and medium business division.
Furthermore, NGA UK's relatively high proportion of recurring
revenues provides good visibility on future earnings. In fiscal
2017, 85% of NGA UK's revenues were recurring. The company has a
meaningful SaaS penetration among its existing client base, and,
based on the company's projections and S&P's forecasts, this
share should increase steadily over fiscal 2018-2021.

S&P said, "Our financial risk profile assessment reflects NGA's
highly leveraged pro forma capital structure and our expectation
that Bain Capital will likely pursue an aggressive financial
policy. We consequently calculate NGA UK's leverage on a gross
debt basis. We also add to our debt calculation for NGA UK about
GBP40 million unfunded pension obligations and adjusted EBITDA
for capitalized development costs (about GBP8 million in fiscal
2018). As a result, we estimate that, at the transaction's
closing, the company's S&P Global Ratings-adjusted debt-to-EBITDA
ratio will be about 7.1x and remain above 6.0x during fiscal
years 2018-2020. In addition, we estimate that the ratio of funds
from operations (FFO) to debt will be about 8% on a pro forma
basis in fiscal 2018 and below 10% in fiscal years 2019-2020.

"In our view, NGA UK benefits from relatively good cash
conversion thanks to low capital expenditure (capex)
requirements, excluding capitalized expenses for research and
development (R&D), and limited working capital requirements due
to a large recurring revenue base with upfront annual billing. We
anticipate solid annual FOCF generation of about GBP20 million-
GBP25 million in fiscal years 2018-2020, which corresponds to our
forecast adjusted FOCF-to-debt ratio of about 6%-8% over the same
period. Nevertheless, this excludes about GBP4.9 million annual
contributions to the company's pension plan. Furthermore, under
our base case, NGA UK maintains solid EBITDA interest cover of
more than 3x in 2019 and 2020 (assuming a full year of interest
for fiscal 2019)."

In S&P's base case, it assumes:

-- Revenue growth of about 2%-4% in fiscal years 2018 and 2019,
    mainly stemming from cross and up-sell opportunities within
    its existing client base and further SaaS transition.

-- Adjusted EBITDA margin of about 31%-32% in fiscal years 2018
    and 2019, after S&P's estimate of about 33% in fiscal 2017,
    primarily due to additional overhead following the carve-out.
    S&P expects a modest margin improvement thereafter, due to
    some offshoring and further cost saving initiatives.

-- Modest capex of about GBP1 million-GBP2 million annually
    (excluding capitalized R&D expenses).

-- Cash taxes of about GBP3.5 million-GBP5.0 million in fiscal
    years 2018 and 2019.

-- About GBP4.9 million contracted cash outflow for pension
    obligation funding.

-- No acquisitions.

Based on these assumptions, S&P arrives at the following credit
measures:

-- Adjusted debt to EBITDA of about 7.1x at closing of the
    transaction in fiscal 2018, declining to just above 6.0x over
    the next two years, mainly due to EBITDA growth and the
    additional funding of the pension obligations.

-- Adjusted FFO to debt of about 8.5%-9.0% in fiscal years 2019
    and 2020, compared with our estimate of about 8.0% in 2018 on
    a pro forma basis.

-- Adjusted cash from operations to debt of 7.0%-8.5% in fiscal
    years 2018 and 2020

-- Adjusted FOCF to debt of 6%-8% in fiscal years 2019 and 2020.

-- EBITDA cash interest cover of 2.5x-3.0x in fiscal years 2019
    and 2020.

S&P said, "The stable outlook reflects our expectation that NGA
UK will successfully maintain or expand its well-established
market position and achieve organic revenue growth of 2%-4%, with
adjusted EBITDA margins of more than 30%. We think this will
enable NGA UK to generate positive FOCF generation of about GBP20
million over the next 12 months. We expect that S&P Global
Ratings-adjusted debt to EBITDA will remain well above 6x in
fiscal 2019.

"We could lower the rating if the company's revenues and EBITDA
margins start declining due to meaningful customer losses or
heightened competition. We would also consider a negative rating
action if we saw an increase in leverage to more than 7.5x or if
the FOCF-to-debt ratio fell to below 5%. This could materialize
through a worsening of the company's operating environment or a
sizable debt financed acquisition, which we do not assume under
our base case.

"Although unlikely at this point, we could consider an upgrade if
NGA UK was able to materially deleverage beyond our current base-
case expectations. Specifically, we would consider a positive
rating action if S&P Global Ratings-adjusted debt to EBITDA fell
below 5.5x and if the FOCF-to-debt ratio increased to above 10%.
An upgrade would be subject to our view that these credit metrics
are sustainable."


DUKINFIELD PLC: S&P Affirms BB (sf) Rating on Class E-Dfrd Notes
----------------------------------------------------------------
S&P Global Ratings affirmed its credit ratings on Dukinfield
PLC's class A, B-Dfrd, C-Dfrd, D-Dfrd, and E-Dfrd notes.

The rating actions follow S&P's credit and cash flow analysis of
the most recent transaction information that we have received.
Collateral performance has remained stable since the transaction
closed in September 2015 and credit enhancement has built up for
all classes of notes. Furthermore, the reserve fund is fully
funded and credit enhancement is increasing as the transaction is
paying principal sequentially.

S&P said, "The class B-Dfrd, C-Dfrd, D-Dfrd, and E-Dfrd notes are
deferrable-interest notes and we treated them as such in our
analysis. Under the transaction documents, the issuer can defer
interest payments on these notes. Consequently, any deferral of
interest on these classes of notes would not constitute an event
of default. Although our 'AAA (sf)' rating on the class A notes
addresses the timely payment of interest and the ultimate payment
of principal, our ratings on the other classes of notes address
the ultimate payment of principal and the ultimate payment of
interest.

"Our ratings reflect our assessment of the transaction's payment
structure, cash flow mechanics, and the results of our cash flow
analysis to assess whether the notes would be repaid under stress
test scenarios. Subordination and the reserve fund provide credit
enhancement to the notes that are senior to the unrated class F
notes. Taking these factors into account, we consider the
available credit enhancement for the rated notes to be
commensurate with the ratings that we have assigned.

S&P said, "Owing to the high proportion of loans in the
transaction that have previously had a payment arrangement, we
categorize Dukinfield as "reperforming" when applying our
European residential loan criteria. We apply adjustments for
reperforming loans in pools that we assess as having a material
exposure to these loans."
According to the September 2017 investor report, total
delinquencies of greater than one month comprised 5.75% of the
pool, compared with 4.13% at closing.

S&P's weighted-average foreclosure frequency (WAFF), weighted-
average loss severity (WALS) assumptions, and expected credit
coverage (CC) levels are shown in the table below.

  Rating level    WAFF (%)     WALS (%)     CC (%)
  AAA                57.87        45.77      26.49
  AA                 45.31        38.88      17.62
  A                  34.96        26.92       9.41
  BBB                26.90        20.02       5.39
  BB                 17.90        15.32       2.74
  B                  13.61        11.44       1.56

WAFF--Weighted-average foreclosure frequency.
WALS--Weighted-average loss severity. CC--Credit coverage.

S&P said, "According to our credit stability analysis, the
maximum projected deterioration we would expect at each rating
level for time horizons of one year and three years, under
moderate stress conditions, is in line with our credit stability
criteria."

RATINGS LIST

Dukinfield PLC GBP459.7 Million Mortgage-Backed Floating-Rate
Notes And Unrated Residual Certificates

  Ratings Affirmed
  Class             Rating
  A                 AAA (sf)
  B-Dfrd            AA (sf)
  C-Dfrd            A (sf)
  D-Dfrd            BBB (sf)
  E-Dfrd            BB (sf)


NEW LOOK: S&P Downgrades ICR to 'CCC' on Weakening of Cash Flows
----------------------------------------------------------------
S&P Global Ratings said that it lowered its long-term issuer
credit rating on U.K. apparel retailer New Look Retail Group Ltd.
(New Look) to 'CCC' from 'CCC+'. The outlook is negative.

S&P said, "At the same time, we lowered our long-term issue-level
ratings on New Look's GBP700 million and EUR415 million senior
secured notes to 'CCC' from 'CCC+', in line with the issuer
credit rating. The '4' recovery rating on these notes is
unchanged, reflecting our expectation of average recovery (30%-
50%; rounded estimate: 30%) in the event of default.

"We also lowered our long-term issue-level rating on the group's
GBP200 million senior unsecured notes (of which GBP176.7 million
remain outstanding) to 'CC' from 'CCC-'. The '6' recovery rating
is unchanged, indicating our expectation of negligible recovery
(0%-10%; rounded estimate: 0%) in the event of default.

"The downgrade reflects our view that trading conditions in the
U.K. will remain challenging for discretionary goods retailers,
constraining New Look's operating performance and cash flows.
Given New Look's very high leverage, significant cash interest
burden, and weakening cash flows, we believe there is an
increasing likelihood of the company undertaking a distressed
exchange or experiencing a liquidity shortfall within the next 12
months. That said, we consider New Look's broad international and
multichannel diversity, along with the Jan. 26, 2018 full
drawdown of the remaining revolving credit facility (RCF)
availability, as supportive of the group's liquidity."

New Look's merchandising strategy has not succeeded in curtailing
a decline in like-for-like sales in the U.K. and continental
Europe. Competition in the value apparel market remains fierce,
and S&P believes a turnaround looks increasingly unlikely in the
near term. S&P expects the group's extensive store estate and
associated rental costs will continue to constrain profitability
and cash flows. Furthermore, suppliers increasingly require
funding support from New Look--via utilization of letters of
credit (LOCs) and other forms of secured supplier financing--to
maintain their existing creditor terms with the group. A material
tightening of these terms could put further pressure on cash
flows.

In S&P's base case, it assumes:

-- Moderate U.K. real GDP growth, forecast to be 1.5% in 2017
    and 0.9% in 2018, with consumer price inflation of 2.7% in
    2017 and 2.4% in 2018, driven by exchange rate pressures,
    some of which will be passed on to consumers and suppliers.
    S&P also expects a slowdown in U.K. real consumption growth
    to 1.7% in 2017 and 0.8% in 2018.

-- Sales declines of 5% in financial year (FY) 2018 and a
    further decline of 1%-2% in FY2019, as contributions from
    online and franchise operations only partially offset soft
    like-for-like trading in U.K. stores.

-- S&P Global Ratings-adjusted EBITDA margin declines to 17%-19%
    over the next two years (compared with 21% in FY2017 and 25%-
    28% historically) due to continued pricing pressures, the
    dilutive effect of increasing third-party e-commerce
    contributions, and the impact of foreign currency movements
    on gross margins. S&P expects some improvements in FY2019
    margins owing to management's efforts to reduce markdowns and
    cut marketing and staffing expenses.

-- Capital expenditure (capex) of about GBP50 million in FY2018,
    in line with management guidance. S&P expects this to decline
    further to about GBP40 million on a normalized basis.

-- Working capital outflows of about GBP10 million in FY2018 and
    up to GBP20 million in FY2019, reflecting the risk of a
    tightening of creditor terms with suppliers.

-- S&P does not deduct any surplus cash from debt.

-- S&P treats the GBP870 million of shareholder loan instruments
    in place from the ultimate parent (Brait SE) as debt-like
    obligations, although we do recognize their cash-preserving
    nature.

Based on these assumptions, S&P arrives at the following credit
measures:

-- Adjusted debt of about GBP1.3 billion in both FY2018 and
    FY2019.

-- Adjusted EBITDA of GBP230 million-GBP250 million in FY2018
    (equivalent to a reported EBITDA -- including exceptional
    costs -- of about GBP52 million), and GBP235 million-GBP255
    million in FY2019 (GBP65 million). This compares with the
    GBP305 million (GBP135 million) generated in FY2017.

-- Adjusted debt to EBITDA of 12x-14x in both FY2018 and FY2019.
    This is equivalent to 9.0x-9.5x when excluding the
    shareholder loans.

-- Adjusted funds from operations (FFO) to debt of 2.5%-4.5% in
    both FY2018 and FY2019.

-- Reported free operating cash flow burn of up to GBP65 million
    in both FY2018 and FY2019.

-- Adjusted EBITDAR coverage (defined as reported EBITDA plus
    rent, to cash interest plus rent) of 0.9x-1.0x in both FY2018
    and FY2019.

S&P said, "The negative outlook reflects our view that New Look's
weak operating results will continue through 2018, constraining
cash flows and liquidity, increasing the risk of a potential debt
restructuring or distressed exchange--including debt repurchases
as materially below par. As far as we know, the group is
currently not taking any tangible steps in this direction, but we
would likely see such events as distressed and tantamount to a
default.

"We could lower the ratings if we anticipate a specific default
scenario within the next six months. This could occur if New
Look's working capital position comes under pressure or its
liquidity otherwise deteriorates such that a payment shortfall is
likely.

"We could also lower the ratings, including the long-term issuer
credit rating, if we think New Look is likely to take steps to
restructure the group's significant debt obligations through a
distressed exchange. This includes any debt repurchases conducted
at materially below par on the part of either the company or its
shareholders. Any such transactions could trigger a downgrade to
'SD' (selective default) at the issuer level.

"We could take a positive rating action if New Look demonstrated
a sustained recovery in earnings and cash flows, showing that
management's strategic initiatives are beginning to bear fruit.
Any prospective positive rating action would be conditional upon
us perceiving the risk of a distressed exchange offer--including
debt buybacks at materially below par--or liquidity shortfall as
reduced."



                            *********

Monday's edition of the TCR delivers a list of indicative prices
for bond issues that reportedly trade well below par.  Prices are
obtained by TCR editors from a variety of outside sources during
the prior week we think are reliable.  Those sources may not,
however, be complete or accurate.  The Monday Bond Pricing table
is compiled on the Friday prior to publication.  Prices reported
are not intended to reflect actual trades.  Prices for actual
trades are probably different.  Our objective is to share
information, not make markets in publicly traded securities.
Nothing in the TCR constitutes an offer or solicitation to buy or
sell any security of any kind.  It is likely that some entity
affiliated with a TCR editor holds some position in the issuers'
public debt and equity securities about which we report.

Each Tuesday edition of the TCR contains a list of companies with
insolvent balance sheets whose shares trade higher than US$3 per
share in public markets.  At first glance, this list may look
like the definitive compilation of stocks that are ideal to sell
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historical cost net of depreciation may understate the true value
of a firm's assets.  A company may establish reserves on its
balance sheet for liabilities that may never materialize.  The
prices at which equity securities trade in public market are
determined by more than a balance sheet solvency test.

Each Friday's edition of the TCR includes a review about a book
of interest to troubled company professionals.  All titles are
available at your local bookstore or through Amazon.com.  Go to
http://www.bankrupt.com/booksto order any title today.


                            *********


S U B S C R I P T I O N   I N F O R M A T I O N

Troubled Company Reporter-Europe is a daily newsletter co-
published by Bankruptcy Creditors' Service, Inc., Fairless Hills,
Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA.
Marites O. Claro, Rousel Elaine T. Fernandez, Joy A. Agravante,
Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman,
Editors.

Copyright 2018.  All rights reserved.  ISSN 1529-2754.

This material is copyrighted and any commercial use, resale or
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                 * * * End of Transmission * * *