/raid1/www/Hosts/bankrupt/TCREUR_Public/180306.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
E U R O P E
Tuesday, March 6, 2018, Vol. 19, No. 046
Headlines
A Z E R B A I J A N
MORTGAGE AND CREDIT: Fitch Alters Outlook to Stable, Affirms IDR
G R E E C E
ALPHA BANK: Moody's Hikes Mortgage Covered Bonds Rating to Ba3
EPIHIRO PLC: Moody's Puts Caa2 Cl. A Notes Rating Under Review
PIRAEUS BANK: Moody's Hikes Long-Term Deposit Rating to Caa2
* Moody's Puts Ratings on 7 Notes in 3 Greek RMBS Deals on Review
I R E L A N D
AVOCA CLO XV: Fitch Corrects February 20 Rating Release
I T A L Y
OLIDATA SPA: Revocation of Liquidation Status Sought
N E T H E R L A N D S
BRUCKNER CDO I: Moody's Withdraws Ca Rating on Class R Notes
TEVA PHARMACEUTICAL: Fitch to Rate Senior Unsecured Notes 'BB'
P O R T U G A L
CAIXA GERAL: Moody's Hikes LT Deposit & Sr. Debt Ratings to Ba3
LUSITANO SME 3: Moody's Hikes Class C Notes Rating From Ba1(sf)
R U S S I A
CB ALZHAN: Placed on Provisional Administration, License Revoked
ER-TELECOM HOLDING: Moody's Affirms B2 CFR, Outlook Stable
RUSAL PLC: Fitch Places BB-/B IDRs on Watch Evolving
TMK PAO: Moody's Alters Outlook to Stable & Affirms B1 CFR
S W E D E N
TRANSCOM HOLDING: Moody's Assigns B2 CFR, Outlook Stable
U N I T E D K I N G D O M
ALPHA INSURANCE: CBL Collapse Prompts Liquidation
INTERSERVE PLC: Plans to Cut 1,500 Jobs to Avert Bankruptcy
PREZZO: Reveals Locations of Restaurants Marked for Closure
* UK: A Third of Biggest Restaurants Loss-Making, Study Reveals
*********
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A Z E R B A I J A N
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MORTGAGE AND CREDIT: Fitch Alters Outlook to Stable, Affirms IDR
----------------------------------------------------------------
Fitch Ratings has revised Mortgage and Credit Guarantee Fund of
the Republic of Azerbaijan's (MCGF) Outlook to Stable from
Negative while affirming the fund's Long-Term Foreign and Local
Currency Issuer Default Ratings (IDRs) at 'BB+'.
The revision of the Outlook follows a similar rating action on the
Republic of Azerbaijan's IDRs and reflects the fund's continuing
tight links with the central government.
The fund's ratings are equalised with those of the sovereign under
Fitch's 'Government-Related Entities Rating Criteria'. This
reflects MCGF's strong linkage with the state as evidenced by
100%-state ownership, the fund's non-for-profit mission and
strategic importance to the state's economic policy. The ratings
are also supported by an established track record of state support
along with ongoing equity injections and the central bank's
commitment to buy back guarantee on MCGF's bonds. This underpins
Fitch assumption of a strong incentive for the state to support
the fund over the medium term.
KEY RATING DRIVERS
Status, Ownership and Control Assessed as Very Strong
The fund is a non-for-profit organisation, which is fully owned by
the state. It is a legal successor of Azerbaijan Mortgage Fund and
Credit Guarantee Fund, which merged at end- 2017. The entity
operates as a state agent in promoting subsidised long-term
mortgage loans and channelling low-cost funding to national
financial institutions. The fund's operations are tightly
controlled by the central government through the Trustee Board,
whose members are appointed by the President. The fund cannot go
bankrupt, and can only be liquidated by the presidential decree.
Support Track Record Assessed as Very Strong
The fund receives steady contributions from the government since
its establishment and is supported by the central bank's buy-back
guarantee on its bonds. As of end-2017 the cumulative
contributions totalled AZN366 million. For 2018, the government
has approved an AZN100 million equity injection and the central
bank's buy-back guarantee over a new AZN200 million bond issue.
Due to a new mandate, MCGF will receive an additional AZN40
million transfer from the state to finance interest subsidy on
SMEs' loans in 2018. Fitch assumes the fund will continue to
benefit from ongoing state support over the medium term.
Socio-Political Implications of Default assessed as Very Strong
Fitch views the fund's role as strategically important to the
state housing policy, as provision of affordable housing is a high
priority for Azerbaijan. The fund is the only entity that provides
subsidised mortgages in the republic. It also operates as the
centralised mortgage lender on the local mortgage market amid
recent economic turbulence and increased market rates. By its
management's estimate, the fund holds about 40% of real estate
loans portfolio granted to households in Azerbaijan.
The fund's mandate is to issue mortgage bonds, thus providing low-
cost funding to local banks as market-based mortgage
securitisation is under-developed in Azerbaijan along with a
credit squeeze of mortgage lending. It makes the entity dependent
on regular access to financing. This means that financial distress
of the fund would materially impact its operations, leading to
serious socio-political implications, in Fitch's view.
Financial Implications of Default assessed as Strong
The fund has a strong market-maker position on the national
mortgage market and benefits from the central bank's buy-back
guarantee over its bonds. The entity's default would materially
impair the confidence in the central bank and undermine
credibility of the central government, in Fitch's view. This is
somewhat offset by the modest size of the Azerbaijani financial
market and absence of foreign capital market exposure of the fund.
Fitch's assessment under its Government-Related Entities criteria
shows a total score of 50 points, which leads to the fund's
ratings being equalised with the sovereign's, irrespective of the
fund's standalone credit assessment.
New Policy Mandate Strengthens the Fund's Status
Following its reorganisation in December 2017, the fund is
mandated to extend credit guarantee and subsidise interest rates
on loans issued by local banks to SMEs to foster investment in the
sector and boost economic growth. This has enhanced the fund's
role in the domestic capital market and strengthens the fund's
status as a government agent in the implementation of the state's
economic policy. The fund plans to issue up to AZN200 million
guarantees over the medium term, which will be backed up by AZN100
million equity injections from the state budget. Interest rate
subsidies will be fully funded by state transfers (2018: AZN40
million).
State-Supported Credit Profile
The fund's financial profile should remain healthy over the medium
term, in Fitch's view. This will be underpinned by regular state
contributions, low-cost funding, the adequate quality of the
fund's mortgage portfolio and satisfactory liquidity position. The
fund's cash, bank placements and investment in government
securities totalled AZN252 million at end-2017, which corresponded
to 47% of outstanding bonds and mitigated the risk of urgent need
for extra state support.
The fund's new role as a credit guarantee provider would increase
contingent risk and could place a strain on the fund's loss
absorption capacity, in Fitch's view, as the new mandate operating
model has yet to be tested while the Azerbaijani banking sector
remains fragile.
RATING SENSITIVITIES
A rating change would be triggered by changes to the ratings of
the sovereign.
A weakening of linkage with the government through changes to the
fund's legal status leading to a dilution of public control or
reduced state support could result in the ratings being notched
down from the sovereign ratings.
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G R E E C E
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ALPHA BANK: Moody's Hikes Mortgage Covered Bonds Rating to Ba3
--------------------------------------------------------------
Moody's Investors Service has upgraded the following ratings of
the mortgage covered bonds across six Greek covered bond
programmes:
- Upgraded to Ba3 from B3, the mortgage covered bonds issued by
Alpha Bank AE (counterparty risk (CR) assessment Caa1(cr)),
under its Direct Issuance Global Covered Bond Programme I
- Upgraded to Ba3 from B3, Alpha Bank AE, under its Direct
Issuance Global Covered Bond Programme II
- Upgraded to Ba2 from B3, the mortgage covered bonds issued by
Eurobank Ergasias S.A. (CR assessment Caa2(cr)), under its
Mortgage Covered Bonds 1 programme
- Upgraded to B1 from B3, the mortgage covered bonds issued by
Eurobank Ergasias S.A., under its Mortgage Covered Bonds 2
programme
- Upgraded to Ba2 from B3, the ratings on the mortgage covered
bonds issued by National Bank of Greece S.A. (CR assessment
B3(cr)), under its Global Mortgage Covered Bonds programme
- Upgraded to Ba2 from B3, the mortgage covered bonds issued by
National Bank of Greece S.A. under its Mortgage Covered Bonds 2
programme
RATINGS RATIONALE
The upgrades on the covered bond ratings referenced above follow
(1) the rating actions on the relevant issuer ratings and CR
assessments; and (2) following the Greek sovereign rating upgrade
to B3 from Caa2, the increase of Greece's long-term country
ceilings for foreign currency and local currency bonds to Ba2.
The ratings of Eurobank Ergasias S.A. - Mortgage Covered Bonds 1
and National Bank of Greece S. A. - Mortgage Covered Bonds 2 are
now constrained by the long-term country ceilings for foreign
currency and local currency bonds of Ba2.
The ratings of Alpha Bank A.E. Direct Issuance Global Covered Bond
Programme I, Alpha Bank A.E. Direct Issuance Global Covered Bond
Programme II, Eurobank Ergasias S.A. - Mortgage Covered Bonds 2
and National Bank of Greece S.A. - Global Mortgage Covered Bonds
are now constrained by the timely payment indicator (TPI) of Very
Improbable.
KEY RATING ASSUMPTIONS/FACTORS
Moody's determines covered bond ratings using a two-step process:
an expected loss analysis and a timely payment indicator (TPI)
framework analysis.
EXPECTED LOSS: Moody's uses its Covered Bond Model (COBOL) to
determine a rating based on the expected loss on the bond. COBOL
determines expected loss as (1) a function of the probability that
the issuer will cease making payments under the covered bonds (a
CB anchor event), and (2) the stressed losses on the cover pool
assets following a CB anchor event.
The cover pool losses are an estimate of the losses Moody's
currently models following a CB anchor event. Moody's splits cover
pool losses between market risk and collateral risk. Market risk
measures losses stemming from refinancing risk and risks related
to interest-rate and currency mismatches (these losses may also
include certain legal risks). Collateral risk measures losses
resulting directly from the cover pool assets' credit quality.
Moody's derives collateral risk from the collateral score.
The CB anchor for the programmes is the CR assessment plus one
notch. The CR assessment reflects an issuer's ability to avoid
defaulting on certain senior bank operating obligations and
contractual commitments, including covered bonds. Moody's may use
a CB anchor of the CR assessment plus one notch in the European
Union or otherwise where an operational resolution regime is
particularly likely to ensure continuity of covered bond payments.
TPI FRAMEWORK: Moody's assigns a "timely payment indicator" (TPI),
which measures the likelihood of timely payments to covered
bondholders following a CB anchor event. The TPI framework limits
the covered bond rating to a certain number of notches above the
CB anchor.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The CB anchor is the main determinant of a covered bond
programme's rating robustness. A change in the level of the CB
anchor could lead to an upgrade or downgrade of the covered bonds.
The TPI Leeway measures the number of notches by which Moody's
might lower the CB anchor before the rating agency downgrades the
covered bonds because of TPI framework constraints.
A multiple-notch downgrade of the covered bonds might occur in
certain limited circumstances, such as (1) a sovereign downgrade
negatively affecting both the CB Anchor and the TPI; (2) a
multiple-notch downgrade of the CB Anchor; or (3) a material
reduction of the value of the cover pool.
EPIHIRO PLC: Moody's Puts Caa2 Cl. A Notes Rating Under Review
--------------------------------------------------------------
Moody's Investors Service has placed on review for possible
upgrade the rating of the following notes issued by EPIHIRO PLC:
-- EUR1,623 million (Current outstanding amount EUR785.6 million)
Class A Notes, Caa2 (sf) Placed Under Review for Possible
Upgrade; previously on June 28, 2017 Upgraded to Caa2 (sf)
RATINGS RATIONALE
The rating action taken is the result of the raise of Greece's
long-term country ceilings for bonds and long-term ceilings for
deposits.
Moody's placed under review for possible upgrade the Caa2 (sf)
rating of the notes issued by EPIHIRO PLC as a result of the
decrease in country risk. In its analysis, Moody's will consider
the performance of the transaction and the available credit
enhancement among other transaction features in light of the new
country ceiling.
Methodology Underlying the Rating Action:
The principal methodology used in this rating 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 rating:
Factors or circumstances that could lead to an upgrade of the
ratings are (1) a decreased probability of high-loss scenarios
owing to a downgrade of the country ceiling; (2) improvement in
the notes' available CE; and (3) improvement in the credit quality
of the transaction counterparties.
An increase in Moody's assessment of the sovereign risk in Greece,
as well as a deterioration in the collateral performance, could
lead to a downgrade of the ratings.
PIRAEUS BANK: Moody's Hikes Long-Term Deposit Rating to Caa2
------------------------------------------------------------
Moody's Investors Service has upgraded the long-term deposit
ratings of Piraeus Bank S.A. and National Bank of Greece S.A. to
Caa2 from Caa3, and affirmed Alpha Bank AE, Eurobank Ergasias S.A.
and Attica Bank S.A. long-term deposit ratings at Caa3.
The rating agency has also upgraded the long-term counterparty
risk assessments (CRA) of Piraeus Bank S.A. and National Bank of
Greece S.A. to B3(cr) from Caa2(cr), upgraded the CRA of Alpha
Bank AE and Attica Bank S.A. to Caa1(cr) from Caa2(cr), and
affirmed Eurobank Ergasias S.A. CRA at Caa2(cr). The government-
guaranteed senior MTN program ratings of National Bank of Greece
S.A., Alpha Bank AE and Eurobank Ergasias S.A. were also upgraded
to (P)B3 from (P)Caa2, in line with Moody's recent rating action
on Greece.
Concurrently, Moody's affirmed the baseline credit assessment
(BCA) of Piraeus Bank S.A., National Bank of Greece S.A., Alpha
Bank AE and Eurobank Ergasias S.A. at caa2 and that of Attica Bank
S.A. at caa3.
The outlook on the deposit ratings of National Bank of Greece S.A.
and of Alpha Bank AE was maintained at positive, while the outlook
on the deposits ratings of Piraeus Bank S.A., Eurobank Ergasias
S.A. and Attica Bank S.A. was maintained at stable.
The deposit ratings and CRA upgrades are primarily driven by
banks' expansion of their pool of unsecured liabilities available
to absorb losses in a potential bank resolution scenario.
Accordingly, the rating agency's 'Loss Given Failure' (LGF)
analysis of banks' liability structure has led to the rating
upgrades, reflecting the potentially lower losses that unsecured
senior creditors could face.
The upgrades were also driven by Moody's raising of Greece's bank
deposit ceiling to B3 from Caa2, following the rating agency's
upgrade of the country's issuer rating to B3 (positive) from Caa2
(positive) on 21 February. Nonetheless, the banks' deposit ratings
remain positioned within the Caa rating range, reflecting the on-
going deposit controls in Greece, and the fact that depositors do
not have instant access to the full amount of their deposits, but
also the still significant asset quality and funding challenges
that Greek banks face.
Moody's said that its Greek banks ratings balance the improvements
in their credit profiles in 2016-17 and the prospects of further
stabilisation in 2018-19, against the still significant downside
risks stemming from the very high level of nonperforming exposures
and the still difficult operating environment in Greece.
Moody's has also raised Greece's Macro Profile to 'Weak-' from
'Very Weak+', driven mainly by improvements in the country's
institutional strength and reduced susceptibility to event risk in
view of the rating agency's belief that Greece will successfully
conclude its third support programme and return to self-
sufficiency and market-based funding. This was primarily triggered
by the positive on-going third review of the country's adjustment
programme, the fact that public institutions in Greece have
benefited from the technical assistance provided by the official
creditors, and also the country's reduced political and
refinancing risk.
Greece's macro profile also reflects the difficult credit and
funding conditions, with structural challenges faced by all banks.
The higher Macro Profile, which is used in Moody's banking
scorecards that derive the banks' BCAs, combined with the rating
agency's expectation of gradual improvements in banks' financial
fundamentals as the economy recovers, will support their
standalone credit profiles and ratings going forward.
RATINGS RATIONALE
RATINGS RATIONALE FOR INDIVIDUAL BANKS
-- PIRAEUS BANK S.A.
Piraeus Bank S.A.'s deposit and CRA upgrades to Caa2 and B3(cr)
respectively are underpinned by the bank's deleveraging in recent
months through the sale of non-core assets, and the resulting
increased pool of domestic unsecured liabilities relative to the
bank's tangible banking assets. This positioning has lowered the
potential losses to be absorbed by senior creditors in a possible
resolution scenario, as per the rating agency's LGF analysis. The
bank's deposit and CRA upgrades also take into account the
improvements in its funding profile through the reduction of its
emergency liquidity assistance (ELA) that dropped to EUR7.8
billion in September 2017 from EUR12.7 billion in September 2016.
Accordingly, there was also a proportional increase in deposits
that comprised 61% of total assets in September 2017 from 48% the
year before.
The bank's BCA affirmation at caa2 considers its common equity
Tier 1 (CET1) capital ratio at 17% in September 2017 from 17.1% in
September 2016, including the EUR2 billion CoCos that the bank
still retains but will have to repay back to the state-owned
Hellenic Financial Stability Fund (HFSF) at some stage. The bank's
eligible deferred tax assets (DTAs) of around EUR4 billion
comprised around 59% of its nominal CET1 capital, excluding its
CoCos, undermining the quality of its capital position. Moody's
does not consider these DTAs as tangible common equity, due to the
still weak creditworthiness of the sovereign.
Moody's considers Piraeus Bank S.A.'s asset quality position to be
among the weakest in the system and globally due to its numerous
take-overs of smaller problematic banks in the last few years,
which resulted in an NPL and NPE ratio of around 36% and 55%,
respectively, as of September 2017. In addition, the bank's NPL
and NPE provisioning coverage was at 70% and 46%, respectively.
However, the rating agency expects the bank's asset quality to
gradually improve in view of its focus and active management of
its NPLs, and the additional tools provided to the banks for
managing their NPLs through recent legislative measures. The bank
reported a net loss of around EUR19 million during the first nine-
months of 2017, although Moody's positively views the bank's
ability to increase its pre-provision income by 16% year-on-year.
-- NATIONAL BANK OF GREECE S.A.
National Bank of Greece S.A.'s (NBG) deposit and CRA upgrades to
Caa2 and B3(cr) respectively are also driven by the sale of non-
core assets in recent months, and the resulting increased pool of
domestic unsecured liabilities relative to the bank's tangible
banking assets. This was also achieved through the drastic
reduction of its emergency liquidity assistance (ELA) that
decreased to EUR2.3 billion in September 2017 from EUR5.2 billion
in September 2016, and was subsequently fully repaid in December
2017. The bank's group deposits comprised 59% of total assets in
September 2017, from 47% in September 2016, having the lowest
loans-to-deposits ratio among its local peers at 83% in September
2017 underpinned by its strong deposit savings franchise in
Greece.
The bank's BCA was affirmed at caa2 and takes into consideration
the quality of its capital base, with a reported CET1 ratio of
16.8% in September 2017 from 16.4% in September 2016. However,
this healthy regulatory capital ratio is undermined by the bank's
high eligible DTAs (EUR4.7 billion), which comprised around 72% of
its nominal CET1 capital as of September 2017. NBG has been in a
position to gradually enhance its tangible CET1 capital through
the sale of non-core assets, enhancing somewhat its overall credit
profile.
The bank's caa2 BCA also reflects the lowest NPL and NPE ratios
among its local peers at 34% and 45%, respectively, as of
September 2017, while the NPL and NPE provisioning coverage was
74% and 56%, the highest within its local peer group. The rating
agency believes that recoveries from the NPL portfolio could
further enhance the bank's core pre-provision income, which
increased by 9% year-on-year in the first nine-months of 2017,
combined with further reduction in its operating expenses.
The positive deposit rating outlook reflects the recent
improvements in the bank's underlying financial fundamentals, and
the prospects for further enhancements particularly in asset
quality despite the still significant challenges from the high
stock of problem loans. The positive outlook for NBG is also
driven by the strongest funding an liquidity position that the
bank retains domestically, which combined with tangible progress
in the asset quality and profitability could eventually benefit
its BCA.
-- ALPHA BANK AE
Alpha Bank AE's BCA affirmation at caa2 balances its relatively
stronger tangible capital position, and as a result a higher loss
absorption cushion compared to its local peers, but also the
downside risks stemming from its highest level of NPEs at 54% in
September 2017. The bank has a high reported common equity Tier 1
(CET1) ratio of 17.8%, while its tangible common equity (TCE)
ratio as adjusted by the rating agency to deduct any eligible DTAs
was 9.4% in September 2017. Moody's notes that Alpha Bank has the
lowest level of deferred tax assets (DTAs) on its balance sheet at
around EUR3.3 billion in September 2017, which comprised around
37% of its nominal CET1 capital. This level positions the bank at
the stronger end in terms of loss-absorbing tangible capital
available, among its local systemic peers.
Concurrently, the bank faces a significant challenge in tackling
its problem loans with its nonperforming loans (NPL) and
nonperforming exposures (NPE) ratio at a high 37% and 54%
respectively as of September 2017. NPL and NPE provisioning
coverage was around 68% and 48%, respectively. Moody's believes
that the relatively high NPL provisioning coverage provides the
bank with more flexibility to actively manage its NPL portfolio.
The bank's improving funding profile is also a factor driving its
BCA, with ELA as of September 2017 at EUR8.4 billion (down from
EUR13.2 billion in December 2016), comprising 13.7% of its total
assets, although Moody's expects this type of funding to reduce
further in 2018. The bank's BCA also considers its improving
profitability prospects with a net profit of around EUR85 million
for the first nine-months of 2017.
The bank's long-term deposit rating was affirmed at Caa3, which is
positioned one notch lower than its BCA due to the bank's
relatively small pool of domestic unsecured obligations and
minimal subordinated liabilities available to absorb potential
losses in case of a bank resolution scenario. Accordingly, senior
creditors remain vulnerable to bail-in risks within the context of
the Bank Recovery and Resolution Directive (BRRD) transposition
law that was passed in Greece in 2015. The long-term deposit
rating of Caa3 also takes into consideration the on-going capital
controls in place as well as the implied losses faced by
depositors that do not have instant access to the full amount of
their funds.
The positive outlook for the bank's deposit ratings, is mainly
driven by the its stronger tangible capital position and the
expectation of further improvements in the bank's underlying
financial fundamentals. A sustainable reduction of its high level
of NPEs, which still pose significant downside risks to the bank's
credit profile, could eventually translate into a higher BCA.
-- EUROBANK ERGASIAS S.A.
Eurobank Ergasias S.A.'s (Eurobank) BCA affirmation of caa2 takes
into account its reported CET1 ratio of 15.1% in September 2017,
down from 17.4% in September 2016, following the redemption of its
state preference shares of EUR994 million through EUR970 million
Tier 2 subordinated bonds subscribed by the government and a cash
payment for the balance. Moody's considers the bank to have a
lower quality of capital than its peers, in view of its
proportionally higher level of eligible DTAs (EUR4 billion). The
rating agency estimates that around 70% of the bank's nominal CET1
capital is in the form of eligible DTAs, leaving minimal loss-
absorbing tangible common equity available.
The bank's profit in the first nine months of 2017 amounted to
around EUR61 million, while its NPL and NPE ratio were at around
35% and 45%, respectively, as of September 2017. Eurobank's NPL
and NPE provisioning coverage was around 66% and 52%,
respectively. The bank's ELA as of September 2017 was EUR9
billion, comprising around 15% of its total assets, although
Moody's notes that the bank was able to reduce this ELA dependence
significantly from EUR22.9 billion in June 2015.
The affirmation of the bank's Caa3 deposit rating, which is
positioned one notch lower than its caa2 BCA, takes into
consideration the rating agency's LGF analysis and the bank's
relatively small pool of unsecured obligations on its balance
sheet, making senior creditors more vulnerable to a bail-in than
is the case for its large local peers. The stable outlook balances
the potential for further improvements in the bank's earnings and
funding profile, but also its high NPEs and lower quality of
capital, which in turn constrain the bank's BCA.
-- ATTICA BANK S.A.
The affirmation of Attica Bank S.A.'s BCA at caa3 takes into
consideration its CET1 ratio of 15% in September 2017, but also
the fact that its transitional fully-loaded CET1 ratio reduces to
11.8% primarily due to EUR100.2 million of state preference shares
that the bank still retains and will no longer qualify as CET1
capital from January 1, 2018. The BCA of caa3, the lowest among
Greek banks, also reflects the bank's weak earnings profile with
normalized operating income (excluding one-off gains) reducing by
around 14% year-on-year during the first nine months in 2017.
The bank, which is the smallest among all rated Greek banks with a
market share of only around 2%, reported an NPE ratio of 43.2% in
September 2017, down from 58.9% in September 2016, following a
structured deal with a foreign investor that allowed the bank to
shift around EUR1.3 billion of NPEs off its balance sheet. The
bank's ELA dependence was around EUR960 million as of September
2017, comprising around 27% of its total assets, which
proportionally is the highest among local banks.
The stable outlook on the bank's deposit rating of Caa3, which is
in line with its BCA of caa3, reflects the rating agency's
expectation that the on-going restructuring at the bank by the new
top management is likely to take some time before it starts
yielding results and that Attica Bank's performance is likely to
still lag behind its peers. The upgrade of its CRA to Caa1(cr)
from Caa2(cr) is purely driven by the lower tangible banking
assets of the bank following the NPE structured deal above, and
the proportionally higher level of protection provided to senior
counterparties in a potential resolution scenario based on the
rating agency's LGF assessment.
WHAT COULD MOVE THE RATINGS UP/DOWN
Over time, upward deposit and senior debt rating pressure could
arise following further improvements of the country's macro-
economic environment, combined with better asset quality,
profitability and funding. The return of more deposits back to the
banking system would also increase the pool of unsecured
obligations available to banks, which could trigger a deposit and
senior debt rating upgrade driven by the rating agency's LGF
approach.
Greek banks' deposit and senior debt ratings could be downgraded
in the event of political turmoil in the country for an extended
period of time that substantially affects domestic consumption and
economic activity, which have gradually been recovering from a
very low base.
LIST OF AFFECTED RATINGS
Issuer: Alpha Bank AE
Upgrades:
-- BACKED (Government Guaranteed) Senior Unsecured MTN Program,
Upgraded to (P)B3 from (P)Caa2
-- LT Counterparty Risk Assessment, Upgraded to Caa1(cr) from
Caa2(cr)
Affirmations:
-- LT Bank Deposits, Affirmed Caa3 Positive
-- ST Bank Deposits, Affirmed NP
-- Senior Unsecured MTN Program, Affirmed (P)Caa3
-- Subordinate MTN Program,Affirmed (P)Caa3
-- Other Short Term Program, Affirmed (P)NP
-- Adjusted Baseline Credit Assessment, Affirmed caa2
-- Baseline Credit Assessment, Affirmed caa2
-- ST Counterparty Risk Assessment, Affirmed NP(cr)
Outlook Actions:
-- Outlook, Remains Positive
Issuer: Alpha Credit Group plc
Affirmations:
-- BACKED Senior Unsecured Regular Bond/Debenture, Affirmed Caa3
Positive
-- BACKED Subordinate, Affirmed Caa3
-- BACKED Senior Unsecured MTN Program, Affirmed (P)Caa3
-- BACKED Subordinate MTN Program, Affirmed (P)Caa3
-- BACKED Other Short Term Program, Affirmed (P)NP
-- BACKED Commercial Paper, Affirmed NP
Issuer: Alpha Group Jersey Limited
Affirmations:
-- BACKED Pref. Stock Non-cumulative, Affirmed C(hyb)
-- BACKED Senior Unsecured MTN Program, Affirmed (P)Caa3
-- BACKED Subordinate MTN Program, Affirmed (P)Caa3
Issuer: Emporiki Group Finance Plc
Affirmations:
-- BACKED Senior Unsecured Regular Bond/Debenture, Affirmed Caa3
Positive
Issuer: Attica Bank S.A.
Upgrades:
-- LT Counterparty Risk Assessment, Upgraded to Caa1(cr) from
Caa2(cr)
Affirmations:
-- LT Bank Deposits, Affirmed Caa3 Stable
-- ST Bank Deposits, Affirmed NP
-- Adjusted Baseline Credit Assessment, Affirmed caa3
-- Baseline Credit Assessment, Affirmed caa3
-- ST Counterparty Risk Assessment, Affirmed NP(cr)
Outlook Actions:
-- Outlook, Remains Stable
Issuer: Eurobank Ergasias S.A.
Upgrades:
-- BACKED (Government Guaranteed) Senior Unsecured MTN Program,
Upgraded to (P)B3 from (P)Caa2
Affirmations:
-- LT Bank Deposits, Affirmed Caa3 Stable
-- ST Bank Deposits, Affirmed NP
-- Senior Unsecured MTN Program, Affirmed (P)Caa3
-- Subordinate MTN Program, Affirmed (P)Caa3
-- Other Short Term MTN Program, Affirmed (P)NP
-- BACKED Other Short Term Program, Affirmed (P)NP
-- Adjusted Baseline Credit Assessment, Affirmed caa2
-- Baseline Credit Assessment, Affirmed caa2
-- LT Counterparty Risk Assessment, Affirmed Caa2(cr)
-- ST Counterparty Risk Assessment, Affirmed NP(cr)
Outlook Actions:
-- Outlook, Remains Stable
Issuer: ERB Hellas (Cayman Islands) Limited
Affirmations:
-- BACKED Senior Unsecured MTN Program, Affirmed (P)Caa3
-- BACKED Subordinate MTN Program, Affirmed (P)Caa3
-- BACKED Other Short Term Program, Affirmed (P)NP
Issuer: ERB Hellas Funding Limited
Affirmations:
-- BACKED Pref. Stock Non-cumulative, Affirmed C(hyb)
Issuer: ERB Hellas PLC
Affirmations:
-- BACKED Senior Unsecured Regular Bond/Debenture, Affirmed Caa3
Stable
-- BACKED Subordinate, Affirmed Caa3
-- BACKED Senior Unsecured MTN Program, Affirmed (P)Caa3
-- BACKED Subordinate MTN Program, Affirmed (P)Caa3
-- BACKED Other Short Term Program, Affirmed (P)NP
-- BACKED Commercial Paper, Affirmed NP
Issuer: National Bank of Greece S.A.
Upgrades:
-- LT Bank Deposits, Upgraded to Caa2 from Caa3, Outlook remains
Positive
-- BACKED (Government Guaranteed) Senior Unsecured MTN Program,
Upgraded to (P)B3 from (P)Caa2
-- LT Counterparty Risk Assessment, Upgraded to B3(cr) from
Caa2(cr)
Affirmations:
-- ST Bank Deposits, Affirmed NP
-- BACKED Other Short Term Program, Affirmed (P)NP
-- Adjusted Baseline Credit Assessment, Affirmed caa2
-- Baseline Credit Assessment, Affirmed caa2
-- ST Counterparty Risk Assessment, Affirmed NP(cr)
Outlook Actions:
-- Outlook, Remains Positive
Issuer: NBG Finance plc
Upgrades:
-- BACKED Senior Unsecured MTN Program, Upgraded to (P)Caa2 from
(P)Caa3
Affirmations:
-- BACKED Subordinate MTN, Affirmed (P)Caa3
Issuer: Piraeus Bank S.A.
Upgrades:
-- LT Bank Deposits, Upgraded to Caa2 from Caa3, Outlook remains
Stable
-- Senior Unsecured MTN Program, Upgraded to (P)Caa2 from (P)Caa3
-- LT Counterparty Risk Assessment, Upgraded to B3(cr) from
Caa2(cr)
Affirmations:
-- ST Bank Deposits, Affirmed NP
-- Subordinate MTN Program, Affirmed (P)Caa3
-- Adjusted Baseline Credit Assessment, Affirmed caa2
-- Baseline Credit Assessment, Affirmed caa2
-- ST Counterparty Risk Assessment, Affirmed NP(cr)
Outlook Actions:
-- Outlook, Remains Stable
Issuer: Piraeus Group Finance Plc
Upgrades:
-- BACKED Senior Unsecured MTN Program, Upgraded to (P)Caa2 from
(P)Caa3
Affirmations:
-- BACKED Subordinate MTN Program, Affirmed (P)Caa3
-- BACKED Other Short Term Program, Affirmed (P)NP
-- BACKED Commercial Paper, Affirmed NP
* Moody's Puts Ratings on 7 Notes in 3 Greek RMBS Deals on Review
-----------------------------------------------------------------
Moody's Investors Service has placed on review for upgrade the
ratings of 7 notes in 3 Greek RMBS transactions.
Issuer: Estia Mortgage Finance II PLC
-- EUR1137.5M Class A Notes, Caa1 (sf) Placed Under Review for
Possible Upgrade; previously on Jun 27, 2017 Upgraded to Caa1
(sf)
Issuer: Grifonas Finance No. 1 Plc
-- EUR897.7M Class A Notes, B3 (sf) Placed Under Review for
Possible Upgrade; previously on Jun 27, 2017 Upgraded to B3
(sf)
-- EUR23.8M Class B Notes, Caa3 (sf) Placed Under Review for
Possible Upgrade; previously on Jun 27, 2017 Affirmed Caa3
(sf)
-- EUR28.5M Class C Notes, Caa3 (sf) Placed Under Review for
Possible Upgrade; previously on Jun 27, 2017 Affirmed Caa3
(sf)
Issuer: KION Mortgage Finance Plc
-- EUR553.8M Class A Notes, B3 (sf) Placed Under Review for
Possible Upgrade; previously on Jun 27, 2017 Upgraded to B3
(sf)
-- EUR28.2M Class B Notes, Caa3 (sf) Placed Under Review for
Possible Upgrade; previously on Jun 27, 2017 Affirmed Caa3
(sf)
-- EUR18.0M Class C Notes, Caa3 (sf) Placed Under Review for
Possible Upgrade; previously on Jun 27, 2017 Affirmed Caa3
(sf)
On February 21, 2018, Greece's long-term country ceilings for
foreign and local-currency bonds have been raised to Ba2 from B3.
RATINGS RATIONALE
The placement on review for upgrade reflects Greece's reduced
country risk associated to the affected transactions. In its
analysis, Moody's will consider their performance, available
credit enhancement among other transaction features, and will
reassess the loss distribution of the underlying pool in light of
the new country ceiling.
MILAN CE is a key input in the RMBS methodology used to calibrate
the loss distribution in the cash flow model, however Moody's
noted in its previous actions that a MILAN CE that would generate
the desired loss distribution could not be established given the
low level of the Greek country ceilings, and the relatively high
level of expected losses. Therefore Moody's did not carry out the
cash flow analysis to determine the note rating, but rather used a
qualitative approach:
- The ratings were positioned according to the ratio of the
notes' credit enhancement to the portfolio expected loss
(CE/EL).
- The position in the capital structure as well as notes' size
were also taken into account in the ratings. Such approach was
further adjusted in view of maximum achievable rating.
The principal methodology used in these ratings was "Moody's
Approach to Rating RMBS Using the MILAN Framework" published in
September 2017.
The analysis undertaken by Moody's at the initial assignment of
these ratings for RMBS securities may focus on aspects that become
less relevant or typically remain unchanged during the
surveillance stage.
Factors that would lead to an upgrade or downgrade of the ratings:
Factors or circumstances that could lead to an upgrade of the
ratings include (1) performance of the underlying collateral that
is better than Moody's expected, (2) deleveraging of the capital
structure, (3) improvements in the credit quality of the
transaction counterparties and (4) a decrease in sovereign risk.
Factors or circumstances that could lead to a downgrade of the
ratings include (1) an increase in sovereign risk, (2) performance
of the underlying collateral that is worse than Moody's expected,
(3) deterioration in the notes' available credit enhancement and
(4) deterioration in the credit quality of the transaction
counterparties.
=============
I R E L A N D
=============
AVOCA CLO XV: Fitch Corrects February 20 Rating Release
-------------------------------------------------------
Fitch Ratings issued a correction to the ratings release on Avoca
CLO XV DAC published on February 20, 2018, to amend the downgrade
notching in the rating sensitivities section.
The revised release is as follows:
Fitch Ratings has assigned Avoca CLO XV DAC refinancing notes
final ratings, as follows:
EUR3 million Class X notes: 'AAAsf'; Outlook Stable
EUR309.5 million Class A-R notes: 'AAAsf'; Outlook Stable
EUR9 million Class B-1R notes: 'AAsf'; Outlook Stable
EUR44.5 million Class B-2R notes: 'AAsf'; Outlook Stable
EUR29 million Class C-R notes: 'Asf'; Outlook Stable
EUR26.5 million Class D-R notes: 'BBBsf'; Outlook Stable
EUR34 million Class E-R notes: 'BBsf'; Outlook Stable
EUR13.5 million Class F-R notes: 'B-sf'; Outlook Stable
EUR24.6 million Class M-1 notes: not rated
EUR28.5 million Class M-2 notes: not rated
Avoca CLO XV DAC is a cash flow collateralised loan obligation
(CLO). Net proceeds from the notes are being 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, below the indicative maximum
covenanted WARF of 33 for assigning the final ratings.
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%, above the minimum covenant of 62.3%
corresponding to the matrix point of WARF 33, weighted average
spread (WAS) of 3.4% and maximum fixed-rate assets of 5%.
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 four notches for the rated notes.
=========
I T A L Y
=========
OLIDATA SPA: Revocation of Liquidation Status Sought
----------------------------------------------------
Reuters reports that Olidata SpA's liquidator has approved fiscal
year net profit of EUR29.8 million following the finalization of
agreements with creditors. Subsequently, the liquidator is
calling on shareholders to approve the revocation of the company's
liquidation status, Reuters discloses.
The liquidator also proposes capital increase of an expected
amount of EUR3.5 million, Reuters relates.
On March 29, 2016, Reuters reported that the board of directors
acknowledged that the conditions to continue the business were not
present and verified the cause of dissolution according to the
law.
Olidata entrusted a board of liquidators for the liquidation of
the company as previously announced on Dec. 22, 2015, according to
Reuters.
Olidata is an Italian computer system manufacturer. The company
was founded in Cesena, Italy.
=====================
N E T H E R L A N D S
=====================
BRUCKNER CDO I: Moody's Withdraws Ca Rating on Class R Notes
------------------------------------------------------------
Moody's Investors Service has withdrawn the rating of the
following combination notes issued by Bruckner CDO I B.V.:
-- EUR7M (Current rated balance: EUR1.9M) Class R Combination
Notes, Withdrawn (sf); previously on Nov 30, 2016 Affirmed
Ca (sf)
RATINGS RATIONALE
Moody's has decided to withdraw the rating because it believes it
has insufficient or otherwise inadequate information to support
the maintenance of the rating.
TEVA PHARMACEUTICAL: Fitch to Rate Senior Unsecured Notes 'BB'
--------------------------------------------------------------
Fitch Ratings expects to assign a 'BB'/'RR4' rating to Teva
Pharmaceutical Finance Netherlands II B.V's. proposed offering of
EUR1 billion of EUR-denominated senior unsecured notes and Teva
Pharmaceutical Finance Netherlands III B.V.'s proposed offering of
$2.25 billion of USD-denominated senior unsecured notes. The
offerings are exempt from registration requirements under the
Securities Act of 1933, but Fitch expects that Teva and the
issuers of the notes will enter into a registration rights
agreement with respect to the notes. Fitch expects the net
proceeds from the offerings to be used to pay approximately $2.3
billion outstanding indebtedness under Teva's USD and Japanese Yen
term loan agreements and, together with cash on hand, to pay all
$1.5 billion outstanding indebtedness under its 1.4% senior notes
due 2018, as well fees and expenses.
KEY RATING DRIVERS
High Debt Levels and Non-investment Grade Status: Teva
consolidated debt levels were approximately $32.5 billion and
estimated leverage (measured as gross debt to EBITDA) was 5.2x at
Dec. 31, 2017. Fitch expects leverage to stay elevated through
2020, despite Teva's aggressive and committed deleveraging plans.
This belief is based on the expectation that Teva's cash flows
will continue to decline in the near term because of price erosion
challenging its generic medicines business and increased
competition related to its specialty medicines business. Even
though Teva has a number of levers to reduce its debt to EBITDA
ratio, including reducing costs, paying debt from FCF and selling
assets, Fitch estimates that leverage will remain above 5x through
2019. Fitch's Negative Outlook is premised on the belief that
there is uncertainty about whether Teva can reduce its gross
leverage below 5x in 2020.
Continued Price Erosion and Pricing Pressure: Teva's generics
business in the U.S. has been negatively affected by certain
developments, including: (i) additional pricing pressure as a
result of customer consolidation into larger buying groups capable
of extracting greater price reductions, (ii) accelerated FDA
approvals for versions of off-patent medicines, resulting in
increased competition for Teva's products and (iii) delays in the
launch of new products. Pricing pressure, particularly in the
U.S., will likely continue to meaningfully weigh on revenue and
margins in the near term. This is particularly concerning for the
less differentiated product segments. Fitch expects aging
populations in developed markets and increasing access to
healthcare in emerging markets will support volume growth for Teva
and its generic pharma peers, but price erosion is expected to
meaningfully offset such growth over the near term.
Asset Sales Required: Teva is taking meaningful steps to reduce
costs and stabilize margins. However, operational stabilization
and dividend reduction, alone, is expected to be insufficient to
provide the FCF needed to deleverage below 5x by year-end 2019.
The company will also need to use proceeds from asset divestitures
to pay down debt. As with all asset sales, the valuation multiples
(sales price/EBITDA) are variable and important inputs into the
deleveraging potential.
Decreasing Sales of COPAXONE Resulting From Generic Competition:
Teva's best-selling product, Copaxone is gradually declining in
revenue. Generic competition for Copaxone is expected to continue
over the forecast period in the U.S. market in light of the FDA
approval of a generic version of both 20mg and 40mg Copaxone and
the possibility of more generics to follow. Fitch expects revenues
and profitability from COPAXONE to decrease by roughly 50% in 2018
compared to 2017, which will pressure Teva's cash flows and
ability to pay debt.
Execution of Restructuring Plan: Teva announced a comprehensive
restructuring plan in December 2017, aimed at reducing its cost
base by $3 billion by the end of 2019. Fitch believes the plan has
the potential to stabilize Teva's business by creating operational
efficiencies to help offset the substantial decline in revenues.
However, even if Teva is successful in realizing the benefits from
the restructuring by the end of 2019, Fitch believes there remain
substantial challenges to Teva's growth and cost structure that
continue to support a Negative Outlook over the forecast period.
DERIVATION SUMMARY
Teva Pharmaceutical Industries Limited's 'BB'/Negative rating
reflects the company's substantial indebtedness and modest
financial flexibility; this position is caused by several adverse
developments including: (i) regular and increasing price erosion
of its generic medicines business, (ii) heightened competition for
Teva's leading specialty medicine, COPAXONE, (iii) continuing
consolidation of Teva's customer base, and (iv) delays in
development and launches of both generic and speciality products.
Despite these challenges, Teva is the leading pharmaceutical
manufacturer of generic drugs in the world relative to Mylan N.V.,
(BBB-/Stable) and Novartis (AA/Negative). The company's scale,
geographic reach, and the level of product differentiation
contribute to free cash flow of about $2.6 billion in 2018. Mylan
is Teva's closest peer and its investment grade credit profile
reflects a stronger balance sheet and less operational risk
compared to Teva.
Because of these challenges, it is expected that Teva will need to
sell assets or find external capital resources to pay its debt
through 2020. Over the medium to long term, Fitch believes that
Teva may benefit from its focus on innovative pharmaceuticals and
difficult to manufacture, chemically complex drugs, which
generally command relatively more defensible prices and margins.
However, the commoditized portion of its generic drug portfolio is
more prone to pricing pressure. That pressure, as well as its
substantial debt, is expected to result in gross leverage for Teva
remaining above 5x by year-end 2019, unless the company undertakes
aggressive deleveraging efforts involving asset sales.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within Fitch Rating Case for the Issuer
-- Generic competition for Copaxone and additional generic
launches in 2018 result in revenues of $1.8 billion in 2018 and
$1.26 billion in 2019, representing a decrease of 66% over two
years.
-- Generic medicine revenue growth declines at a rate of 13% in
the US in 2018 and declines at a decreasing rate through 2021.
European generics face low single digit price increases, somewhat
mitigated by flat growth in ROW.
-- Proceeds from sale of the Women's Health division of $703
million in 2018 are used mainly for debt repayments. An additional
$1 billion of asset sales are expected in the intermediate term.
-- Restructuring represents a $3 billion decline in operating
expenses by YE 2019; however, this still results in a decrease in
EBITDA margin from historical levels.
-- Allergan working capital settlement provides around $700
million of cash in 2018.
-- Working capital held roughly static 2018 and 2019.
-- There are one-time restructuring charges of $800 million in
2018.
-- No new equity is issued for cash; however, common equity
increases $3.6 billion in 2018 as a result of the conversion of
convertible preferred stock into common.
-- Gross leverage is assumed to remain above 5x through 2019.
-- The refinancing of debt improves Teva's financial flexibility
in the near term, but is neutral to the rating, because gross
leverage remains unchanged.
RATING SENSITIVITIES
Positive:
-- A one-notch upgrade would be considered if Teva were expected
to maintain gross debt/EBITDA below 4.5x.
-- In addition, positive rating momentum could build if Teva is
able to grow EBITDA; which may occur if Teva is able to
arrest the rate of price deflation in North American generics
and replace the loss of the revenue and EBITDA from
Copaxone by successfully launching new products.
-- The application of proceeds from asset sales to pay debt is
viewed positively, but will need to be considered in the
context of the company's earnings power thereafter.
Negative:
-- A one-notch downgrade would incorporate the company operating
with gross debt/EBITDA durably above 5.0.
-- The company does not return to sustainably stable operating
performance, in part due to an even more onerous than
forecasted pricing environment.
-- The U.S.FCF, while positive, declines to levels that
meaningfully increase Teva's reliance on asset sales or new
external capital resources to be able to meet its debt
obligations.
-- Generic competition against Copaxone 40mg drives a greater
than expected share loss in 2018 and 2019.
LIQUIDITY
Cash Prioritized for Deleveraging:
Cash and cash equivalents were approximately $1.1 billion as of
Dec 31, 2017. In addition, Teva had access to a $3 billion
syndicated revolving line of credit at Dec. 31, 2017, which Teva
reported was unused as of Dec 31, 2017.
The proposed refinancing of long-term debt is a positive credit
development for Teva. In addition, Fitch expects Teva to generate
meaningfully positive FCF in the range of $2.4 billion to 2.9
billion per year through 2020. However, it is unclear whether FCF
and available sources of liquidity (cash and lines of credit) will
be adequate to meet total debt obligations due through 2020,
because of the headwinds to revenues.
FULL LIST OF RATING ACTIONS
Fitch expects to assign the following rating:
Senior unsecured notes 'BB'/'RR4'.
Fitch currently rates Teva as follows:
Teva Pharmaceutical Industries Limited
-- Long-Term IDR 'BB'.
Teva Pharmaceuticals USA, Inc.
-- Long-Term IDR 'BB'.
The Rating Outlook is Negative.
Teva Pharmaceuticals USA, Inc.
-- Senior unsecured bank facilities 'BB/'RR4'.
Teva Pharmaceutical Finance Company LLC
-- Senior unsecured notes at 'BB/'RR4'.
Teva Pharmaceutical Finance IV, LLC
-- Senior unsecured notes at 'BB/'RR4'.
Teva Pharmaceutical Finance Company, B.V.
-- Senior unsecured notes at 'BB/'RR4'.
Teva Pharmaceutical Finance IV, B.V.
-- Senior unsecured notes at 'BB/'RR4'.
Teva Pharmaceutical Finance V, B.V.
-- Senior unsecured notes at 'BB/'RR4'.
Teva Pharmaceutical Finance Netherlands II B.V.
-- Senior unsecured notes at 'BB/'RR4'.
Teva Pharmaceutical Finance Netherlands III B.V.
-- Senior unsecured notes at 'BB/'RR4'
Teva Pharmaceutical Finance Netherlands IV B.V.
-- Senior unsecured notes at 'BB/'RR4'.
All bonds issued by Teva subsidiaries are unconditionally
guaranteed by the parent company, Teva Pharmaceutical Industries
Ltd.
===============
P O R T U G A L
===============
CAIXA GERAL: Moody's Hikes LT Deposit & Sr. Debt Ratings to Ba3
---------------------------------------------------------------
Moody's Investors Service has upgraded the long-term deposit and
senior unsecured debt ratings of Caixa Geral de Depositos, S.A.
(CGD) and its supported entities, Portugal's largest bank, to Ba3
from B1, reflecting the improvement in the bank's credit
fundamentals. Moody's has also upgraded the bank's baseline credit
assessment (BCA) and adjusted BCA to b1 from b2. The outlook on
the long-term deposit and senior debt ratings remains stable. As
part of rating action the rating agency has also affirmed CGD's
Counterparty Risk (CR) Assessment at Ba1(cr)/Not Prime(cr).
The rating action follows CGD's announcement on February 2, 2018
of unaudited financial results for 2017 that show stronger than
anticipated performance and improvements in the bank's financial
fundamentals, thereby making visible progress in its 2017-2020
restructuring plan. That plan was approved by the European
Commission (EC) last year at the time of the large
recapitalization by its shareholder the Portuguese government (Ba1
positive).
The bank's short-term deposit and programme ratings are unaffected
by this rating action.
RATINGS RATIONALE
-- RATIONALE FOR UPGRADING THE BCA
The upgrade of CGD's BCA to b1 from b2 reflects the bank's faster
than anticipated improvements in the bank's credit fundamentals.
Moody's considers that CGD is gradually delivering on the targets
of its restructuring plan, particularly in terms of asset risk and
profitability. At the time of its public recapitalization in early
2017, the EC approved CGD's restructuring plan running until 2020.
The plan intends to ensure the bank's long-term viability by
implementing a deep restructuring of its operations.
At end-December 2017, CGD's non-performing loans (NPL) ratio
declined to 12.1%, compared with 15.8% at end-December 2016.
Despite this positive trend, Moody's acknowledges that CGD still
has a high level of NPLs when compared to other European banks
(the average NPL ratio as defined by the European Banking
Authority was 4.2% at end-September 2017). More positively,
Moody's notes that the bank's coverage by provisions of NPLs
reached 57.2% at end-December 2017,which compares favorably to the
52.8% reported a year earlier.
In upgrading the bank's BCA to b1, Moody's also incorporates its
expectation of a further improvement in CGD's asset risk on the
back of Portugal's economic growth prospects (the rating agency
expects GDP to grow by 1.7% in 2018). The upgrade also
incorporates the bank's intention to continue focusing on
recoveries, write-offs and to complete some further NPL sales in
the market.
CGD was able to break-even at end-December 2017 after reporting a
large loss of EUR1.9 billion at end-December 2016. This positive
performance was achieved through a significant reduction in
funding costs, as well as an increase in trading income, while
credit provisions were down significantly after the extraordinary
provisioning effort the bank made in 2016. The bank's pre-
provision profit increased to EUR861 million at the end of
December from EUR254 million a year earlier, which enabled it to
book close to EUR600 million of non-recurring provisions related
to the employee reduction plan up to 2020, and the restructuring
and disposal of its international operations.
CGD's BCA is also underpinned by the bank's: (1) improved capital
buffers after the EUR3.9 billion recapitalization made by the
Portuguese government in early 2017, with the fully loaded Common
Equity Tier 1 ratio standing at 14.0% at end-December 2017
compared to 5.5% a year earlier; and (2) sound liquidity position,
with a large and stable deposit base (representing 75% of total
funding at end-December 2017) and sizeable liquid assets.
Despite the visible progress in 2017, and the rating agency's
expectation that CGD's pre-provision profit should benefit as the
industrial plan continues to be implemented, Moody's considers
that the bank's operating income will remain challenged by
pressures stemming from the low interest rate environment and
subdued business volumes.
-- RATIONALE FOR UPGRADING THE DEPOSIT RATINGS
The one-notch upgrade of CGD's long-term deposit and senior debt
ratings to Ba3 from B1 reflects: (1) the upgrade of the bank's
adjusted BCA to b1 from b2; (2) the result from the rating
agency's Advanced Loss Given Failure (LGF) analysis that currently
reflects no uplift from the bank's adjusted BCA of b1; and (3) a
one notch of uplift from Moody's assumptions of moderate
government support.
-- RATIONALE FOR THE STABLE OUTLOOK
The outlook on CGD's long-term debt and deposit rating is stable,
reflecting the rating agency's view that CGD will continue to
deliver progressively on the targets of its 2017-2020
restructuring plan that will translate into a further de-risking
of the bank's balance sheet and a gradual improvement of core
profitability metrics. Moody's expects CGD's credit profile to
remain commensurate with a b1 BCA over the next 12 to 18 months
despite pressures stemming from the bank's still high level of
NPAs and expected modest revenue generation capacity.
-- RATIONALE FOR AFFIRMING THE CR ASSESSMENT
As part of rating action, Moody's has also affirmed CGD's CR
Assessment at Ba1(cr)/Not Prime(cr), three notches above the
adjusted BCA of b1 and reflecting the cushion provided by the
volume of bail-in-able debt and deposits (10.8% of tangible
banking assets at end-June 2017), which would likely support
operating obligations in the event of a resolution.
The CR Assessment also benefits from a moderate probability of
government support, in line with Moody's support assumptions on
deposits and senior unsecured debt. However, as the bank's CR
Assessment stands at the level of the Portuguese sovereign rating
it results in no further uplift.
WHAT COULD CHANGE THE RATING UP/DOWN
Upward pressure on the BCA could be driven by a further decline of
CGD's stock of problematic assets, while the bank continues to
improve its revenue generation capacity and maintains its capital
at current levels.
CGD's standalone BCA could be downgraded if current improving
trends on key financial metrics are reversed and the restructuring
plan proves insufficient to bolster the bank's profitability and
reduce further the stock of problematic assets.
The bank's deposit and senior debt ratings could also change due
to movements in the loss-given failure faced by these securities.
In addition, any changes to Moody's considerations of government
support could trigger downward pressure on the bank's deposit and
debt ratings.
LIST OF AFFECTED RATINGS
Issuer: Caixa Geral de Depositos, S.A.
Upgrades:
-- Long-term Bank Deposits, upgraded to Ba3 Stable from B1 Stable
-- Senior Unsecured Regular Bond/Debenture, upgraded to Ba3
Stable from B1 Stable
-- Senior Unsecured Medium-Term Note Program, upgraded to (P)Ba3
from (P)B1
-- Subordinate Regular Bond/Debenture, upgraded to B2 from B3
-- Subordinate Medium-Term Note Program, upgraded to (P)B2 from
(P)B3
-- Preferred Stock Non-cumulative, upgraded to Caa1(hyb) from
Caa2(hyb)
-- Adjusted Baseline Credit Assessment, upgraded to b1 from b2
-- Baseline Credit Assessment, upgraded to b1 from b2
Affirmations:
-- Long-term Counterparty Risk Assessment, affirmed Ba1(cr)
-- Short-term Counterparty Risk Assessment, affirmed NP(cr)
Outlook Actions:
-- Outlook remains Stable
Issuer: Caixa Geral Finance Limited
Upgrades:
-- Backed Preferred Stock Non-cumulative, upgraded to Caa1(hyb)
from Caa2(hyb)
No Outlook assigned
Issuer: Caixa Geral de Depositos Finance
Upgrades:
-- Backed Junior Subordinated Regular Bond/Debenture, upgraded
to B3(hyb) from Caa1(hyb)
No Outlook assigned
Issuer: Caixa Geral de Depositos, S.A. (London)
Affirmations:
-- Long-term Counterparty Risk Assessment, affirmed Ba1(cr)
-- Short-term Counterparty Risk Assessment, affirmed NP(cr)
No Outlook assigned
Issuer: Caixa Geral de Depositos, S.A. (Madeira)
Affirmations:
-- Long-term Counterparty Risk Assessment, affirmed Ba1(cr)
-- Short-term Counterparty Risk Assessment, affirmed NP(cr)
No Outlook assigned
Issuer: Caixa Geral de Depositos, S.A. (Paris)
Upgrades:
-- Senior Unsecured Regular Bond/Debenture, upgraded to Ba3
Stable from B1 Stable
-- Senior Unsecured Medium-Term Note Program, upgraded to (P)Ba3
from (P)B1
-- Subordinate Regular Bond/Debenture, upgraded to B2 from B3
-- Subordinate Medium-Term Note Program, upgraded to (P)B2 from
(P)B3
-- Junior Subordinated Regular Bond/Debenture, upgraded to
B3(hyb) from Caa1(hyb)
Affirmations:
-- Long-term Counterparty Risk Assessment, affirmed Ba1(cr)
-- Short-term Counterparty Risk Assessment, affirmed NP(cr)
Outlook Action:
-- Outlook remains Stable
Issuer: Caixa Geral de Depositos/New York
Upgrades:
-- Long-term Bank Deposit, upgraded to Ba3 Stable from B1 Stable
Affirmations:
-- Long-term Counterparty Risk Assessment, Affirmed Ba1(cr)
-- Short-term Counterparty Risk Assessment, Affirmed NP(cr)
Outlook Action:
-- Outlook remains Stable
LUSITANO SME 3: Moody's Hikes Class C Notes Rating From Ba1(sf)
---------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of Class B
notes and Class C notes on Lusitano SME No. 3. Class A notes have
been affirmed at A1 (sf):
-- EUR385.6M (Current Outstanding amount EUR129.3M) Class A
Notes, Affirmed A1 (sf); previously on Jul 20, 2017 Upgraded
to A1 (sf)
-- EUR62.7M Class B Notes, Upgraded to A1 (sf); previously on
Jul 20, 2017 Upgraded to A3 (sf)
-- EUR62.7M Class C Notes, Upgraded to Baa2 (sf); previously on
Jul 20, 2017 Upgraded to Ba1 (sf)
Lusitano SME No. 3 is a cash securitisation of SME loan
receivables originated by Novo Banco, S.A. (Caa1 on review for
downgrade/NP, "Novo Banco") closed in November 2016 and granted to
small and medium-sized enterprises (SME) domiciled in Portugal.
Novo Banco was created in August 2014 as a bridge bank by Bank of
Portugal's resolution measure on Banco Espirito Santo, S.A.
RATINGS RATIONALE
The upgrade is prompted by the increase in the credit enhancement
(CE) available for the affected tranches due to portfolio
amortization.
CE levels for outstanding tranches have increased significantly
since last rating action in July 2017. Class B credit enhancement
levels have increased to 49.8% from 40.8% observed at closing,
which is a 25% increase in relative terms in just 7 months. At the
same time, Class C have increased to 32.9% from 27.11% during the
same period.
Revision of key collateral assumption
As part of the review, Moody's reassessed its default
probabilities (DP) as well as recovery rate (RR) assumptions based
on updated loan by loan data on the underlying pools and
delinquency, default and recovery ratio update. Moody's maintained
its DP on current balance and Recovery rate assumptions as well as
portfolio credit enhancement (PCE) due to observed pool
performance in line with expectations.
Exposure to counterparties
The rating action took into consideration the notes' exposure to
relevant counterparties, such as servicer and account bank.
Moody's also assessed the default probability of the account bank
providers by referencing the bank's deposit rating.
None of the ratings of the outstanding classes of Lusitano SME No.
3 are constrained by operational risk. Moody's considers that the
current back-up servicer facilitator and cash management
arrangements as well as the liquidity available are sufficient to
support payments in the event of servicer disruption.
There is no swap exposure in Lusitano SME No. 3.
Principal Methodology:
The principal methodology used in these ratings was "Moody's
Global Approach to Rating SME Balance Sheet Securitizations"
published in August 2017.
Factors that would lead to an upgrade or downgrade of the ratings:
Factors or circumstances that could lead to an upgrade of the
ratings include: (1) performance of the underlying collateral that
is better than Moody's expected, (2) deleveraging of the capital
structure, (3) improvements in the credit quality of the
transaction counterparties, and (4) reduction in sovereign risk.
Factors or circumstances that could lead to a downgrade of the
ratings include: (1) performance of the underlying collateral that
is worse than Moody's expected, (2) deterioration in the notes'
available credit enhancement, (3) deterioration in the credit
quality of the transaction counterparties and, (4) an increase in
sovereign risk.
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CB ALZHAN: Placed on Provisional Administration, License Revoked
----------------------------------------------------------------
The Bank of Russia, by its Order No. OD-539, dated March 2, 2018,
revoked the banking license of Makhachkala-based credit
institution Commercial Bank Alzhan Limited Liability Company, or
CB Alzhan LLC (Registration No. 2491), further also referred to as
the credit institution. According to its financial statements, as
of February 1, 2018, the credit institution ranked 517th by assets
in the Russian banking system. The credit institution is not a
member of the deposit insurance system.
The major transactions the credit institution conducted in the
second half of February this year, aimed to replace a considerable
part of assets, resulted in the loss of liquidity and the credit
institution's failure to timely honour its obligations to
creditors; this led to the emergence of grounds for regulatory
measures to prevent its failure (bankruptcy). It was further
revealed that the credit institution repeatedly violated the
requirements of the Federal Law "On Countering the Legalisation
(Laundering) of Criminally Obtained Incomes and the Financing of
Terrorism" in respect of the completeness and reliability of
information submitted to the authorised body, on operations
subject to mandatory control.
The management and owners of the bank failed to take effective
measures to normalise its activities. In addition, their
behaviour was unscrupulous: they withdrew assets to the detriment
of creditors' interests. Under the circumstances the Bank of
Russia took the decision to withdraw CB Alzhan Limited Liability
Company from the banking services market.
The Bank of Russia took this decision due the credit institution's
failure to comply with federal banking laws and Bank of Russia
regulations, repeated violations within one year of the
requirements stipulated by Article 7 (except for Clause 3 of
Article 7) of the Federal Law "On Countering the Legalisation
(Laundering) of Criminally Obtained Incomes and the Financing of
Terrorism" and taking into account repeated applications within
one year of measures envisaged by the Federal Law "On the Central
Bank of the Russian Federation (Bank of Russia)"; the decision was
also made taking into account a real threat to the interests of
creditors.
The Bank of Russia, by its Order No. OD-540, dated March 2, 2018,
appointed a provisional administration to CB Alzhan Limited
Liability Company for the period until the appointment of a
receiver pursuant to the Federal Law "On Insolvency (Bankruptcy)"
or a liquidator under Article 23.1 of the Federal Law "On Banks
and Banking Activities". In accordance with federal laws, the
powers of the credit institution's executive bodies have been
suspended.
The current development of the bank's status has been detailed in
a press statement released by the Bank of Russia.
ER-TELECOM HOLDING: Moody's Affirms B2 CFR, Outlook Stable
----------------------------------------------------------
Moody's Investors Service has affirmed the corporate family rating
(CFR) of Russian telecoms company ER-Telecom Holding, JSC at B2
and its probability of default rating (PDR) at B2-PD.
Concurrently, the agency changed the outlook on the ratings to
stable from positive.
"Our decision to stabilise outlook on ER-Telecom's ratings
recognizes the fact that the company's ambitious growth strategy
primarily through M&A will not allow it to achieve a financial
profile commensurate with a higher rating category in the next 12-
18 months," says Julia Pribytkova, a Moody's Vice President -
Senior Analyst.
RATINGS RATIONALE
The action reflects Moody's view that ER-Telecom's operating
profile weakened in 2017 and will not likely recover in 2018 as a
result of continuing massive investment into organic development
of its network as well as acquisition of new businesses across
Russia. M&A activities materially increased the company's
geographic footprint and diversification of its product offerings,
but their positive effect on cash flow generation and debt
reduction will likely demonstrate itself following full
integration of the new companies. At the same time, weakened
economic environment in Russia and heightened competition will
limit the company's organic growth and weigh on the profitability
of its traditional pay TV business. As a result, Moody's expect
ER-Telecom to experience pressure on its cash flow generation and
financial metrics which will translate into leverage measured by
Moody's adjusted debt/EBITDA remaining above 3.5x and (EBITDA --
capex)/interest below 1.0x in 2018 and potentially 2019.
ER-Telecom's B2 CFR is constrained by (1) the company's small size
on a global scale; (2) its evolving and elevated at times leverage
profile driven by fast growth, as well as expectations of
negative/weak free cash flow generation in 2018-19 as a result of
ambitious growth strategy implementation; (3) limitations to
growth resulting from the saturation of fixed-line broadband and
the pay TV market in Russia, and declining dispensable incomes in
the country; and (4) strong competition from integrated operators,
such as the country's largest fixed-line national
telecommunications operator PJSC Rostelecom and satellite
broadcasting.
The rating takes into account the company's (1) demonstrated
ability to achieve geographic expansion and strong double-digit
annual revenue growth; (2) strong competitive position (ER-Telecom
with its brand dom.ru is the 2nd largest player in the country's
broadband market and the 4th largest player in pay TV market) and
brand recognition; (3) robust profitability and positive free cash
flow generation in most of the markets in which it has operated
for more than three years; (4) modern fixed-line network, which
requires fairly low maintenance capex; and (5) long-term debt
maturity profile owing to the new 7- year debt facility from Bank
VTB, PJSC (Ba1 positive (m)) with a 3-year grace period. Moody's
notes that ER-Telecom continues to grow its revenue organically
notwithstanding weak market conditions in Russia.
RATIONALE FOR THE STABLE OUTLOOK
The stable outlook reflects Moody's view that the company's
ratings are adequately positioned in the current rating category
supported by the long-term funding structure.
WHAT COULD CHANGE THE RATING UP/DOWN
Moody's could consider an upgrade of ER-Telecom's ratings if the
company were to sustainably (1) maintain (EBITDA-capex)/interest
above 1.5x-2.0x, (2) generate positive free cash flow, and 3)
maintain solid liquidity.
Conversely, negative pressure on the ratings would develop if ER-
Telecom's (1) (EBITDA-capex)/interest did not recover above 1.0x
for more than 12-18 months; (2) leverage measured by debt/EBITDA
rose above the currently maximum anticipated levels of 4.0x; (3)
liquidity profile deteriorated, including as a result of
diminishing headroom under the current covenants or a covenant
breach; (4) competitive position weakened, resulting in a
sustained decline in profitability and poor conversion of
investment into cash flow; and (4) shareholder structure changed
in a way that could lead to diminished shareholder support.
Material debt-funded acquisitions would be considered by the
agency separately for their effect on the ratings.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Global Pay
Television - Cable and Direct-to-Home Satellite Operators
published in January 2017.
ER-Telecom Holding, CJSC (ER-Telecom) is a telecommunications
company providing high-speed internet access, cable TV, and fixed
line telephony services in Russia under the brand dom.ru. The
company's network currently covers around 11 million households in
566 towns. ER-Telecom is 67.9% owned by the Perm Industrial and
Financial Group (PFIG), 9.3% by Baring Vostok Capital Partners,
15.8% by management and 7% by Enforta B.V. In the last 12 months
ended September 30, 2017, ER-Telecom generated revenue of RUB32.4
billion ($545 million) and EBITDA, as adjusted by Moody's, of
RUB12.9 billion ($216 million).
RUSAL PLC: Fitch Places BB-/B IDRs on Watch Evolving
----------------------------------------------------
Fitch Ratings has placed Russia-based aluminium company United
Company Rusal Plc's Long-Term Issuer Default Rating (IDR) of
'BB-', Short-Term IDR of 'B' as well as Rusal DAC's senior
unsecured rating of 'BB-'/'RR4' on Rating Watch Evolving (RWE).
These actions follow Rusal's announcement that the company intends
to obtain approval from a majority of its shareholders and
debtholders to allow the shoot-out mechanism included in the
shareholder agreement between Rusal and Whiteleave Holdings Ltd
(which replaced Interros Holding Co. in the agreement) to be
triggered.
The RWE reflects uncertainty regarding the relationship between
the main shareholders of Rusal and PJSC MMC Norilsk Nickel (NN;
BBB-) following the conclusion of the five-year lock-up period
which expired in December 2017, and the outcome of a potential
shoot-out process.
Fitch is currently unable to assess the likelihood of the shoot-
out mechanism being triggered, nor the impact it may have on
Rusal's credit profile as several outcomes are possible. Under a
scenario where both parties reach an agreement over the sale of
the Crispian Investment's stake in NN, irrespective of whether the
stake would be equally divided between Rusal and Whiteleave or
sold to a third party, and the shoot-out is not triggered then
Fitch would assess the impact on the company's ratings as likely
to be neutral. If however Rusal is to dispose of its 27.8% stake
in NN in return for net proceeds of a minimum of USD10.6 billion,
which are used to repay some portion of its existing debt, this in
isolation would likely result in a positive rating action.
However, if Rusal acquires Whiteleave's 30.4% stake in NN for a
maximum of USD15.4 billion, this could result in negative rating
action subject to the acquisition finance structure used.
KEY RATING DRIVERS
Stake in Norilsk Nickel: Rusal effectively owns 27.82% of the
world's second largest nickel producer, NN. The market value of
the stake was USD9.3 billion at 26 February 2018, representing
more than 100% of Rusal's total indebtedness at end-2017, and
therefore providing significant collateral coverage.
NN has historically paid out significant dividends to its
shareholder. Since 2017 a new dividend policy has applied, with a
variable pay-out ratio of 30%-60% of EBITDA, depending on NN's net
leverage metrics. The total dividend declared by NN in 2017 was
around USD3 billion (Rusal received USD0.8 billion in 2017) and
the total minimum payment will be USD1 billion from 2018 (USD278
million Rusal pre-tax share). Fitch expects dividends attributable
to Rusal to on average exceed USD650 million/year in 2019-2020,
contributing materially to Rusal's debt service.
Ongoing Deleveraging: Rusal had a high debt burden since the
purchase of its 25% stake in NN in 2008. However, the company has
benefitted from strong support from its bank group and has
deleveraged to USD8.7 billion at end-2017 (Fitch-adjusted) from
USD9.1 billion in 2016. In Fitch's view further debt reduction
remains a key priority for Rusal but the pace will depend on
aluminium prices and the level of dividends paid by NN. At end-
December 2017 funds from operations (FFO) gross leverage decreased
to 3.1x (2016: XX) and Fitch expect it to remain below 3.5x in
2018-2020. This is mainly due to improved prices, as reflected in
a 42% rise in EBITDA at end-2017.
Absent an absolute debt reduction, Rusal will remain exposed to
external factors, such as market price volatility, rouble
strengthening and energy cost inflation, which add volatility to
the company's leverage metrics. Fitch expects future positive free
cash flow (FCF) will be partly directed to deleveraging, resulting
in total debt of less than USD8 billion at end-2018, USD7 billion
at end-2019 and around USD6.5 billion in 2020.
Competitive Cost Position: Rusal's smelters are still strongly
positioned in the first quartile of the global aluminium cost
curve despite a 20% yoy increase in average costs in 2017. For
4Q17, Rusal's average costs increased to USD1,602/t (against
1,334/t in end-2016) on the back of higher energy costs due to a
new electricity agreement, higher raw material costs and FX
effects. However, Rusal's smelters are located in Siberia and
source 90% of their electricity needs from the region's hydro
power generation assets, and thus continue to benefit from low
electricity prices. This location favourably differentiates Rusal
from its aluminium peers that have been also negatively impacted
by cost inflation but do not have access to cheap power supply.
Fitch forecasts gradual rouble strengthening to 56RUB/USD by 2020,
which will result in the largest negative impact on the company's
cost structure, leading to gradual EBITDA margin erosion to 16% by
2020 from 22% in 2017.
Positive Outlook for Aluminium: Aluminium industry supply and
demand fundamentals remain favourable for 2018 and support Fitch
expectation of higher average prices compared with 2017's
USD1,968/tonne. Prices are, however, likely to consolidate at
around USD2,200/tonne. This reflects a combination of an amply
supplied market, increasing Chinese stocks, post winter-closure
restarts, slowing demand from the Chinese construction sector and
that cost input prices are likely to peak during the year. Global
consumption growth is likely to remain sound in 2018 at around 4%-
4.5% yoy compared with 5.7% in 2017.
The key development is, however, coming on the supply side with
continuing evidence that the Chinese state will actively control
future smelter production growth. CRU estimates that annual
production growth in China will slow to 5% in 2018 and 2019 and
further slow from 2020-2022. The net result is a reduced market
surplus in China of around 1.2 million tonnes in 2018 with further
reductions expected out to 2020. Outside China, the aluminium
market has been in physical deficit since 2012 and this will
continue in 2018. Fitch expects that exports from China will
increase from 2H18, although not at a level to cover the ex-China
deficit.
Vertically Integrated Business Model: Rusal operates throughout
the aluminium value chain with bauxite mining, alumina refining
and aluminium smelting production. The Dian Dian project in Guinea
(first delivery planned in 3Q18) will make Rusal almost 100% self-
sufficient in bauxite. This provides the company with significant
control over its raw material costs, and limits its exposure to
input cost fluctuations.
DERIVATION SUMMARY
Comparable peers to Rusal rated by Fitch include Alcoa Corporation
(BB+/Stable), Aluminium Corporation of China (Chalco)
(BBB+/Stable) and China Hongqiao Group (B+/Stable). Rusal's rating
reflects a comparable operating profile in most respects (eg,
market position, self-sufficiency, cost competitiveness), but
typically higher leverage metrics than Alcoa and Chalco. Rusal's
rating also incorporates the higher-than-average systemic risks
associated with the Russian business and jurisdictional
environment.
Chalco is rated three notches below the Chinese sovereign rating
based on Fitch's top-down approach in line with its parent and
subsidiary linkage rating criteria. Fitch downgraded Hongqiao
Group, the biggest aluminium producer in the world, from 'BB' in
April 2017 due to weak internal controls and uncertainty regarding
the impact of its capacity closures in 2H17.
KEY ASSUMPTIONS
Key Assumptions within Fitch Rating Case for Rusal are:
- Fitch aluminium LME base prices: USD1,900 in 2018-2020
- Aluminium premiums earned by Rusal to average USD170/t in 2018
and USD180/t thereafter (across all products produced by the
company)
- USD/RUB exchange rates: 58 in 2018, and 56 in 2019
- 6% increase in production volumes in 2018, flat thereafter
- EBITDA margin to average 19% in 2018 and 16% in 2019-2020
- Dividend payment to average USD350 million in 2018-2020
- Sustained dividend from NN under new dividend policy
RATING SENSITIVITIES
In order to resolve the Rating Watch, Fitch would need to gain
clarity around a sustainable resolution of the shareholders
dispute, either through an agreement on the sale of the Crispian
Investment's stake in NN, or through the completion of the shoot-
out mechanism.
LIQUIDITY
Adequate Liquidity: At end-2017, Rusal had nearly USD8.5 billion
of debt, excluding USD159 million Fitch adjustments for factoring
and leases. Some USD0.6 billion maturities are to be repaid before
December 2018 compared with USD0.8 billion of non-restricted cash.
Near-term liquidity is also supported by FCF generation, which
Fitch forecasts to be around USD0.7 billion in the next 12 months,
including dividends from NN.
Rusal has reduced its debt redemptions after 2018, refinancing
USD1.4 billion and USD2.9 billion of 2019 and 2020 maturities, and
reducing maturities for both years to USD0.6 billion. The next
significant debt maturities of USD1.5 billion will not be due
before 2021.
TMK PAO: Moody's Alters Outlook to Stable & Affirms B1 CFR
----------------------------------------------------------
Moody's Investors Service has changed to stable from negative the
outlook on the ratings of PAO TMK, one of the world's largest
producers of steel pipe products for the oil and gas industry.
Concurrently, Moody's has affirmed TMK's B1 corporate family
rating (CFR), B1-PD probability of default rating (PDR) and the B1
senior unsecured rating assigned to the notes issued by TMK
Capital S.A., a wholly owned subsidiary of TMK. The outlook of TMK
Capital S.A. has also been changed to stable from negative.
"Our decision to change the outlook on TMK's rating to stable
mainly reflects a significant improvement in the financial and
operating performance of its American division, complemented by
the resilience of its Russian operations to oil price volatility.
It also factors in Moody's expectation that the company will be
able to reduce leverage and maintain adequate liquidity," says
Artem Frolov, a Vice President-Senior Credit Officer at Moody's.
RATINGS RATIONALE
The change of TMK's outlook to stable and affirmation of its
ratings primarily reflect (1) a rebound in the performance of
TMK's US-based operations from the trough 2016 level on the back
of higher oil prices; (2) continuing resilience of the company's
Russian business to volatile oil prices, rouble exchange rate,
feedstock prices and declined demand for large-diameter pipes
(LDP); and (3) Moody's expectation that TMK will reduce its
leverage towards or below 4.5x Moody's-adjusted gross debt/EBITDA
in 2018, with a potential for accelerated deleveraging should the
initial public offering of the company's US-based subsidiary take
place.
Financial and operating performance of TMK's American division has
improved considerably throughout 2017 owing to growing drilling
activity in North America driven by higher oil prices. In the
first nine months of 2017, TMK's US business increased its sales
to 472 thousand tonnes from 189 thousand tonnes a year earlier,
and generated $72 million EBITDA, as opposed to a negative $63
million for the first nine months of 2016. Stronger performance of
the American division was the key factor driving the growth of
TMK's Moody's-adjusted EBITDA by 18% to $679 million in the 12
months ended September 30, 2017 from $573 million in 2016.
Moody's estimates Brent/WTI oil prices will be in a $40-$60 per
barrel price band for the medium-term, compared with the 2017
average Brent price of $54 and year-to-date average of $67. Prices
in the upper half of the estimated oil price band, let alone
above, and higher drilling efficiency will support increased oil
production and demand for oil country tubular goods (OCTG) in the
US. Therefore, Moody's expects the performance of TMK's American
division to continue to improve in 2018, unless average oil prices
fall below the medium-term price band.
TMK's Russian operations have proved to be resilient to the low
oil price environment, owing to the depreciation of the Russian
rouble and flexible tax system, which have cushioned the impact of
low oil prices on the domestic oil companies' upstream margins. As
a result, drilling activity and demand for seamless OCTG, TMK's
key product category, in Russia remained healthy. Although demand
for LDP has fallen significantly from the 2015 peak, TMK's
exposure to this segment is fairly limited, at less than 10% of
revenue. TMK's margins have also shown resilience in the last
three years, despite short-term fluctuations, with Moody's-
adjusted EBITDA margin staying around or above 15%. TMK's margins
are supported by the company's integration in the production of
steel billets and its ability to pass on, at least partly, the
volatility in feedstock costs to its customers, owing to a
sizeable share of formula-based contracts.
Moody's expects that a combination of increased earnings of
American division and sustainable solid earnings of Russian
division will allow TMK to reduce its leverage towards or below
4.5x by year-end 2018 from 5.2x as of September 30, 2017.
Deleveraging in 2018 may be more pronounced should the company
proceed with the initial public offering of its US-based
subsidiary IPSCO Tubulars Inc. The timing of the transaction and
the use of proceeds have not been announced so far. Moody's
expects that TMK would primarily use the proceeds to repay part of
its outstanding debt, in line with the company's aim to reduce its
net debt/EBITDA to 3.0x by the end of 2019.
TMK's B1 rating continues to take into account (1) the company's
wide product range and technological advancements; (2) leading
market position in Russia in high-margin seamless OCTG; (3)
operating and geographical diversification, with meaningful
production assets in the US and Europe, although the US
operations' revenue and EBITDA are strongly dependent on oil price
and have shown significant volatility in 2014-17; (4) fairly high
profitability owing to integration in steelmaking operations and
cost-cutting measures; (5) moderate capital spending; (6) Moody's
expectation that the company will generate sustainable positive
post-dividend free cash flow, although the rating agency estimates
that free cash flow was negative in 2017, as a result of the
accelerated increase in inventory in the US division on the back
of market recovery; and (7) the company's continuing commitment to
deleverage and maintain adequate liquidity, although deleveraging
will take time.
TMK's rating also factors in (1) the company's significant
exposure to the oil and gas sector; (2) Moody's expectation that
oil and gas prices will remain volatile, potentially exerting
pressure on the operating and financial performance of the
company's US assets; (3) the company's high customer
concentration; (4) its elevated leverage and exposure to the
volatile rouble exchange rate and steel prices; and (5) the
company's dependence on covenanted committed credit facilities to
remain liquid.
RATIONALE FOR STABLE OUTLOOK
The stable outlook reflects Moody's expectation that the company
will be able to reduce its leverage below 4.5x over the next 12-18
months, and its financial metrics, free cash flow generation and
liquidity will be commensurate with its B1 rating on a sustainable
basis.
WHAT COULD CHANGE THE RATINGS UP/DOWN
Moody's could upgrade TMK's ratings if the company were to (1)
reduce its Moody's-adjusted gross debt/EBITDA to below 3.0x on a
sustainable basis; (2) generate sustainable positive post-dividend
free cash flow; and (3) maintain healthy liquidity.
Moody's could downgrade the ratings if (1) the company were unable
to reduce its leverage, with Moody's-adjusted gross debt/EBITDA
remaining above 4.5x on a sustained basis; (2) the company fails
to generate positive free cash flow on a sustained basis; or (3)
its liquidity were to deteriorate.
TMK is Russia's largest and one of the world's largest producers
of steel pipe products for the oil and gas industry, operating 26
production sites across the US, Russia, Romania, Canada,
Kazakhstan and the Sultanate of Oman. The largest share of TMK's
shipments comprises high-margin OCTG, including tubing, casing and
drill pipes, complemented with line, large-diameter and industrial
pipes, as well as an entire range of premium connections. In 2017,
TMK shipped 3.8 million tonnes of steel pipes, including 2.7
million tonnes of seamless pipes. In the 12 months ended September
30, 2017, the company generated revenue of $4.1 billion and
Moody's-adjusted EBITDA of $679 million. TMK's largest shareholder
is Dmitry Pumpyanskiy who controls a stake of around 65.1% in the
company.
The principal methodology used in these ratings was Steel Industry
published in September 2017.
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S W E D E N
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TRANSCOM HOLDING: Moody's Assigns B2 CFR, Outlook Stable
--------------------------------------------------------
Moody's Investors Service has assigned a B2 corporate family
rating (CFR) and a B2-PD probability of default rating (PDR) to
Transcom Holding AB, a European provider of outsourced customer
relationship management with a leading position in the Nordic
markets. Concurrently, Moody's has assigned a B3 instrument rating
to the new EUR180 million senior secured notes due 2023 to be
issued by Transcom Holding AB. The outlook on all ratings is
stable.
The proceeds from the notes, together with EUR1 million of net
cash on balance sheet, will be used, to repay EUR164 million of
existing debt put in place following Altor's LBO of Transcom in
April 2017, and pay transaction costs. At closing, the company is
expected to have approximately EUR14 million of cash on balance
sheet.
As part of the new capital structure, Transcom will have a new
EUR45 million 4.5-years super senior revolving credit facility
(RCF) issued by its subsidiary Transcom Worldwide AB. The RCF is
expected to be undrawn at closing.
Pro-forma for the envisaged transaction, the company is expected
to have a Moody's adjusted gross leverage of 5.3x for the full
year 2017 ended in December. Moody's adjusted EBITDA has been
determined by adding back certain extraordinary costs related to
Altor's LBO, non-recurring legal and consultancy costs and the
impact of gains/losses of business disposal during 2017.
The high opening leverage coupled with lower profitability
compared to direct peers and challenged top-line trends, weakly
position the company within the rating category.
RATINGS RATIONALE
Transcom's B2 CFR reflects (1) its position among the largest
European customer relationship management operators and leading
presence in the Nordics; (2) the expectation that identified cost-
saving initiatives will support improvements in profitability
during the next 12-18 months; (3) the global footprint with
offshore and nearshore activities which provide capabilities to
serve international contracts; (4) the positive trends for the
European Business Process Outsourcing (BPO) industry; and (5) a
portfolio of long-standing blue-chip customers.
The CFR also reflects (1) the historical revenue decline, impacted
by divestments and ramp-down of certain operations, and
expectation that top-line will further reduce in 2018 as the
company exits unprofitable contracts; (2) the company's low
profitability compared to peers, albeit improving, and limited
free cash flow generation; (3) the high customer and sector
concentration with telecom and cable accounting for a combined 47%
of revenue in 2017; (4) the inherent volume volatility of
outsourcing contracts only partially mitigated by the low clients'
churn rate; (5) the highly fragmented and competitive nature of
the outsourced customer management industry, resulting in
significant pressure on prices and margins; and (6) the exposure
to headwinds from technological changes as a result of increasing
automation which could take over a portion of the most routine
end-customer requests from physical agents.
Transcom is among the largest European providers of outsourced
customer relationship management and the leading player in Sweden
and Norway. In the last years the company has ramped-down certain
operations in Latin America, divested its Credit Management
Services (CMS) business, and deconsolidated its French and Belgian
subsidiaries however continued to serve these two markets via
nearshore centers. These actions, coupled with some volume
volatility across markets and clients, resulted in a top-line
decline to approximately EUR584 million in 2017 from EUR653
million in 2013. However, as Transcom exited loss-making
operations in France and Latin America, the company's adjusted
EBITDA increased during the same period to EUR38.2 million (6.5%
EBITDA margin) in 2017 from EUR24.8 million (4.0%) in 2013.
Despite the improvement in EBITDA, the profitability remains below
that generated by direct peers. The lower profitability could be
partially explained by unprofitable contracts within its
portfolio, underutilization of its agents as a result of declines
in volumes and a lower percentage of value-added services compared
to peers. Moody's expects Transcom's revenue will continue to
decline in 2018, impacted by termination of unprofitable contracts
and some volume reductions across telecom clients in the Nordics,
and return to deliver annual organic revenue growth of 1.0-2.0%
from 2019. Concurrently, EBITDA margin should improve by 100-150
basis points in the next 12-18 months as the company focuses on
terminating unprofitable contracts, broadening value-added
offering and accelerating cost-savings actions identified across
personnel and non-personnel costs and via the introduction of
shared service support centers.
The company benefits from a portfolio of established blue-chip
clients however its revenue remains significantly concentrated
around the telecom and cable sectors which account for a combined
47% of the company's total revenue. In addition, there is a high
concentration of revenue around major clients as top 1, top 3 and
top 10 clients represent 12%, 27% and 60% of revenue respectively.
In line with other BPO providers, the company has reported single-
digit customer churn rates however it remains exposed to revenue
volatility within each contract due to volumes' fluctuations.
Despite this short term volatility, BPO providers will continue to
benefit from positive industry trends. The global outsourced
customer management market is expected to deliver mid-single digit
annual growth over the period 2017-21 - the European and the North
American CRM markets are expected to grow at approximately 4.0-
4.5% in the period - driven by (1) the secular trend among
companies for outsourcing non-core back-office operations as a way
to reduce costs; (2) the underlying operational growth of existing
clients; and (3) the expected increase in volumes as a result of
higher complexity of customer interactions.
Technological changes, chiefly the rise of Artificial Intelligence
and BOTs, will continue to transform the way BPOs operate.
Technological developments will be instrumental for BPOs in order
to efficiently manage the rising complexity of customers
interaction across several non-voice channels (e.g. social media,
chats, emails). Moody's expects non-voice channels to increase at
a faster rate than voice channels. In addition, Moody's
anticipates that BOTs and Artificial Intelligence software will
likely take over a portion of the most routine end-customer
requests currently handled via calls done by physical agents. As
such, the redistribution of part of the volumes of calls in favour
of automated systems could over time result in the transfer of a
portion of the providers' value added and profits towards BOTs and
artificial intelligence software developers. Transcom has
currently favoured collaboration with key software suppliers
rather than developing in-house proprietary digital solutions. The
company expects that this technological-agnostic approach will
enable its agents to create value by focusing on delivering
integration into clients' systems regardless of technology.
Liquidity profile
Transcom's liquidity profile, pro-forma for the transaction, is
adequate supported by EUR14 million of cash on balance sheet and
by EUR45 million undrawn super senior revolving credit facility
(RCF).
Transcom's free cash flow (FCF) generation - calculated after
interest expenses, cash taxes, working capital changes, capex and
dividend payments - has been limited in the last four years
despite low cash interest expenses. In 2016 the company reported a
negative FCF of -EUR10 million mainly resulting from unfavourable
working capital changes due to timing effect. In 2017 the company
expects to generate positive FCF at around EUR6 million.
Despite an increase in cash interest to EUR9 million projected
under the new capital structure from EUR1 million pre-LBO, the
company's FCF should remain positive at around EUR10 million in
2018 supported by improving profitability and despite
extraordinary costs required to achieve identified cost-savings in
personnel and rental expenses.
Moody's expects the company to pursue small bolt-on acquisitions
in order to consolidate its geographic footprint, increase
customer and sector diversification and enhance its technological
offering. These acquisitions will likely rely on the new RCF and
cash on balance sheet. While the new notes are part of a debt
framework, which would allow the company to raise additional total
debt subject to an incurrence test set at 5.0x prior to the first
call date, Moody's expects that the shareholders will provide
additional equity to part finance any larger scale acquisition.
Structural considerations
The pro forma capital structure comprises a EUR180 million 5-years
senior secured notes and a EUR45 million 4.5-years super senior
RCF. The instrument rating of B3 assigned to the notes is one
notch below the company's CFR and reflects the priority ranking of
the super senior RCF in an enforcement scenario. The company's
facilities benefit from a security package which mainly includes
subsidiaries' shares; they also benefit from guarantees from a
number of guarantors which together represent no less than 75% of
Transcom's consolidated EBITDA and total assets.
The capital structure includes one springing covenant under the
RCF agreement: a super senior net leverage ratio, with a maximum
covenant level set at 2.5x, tested when the facility is drawn for
more than 35%.
Rating outlook
The stable outlook reflects the expectation that the company will
maintain resilient operating performance with EBITDA growth
expected in the next 12-18 months as a result of successful
delivery of cost savings initiatives identified. The stable
outlook also reflects expectation that the company will return to
positive low single digit annual organic revenue growth from 2019.
Finally, the outlook incorporates the assumption that shareholders
would provide additional equity to finance any larger scale
acquisitions and that the company will successfully renew
contracts with its major clients.
Factors that could lead to an upgrade
Positive ratings pressure could develop over time if (1) the
company delivers sustainable revenue growth while improving its
customer and sector diversification; (2) the company improves its
Moody's adjusted EBITA margins towards high single digit while
generating positive free cash flow; and (3) Moody's adjusted gross
leverage falls sustainably below 4.5x.
Factors that could lead to a downgrade
Downward pressure could develop if (1) Moody's adjusted gross
leverage increases to above 5.5x on a sustainable basis; (2) free
cash flow trends toward zero or liquidity profile deteriorate; and
(3) the company is unsuccessful in renewing its major contracts.
Any material debt-funded acquisition or shareholder friendly
action could put pressure on the ratings.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Business and
Consumer Service Industry published in October 2016.
CORPORATE PROFILE
Founded in 1995 in Sweden, Transcom is among the largest European
provider of outsourced customer relationship management and the
leading player in Sweden and Norway offering services in 33
languages to more than 200 international clients and operating 50
contact centres in 20 countries. The company delivers a broad
range of services including QRC management (request for
information, subscriptions, complaint, technical support),
customer acquisition & onboarding (sales and marketing
operations), CRM & retention, back office, credit and collections,
and advisory & analytics. At the end of 2017, the company has
approximately 26,500 employees, including work-at-home agents in
the US, and -- based on unaudited accounts - generated annual
revenue and adjusted EBITDA (as reported by the company) of EUR584
million and EUR38.2 million, respectively. Since March 2015, Altor
Fund Manager AB (Altor), a leading Swedish private equity, has
been the largest shareholder of the public listed entity Transcom
WorldWide AB with 24.5% of the shares outstanding. In April 2017,
Altor completed the take-private of the company.
===========================
U N I T E D K I N G D O M
===========================
ALPHA INSURANCE: CBL Collapse Prompts Liquidation
------------------------------------------------
Sian Barton at Insurance Age reports that Danish unrated insurer
Alpha Insurance has gone into solvent liquidation.
An announcement on the insurer's website blamed CBL Insurance for
the failure, Insurance Age relates.
The company, as cited by Insurance Age, stated: "Effective
immediately, Alpha Insurance A/S has ceased all underwriting,
including renewals.
"This decision is a direct consequence of CBL Insurance Limited,
one of Alpha Insurance's largest reinsurers, having had their AM
Best A- rating suspended and has been placed into interim
liquidation."
The statement explained that the Alpha board of directors decided
on March 3 to cease all underwriting of new business and renewals
with immediate effect, Insurance Age relates.
The following day, March 4, the general assembly of Alpha
insurance chose to place the company into solvent liquidation,
Insurance Age notes.
The Danish regulator warned last week that Alpha was at risk of
failing to meet its solvency requirements, Insurance Age recounts.
According to Insurance Age, on March 5, the Danish Financial
Supervisory Authority (DFSA) commented: "Alpha Insurance no longer
complies with the minimum capital requirement, which may have
negative implications for the policyholders.
"Further, one of Alpha Insurances most significant reinsurers is
having financial difficulties, and there is a substantial risk
that this reinsurer may not be able to meet its obligations
towards Alpha Insurance."
"Therefore, in the interest of protecting the policyholders, the
Danish Financial Supervisory Authority deems it necessary to order
Alpha Insurance to cease writing any new insurance business
immediately."
INTERSERVE PLC: Plans to Cut 1,500 Jobs to Avert Bankruptcy
-----------------------------------------------------------
Gill Plimmer at The Financial Times reports that UK-based
government contractor Interserve is on track to cut 1,500 jobs as
it fights to stave off bankruptcy.
According to the FT, people close to the board said Interserve,
which employs 80,000 people worldwide, including 25,000 in the UK,
has already cut 500 administrative staff in the last quarter and
is planning a further 1,000 by the end of 2018.
Interserve says the talks are "progressing well" and it is hopeful
of a deal being reached before the end of the month, the FT
relates. But with net debt of more than GBP600 million in the
first half of 2018 and a market cap of just GBP81 million new
chief executive Debbie White has acted quickly to convince banks
of its turnround case, the FT discloses.
She has acknowledged the company under predecessor
Adrian Ringrose, who was forced out last year, expanded too fast,
making acquisitions and contract wins in sectors of which it had
little experience, the FT relays, citing briefings to analysts.
Negotiations with banks have been made more difficult by the
collapse in January of rival construction and public services
contractor Carillion, which left banks nursing almost GBP1 billion
in losses, the FT notes.
Concerns over the company's future and debt have grown since it
took a GBP195 million hit on delivering energy-from-waste
incinerator projects, which started going wrong in 2016, the FT
states.
PREZZO: Reveals Locations of Restaurants Marked for Closure
-----------------------------------------------------------
Chris Kelsey at Western Mail reports that Italian restaurant chain
Prezzo has revealed the locations of the restaurants it intends to
close in Wales.
According to Western Mail, the troubled company is looking to
close around a third of its restaurants around the UK, adding up
to a total of 94, which include some of those in Wales.
Prezzo is also closing all 33 of its Chimichanga restaurants,
Western Mail states.
Prezzo has entered into a company voluntary arrangement as it
tries to rescue its business, Western Mail relates.
It is thought that the move will result in around 1,000 jobs being
lost, but Prezzo has said it will try to find staff new roles
within the business, Western Mail notes.
The Prezzo restaurants marked for closure in Wales are:
Abergavenny, Carmarthen, Penarth, and Chimichanga in Cardiff,
Western Mail discloses.
* UK: A Third of Biggest Restaurants Loss-Making, Study Reveals
---------------------------------------------------------------
Sophie Christie at The Telegraph reports that a third of Britain's
biggest restaurant groups is loss-making, up by 75% in the past
year, according to a new study.
Major names on the high street have come under pressure from
increased competition in the market, rising wage costs, brought
about by the introduction of a higher minimum wage, which rose
from GBP7.20 to GBP7.50 last year and is set to rise in April to
GBP7.83 for those aged 25 and over, and the Government's
apprenticeship levy, The Telegraph discloses.
High-end burger chain Byron, Jamie's Italian and Strada, have all
announced store closures in recent weeks, The Telegraph relates.
According to The Telegraph, accountancy group UHY Hacker Young
found that more than a third of the biggest companies in the
restaurant sector are losing money, "and there is little respite
on the horizon".
"Pressures on the restaurant sector have been building for years,
and the last year has pushed a number of major groups to breaking
point. With Brexit hanging over consumers like a dark cloud,
restaurants can't expect a bailout from a surge in discretionary
spending," The Telegraph quotes UHY's Peter Kubik as saying.
According to The Telegraph, the firm blamed the Government for
ratcheting up costs with a series of above-inflation rises in the
minimum wage which have been "tough" for a lot of restaurants to
absorb.
Industry expert Peter Backman, as cited by The Telegraph, said he
expects "more pain" for the restaurant sector this year but
predicts it to return to health at the back end of 2019.
He previously told The Telegraph: "My feeling is the number of
sites that are closing is not enough to restore sanity.
Overcapacity is endemic in the sector, you always have it, but it
is about whether operators have the funding and the brand to keep
going."
John Webber, of Colliers, said casual dining chains were being
squeezed after the revaluation of business rates in April 2017,
The Telegraph relays.
"Many companies are now asking their landlords for a reduction in
rent as the physical costs of running a property become an
increasing burden," Mr. Webber, as cited by The Telegraph, said.
*********
Monday's edition of the TCR delivers a list of indicative prices
for bond issues that reportedly trade well below par. Prices are
obtained by TCR editors from a variety of outside sources during
the prior week we think are reliable. Those sources may not,
however, be complete or accurate. The Monday Bond Pricing table
is compiled on the Friday prior to publication. Prices reported
are not intended to reflect actual trades. Prices for actual
trades are probably different. Our objective is to share
information, not make markets in publicly traded securities.
Nothing in the TCR constitutes an offer or solicitation to buy or
sell any security of any kind. It is likely that some entity
affiliated with a TCR editor holds some position in the issuers'
public debt and equity securities about which we report.
Each Tuesday edition of the TCR contains a list of companies with
insolvent balance sheets whose shares trade higher than US$3 per
share in public markets. At first glance, this list may look like
the definitive compilation of stocks that are ideal to sell short.
Don't be fooled. Assets, for example, reported at historical cost
net of depreciation may understate the true value of a firm's
assets. A company may establish reserves on its balance sheet for
liabilities that may never materialize. The prices at which
equity securities trade in public market are determined by more
than a balance sheet solvency test.
Each Friday's edition of the TCR includes a review about a book of
interest to troubled company professionals. All titles are
available at your local bookstore or through Amazon.com. Go to
http://www.bankrupt.com/booksto order any title today.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Europe is a daily newsletter co-
published by Bankruptcy Creditors' Service, Inc., Fairless Hills,
Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA.
Marites O. Claro, Rousel Elaine T. Fernandez, Joy A. Agravante,
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Editors.
Copyright 2018. All rights reserved. ISSN 1529-2754.
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