/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/181004.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 Thursday, October 4, 2018, Vol. 19, No. 197 Headlines A U S T R I A AI ALPINE: Moody's Assigns B3 Corp. Family Rating, Outlook Stable B E L A R U S BELARUSIAN NATIONAL: Fitch Affirms 'B' IFS Rating, Outlook Stable F R A N C E PSA GROUP: Open to New Deals Amid Swift Restructuring G E R M A N Y E-MAC DE 2006-I: S&P Affirms D Rating on Class D & E Notes G R E E C E GREECE: Wants To Repay Loans To Lenders Before Maturity I R E L A N D SEAN DUNNE: High Court Extends Bankruptcy by 12 Years I T A L Y ASTALDI SPA: S&P Lowers Issuer Credit Rating to 'D' ITALY: Raises EUR6.5 Billion in 5G Auction L A T V I A SC CITADELE: Moody's Hikes Deposit Rating to Ba1, Outlook Pos. M O L D O V A AIR MOLDOVA: Sold to Romanian Group for $71 Million R U S S I A ENNIA CARIBE: Davis Polk Advises Foreign Representative of Firm R U S S I A ALMAZERGIENBANK: Fitch Affirms B+ LT IDR, Outlook Stable S P A I N ABANCA CORP: Fitch Rates EUR250MM Perpetual AT1 Notes 'B' U N I T E D K I N G D O M AVOCET MINING: Warns of Break-Up as Restructure Talks Continue SOHO HOUSE: Remains Lossmaking Despite Faster Revenue Growth TRITON UK: Fitch Affirms 'BB-' Long-Term Issuer Default Rating TURNSTONE MIDCO: Moody's Cuts CFR to Caa1, Outlook Stable ********* ============= A U S T R I A ============= AI ALPINE: Moody's Assigns B3 Corp. Family Rating, Outlook Stable ----------------------------------------------------------------- Moody's Investors Service assigned a B3-PD Probability of Default Rating to Austria-based distributed power technology company AI Alpine AT BidCo GmbH and assigns definitive rating on the B3 Corporate Family Rating. At the same time it affirmed the provisional ratings assigned to the company's revolving credit facility and to its first and second lien term loans. The outlook on the ratings is stable. The action follows Moody's receipt and review of audited combined financial statements as of December 31, 2017 and 2016 for GE Distributed Power, the target entity to be acquired by AI Alpine. The provisional ratings were assigned on September 24, 2018, pending receipt and review of the audited financial information. Assignments: Issuer: AI Alpine AT BidCo GmbH Corporate Family Rating, Assigned Definitive B3 from (P)B3 Probability of Default Rating, Assigned B3-PD Affirmations: Issuer: AI Alpine AT BidCo GmbH Backed Secured Bank Credit Facility, Affirmed (P)B2 (LGD3) Backed Secured Bank Credit Facility, Affirmed (P)Caa2 (LGD6) Outlook Actions: Issuer: AI Alpine AT BidCo GmbH Outlook, Remains Stable The credit facilities will be used to finance the acquisition of General Electric's distributed power business known under the brands of Jenbacher and Waukesha by funds advised by Advent International Corporation. Moody's issues provisional ratings in advance of the syndication of the financing package and these ratings reflect the agency's preliminary credit opinion regarding the transaction only. Upon closing of the transaction and a conclusive review of the final documentation, Moody's will endeavor to remove the provisional designation on the rated credit facilities. Definitive ratings may differ from provisional ratings. RATINGS RATIONALE The B3 Corporate Family Rating is primarily supported by (1) the leading market positions both Jenbacher and Waukesha hold in their respective niches and a long track-record of reliable products serving diversified end-markets with select barriers to entry; (2) the mission critical nature of the products offered and some tailwind resulting from a structural long-term shift to renewables which drives demand for Jenbacher's products; (3) the high share of revenues (c. 50%) generated with service business which has proven to be more stable than the sale of new equipment and which is a key contributor to the high margins generated; (4) strong free cash flow generation capability; and (5) a well invested asset base. At the same time the rating is constrained by (1) an initially high adjusted leverage of 8.0x debt / EBITDA based on June 2018 results pro-forma for the new capital structure; (2) some reliance on the cyclical swings of the oil & gas upstream business via Waukesha (c. 20% of revenues); (3) the challenge to complete the transfer of Waukesha's production to the new plant in Welland and to reap identified cost savings potential as planned, on time without cost overruns; and (4) limited prospects of deleveraging over the next 12 to 18 months. LIQUIDITY Following the closure of the proposed transaction, Moody's considers liquidity to be adequate. Moody's expects that the company's liquidity sources including $64 million cash on hand, $100 million availability under the company's $225 million revolving credit facility (i.e. the $225 million RCF will be drawn by up to $125 million at closing, representing a short-term bridge until a factoring facility is in place) and funds from operations totaling approximately $161 million are sufficient to cover its liquidity needs such as working cash, working capital outflow, capital expenditures and other items together amounting to approximately $200 million. STRUCTURAL CONSIDERATIONS The (P)B2 rating (LGD3), assigned to the issuer's $1,485 million equivalent first lien senior term loan facility (Facility B) and to the $225 million equivalent revolving credit facility is one notch above the CFR and reflects the debt cushion provided by the subordinated $337.5 million equivalent second lien facility, which has been rated (P)Caa2. The credit facilities benefit from a guarantor package including upstream guarantees from operating subsidiaries, representing at least 80% of group EBITDA. The instruments are secured by a security package including shares, bank accounts, and material structural intercompany receivables with priority given to the first lien term loan facility against the second lien facility. OUTLOOK The stable outlook assumes gradual deleveraging in the next 12-18 months towards 7.5x debt/EBITDA, EBITA margins sustained in the mid-teens and continued positive FCF generation. WHAT COULD CHANGE THE RATING UP/DOWN The ratings could be upgraded in case of a successful completion of the move of Waukesha's production to the new Wellington plant and completion of restructuring measures indicated by EBITA margin sustainably exceeding 16%. An upgrade would also require a sustainable leverage reduction to a level well below 7.0x Debt/EBITDA and strong free cash flow generation leading to mandatory prepayments of the Term Loan B. Downward pressure would develop in case of interest cover falling below 1.0x EBITA/interest, negative FCF or weak liquidity, exemplified for instance by an extended use of the new revolving credit facility as a bridge for the former factoring agreement or by decreasing headroom under the springing financial covenant Indications of a move towards a more shareholder-friendly financial policy could also trigger a negative rating action. METHODOLOGY The principal methodology used in these ratings was Global Manufacturing Companies published in June 2017. PROFILE AI Alpine AT BidCo GmbH is a holding company heading the Jenbacher and Waukesha businesses both spin-offs from GE's Power division. Headquartered in Austria the group is active in the field of distributed power by offering mission critical solutions for power generation and gas compression. AI Alpine operates under two well-known brand names: Jenbacher, which accounts for c. 80% of group revenues, offers reciprocating gas engines for distributed power generation serving peak load power and backup power needs, an area which becomes increasingly important with the shift of energy production to renewable sources; Waukesha, representing the remaining c. 20% of group revenues, is active in the field of gas compression for the natural gas industry. Its engines are used for the production and transmission of natural gas and on-site power generation for oil and gas producers. ============= B E L A R U S ============= BELARUSIAN NATIONAL: Fitch Affirms 'B' IFS Rating, Outlook Stable ----------------------------------------------------------------- Fitch Ratings has affirmed Belarusian National Reinsurance Organisation's Insurer Financial Strength (IFS) Rating at 'B'. The Outlook is Stable. KEY RATING DRIVERS The rating reflects the 100% state ownership of Belarus Re, its exclusive position in the local reinsurance sector underpinned by legislation and its strong capitalisation. The rating also takes into account the weak quality and high concentration of the reinsurer's investment portfolio. The Belarusian State has established strong support for Belarus Re in its legal framework, as part of its aim to develop a well- functioning reinsurance system. Fitch believes that the government could support Belarus Re in priority over other state- owned companies, because of its small size and systemic importance to the financial sector. Belarus Re benefits from its exclusive market position. Regulations oblige local primary insurers to reinsure risks exceeding the permitted net retention of 20% of their equity. Belarus Re's monopoly has been introduced gradually with the reinsurer's share in obligatory cessions growing to 100% in 2014 from 10% in 2006. Belarus Re primarily invests in cash and bank deposits (42% of total invested assets at end-2017) and, to a lesser extent, fixed-income securities (26%). The investment opportunities available to Belarus Re are constrained by sovereign risks, as reflected in Belarus's Local-Currency Long-Term IDR of 'B'. Fitch views Belarus Re's investment portfolio as weak. The company is significantly exposed to concentrations by issuer. However, the narrowness of the local capital market and strict regulated investment policy hamper the company's ability to improve the portfolio diversification. In line with all state- owned insurers Belarus Re's investment portfolio is restricted to deposits and securities of only state-owned banks and enterprises. In 2017, Belarus Re's risk-adjusted capital strengthened, with Fitch's Prism Factor Based Model (FBM) moving to "Extremely Strong" at end-2017, from "Very Strong" on end-2016 results. Sustained profit generation underpinned available capital. The regulatory solvency margin, calculated based on Solvency-I formula, was strong at 16x at end-2017 (end-6M18: 18x). However the solvency formula does not take into consideration high investment risks stemming from the sovereign's credit profile. Belarus Re is exposed to FX mismatch on its balance sheet. A large portion of Belarus Re's liabilities are denominated in foreign currencies, with 90% of the company's financial liabilities denominated in currencies other than the Belarus rouble. Fitch understands from management that the company manages foreign-exchange risk by matching the currency of invested assets, receivables and liabilities. Belarus Re's combined ratio fell to 58% in 2017 from 92% in 2016, with the loss ratio being the main contributor. The loss ratio improved considerably to 33% in 2017 from 68% in 2016, mainly due to the absence of large losses under the company's property line for 2017 compared with 2016. The reported loss ratio for property insurance, which accounted for 28% of net business portfolio, improved to 44%. Belarus Re has maintained robust underwriting performance under its other lines of business. Belarus Re reported a profit of BYN27 million in 2017, significantly stronger than in 2016, with net income return on equity increasing to 19% from 12%. The strengthening of net result in 2017 was mainly driven by improved underwriting result, which grew to BYN15 million from BYN3 million. In 6M18 Belarus Re continued to demonstrate profitable financial performance, with a positive net result of BYN9 million compared with BYN7 million a year ago. RATING SENSITIVITIES A change in Belarus's Local-Currency Long-Term IDR is likely to lead to a corresponding change in the reinsurer's IFS rating. A significant change in the reinsurer's relationship with the government would also likely have a direct impact on Belarus Re's ratings. =========== F R A N C E =========== PSA GROUP: Open to New Deals Amid Swift Restructuring ----------------------------------------------------- Laurence Frost and Joseph White at Reuters reports that French carmaker PSA Group (PEUP.PA) is open to new industry tie-ups and is attracting attention from competitors after its lightning turnaround and swift progress in restructuring recently acquired Opel, Chief Executive Carlos Tavares said. The maker of Peugeot cars, which came close to bankruptcy in 2013-14, has rebounded under Tavares to record levels of profitability. The group posted a 7.8 percent first-half operating margin as it returned Opel and its British Vauxhall brand to profit less than a year after acquiring the business from General Motors (GM.N), according to Reuters. ============= G E R M A N Y ============= E-MAC DE 2006-I: S&P Affirms D Rating on Class D & E Notes --------------------------------------------------------------- S&P Global Ratings affirmed its ratings in E-MAC DE 2006-I B.V. The affirmations follow S&P's cash flow analysis of the most recent transaction information it has received and the application of its European residential loans criteria and its current counterparty criteria. Since S&P's previous full review of this transaction, available credit enhancement has decreased for the class C, D, and E notes. At the same time, credit enhancement has increased for the class A and B notes due to sequential repayment of the notes. The collateral pool's poor performance has resulted in the reserve fund being fully depleted. Further, the principal deficiency ledgers (PDLs) for the subordinated notes have been credited, leading to interest shortfalls for the class D and E notes. Delinquencies of more than 150 days have remained very high since our previous review. As of August 2018, delinquencies of 150+ days were 13.4% of the current outstanding balances. The servicer is Adaxio AMC GmbH (previously GMAC-RFC Servicing). It refers decisions on payment plans or foreclosure to the mortgage payment transactions provider, CMIS Investments B.V. The observed loss severities on the foreclosed properties in this transaction are higher compared to loss severities as calculated under our European residential loans criteria. Therefore, the original valuations--given this difference--may not be reliable. Consequently, to account for this originator-specific risk in S&P's analysis, ut has applied a valuation haircut (discount) of 20%. S&P said, "The swap documents in this transaction are not in line with our current counterparty criteria. As a result, in the scenarios where we give benefit to the swap provider, our current counterparty criteria cap the rating on the notes at our long- term issuer credit rating (ICR) plus one notch on the swap provider, Deutsche Bank AG. "The bank account and liquidity facility documents in this transaction are in line with our current counterparty criteria and can support maximum potential ratings of 'A'. "Given the current credit enhancement, we have affirmed our 'A' rating on the class A notes. In our cash flow analysis, without the benefit of the swap provider, these notes face minor interest shortfalls at the current rating level. However, the affirmation of the rating reflects the build-up in credit enhancement and the small note balance. We have delinked the rating on the notes from the long-term ICR on the swap provider. "Our analysis indicates that the available credit enhancement for the class B notes is commensurate with the currently assigned rating. We have therefore affirmed our rating on this class of notes. We also considered our view of the tail-end risk, given the transaction's small pool factor (the outstanding collateral balance as a proportion of the original collateral balance), and collateral pool's poor performance and sensitivity to recoveries. "The class C notes fail our 'B' stressed rating level scenario in our analysis under our European residential loans criteria. In our view, given the increase in the notes' PDL, the tranche is more likely to default. We have therefore affirmed our rating on this class of notes. "We have affirmed our 'D (sf)' ratings on the class D and E notes as they are not receiving interest payments. "We also consider credit stability in our analysis. To reflect moderate stress conditions, we adjusted our weighted-average foreclosure frequency (WAFF) assumptions by assuming additional arrears of 16% for one- and three-year horizons. This did not result in our rating deteriorating below the maximum projected deterioration that we would associate with each relevant rating level as outlined in our credit stability criteria." This transaction is true sale German residential mortgage-backed securities (RMBS) transaction, originated and serviced by Adaxio AMC (previously GMAC-RFC Servicing). RATINGS AFFIRMED E-MAC DE 2006-I B.V. Class Rating A A (sf) B B+ (sf) C CCC (sf) D D (sf) E D (sf) =========== G R E E C E =========== GREECE: Wants To Repay Loans To Lenders Before Maturity ------------------------------------------------------- ekathimerini.com reports that Greece wants to repay loans owed to its lenders from the European Central Bank (ECB) and the International Monetary Fund before they are due in a bid to cut its debt servicing costs, its finance minister said. Greece, whose public debt amounts to 180 percent of its gross domestic product, has received loans totaling about EUR280 billion under three international bailouts since 2010, according to ekathimerini.com. Greece wants to repay loans owed to its lenders from the European Central Bank (ECB) and the International Monetary Fund before they are due in a bid to cut its debt servicing costs, its finance minister said, the report relays. Greece, whose public debt amounts to 180 percent of its gross domestic product, has received loans totaling about EUR280 billion under three international bailouts since 2010, the report relays. The ECB holds about EUR12 billion worth of Greek debt with an average maturity of four years and the IMF about EUR10 billion with an average maturity of three years, the report says. "We have plans to pay the IMF and the ECB earlier and, you know, this is a kind of restructuring because we swap expensive debt for cheap debt," Finance Minister Euclid Tsakalotos told Greek state television, the report notes. He said Athens, which emerged from its bailout in August, could use part of a substantial cash buffer it has built with its lenders to repay the ECB and the IMF debt, the report discloses. The buffer, which totals about EUR24 billion, covers Greece's needs for at least two years, the report says. Shut out of bond markets in 2010 after its debt crisis erupted, Greece has been tiptoeing back and Mr. Tsakalotos said it was in a position to decide when it would issue new debt thanks to that cash buffer, the report notes. He added there was convergence with the lenders on Greece's bid to revoke painful pension cuts mandated for next year, he added. ============= I R E L A N D ============= SEAN DUNNE: High Court Extends Bankruptcy by 12 Years ----------------------------------------------------- Mary Carolan at The Irish Times reports that Sean Dunne's Irish bankruptcy has been extended by 12 years by the High Court over "wilful and deliberate" failure to co-operate with the trustee administering his bankruptcy, including hiding or not disclosing information about certain assets. The Irish Times relates that Ms. Justice Caroline Costello also ruled that Mr. Dunne must pay EUR7,000 monthly to his Irish bankruptcy trustee to increase the assets available for his creditors. According to the report, Ms. Justice Costello said Mr. Dunne, who was in court, was a "deeply dishonest" witness who clearly told lies about a number of matters, engaged in "wholesale non- compliance" of his statutory obligations and demonstrated an "incredible" attitude. "I find it difficult to conceive of a bankrupt who could be more obstructive and less co-operative with the bankruptcy process." The breaches of his statutory duties under the Bankruptcy Act were "extremely grave, serious, persistent and deliberate," Ms. Justice Costello said. The judge had "no hesitation" in concluding Mr. Dunne failed to co-operate and failed to disclose or hidden information about assets from the official assignee Chris Lehane. A statement issued by lawyers on behalf of Mr. Dunne, after the judgment described the ruling as "extraordinary," The Irish Times says. The property developer, who was due to automatically exit bankruptcy in late July 2016, will not now until April 2028, the report notes. The statement said Mr. Dunne was "deeply disappointed and shocked" and considered the judgment failed to address adequately the very complex issues of dual bankruptcy in Ireland and the United States. He intended to lodge an appeal as soon as possible, it added, The Irish Times reports. About Sean Dunne Irish real estate developer Sean Dunne filed a liquidating Chapter 7 bankruptcy petition (Bankr. D. Conn. Case No. 13-50484) on March 30, 2013, in Bridgeport, Connecticut. Mr. Dunne says he now lives and works in Connecticut. Mr. Dunne said he filed for bankruptcy in the U.S. because Ulster Bank was applying to an Irish court for permission to commence bankruptcy proceedings there. The formal lists of property and debt Dunne filed in May 2013 in the U.S. court shows assets with a total claimed value of $55.2 million and liabilities totaling $942.2 million. The assets include $40.8 million of real estate, all in Ireland. Among the $280.2 million in secured creditors and $612.2 million in unsecured creditors, almost all are in Ireland. The Irish bankruptcy proceedings continued and in July 2013, the Irish High Court adjudicated Mr. Dunne bankrupt, according to The Irish Times. ========= I T A L Y ========= ASTALDI SPA: S&P Lowers Issuer Credit Rating to 'D' --------------------------------------------------- S&P Global Ratings lowered its issuer credit rating on Italian engineering and construction group Astaldi SpA to 'D' (default) from 'CCC-'. S&P also lowered to 'D' from 'CCC-' its issue rating on Astaldi's EUR750 million senior unsecured notes. The '4' recovery rating is unchanged, reflecting its expectation of average recovery prospects (30%-50%; rounded estimate: 30%) in the event of a payment default. The downgrade follows Astaldi's announcement on Sept. 28, 2018, that its board of directors had applied in a court in Rome for a composition with creditors "with reservation," in accordance with Italian insolvency law, and to continue operations as a going concern. S&P said, "We consider these circumstances to be tantamount to a default, because the application foresees the suspension of payments related to outstanding obligations, unless authorized by the court, during the period related to the process of composition with creditors. As such, we do not expect Astaldi to make regular payments on its outstanding debt." S&P said, "We understand that Astaldi aims to protect its assets and its stakeholders' interests, as well as to safeguard the business by seeking the continuity of its operations. The financial stress stems mainly from the group's inability to pursue its capital strenghtening plan announced in May 2018. "In our view, the delay in the sale of Astaldi's stake in its concession asset, the Third Bosporus Bridge--complicated by extreme volatility of the Turkish lira as well as Turkey's prolonged economic overheating, external leveraging, and policy drift--has accentuated the group's existing liquidity issues. This setback hampers the group's capital strengthening plan, since the refinancing depends on the progress of the disposal of the concession asset. We noted increased short-term risks of a material liquidity deficit when the group reported a substantial working capital cash drain in the first quarter of 2018. In our view, Astaldi's liquidity position had already been vulnerable to funding conditions and banks' willingness to roll over short-term lines, as well as to potential delays in cash collection or any unexpected cash outflows relating to projects." During the process of composition with creditors, Astaldi will be able to continue operations as a going concern, proceeding to work on contracts under construction and to take part in new tenders, among other business. In addition, we understand that Astaldi is in an advanced stage of a new business continuity plan, which will likely be filed in the next months to obtain the court's statement of eligibility, as well as its creditors' approval. As at June 30, 2018, Astaldi reported net financial position stood at EUR1.9 billion, and gross debt totalled EUR2.5 billion. The issuer credit rating will remain at 'D' until the payments resume according to the terms of the notes or the financial obligations have been restructured. ITALY: Raises EUR6.5 Billion in 5G Auction ------------------------------------------ Nic Fildes at The Financial Times reports that Italy's 5G auction ended on Oct. 2, raising EUR6.5 billion for the country's cash- strapped government. The FT relates that the unexpectedly fierce battle for spectrum, the airwaves that carry mobile phone signals, raged for 14 days as four networks jostled to dominate the next generation of mobile technology in the Italian market. The proceeds proved to be more than double what had been expected. While a fillip for Rome's coffers, the size of the bids has raised concerns about balance sheet pressure on the networks which are already engaged in a price war in Italy, the FT states. According to the FT, Telecom Italia said it paid EUR1.7 billion for a 80Mhz block of spectrum in the sought after 3.7Ghz range ideal for 5G. The former state owned network also acquired spectrum at higher and lower bands and spent EUR2.5 billion on spectrum for 5G. Amos Genish, chief executive of TI, said the spectrum it has acquired would allow it to extend its network leadership in its home market, the FT relates. The FT relays that Vodafone paid EUR2.4 billion for a large block of spectrum, which spanned across a number of frequencies. Nick Read, in his first week as chief executive of Vodafone, fired a warning shot at governments looking to ramp up the proceeds of spectrum sales. "It is critical that European governments avoid artificial auction constructs which fail to strike a healthy balance for the industry," the report quotes Mr. Read as saying. Iliad, the new entrant that triggered a price war, has also yet to detail how it fared, the FT cites. Wind Tre, owned by CK Hutchison, said it had paid EUR517 million for a 20Mhz block of 3.7ghz spectrum and some higher band airwaves, adds the FT. =========== L A T V I A =========== SC CITADELE: Moody's Hikes Deposit Rating to Ba1, Outlook Pos. -------------------------------------------------------------- Moody's Investors Service has upgraded the long-term deposit ratings of SC Citadele Banka in Latvia to Ba1 from Ba2 and the long-and short-term Counterparty Risk Ratings were upgraded to Baa3/P-3 from Ba1/NP. The short-term deposit ratings were affirmed at NP. The Baseline Credit Assessment and the adjusted BCA were upgraded to ba3 from b1, and the long- and short-term counterparty risk assessment were upgraded to Baa3(cr)/P-3(cr) from Ba1/NP. The outlook on the long-term bank deposits remains positive. The primary driver for upgrading Citadele Banka's ratings is the fundamental strengthening of its standalone credit assessment, reflecting: 1) strengthened governance, with a clear strategy to grow moderately and selectively, focusing on retail and small- and-medium business customers based in the Baltics; and 2) the bank's improved competitiveness and profitability which, in turn, contribute to strengthen its solvency profile, with higher capitalization and declining -- although still high -- levels of problem loans. The positive outlook reflects Moody's expectation of a continuation of these trends, with further improvements in the fundamentals of the bank in the context of a supportive operating environment, prudent governance at the bank and a strengthening of its competitiveness and market position in the Baltic countries despite increasing competition, allowing the bank to maintain its improved profitability. RATINGS RATIONALE BASELINE CREDIT ASSESSMENT The primary drivers for the upgrade of Citadele Banka's BCA to ba3 are twofold. First, the bank's strengthened governance and risk controls, together with its strategy to extend credits selectively to consumers and SME's in its home market, provides a robust base for the bank to remain competitive and profitable over time. Citadele Banka had market share in terms of assets of 9% in Latvia, 2% in Lithuania and 1% in Estonia at year-end 2017. The prudent approach to exit non-resident related business, which have posed money laundering risks and caused reputational damage at some banks in the region, will reduce tail risks relating to conduct. Second, the bank's strategy has resulted in a noticeable improvement in its recurring profitability level, with a return on tangible banking assets of 1.18% during the first six months of 2018 from 0.91% for the first six months of 2017. Taking advantage of its improved profitability, the bank has retained a substantial amount of earnings to boost its capital base, with transitional CET1 of 14.6% at end-June 2018 from 13.8% in June 2017 and 10.7% in June 2015, and it took various steps to reduce its stock of problem loans to gross loans, at 8.75% at end-June 2018, which nevertheless remains slightly higher by comparison with similarly rated peers. DEPOSIT RATINGS The Ba1 deposit ratings reflect the upgraded BCA of ba3, while its Advanced Loss Given Failure approach and government support assumptions remain unchanged. Accordingly, the upgrade of Citadele Banka's long-term deposit rating reflects: (1) the bank's BCA and adjusted BCA of ba3; and (2) Moody's Advance Loss- Given Failure (LGF) analysis, whereby the large volumes of deposits and subordinated liabilities protecting depositors in case of failure results in two notches of uplift. COUNTERPARTY RISK RATINGS As part of the rating action, Moody's upgraded Citadele Banka's long-term Counterparty Risk ratings (CRR) to Baa3 from Ba1, three notches above the BCA of ba3. The short-term CRR was upgraded to Prime-3 from NP. The CRR is driven by the bank's adjusted BCA, and by the large cushion of obligations protecting unsecured counterparty obligations in case of failure, resulting in three notches as indicated by LGF. COUNTERPARTY RISK ASSESSMENT The CRA of Baa3(cr)/P-3(cr) reflects the adjusted BCA of ba3, and three notches of uplift as indicated by LGF. OUTLOOK The outlook on Citadele Banka's long-term deposit ratings remains positive, reflecting Moody's expectations that the strategic direction of the bank and the continued focus on moderate and selective growth will lead to a further strengthening of its credit profile. The positive outlook also reflects Moody's view that the bank will continue to maintain or even increase its market shares despite growing competition for domestic customers in the region, allowing it to maintain its improved profitability at current levels and further supporting internal capital retention. FACTORS THAT COULD LEAD TO AN UPGRADE Citadele Banka's deposit ratings could be upgraded if the bank reports sustained improvements in asset risk while maintaining current profitability levels, strong capital buffers and a sound funding profile. Evidence of a consistent implementation of its prudent strategy despite increasing competition would also be required for an upgrade. FACTORS THAT COULD LEAD TO A DOWNGRADE Citadele Banka's deposit ratings could be downgraded if the bank changes its strategy towards riskier markets and customer segments, or if the bank's funding profile was at risk of being significantly affected by a rise in negative sentiments due to money laundering concerns in the Baltic banking systems more generally. LIST OF AFFECTED RATINGS Issuer: SC Citadele Banka Upgrades: Baseline Credit Assessment, upgraded to ba3 from b1 Adjusted Baseline Credit Assessment, upgraded to ba3 from b1 Long-term Counterparty Risk Assessment, upgraded to Baa3(cr) from Ba1(cr) Short-term Counterparty Risk Assessment, upgraded to P-3(cr) from NP(cr) Long-term Counterparty Risk Rating, upgraded to Baa3 from Ba1 Short-term Counterparty Risk Rating, upgraded to P-3 from NP Long-term Bank Deposits, upgraded to Ba1 Positive from Ba2 Positive Affirmations: Short-term Bank Deposits, affirmed NP Outlook Action: Outlook remains Positive ============= M O L D O V A ============= AIR MOLDOVA: Sold to Romanian Group for $71 Million --------------------------------------------------- Financial Post reports that the Moldovan government says loss- making national airline Air Moldova has been sold to a Romanian group for 1.2 billion Moldovan lei (US$71 million.) The Public Property Agency said that Civil Aviation Group paid 50 million lei (US$2.96 million) to Moldova's state budget, according to Financial Post. The remaining money from the purchase will go toward covering debts that were sold to prevent the airline's bankruptcy, the report relays. Air Moldova was founded in 1983 and has flights to 33 destinations. The group said it would keep Air Moldova's status as the national airline. The new owners also plan to launch seven new routes next year and four more in 2020, the report discloses. The Civil Aviation Group includes Romanian low-cost airline Blue Air and two Moldovan associates, the report says. One is co-owner of AMS Airlines, an air cargo company in Georgia, the report adds. =========== R U S S I A =========== ENNIA CARIBE: Davis Polk Advises Foreign Representative of Firm --------------------------------------------------------------- Davis Polk advised the foreign representative of ENNIA Caribe Holding N.V. and certain of its subsidiaries in connection with petitioning the U.S. Bankruptcy Court for the Southern District of New York for recognition of ENNIA's restructuring proceedings in Curacao in the United States under Chapter 15 of the U.S. Bankruptcy Code. ENNIA is an insurance company in Curacao and St. Maarten that offers a wide variety of products, including life insurance, casualty insurance, health insurance and pensions. ENNIA is regarded as a systemically important insurer in Curacao and St. Maarten because of its scale relative to the size of those countries and the degree to which the people of Curacao and St. Maarten rely on pensions that ENNIA provides to supplement a limited government pension scheme. The Davis Polk restructuring team included partner Timothy Graulich and associates Adam L. Shpeen, Dylan A. Consla and Mary A. Prager. The litigation team included partner James I. McClammy and associate Andrew J. Pearlman. All members of the Davis Polk team are based in the New York office. =========== R U S S I A =========== ALMAZERGIENBANK: Fitch Affirms B+ LT IDR, Outlook Stable -------------------------------------------------------- Fitch Ratings has affirmed Almazergienbank's (AEB) Long-Term Issuer Default Ratings (IDRs) at 'B+' and Viability Rating (VR) at 'b-' and removed them from Rating Watch Negative (RWN). The Outlook is Stable. KEY RATING DRIVERS IDRS, VR AND SUPPORT RATING The removal of AEB's ratings from RWN and affirmation reflects the completion in August 2018 of the provision of RUB2.7 billion capital support (10% of regulatory RWAs at end-8M18) by the ultimate majority shareholder, Russia's Republic of Sakha (Yakutia) (BBB-/Stable). The support package included a RUB0.9 billion common equity injection, RUB0.5 billion additional Tier 1 (AT1) perpetual debt placement and RUB1.3 billion buy-out of risky loans, mostly issued to Sakha-controlled entities. This enabled AEB to fully reserve risky credit exposures, which had been identified by the Central Bank of Russia (CBR) during its review of AEB in 2017. The delayed recapitalisation was previously agreed with the regulator. The affirmation of AEB's IDRs at 'B+' and Support Rating at '4' reflects Fitch's view that AEB could be supported by Sakha, in case of need, given (i) the regional authorities' majority ownership (91% ultimate stake); and (ii) the region's operational and strategic control over the bank (the local administration sits on the bank's supervisory and management boards). At the same time, AEB's Long-Term IDRs remain four notches below those of Sakha, reflecting (i) AEB's limited strategic importance for the region, in Fitch's view; and (ii) the low flexibility of the local authorities to provide extraordinary support, which has resulted in the provision of capital support to AEB being delayed by one year. The affirmation of AEB's VR reflects reduced asset quality risks due to provisioning/disposal of risky assets as a result of received shareholder support. However, asset quality and hence capitalisation remain vulnerable due to still sizable volumes of unreserved potentially risky assets and generally high borrower and industry concentrations (including construction). Earnings are only modest. Positively, the bank's liquidity and funding profile remain adequate and stable. Net of the loans bought out by the shareholder in August 2018, impaired (Stage 3) loans at end-1H18 were a substantial 20% of total loans and 74% covered by specific reserves. Stage 2 exposures, which are not yet impaired, but imply a significant increase in credit risk, made up an additional 18% of loans and were 16% reserved. As a moderate mitigant, Fitch considers the fact that most Stage 2 borrowers are involved in construction of a number of social objects under essentially one infrastructure programme. However, this implies significant concentration risk and dependence on regional authorities' commitment to pay for them, in Fitch's view. The bank's Fitch Core Capital (FCC) ratio was a modest 6.5% but is estimated to have increased to a moderate 10% after the common equity injection in August 2018. In addition, there is also AT1 perpetual debt held by the shareholder (RUB0.8 billion, or 3% of RWAs), which could be potentially converted into common equity, if needed. The regulatory ratios at end-8M18 had an adequate 2pp- 3pp headroom above the mandatory minimums, including an additional 1.875% conservation buffer (Core Tier 1 ratio at 8.7% against 6.375% minimum; Tier 1 ratio at 11.8% against 7.875%; and total capital ratio at 12.5% against 9.875%). However, Fitch estimates the net amount of Stage 3 and Stage 2 exposures amounted to 1.4x of post-recapitalisation FCC. This means that capitalisation is potentially vulnerable, especially considering the weak performance. The bank's core pre-impairment operating profit (net of one-offs) reduced to just 1% of average gross loans in 1H18 from below 3% in 2017. The net result was predictably deeply negative at around 20% ROAE in 2017-1H18 due to high provisioning charges. According to AEB's management, the bank's pre-impairment profit in 2018 is forecast to be higher at 2.5% of average gross loans due to additional interest income linked to deferred budget payments at year-end. AEB is mainly deposit-funded (92% of liabilities at end-1H18), but concentration is low, with around 80% being granular retail accounts. The cushion of highly liquid assets covered customer accounts reasonably by 24% at end-August 2018, while liquidity risks are additionally mitigated by rather sticky customer funding. RATING SENSITIVITIES IDRS AND SUPPORT RATING Upside potential for AEB's IDRs is limited given the support notching considerations. The bank's support-driven ratings could be downgraded if (i) Sakha is downgraded; or (ii) the propensity of the parent to provide support diminishes. VR The bank's VR could be upgraded if the bank's asset quality and capitalisation further strengthen significantly. Downward pressure on AEB's VR could stem from a marked deterioration in asset quality leading to capital and profitability erosion, in the absence of parental support. The rating actions are as follows: Long-Term Foreign- and Local-Currency IDRs: affirmed at 'B+'; off RWN; Outlooks Stable Short-Term Foreign-Currency IDR: affirmed at 'B'; off RWN Viability Rating: affirmed at 'b-'; off RWN Support Rating: affirmed at '4'; off RWN ========= S P A I N ========= ABANCA CORP: Fitch Rates EUR250MM Perpetual AT1 Notes 'B' --------------------------------------------------------- Fitch Ratings has assigned ABANCA Corporacion Bancaria, S.A.'s (Abanca, BB+/Positive/bb+) issue of EUR250 million perpetual non- cumulative additional Tier 1 (AT1) capital notes a final rating of 'B'. The final rating is in line with the expected rating Fitch assigned to the notes on September 14, 2018. KEY RATING DRIVERS The notes are CRD IV-compliant perpetual, deeply subordinated, fixed-rate resettable AT1 debt securities. The notes have fully discretionary non-cumulative interest payments and are subject to partial or full write-down if any of the bank's standalone or consolidated, or ABANCA Holding Financiero, S.A's (AHF; topco) common equity Tier 1 (CET1) ratios fall below 5.125%. The principal write-down can be reversed and written up at full discretion of the issuer if a positive consolidated net income is recorded. The rating assigned to the securities is four notches below Abanca's 'bb+' Viability Rating (VR), in accordance with Fitch's criteria for assigning ratings to hybrid instruments. This notching comprises two notches for loss severity in light of the notes' deep subordination, and two notches for additional non- performance risk relative to the VR given fully discretionary coupons and a high write-down trigger. Fitch expects the non-payment of interest on this instrument will occur before any of the bank, the group, or the topco breaches the notes' 5.125% CET1 write-down trigger, most probably when Abanca's or AHF's capital ratios approach their supervisory review and evaluation process requirement set at 11.375% for 2018. Abanca's consolidated phased-in CET1 ratio was 14.66% at end-June 2018, providing the bank with a buffer from the write- down trigger. Given this, and Fitch's expectations for each entity's capital ratios, Fitch has limited the notching for non- performance to two notches. RATING SENSITIVITIES The AT1 notes' rating is primarily sensitive to changes in Abanca's VR. The rating is also sensitive to changes in their notching from Abanca's VR, which could arise if Fitch changes its assessment of the probability of their non-performance relative to the risk captured in the VR. This may reflect a change in capital management in the group or an unexpected shift in regulatory buffer requirements, for example. Under Fitch's criteria, a one-notch upgrade of the AT1 instrument would be conditional upon a two-notch upgrade of Abanca's VR. =========================== U N I T E D K I N G D O M =========================== AVOCET MINING: Warns of Break-Up as Restructure Talks Continue -------------------------------------------------------------- Reuters reports that shares of Avocet Mining dropped more than 17 percent on Oct. 1 after warning that it could be broken up as the struggling gold miner continues talks with its largest shareholder, Elliott Management, to restructure its debt. Reuters relates that the company, which debuted on the London Stock Exchange in 2007 at 1,200 pence a share, has lost nearly all of its value and was trading at 9.9 pence. The stock was the largest percentage loser on the exchange, the report says. According to Reuters, the company said that it has sufficient funds to operate for the next 12 months provided that the capital and interest on Elliott's loan will not have to be paid in the period. "A possible outcome of these discussions could be that the Avocet Group is broken up further in an orderly manner and eventually wound up," Avocet said in its statement. The company was not immediately available for a comment when Reuters sought further details. Avocet has relied primarily on loans from Elliott since 2014 due to cash flow shortages resulting from a fall in gold prices and lower production at its Inata mine in Burkina Faso. It sold its assets in Burkina Faso for $5 million to Ghana-based Balaji Group last year, Reuters says. "It will be necessary to restructure these loans in order to put the company on a sustainable financial footing", Avocet said, adding that the interest burden of the Elliott loans of more than $200,000 per month cannot currently be met out of its own funds, Reuters relays. It owes Elliott affiliate Manchester Securities Corp about $30.5 million as of Sept. 30, Reuters discloses. According to Reuters, Avocet said that if Elliott requests the repayment of loans, the company would be obliged to seek alternative funding, calling it a "considerable challenge". However, it added that it does not believe that Elliott currently intends to demand repayment of the loans in the next 12 months. Avocet is relying on the success of its Tri-K project in Guinea where it completed a feasibility study indicating about 1.1 million ounces of gold, Reuters states. However, in order to start mining activities, the company must raise more funds, which is likely to add to its existing debt. Reuters adds that the company also said on Oct. 1 that its loss narrowed to $1.88 million in the six months ended June 30 from a $5.48 million loss last year. The company did not post any revenue, Reuters notes. Headquartered in London, the United Kingdom, Avocet Mining plc operates as a gold mining and exploration company in West Africa. It operates through UK, Burkina Faso, and Guinea segments. The company primarily holds a 90 per cent interest in the Inata gold mine located in the Belahouro district of northern Burkina Faso; and five exploration permits cover approximately 1,660 km2 surrounding the Inata gold mine in the broader Belahouro region. It also holds interest in the Tri-K project that is located in the northeast Guinea. SOHO HOUSE: Remains Lossmaking Despite Faster Revenue Growth ------------------------------------------------------------ Leila Abboud at The Financial Times reports that Soho House, the network of private members' clubs, has achieved faster revenue growth as it opened new venues such as the Ned in London, but the privately held company remains lossmaking as it shoulders the costs of an ambitious expansion. According to the FT, Nick Jones, the founder, said the company was aiming to open four to five houses a year, with its first Asian outposts soon to launch in Mumbai and Hong Kong. In Europe, new venues are being planned in Paris, Milan, Rome and Lisbon, and in Austin and Nashville in the US. "We are well on our way to becoming the first global club," said the entrepreneur, who opened the first Soho House in central London in 1995, the FT relays. Soho House's target market is people working in creative industries, and membership fees in the UK run from GBP750 to GBP1,650. The clubs have become known as celebrity hang-outs: Prince Harry and Meghan Markle attended the recent opening of Soho House in Amsterdam in July. Total turnover for the calendar year 2017 rose 23 per cent year on year to GBP360.1 million, the company said on Oct. 2. The ranks of paying members also rose 18 per cent to 71,000, and 51,000 were on waiting lists for admission. The FT relates that Peter McPhee, chief financial officer, said the company made a loss before tax of GBP60 million last year, roughly flat from a year before, which he ascribed to Soho House being in "growth mode". It reported adjusted earnings before interest, tax, depreciation and amortisation of GBP50.5 million, up from GBP31.7 million a year earlier, the FT discloses. Asked whether an initial public offering was being considered, as had been reported earlier this year, Mr. Jones said it was still a possibility although nothing was immediately in the works, according to the FT. "We're still looking at options on that. We don't have to do anything, and aren't looking for new investors at the moment." The FT notes that as it expanded in recent years, there were concerns Soho House was taking on too much debt and spending rapidly to open up new clubs. That led to ratings downgrades by Standard & Poor's and Moody's in 2016 when the debt was still publicly traded. In 2017, Soho House signed a GBP275 million refinancing agreement with Permira Debt Managers for a secured loan that will mature over five years, with the option of a further GBP100 million of potential financing. The debt was taken private and now stands at GBP325 million, Mr. McPhee, as cited by the FT, said. According to the FT, Mr Jones said he felt very comfortable with the level of debt. "Soho House is less of a hospitality business and more of a subscription business," the FT quotes Mr. Jones as saying. "Growth comes from adding houses and adding members, and there is predictability when retention rates are above 95 per cent." The FT says that while the core business model is not new - social clubs and country clubs have been around for centuries - Soho House membership tends to be skewed towards younger and more international clients. The venues usually feature hotel rooms, as well as restaurants and bars, so serve the globe-trotting set in a way that traditional clubs cannot. "Our members love new houses since it gives them new places to visit," the FT quotes Mr. Jones as saying. "Each time we open in a new city it brings a new flavour to the whole community." Soho House & Co Limited is a fully integrated hospitality company that operates exclusive, private members' clubs (or Houses) as well as public restaurants, workspaces, hotels and spas. Membership targets professionals in the creative industries and access to Houses is reserved exclusively for members and their guests. Soho House is owned by the consortium of The Yucaipa Companies, Richard Caring, a British entrepreneur who owns several retail and fashion oriented businesses, and Soho House founder and CEO Nick Jones. TRITON UK: Fitch Affirms 'BB-' Long-Term Issuer Default Rating -------------------------------------------------------------- Fitch Ratings has affirmed Triton UK Midco Limited's (Triton) 'BB-' Long-Term Issuer Default Rating (IDR) following the launch of revised financing associated with the acquisition of Cisco Systems, Inc.'s. Service Provider Video Software and Solutions Business. In addition, Fitch has assigned a first-time rating to Triton Solar US Acquisition Co as the new borrower, and has assigned 'BB'/'RR2' and 'BB-'/'RR4' issue level ratings to the first lien and second lien senior secured facilities, respectively. The rating affirmation and Outlook reflect Triton's still conservative capitalization, which is now expected to have modestly lower pro forma total gross leverage at close, a shorter first lien maturity, increased amortization and improved credit protection terms, albeit offset by higher anticipated interest expense. Fitch maintains its expectation of superior recovery, associated with an 'RR2' recovery rating and one-notch uplift from the borrower's Long-Term IDR, on the first lien facility under the revised capital structure. This is despite the $110 million reduction in first lien debt to reflect still anticipated uncertainties surrounding a potential stress scenario and recovery values. Similarly, Fitch's assignment of a 'RR4' recovery rating and associated zero-notch uplift from the borrower's Long-Term IDR reflects its relative positioning in the revised capital structure and average anticipated recoveries. KEY RATING DRIVERS Leverage Profile: Triton is conservatively capitalized, particularly for a financial sponsor transaction. Pro forma leverage at close is now expected to be 2.9x. Fitch believes leverage will now decline to 2.4x (from 2.6x originally) by year- end 2020 (end July) and 1.8x (from 2.1x) by 2021, achieved mainly through margin expansion. The sponsor has stated it does not intend to extract dividends. This is a somewhat reasonable assumption given the sponsor's desire to invest in growth initiatives, mainly around the cloud DVR and end-to-end cloud platform as well as streaming piracy protection and targeting advertising. Fitch's technology universe median leverage in the 'B' category ranges from approximately 5.5x to 6.5x while the 'BB-' median leverage is 2.9x. Pay-TV Decline: The business's conservative capital structure is clearly a function of negative secular trends in the pay-TV universe where the subscriber base is expected to contract low single digits in the U.S. and be flat to modestly up in Europe. However, developing markets are still expanding and Triton has exposure to many, including China and India, which are expected to grow in the single digits. Additionally, pay-TV operators in Triton's largest customer's markets are increasingly offering gateway set top boxes that require just one smart card (Triton's main security product) per household. Overall, Fitch sees -4% CAGR smart card declines across Triton's four largest customers. Customer Concentration: Triton's four largest customers represent about 70% of its Triton segment revenue and about half of total revenue. Three customers, Sky plc (BBB-/Rating Watch Positive), AT&T Inc. (A-/Stable), and China, each individually represented more than 10% of total revenue in FY17. Together with its limited end-market diversification, Triton's diversification factor would be consistent with a single 'b' rating under Fitch's Ratings Navigator. Offsetting this, Triton's largest customer is making a 20% equity investment, and rip and replace of Triton's technology for its largest customers would be economically if not technically unfeasible. Carve-Out Rationale: There is strategic merit to carving out Triton from Cisco since discounting for Cisco's largest switch/router carrier enterprise customers that were also Triton customers was highly prevalent. Control over sales strategy, channel relationships, and the product roadmap will yield strategic benefit to Triton. R&D cost rationalization potential is significant with FY17 expenditure of $195 million and brought down to around $100 million over the rating horizon. Standalone facility within cost of goods sold and R&D costs compared to facility allocations from Cisco represent approximately 20% of LTM EBITDA net of standalone SG&A costs. The sponsor is experienced with technology carve-outs and is quite familiar with the business, having owned Triton (51% majority stake) with News Corporation from 2009 until the Cisco acquisition. Fitch believes cost rationalization will enable Triton to roughly double its Operating EBITDA margin by FY22, consistent with its historical margin profile, despite a 5% to 6% CAGR top line decline. Financial Flexibility: Fitch believes Triton's financial flexibility makes it resilient to the fast decline in pay-TV. Under a stress scenario where its core business declines at double the rate contemplated in the ratings case and margins expansion is just five points (limited to restructuring and standalone efficiencies at the outset) owing to pricing pressure and reduced cost absorption, in addition to limited traction in cloud efforts, credit protection metrics are degraded but not indicative of an inability to service its financial commitments. This ability to weather deterioration in the business is a key differentiator among the 'BB' and 'B' rating categories. Under this scenario, Fitch estimates leverage would rise to slightly above 4x over the ratings horizon but liquidity in the form of readily available cash would be on the order of $15 to $30 million while Triton would have access to its $50 million revolver. Additionally, Fitch believes Triton would still be able to maintain positive FCF. DERIVATION SUMMARY NDS is conservatively capitalized for a financial sponsor-led acquisition reflecting in part the secular challenges in the pay- TV market in which it operates. However, NDS is a market leader with a #1 or #2 position in its product categories. The company has limited diversification with predominantly all of its business derived from video content protection in the pay-TV space, which is in decline. Moreover, NDS has significant customer concentration with half of its revenues derived from a handful of pay-TV operators. While these features are limiting to the rating, it is offset in part by the fact that its largest customer is co-investing in the carve-out transaction, and the basis for switching away from NDS's offering is uneconomic for its largest customers. NDS has some growth prospects particularly in its cloud products and in the eventual shift by pay-TV operators to a hybrid/IP distribution model as well as anti- piracy technology. While this will potentially bolster the company's growth prospects it may expose it to direct competition with very large, well-capitalized technology players who already figure prominently in the IP space, to the extent this becomes a major threat to traditional pay-TV models. NDS's rating benefits from a degree of financial flexibility, afforded by its conservative capital structure and Fitch estimates the company would withstand a sharp acceleration in the rate of pay-TV subscriber declines without significant impairment to its credit protection metrics and be well positioned to meet its financial obligations. Fitch established a strong linkage between Triton UK Midco Limited as holdings and Triton Solar US Acquisition Co, as borrower. No country ceiling constraint or operating influence factored into the ratings. KEY ASSUMPTIONS Fitch's Key Assumptions Within Its Rating Case for the Issuer - Mid-single digit CAGR '17-'23 decline in core video security business reflecting approximately 4% weighted average subscriber decline across largest customers and 2% to 3% weighted decline in total. - Mid-teens CAGR decline in middleware and services; mid-teens CAGR increase in cloud DVR and cloud platform products revenue. - Operating margin expansion through an approximately 10 point improvement in gross margin, five point reduction in R&D as % of revenue, and a one point improvement in SG&A reflecting net standalone efficiencies and rationalization efforts. - No dividends, acquisitions or divestitures over the ratings horizon; debt reduction limited to required amortization and excess cash flow payments to the extent applicable. - Capex of 2.5% to 3% of revenue; 26% cash tax rate. RATING SENSITIVITIES Developments That May, Individually or Collectively, Lead to Positive Rating Action - Total debt with equity credit sustained below 2x; - Sustained positive revenue growth; - FCF margin sustained above 10%; - Material voluntary debt reduction. Developments That May, Individually or Collectively, Lead to Negative Rating Action - Total debt with equity credit sustained above 3x; - Sustained revenue declines exceeding 5% annually; - Sustained negative FCF; - Dividends or leveraged acquisitions. LIQUIDITY Triton is now expected to have approximately $85 million in cash on day one, up from approximately $70 million. Fitch assumes $20 million reserved for vesting RSUs is not readily available. Triton will have access to a $50 million revolver that is expected to be undrawn at close and will mature in five years. Fitch expects Triton to generate positive FCF of $20 million in FY20 increasing to approximately $100 million in FY22. Under its revised capital structure, Triton's $305 million first lien senior secured term loan will mature six years from closing and require increased amortization payments. The non-amortizing $100 million second lien loan will mature in FY25. Under the revised credit agreement terms, Fitch estimates Triton will make excess cash flow payments over the course of FY20-FY22. FULL LIST OF RATING ACTIONS Fitch has affirmed the following rating: Triton UK Midco Limited - Long-Term Issuer Default Rating at 'BB-'. Fitch has assigned the following ratings: Triton Solar US Acquisition Co - Long-Term Issuer Default Rating at 'BB-'; - First Lien Senior Secured Facilities at 'BB'/'RR2'; - Second Lien Senior Secured Facility 'BB-'/'RR4'. The Rating Outlook is Stable. Fitch has withdrawn the following ratings: Triton UK Midco Limited - Senior Secured Credit Facilities 'BB'/'RR2'; NDS Ltd. - Long-Term IDR 'BB-'. TURNSTONE MIDCO: Moody's Cuts CFR to Caa1, Outlook Stable --------------------------------------------------------- Moody's Investors Service has downgraded the Corporate Family Rating and Probability of Default rating of Turnstone Midco 2 Limited to Caa1 and Caa1-PD from B3 and B3-PD, respectively. The rating action primarily reflects the following drivers: - Moody's adjusted metrics remaining outside of B3 guidance for the next 24 months, despite anticipated gradual deleveraging, leading to concerns about sustainability of capital structure ahead of the notes maturity in August 2022; - Free cash flow turning negative in fiscal year 2019, ending March 2019 and likely in 2020 stemming from unwinding of high accrual balances due to NHS for previous years' under- delivery under the contracts; offset by - Adequate liquidity profile although with an increased reliance on drawings under Revolving Credit Facility (RCF) Concurrently, Moody's has downgraded to Caa1 from B3 the ratings of the GBP275 million Senior Secured Fixed Rate Notes and the GBP150 million Senior Secured Floating Rate Notes (together the 'Senior Secured Notes'), due 2022, and to Caa3 from Caa2 the rating of the GBP130 million Second Lien Notes, due 2023, all of which are issued by IDH Finance plc. The outlook on all ratings is stable. RATINGS RATIONALE The rating action is driven by weak financial metrics of the company, particularly high Moody's adjusted leverage of around 9x which Moody's expects to remain above 7.5x in the next 24 months, despite slow deleveraging expectation. Previously, Moody's downward rating pressure guidance included Moody's adjusted debt/EBITDA being sustained at above 7.5x for a prolonged period of time. Financial performance over the last three years has been negatively affected by a continuing contraction in Unit of Dental Activity ('UDA') delivery rates that has in part resulted from a market shortage in dental clinicians. Following increased recruitment and cost control measures the like-for-like UDA per working day declined by 1.3% during Q1 of fiscal 2019 from 4.6% shortfall during Q1 of fiscal 2018, but group wide UDA delivery remains well below the required contractual minimum of 96%. Moody's expects the pace of recovery to remain slow, potentially hindered by Brexit-related recruitment issues, and leverage to remain above 7.5x during the next two years. Additionally, free cash flow is expected to turn negative in fiscal 2019 because of a reduction in accruals due to the NHS (at GBP57m at fiscal 2018 year-end) resulting from the movement in working capital under NHS contracts. IDH's Caa1 CFR reflects: 1) its relatively small size compared with other Moody's rated healthcare companies, although with the leading position in the fragmented UK dental market; 2) challenges which require turnaround in financial metrics including continued recruitment effort while maintaining quality, productivity improvement and cost control; 3) high financial leverage at 9.0x LTM June 2018 which Moody's expect to remain above 7.5x despite gradual deleveraging during the next two years leading to concerns about sustainability of capital structure, and 4) negative free cash flow expected in fiscal 2019. The CFR also factors in: 1) IDH's scale and good revenue visibility, with around 94% of NHS contracts being 'evergreen' (c.54% of consolidated revenues in fiscal 2018), subject to meeting the targets (which IDH underperformed for four consecutive years on an aggregate basis); 2) the Company's limited underlying working capital requirements and predictable cash flows, as one twelfth of NHS funding is received at the start of each month; 3) first signs of operational improvement demonstrated in Q1 2019; 4) higher growth potential in privately funded revenue, albeit it also increases exposure to economic cycles and competition. Moody's expects that IDH will maintain adequate liquidity over the next 12-18 months, despite negative free cash flow expected in fiscal 2019. Moody's expect the free cash flow to be negative due to an obligation to repay to NHS the money for the previous year contracts underperformance combined with some expected contract performance improvement, which means that IDH will pay down a larger accrual for the previous year than they accrue in the current year. Given limited cash on balance sheet typically held by the company the shortfall is expected to be financed by drawings under the Revolving Credit Facility (RCF). The company's liquidity profile is supported by GBP95million of availability under its GBP100 million RCF maturing in 2022 and around GBP15 million cash as of June 30, 2018. The Company's only debt obligations are the GBP555 million Notes maturing in 2022 and 2023. The RCF contains one financial covenant for total drawings under the RCF not to exceed 2.3x EBITDA, tested when RCF is more than 35% drawn. Moody's expects headroom under this covenant to remain significant. RATIONALE FOR THE STABLE OUTLOOK The stable outlook assumes that financial metrics will continue to improve gradually in line with underlying operating performance, primarily visible from fiscal 2020 onwards. WHAT COULD CHANGE THE RATING UP/DOWN Positive ratings pressure could be exerted if Moody's adjusted leverage reduces towards 7.0x, with a sustained recovery in the delivery of UDAs and margin performance being evidenced, an adequate liquidity profile being maintained and free cash flow returning to positive. Conversely, negative pressure on the ratings would likely occur if the criteria for the stable outlook were not to be met, or negative free cash flow generation were to be worse than expected and / or IDH's liquidity profile were to weaken materially. The principal methodology used in these ratings was Business and Consumer Service Industry published in October 2016. Turnstone Midco 2 Limited, the parent company for IDH, is the largest provider of NHS (UK National Health Service) dental services in the fragmented UK dental market, operating 643 dental practices in this jurisdiction as of March 31, 2018. For fiscal 2018, IDH generated GBP580.5 million of revenues. ********* 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. 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