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        T R O U B L E D   C O M P A N Y   R E P O R T E R

                           E U R O P E

          Wednesday, October 24, 2018, Vol. 19, No. 211


                            Headlines


A Z E R B A I J A N

BANK RESPUBLIKA: Moody's Alters Outlook on Caa1 Rating to Pos.


I R E L A N D

DUBLIN BAY 2018-MA1: Moody's Assigns (P)B3 Rating to Cl. F Notes
RMAC PLC 2: S&P Assigns CCC Rating on $6.4MM Class X Certs
TABERNA EUROPE I: S&P Affirms CC Ratings on 4 Note Classes


I T A L Y

* ITALY: Coalition Leaders Vow to Stick with Spending Plans


L U X E M B O U R G

MILLICOM INT'L: Fitch Rates $500MM Senior Unsecured Notes BB+


N O R W A Y

SOLSTAD OFFSHORE: Seeks Debt Negotiations with Creditors


P O R T U G A L

MADEIRA: DBRS Confirms BB Long-Term Issuer Rating


R U S S I A

EAST-SIBERIAN TRANSPORT: Put on Provisional Administration
MARI EL: Fitch Affirms BB Long-Term IDRs, Outlook Stable
UDMURTIA: Fitch Withdraws B+ Senior Unsecured Debt Ratings


S P A I N

CATALONIA: Fitch Affirms BB Long-Term IDRs, Outlook Stable
GENERALITAT DE CATALUNYA: Moody's Affirms Ba3 Issuer Ratings


U K R A I N E

KERNEL HOLDING: Fitch Affirms B+ LT IDR, Outlook Stable
UKRAINE: S&P Affirms 'B-/B' Sovereign Credit Ratings


U N I T E D   K I N G D O M

DEBENHAMS PLC: Mulls Closure of 55 Stores to Cut Costs
NEW LOOK: Set to Close 120 Shops in China by End of 2018
TURBO FINANCE 8: Moody's Rates Class E Notes (P)B3 (sf)
NEWDAY PARTNERSHIP 2017-1: DBRS Confirms B Rating on Cl. F Notes
VUE INTERNATIONAL: S&P Alters Outlook to Neg. & Affirms 'B' ICR


                            *********



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A Z E R B A I J A N
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BANK RESPUBLIKA: Moody's Alters Outlook on Caa1 Rating to Pos.
--------------------------------------------------------------
Moody's Investors Service affirmed the Caa1 long-term local and
foreign currency deposit ratings of Azerbaijan-based Joint Stock
Commercial Bank Respublika (BR or Bank Respublika) and changed
the outlook to positive from negative. Concurrently, the rating
agency affirmed BR's Baseline Credit Assessment and adjusted BCA
of caa1, the bank's long-term and short-term local and foreign
currency Counterparty Risk Ratings of B3/Not Prime, as well as
its Not Prime short-term local and foreign currency deposit
ratings. BR's long-term and short-term Counterparty Risk
Assessments (CR Assessments) of B3(cr)/Not Prime(cr) were also
affirmed.

RATINGS RATIONALE

The change in outlook on Bank Respublika's ratings' reflects
improvement in the bank's solvency metrics, particularly its
capital adequacy, beyond the rating agency's expectations.
Furthermore, now with resumed economic growth, decelerating
inflation and stable local currency exchange rate, the rating
agency expects BR's asset quality and profitability to improve
gradually in the next 12 to 18 months owing to the improved
quality of the bank's new loans compared with its old loan
portfolio, and recovering pre-provision income owing to increased
business volumes since Q4 2017. Overall, Moody's now expects Bank
Respublika's  financial metrics to improve further in the absence
of external shocks.

In Q1 2018, the controlling shareholder provided additional share
capital of AZN10 million, which improved the bank's tangible
common equity (TCE) to risk-weighted assets (RWA) ratio by more
than 400 basis points, according to Moody's estimates. This was
followed by Deutsche Investitions- und Entwicklungsgesellschaft's
(DEG) equity injection of AZN6 million in Q3 2018. As a result of
the shareholders' support, the bank's TCE has more than doubled
in absolute terms since end of 2017, while Bank Respublika has
become fully compliant with regulatory capital requirements since
September 1, 2018.

Under local accounts BR posted AZN1.2 million pre-tax income over
the first nine months of 2018, compared with a pre-tax loss of
AZN10.5 million for 2017. Profitability improvement has been
largely driven by steady growth of net interest income (NII)
owing to loan book expansion since the beginning of 2018. Moody's
expects further growth of NII as well as non-interest income amid
lower provisioning charges in 2019. As a consequence, BR will
restore its internal capital generation capacity and
profitability.

The asset quality improvement will be driven by both amortization
of the old portfolio and the increasing share of new lending
under tighter underwriting standards, as well as loan book
expansion through 2018-19. The resumption in real GDP growth in
Azerbaijan, projected at 2% in 2018 and 3% in 2019, along with
lower inflation and a stable exchange rate (a USD/AZN rate of
around 1.7), should underpin the creditworthiness of the
borrowers, in particular households and small and medium
enterprises (SME), the key segments Bank Respublika is focusing
on.

Bank Respublika's funding and liquidity positions will remain
stable, supported by reliance on its customer deposit base, the
bank's access to long-term funding from a diversified number of
international financial institutions, as well as its ample
liquidity cushion exceeding 50% of total assets.

WHAT COULD MOVE THE RATINGS UP / DOWN

Moody's could upgrade Bank Respublika's BCA and long-term bank
deposit ratings in the next 12 to 18 months if the bank's
profitability grew in line with or above the rating agency's
expectations, and the business expansion were matched by a
similar or higher pace of growth of the bank's capital, while
asset quality steadily improved despite the seasoning of its
rapidly expanded loan book.

Bank Respublika's BCA and long-term deposit ratings could be
downgraded, or the outlook on its long-term bank deposit ratings
might be revised to stable from positive, if the bank failed to
show sustainable profitability and internal capital generation,
in contrast with Moody's current expectations.

LIST OF AFFECTED RATINGS

Issuer: Joint Stock Commercial Bank Respublika

Affirmations:

Long-term Counterparty Risk Rating, affirmed B3

Short-term Counterparty Risk Rating, affirmed NP

Long-term Bank Deposits, affirmed Caa1, outlook changed to
positive from negative

Short-term Bank Deposits, affirmed NP

Long-term Counterparty Risk Assessment, affirmed B3(cr)

Short-term Counterparty Risk Assessment, affirmed NP(cr)

Baseline Credit Assessment, affirmed caa1

Adjusted Baseline Credit Assessment, affirmed caa1

Outlook Action:

Outlook, changed to positive from negative

PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was Banks
published in August 2018.



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I R E L A N D
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DUBLIN BAY 2018-MA1: Moody's Assigns (P)B3 Rating to Cl. F Notes
----------------------------------------------------------------
Moody's Investors Service has assigned provisional long-term
credit ratings to the following Notes to be issued by Dublin Bay
Securities 2018-MA1 DAC:

EUR[ ] Class S Residential Mortgage Backed Floating Rate Notes
due September 2053, Assigned (P)Aaa (sf)

EUR[ ] Class A1 Residential Mortgage Backed Floating Rate Notes
due September 2053, Assigned (P)Aaa (sf)

EUR[ ] Class A2A Residential Mortgage Backed Floating Rate Notes
due September 2053, Assigned (P)Aaa (sf)

EUR[ ] Class A2B Residential Mortgage Backed Floating Rate Notes
due September 2053, Assigned (P)Aaa (sf)

EUR[ ] Class B Residential Mortgage Backed Floating Rate Notes
due September 2053, Assigned (P)Aa3 (sf)

EUR[ ] Class C Residential Mortgage Backed Floating Rate Notes
due September 2053, Assigned (P)A2 (sf)

EUR[ ] Class D Residential Mortgage Backed Floating Rate Notes
due September 2053, Assigned (P)Baa3 (sf)

EUR[ ] Class E Residential Mortgage Backed Floating Rate Notes
due September 2053, Assigned (P)Ba2 (sf)

EUR[ ] Class F Residential Mortgage Backed Floating Rate Notes
due September 2053, Assigned (P)B3 (sf)

EUR[ ] Class Z1 Residential Mortgage Backed Floating Rate Notes
due September 2053, Assigned (P)B3 (sf)

Moody's has not rated the EUR[ ] Class Z2 Residential Mortgage
Backed Zero Rate Notes due September 2053, Class X1 Residential
Mortgage Backed Notes due September 2053, Class X2 Residential
Mortgage Backed Notes due September 2053 and Class R Residential
Mortgage Backed Fixed Rate Notes due September 2053.

The subject transaction is a static cash securitisation of
residential mortgage loans, extended to obligors located in
Ireland, originated by Bank of Scotland plc (Aa3/P-1; Aa3(cr)/P-
1(cr)). In September 2018, Erimon Home Loans Ireland Limited (a
Special Purpose Vehicle), with Barclays Bank PLC as Sponsor
purchased approx. EUR 5bn of assets from Bank of Scotland plc of
which [7.6]% are sold on to the issuer. The portfolio sold to the
issuer is a positive selection of the total assets purchased and
consists of [2,187] mortgage loans extended to [1,813] primary
borrowers with the total pool balance of around [382] million as
of the cut-off date (July 31, 2018).

RATINGS RATIONALE

The ratings take into account the credit quality of the
underlying mortgage loan pool, from which Moody's determined the
MILAN Credit Enhancement and the portfolio expected loss, as well
as the transaction structure and legal considerations. The
expected portfolio loss of [4.5]% and the MILAN CE of [16]%,
serve as input parameters for Moody's cash flow model and
tranching model, which is based on a probabilistic lognormal
distribution.

The key drivers for the portfolio's expected loss of [4.5]%,
which is lower than the Irish residential mortgage-backed
securities (RMBS) sector average, are as follows: (1) the
collateral performance of the loans to date, as provided by the
sponsor; (2) restructured loans accounting for [11.9]% of the
portfolio; (3) seasoning of the pool with a WA seasoning of [12]
years; (4) the current macroeconomic environment in Ireland; (5)
the stable outlook that Moody's has on Irish RMBS; and (6)
benchmarking with other comparable Irish RMBS transactions.

The key drivers for the MILAN CE number of [16]%, which is in
line with the Irish RMBS sector, are as follows: (1) the WA
Current LTV at around [58.1]%; (2) the positive selection of the
portfolio, whereby no loan in the pool is more than one month in
arrears; (3) the restructured loans accounting for [11.9]% of the
portfolio; (4) the well-seasoned portfolio of around [12] years;
and (5) benchmarking with other Irish RMBS transactions.

Transaction structure: The transaction benefits from an
amortising liquidity reserve fund, sized at [1.25]% of the Class
A1, A2A, A2B Notes, dedicated to pay senior fees and interest on
Class S, X1 and A Notes. In addition, the Class A2A and A2B Notes
benefit from a protected amortisation reserve fund (not funded at
closing) building up to [2]% of the original balance of the
collateralized Notes. The protected amortisation reserve fund is
in place to ensure that the scheduled payment due to the Class
A2A and A2B Notes is met. Further, There is complex waterfall in
place in respect of the principal repayment mechanism of the
Class A Notes. Class A2A and A2B amortisation follow a predefined
amortisation schedule which under certain circumstances will be
dynamically adjusted. Further, in the event the scheduled payment
due on the Class A2A and A2B is not met a Class A2 Deficit Event
of Default occurs upon which all available funds will be used to
amortise the Class A Notes. Following such event, the Class B, C,
D, E, F, and Z1 Notes will only be able to access the available
funds if the more senior Notes are fully repaid except for the
Class B which can access the liquidity reserve in order to make
interest payments, subject to certain conditions.

Operational risk analysis: Pepper Finance Corporation (Ireland)
DAC acts as the servicer of the portfolio during the life of the
transaction. In addition, CSC Capital Markets (Ireland) Limited
(unrated) acts as back-up servicer facilitator. Citibank, N.A.,
London Branch (A1/P-1) was appointed as independent cash manager
at closing. To ensure payment continuity over the transaction's
lifetime, the transaction documents incorporate estimation
language according to which the cash manager, will prepare the
payment report based on estimates if the servicer report is not
available.

Interest rate risk analysis: The portfolio comprises floating
rate loans linked to standard variable rate [29.7]%, loans linked
to ECB Base Rate [70.2]% and fixed rate loans [0.04]%, whereas,
the rated Notes pay 3-month Euribor plus a spread. There is no
swap in the transaction to hedge the fixed-floating rate risk and
the basis risk. Moody's has taken those risks into consideration
in deriving the portfolio yield.

In Moody's opinion, the structure allows for timely payment of
interest and ultimate payment of principal by the legal final
maturity with respect to the Class S, A1, A2A and A2B. Other non-
credit risks have not been addressed, but may have significant
effect on yield to investors.

Principal Methodology

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
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 that may lead to an upgrade of the ratings include
significantly better than expected performance of the pool and
increase in the credit enhancement of the Notes.

Factors that may cause a downgrade of the ratings include,
significantly different realized losses compared with its
expectations at close due to either a change in economic
conditions from its central scenario forecast or idiosyncratic
performance. For instance, should economic conditions be worse
than forecast, the higher defaults and loss severities resulting
from a greater unemployment, worsening household affordability
and a weaker housing market could result in downgrade of the
ratings. A deterioration in the Notes available credit
enhancement could result in a downgrade of the ratings.
Additionally, counterparty risk could cause a downgrade of the
ratings due to a weakening of the credit profile of transaction
counterparties. Finally, unforeseen regulatory changes or
significant changes in the legal environment may also result in
changes of the ratings.


RMAC PLC 2: S&P Assigns CCC Rating on $6.4MM Class X Certs
----------------------------------------------------------
S&P Global Ratings assigned credit ratings to RMAC No. 2 PLC's
class A, B, C-Dfrd, D-Dfrd, and X notes. At closing, RMAC No. 2
also issued unrated class Z1 and Z2 notes and unrated
certificates.

The majority of the mortgage pool was previously securitized in
earlier RMAC transactions issued between 2003 and 2005, namely
RMAC 2003-NS1 PLC, RMAC 2003-NS2 PLC, RMAC 2003-NS3 PLC, 2003-NS4
PLC, RMAC 2004-NS1 PLC, RMAC 2004-NSP2 PLC, RMAC 2004-NS3 PLC,
RMAC 2004-NSP4 PLC, RMAC 2005-NS1 PLC, RMAC 2005-NSP2 PLC, RMAC
2005-NS3 PLC, and RMAC 2005-NS4 PLC, all of which were called and
redeemed on March 12, 2018. All of the loans in these
transactions are securitized in RMAC No. 1 and RMAC No. 2 with no
negative or positive selection. The loans included in RMAC No. 1
PLC, which closed in April 2018, were randomly selected from the
total portfolio.

The securitized pool comprises first-lien U.K. owner-occupied and
buy-to-let residential mortgage loans made to nonconforming
borrowers. These borrowers may have previously been subject to a
county court judgement (or the Scottish equivalent), an
individual voluntary arrangement, a bankruptcy order, have self-
certified their incomes, or were otherwise considered by banks
and building societies to be nonprime borrowers. The loans are
secured on properties in England, Wales, Scotland, and Northern
Ireland and were mostly originated between 2003 and 2005 (91.2%).
Paratus AMC (formerly known as GMAC-RFC Ltd.) originated 99.5% of
the pool, and Amber Homeloans Ltd. 0.5%.

S&P said, "Our ratings on the class A, B, and X notes address the
timely payment of interest and ultimate payment of principal. Our
ratings on the class C-Dfrd and D-Dfrd notes address ultimate
payment of principal and interest while they are not the most
senior class outstanding. When the class C-Dfrd and D-Dfrd notes
become the most senior note outstanding, our ratings address the
timely payment of interest and ultimate payment of principal.
Under the transaction documents, the issuer can defer interest
payments on these notes, with interest accruing on deferred
payments until they become the most senior class outstanding,
whereby any accrued unpaid interest is due on the interest
payment date when the class becomes the most senior, and future
interest payments become due on a timely basis. Although the
terms and conditions of the class X notes allow for the deferral
of interest, interest does not accrue on deferred payments.
Hence, our ratings on the class X notes address the timely
payment of interest and ultimate payment of principal.

"Our ratings reflect our assessment of the transaction's payment
structure, cash flow mechanics, and the results of our cash flow
analysis to assess whether the notes would be repaid under stress
test scenarios. Subordination and the reserve fund provide credit
enhancement to the notes that are senior to the rated class X
notes and unrated class Z1 and Z2 notes. Taking these factors
into account, we consider the available credit enhancement for
the rated notes to be commensurate with the ratings that we have
assigned."

Due to structural features, payment of timely interest on the
class X notes is reliant upon excess spread following
replenishment of the reserve fund. Within the pool, 16.2% of
loans are currently at least one month in arrears, with 9.4%
having been delinquent for 90 days or more. S&P said, "We view
these borrowers as having a higher risk of default and once
related losses are realized, it's likely that excess spread will
be used to cover the junior principal deficiency ledger, causing
deferral of the class X notes' interest. In our view, given the
current level of arrears, payment of timely interest on the class
X notes is dependent upon favorable business, financial, and
economic conditions. We have therefore assigned our 'CCC (sf)'
rating to this class of notes, in line with our "Criteria For
Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings," published on
Oct. 1, 2012."

  RATINGS ASSIGNED

  RMAC No. 2 PLC

  Class         Rating       Amount (mil. GBP)

  A             AAA (sf)                 201
  B             AA (sf)                  6.8
  C-Dfrd        AA- (sf)                 6.8
  D-Dfrd        A (sf)                   5.7
  X             CCC (sf)                 6.4
  Z1            NR                       8.0
  Z2            NR                       3.5

  NR--Not rated.


TABERNA EUROPE I: S&P Affirms CC Ratings on 4 Note Classes
----------------------------------------------------------
S&P Global Ratings affirmed its credit ratings on Taberna Europe
CDO I PLC's class A2, B, C, D, and E notes. At the same time, S&P
has withdrawn its rating on the class A1 notes following their
full redemption.

S&P said, "The ratings actions follow our performance review of
the transaction, which includes our credit and cash flow analysis
using data from the trustee report dated July 30, 2018.

"We conducted our cash flow analysis to determine the break-even
default rate (BDR) for each rated class of notes. The BDR
represents our estimate of the maximum level of gross defaults,
based on our stress assumptions, that a tranche can withstand and
still fully repay the noteholders. We used the portfolio balance
that we consider to be performing, the reported weighted-average
spread, and the weighted-average recovery rates that we
considered to be appropriate. We incorporated various cash flow
stress scenarios using our standard default patterns, levels, and
timings for each rating category assumed for each class of notes,
combined with different interest stress scenarios as outlined in
our criteria.

"Since our previous review on March 11, 2016, we have observed
further deleveraging in the underlying pool. The par value tests
are failing for the class B notes and below.

"In our analysis, we excluded all of the defaulted assets and the
assets that are outside the scope of corporate rating framework.
Our credit and cash flow results indicated that the class B, C,
D, and E notes are unable to withstand our credit and cash flow
stresses at rating levels higher than those currently assigned.
We have therefore affirmed our 'CC (sf)' ratings on the class B,
C, D, and E notes.

"The portfolio' weighted-average spread has increased, resulting
in excess spread, which the class A2 notes, now the senior most
note, is benefitting from. However, the portfolio is now very
concentrated. To address the concentration risk, we applied some
additional stresses to assess rating sensitivity to the modelling
parameters (the spread compression test). In this test, we biased
default stresses to those assets in the portfolio, which
generated highest spread. The cash flow analysis results indicate
that the credit enhancement is commensurate with the currently
assigned rating. The application of largest obligor test also
suggested that the credit enhancement is commensurate with the
current rating. We have therefore affirmed our 'CCC- (sf)' rating
on the class A2 notes.

"Following the full redemption of the class A1 notes, we have
withdrawn our rating on this class of notes."

RATINGS AFFIRMED

  Taberna Europe CDO I PLC

  Class        Rating
  A2           CCC- (sf)
  B            CC (sf)
  C            CC (sf)
  D            CC (sf)
  E            CC (sf)

  RATING WITHDRAWN

  Taberna Europe CDO I PLC

  Class           Rating
               To         From
  A1           NR         B (sf)

  NR--Not rated.



=========
I T A L Y
=========


* ITALY: Coalition Leaders Vow to Stick with Spending Plans
-----------------------------------------------------------
Miles Johnson at The Financial Times reports that the leaders of
Italy's populist coalition government said they had no intention
of leaving the euro but will stick with spending plans that have
triggered both a credit rating downgrade and sharp criticism from
Brussels.
Both Luigi Di Maio, leader of the anti-establishment Five Star
party, and his coalition partner Matteo Salvini, leader of the
anti-immigration League party, said they remained committed to
Italy staying within the single currency, the FT relates.

The European Commission previously said that Rome's plans to
introduce expensive policies including a basic income for poor
Italians and a lowering of the retirement age would result in a
breach of budgetary rules that would be "unprecedented in the
history" of the European Union, the FT notes.
According to the FT, Prime Minister Giuseppe Conte, a law
professor previously unknown in Italian politics before he was
appointed head of the coalition between Five Star and the League,
said that he would seek to convince the commission of the merits
of its spending plans.

Italy has the largest public debt as a proportion of economic
output of any country in the eurozone apart from Greece, meaning
financial markets are acutely sensitive to any increase in
government spending or slowdown in growth, the FT discloses.

To fund its policies the government has said it will expand
Italy's budget deficit for next year to 2.4% of GDP, up from a
pledge by a previous government of 0.8%, the FT states.



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L U X E M B O U R G
===================


MILLICOM INT'L: Fitch Rates $500MM Senior Unsecured Notes BB+
-------------------------------------------------------------
Fitch Ratings rates Millicom International Cellular, S.A.'s (MIC)
USD500 million senior unsecured 2026 notes 'BB+'. Proceeds from
the issuance are expected to be used to refinance part of a
bridge loan that will be used for Millicom's announced
acquisition of Cable Onda.

MIC's ratings reflect the company's geographic diversification,
strong brand recognition and network quality, all of which
contributed to leading positions in key markets, a strong
subscriber base, and solid operating cash flow generation. In
addition, the rapid uptake in subscriber data usage and MIC's
ongoing expansion into the underpenetrated fixed-line services
bode well for medium to long-term revenue growth. MIC's ratings
are tempered, despite the company's diversification benefits, by
the issuer's presence in countries in Latin America and Africa
with low sovereign ratings and low GDP per capita. The
operational environment in these regions, in terms of political
and regulatory stability and economic conditions, tends to be
more volatile than in developed markets.

The ratings reflect Millicom's financial and business profile as
the company continues to implement its strategy to phase out
legacy services in favour of underpenetrated data and content
services. Fitch also views positively he company's strategy to
divest assets in low return countries and reinvest in higher-
return markets. Post financing of Cable Onda, Fitch expects the
company's leverage, as measured by adjusted consolidated net debt
to EBITDA, will increase to 2.8x then trend down in the short to
medium term.

KEY RATING DRIVERS

Acquisition to Increase Diversification: Millicom will acquire a
controlling 80% stake in Cable Onda, the leading cable and fixed
telecommunications services provider in Panama, for USD1.2
billion. The acquisition increases Millicom's regional
diversification and increases the company's cable and broadband
exposure. Cable Onda has a leading market position in Panama with
more than 50% market share in Pay-TV and broadband. Fitch expects
Cable Onda to represent 7% of Millicom's consolidated EBITDA on a
pro forma basis. Fitch views positively Panama's investment-grade
rating of 'BBB'/Outlook Stable as well as the country's
dollarized economy. The acquisition is expected to close by year-
end 2018.

Expected Deleveraging to Bolster Credit Quality: Fitch forecasts
Millicom's adjusted consolidated net leverage is expected to
increase toward 2.8x as the company issues new debt to fund its
acquisition. Fitch expects the company to finance the acquisition
of Cable Onda with existing cash and new debt. Millicom has
secured bridge financing from a group of banks and has raised
USD500 million of senior unsecured debt at the holding company
and is expected to raise an additional amount of up to USD500
million at operating subsidiaries. Fitch's base case expects
leverage to trend down to 2.5x and below in the medium term,
backed by growing cash flow generation and EBITDA.

Strong Market Positions: Fitch expects  MIC's  strong  market
position  to  remain  intact,  supported  by  network  quality
and  extensive  coverage,  strong  brand  recognition  and
growing  fixed-line home operations (cable & broedband).  These
qualities,  exhibited  across  well-diversified  operational
geographies,  should  enable  the  company  to  continue  to
support  stable  cash  flow  generation and growth opportunities
in underpenetrated data and cable segments. As of June. 30, 2018,
the company maintained competitive market positions in its key
mobile markets of Guatemala, Paraguay, Honduras and Colombia.

Stable Performance: Fitch forecasts MIC's EBITDA generation will
improve to USD2.4 billion in 2018, followed by modest growth over
the medium term driven by the company's acquisition of Cable Onda
as well as increasing penetration of mobile data and fixed-line
services. The company's reported revenues have contracted
slightly in recent years, due to the impact of asset disposals.
EBITDA has remained relatively stable as Millicom continued to
benefit from lower corporate and general and administrative
costs.

Strong Upstream Dividends: Creditors of the holding company are
subject to structural subordination to the creditors of the
operating subsidiaries given that all cash flows are generated by
subsidiaries. As of June 30, 2018, the group's consolidated gross
debt was USD5.3 billion, with 67% allocated to the operating
subsidiaries. Positively, Fitch believes that a stable and high
level of cash upstreams, through dividends and management fees
from its subsidiaries, is likely to remain intact over the long
term and will mitigate any risk stemming from this structural
weakness.

DERIVATION SUMMARY

MIC's rating is well positioned relative to regional telecom
peers in the 'BB' rating category based on a solid financial
profile, operational scale and diversification, as well as strong
positions in key markets. These strengths are offset by a high
concentration in countries with low sovereign ratings in Latin
America and Africa, which tend to have more volatile economic
environments.

MIC boasts a much stronger financial profile, compared with
diversified integrated telecom operators in the region such as
Cable & Wireless Communications Limited (BB-/Stable) and Digicel
Limited (CCC/Rating Watch Negative), supporting a higher, multi-
notch rating. MIC's leverage is moderately higher than Empresa de
Telecomunicaciones de Bogota, S.A. E.S.P. (ETB; BB+/Stable) but
benefits from a stronger business profile that has leading market
positions in multiple markets. MIC also has a stronger capital
structure and business profile than Colombia Telecomunicaciones,
S.A. E.S.P. (BB/Stable), an integrated telecom operator, and
Axtel S.A.B. de C.  (BB-/Stable), a Mexican fixed-line operator.

KEY ASSUMPTIONS

  -- Low-single-digit annual revenue growth in the medium term;

  -- Cable Onda to represent 7% of consolidated EBITDA;

  -- Mobile service revenue contraction to be offset by
     increasing mobile data revenues over the medium term;

  -- Revenue contribution from mobile data and home service
     operations to grow toward 55% of total revenues by 2020;

  -- Home service segment to undergo double-digits revenue growth
     in the short-to-medium term;

  -- Annual capex, including spectrum, of USD1.1 billion over the
     medium term;

  -- No significant increase in shareholder distributions in the
     short to medium term with annual dividend payments remaining
     at USD265 million.

RATING SENSITIVITIES

Future Developments That May, Individually or Collectively, Lead
to Positive Rating Action

  -- Improvement in the adjusted consolidated net leverage of
     2.0x and continued on a sustained basis;

  -- Increased diversification of dividends flow/consistent and
     stable dividends from countries with investment-grade
     ratings;

  -- Positive rating action on sovereign countries that
     contribute significant dividend flow.

Future Developments That May, Individually or Collectively, Lead
to Negative Rating Action

  -- Adjusted consolidated net leverage consistently above 3.0x;

  -- Sustained negative FCF generation due to competitive/
     regulatory pressures or aggressive shareholder
     distributions.

LIQUIDITY AND DEBT STRUCTURE

Sound Liquidity Profile: Millicom benefits from a good liquidity
position, given the company's large cash position which fully
covers short-term debt.  As of June 30, 2018, the consolidated
group's readily available cash was USD1.081 billion, which
comfortably covers its short-term debt obligations of USD439
million. Fitch expects the company to finance the acquisition of
Cable Onda with existing cash and new debt. The company has a
five-year undrawn revolving credit facility for USD600 million
until 2022, which further bolsters its liquidity position. Fitch
does not foresee any liquidity problem for both the operating
companies and the holding company given the operating companies'
stable cash generation and consistent cash upstreaming to the
holding company. MIC has a good record, in terms of access to
capital markets when in need of external financing, supporting
liquidity management.



===========
N O R W A Y
===========


SOLSTAD OFFSHORE: Seeks Debt Negotiations with Creditors
--------------------------------------------------------
Reuters reports that oil service company Solstad Offshore said it
is seeking negotiations with creditors and other stakeholders to
boost liquidity ahead of the slow winter season.

Solstad and other oil services companies are trying to bounce
back after being hit by oil company spending cutbacks following a
slide in oil prices, Reuters relates.  The company went through a
major debt restructuring in 2016-17 and merged with several
rivals, Reuters recounts.

Solstad's second-quarter results in August showed that liquidity
continued to shrink during the first six months of 2018, Reuters
discloses.  The company, as cited by Reuters, said it would look
at various options, including vessel sales, entering into joint
ventures or further consolidation.

In the second quarter, Solstad's cash position fell to NOK1.37
billion (US$166.13 million), down from NOK1.47 billion at the end
of March and from NOK2.4 billion in mid-2017, Reuters relays.

Soldstad's total debt and liabilities stood at NOK31.1 billion in
the second-quarter, Reuters states.

Solstad's biggest shareholders are billionaire investors Kjell
Inge Roekke and John Fredriksen, who own close to 40% of the
shares, Reuters discloses.

Solstad, with more than 4,000 employees, is one of the world's
largest suppliers of specialized vessels to the oil and gas
industry as well as offshore wind power developers.  It has a
fleet of 141 vessels.



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


MADEIRA: DBRS Confirms BB Long-Term Issuer Rating
-------------------------------------------------
DBRS Ratings Limited confirmed the Autonomous Region of Madeira's
(Madeira) Long-Term Issuer Rating at BB and Short-Term Issuer
Rating at R-4. The trend on all ratings remains Stable.

KEY RATING CONSIDERATIONS

Madeira's ratings are underpinned by (1) a stabilizing financial
performance over the last few years and slowly improving debt
metrics supported by more favorable economic indicators; (2) the
financial oversight and support to the regional government from
the Republic of Portugal (rated BBB, Stable, by DBRS); and (3)
Madeira's enhanced control over its indirect debt as well as
commercial liabilities in the last few years through a gradual
recentralization of these liabilities onto its own balance sheet.

The Long-Term Issuer Rating is currently constrained at the BB
level by Madeira's still very high direct and indirect debt
levels. This is despite DBRS's expectation that debt metrics are
likely to continue improving over the medium-term, albeit at a
reduced pace. The region's geographical location as an
archipelago in the Atlantic Ocean and the government's still
large exposure to regional companies also remain key challenges
to Madeira's overall credit profile.

RATING DRIVERS

Upward rating pressure could materialize if any or a combination
of the following occur: (1) positive rating action on the
Portuguese sovereign rating; (2) Madeira substantially reduces
its indebtedness; (3) Madeira's economic indicators continue to
improve and the region manages to further diversify its economy;
or (4) there are indications of an additional strengthening of
the relationship between the region and the central government.

Negative downward pressure on the ratings could materialize if
any or a combination of the following occur: (1) negative rating
action on the sovereign rating; (2) Madeira fails to stabilize
its financial performance and debt metrics over the medium term;
(3) indications emerge that the financial support and oversight
currently provided by the central government weaken; or (4) a
reversal in the reduction of the region's indirect and guaranteed
debt occurs.

RATING RATIONALE

Strengthening Fiscal Performance since 2013 and Slowly Declining
Very High Debt Metrics

Madeira's overall fiscal performance has substantially improved
in the last five years. In particular, expenditure control and
some growth in tax revenues, reflecting tax hikes and economic
growth, have allowed the region to deliver a stronger financial
performance. The region's deficit represented a moderate 13% of
operating revenues at the end of 2017, down from 74% at the end
of 2013. While the 2013 financial performance largely reflected
one-off measures with sizeable capital injections into public
companies, DBRS notes that reduction in the region's financing
deficit has been slow and has required continuous efforts from
the regional government.

In 2017, the moderate deterioration in the region's financial
performance compared to 2016, primarily reflected lower corporate
tax income compared to the previous year, with some corporations
moving some of their operations outside of the region. For 2018,
Madeira's financial performance should stabilize and DBRS
positively notes that budget execution at the end of August
signals further fiscal consolidation for the regional finances.

Solid gross domestic product (GDP) growth, supported by a steady
rise of the tourism sector in the region and strengthened fiscal
performance have allowed Madeira to decrease its extremely high
debt ratios since 2012. While in an international comparison, the
region's debt-to-operating revenues at 570% at the end of 2017
remains very high, DBRS views positively the downward trend it
has recorded in the last few years. However, Madeira's debt
ratios continue to represent, in DBRS's view, the main drag on
the region's ratings.

Enhanced Oversight and Sovereign Guarantees Support the Rating

DBRS acknowledges that the region has taken substantial steps to
increase transparency and monitoring around its indirect and
guaranteed debt, but also to reduce its DBRS-adjusted debt stock.
In addition, the national government's support via the Portuguese
Treasury and Debt Management Agency (IGCP) is a positive credit
feature for the region as it strengthens its overall debt
management. Nevertheless, the sustained growth in Madeira's
direct debt obligations and the very high debt stock it has
accumulated over time continue to weigh considerably on the
region's ratings.

The explicit guarantees provided by the central government for
the refinancing of the regional debt and DBRS's expectation that
this support will continue going forward are positive credit
features supporting Madeira's ratings. The region's refinancing
needs therefore fully benefited from the national government's
explicit guarantee in 2018 and will continue to do so in 2019.
Going forward, while the region's financial performance is
expected to slowly improve, additional debt reductions will be
critical for the region to strengthen its credit profile further.

RATING COMMITTEE SUMMARY

The DBRS European Sub-Sovereign Scorecard generates a result in
the BB (high) -- BB (low) range. The main points discussed during
the Rating Committee include: the relationship between the
central government and the autonomous region of Madeira, the debt
metrics and financial performance of the region, the region's
economic growth and its governance.

KEY INDICATORS FOR THE REPUBLIC OF PORTUGAL

The following national key indicators were used for the sovereign
rating. The Republic of Portugal's rating was an input to the
credit analysis of the Autonomous Region of Madeira.

Fiscal Balance (% GDP): -3.0 (2017); -0.7 (2018F); -0.2 (2019F)

Gross Debt (% GDP): 124.8 (2017); 122.2 (2018F); 118.4 (2019F)

Nominal GDP (EUR billions): 194.6 (2017); 200.2 (2018F); 207.0
(2019F)

GDP per Capita (EUR): 18,790 (2017); 19,376 (2018F); 20,000
(2019F)

Real GDP growth (%): 2.8 (2017); 2.3 (2018F); 2.3 (2019F)

Consumer Price Inflation (%): 1.6 (2017); 1.4 (2018F); 1.4
(2019F)

Domestic Credit (% GDP): 253.6 (2017); 250.5% (Mar-2018)

Current Account (% GDP): 0.5 (2017); 0.7 (2018F); 0.7 (2019F)

International Investment Position (% GDP): -104.9 (2017); -105.7%
(Jun-2018)

Gross External Debt (% GDP): 209.4 (2017); 207.7% (Jun-2018)

Governance Indicator (percentile rank): 85.6 (2016); 87.5 (2017)

Human Development Index: 0.85 (2016); 0.85 (2017)

Notes: All figures are in Euros (EUR) unless otherwise noted.



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


EAST-SIBERIAN TRANSPORT: Put on Provisional Administration
----------------------------------------------------------
The Bank of Russia, by virtue of its Order No. OD-2715 dated
October 19, 2018, revoked the banking license of Irkutsk-based
credit institution Joint-stock Company East-Siberian Transport
Commercial Bank (hereinafter, the Bank) (Registration No. 2731)
from October 19, 2018.  According to financial statements, as of
October 1, 2018, the credit institution ranked 305th by assets in
the Russian banking system; its impact on the aggregate indices
of the banking sector of the Irkutsk Region was negligible.

The Bank suffered the problems caused by insufficient equity
capital and the lack of sources to increase it to cover losses
related to the low-quality credit portfolio.  Therefore, the Bank
was involved for a long time in opaque transactions to maintain
the equity capital and comply with prudential requirements in a
formal way.  Moreover, the credit institution conducted
fictitious operations to conceal the shortage of funds in tills
and divert highly liquid assets in the amount of over 130 million
rubles to the detriment of creditors and depositors.  Creation of
the required loss provisions for actually missing assets at the
request of the supervisory authority revealed the loss of the
Bank's equity capital by 98% and the decline in the credit
institution's capital adequacy ratios to critical values.

The management and owners of the credit institution did not take
proper actions to bring its activities back to normal.  The Bank
of Russia will submit information about the transactions
conducted by the Bank bearing signs of a criminal offence to law
enforcement agencies.

The Bank of Russia repeatedly (9 times over the last 12 months)
applied supervisory measures against the Bank, including two
impositions of restrictions on household deposit taking.

Under these circumstances, the Bank of Russia performed its duty
on the revocation of the banking license of the credit
institution in accordance with Article 20 of the Federal Law "On
Banks and Banking Activities".

The Bank of Russia took such an extreme measure because of the
credit institution's failure to comply with federal banking laws
and Bank of Russia regulations, equity capital adequacy ratios
below two per cent, and given the repeated application within a
year of measures envisaged by the Federal Law "On the Central
Bank of the Russian Federation (Bank of Russia)".

Following banking license revocation, the Bank's professional
securities market participant license was cancelled.

The Bank of Russia, by virtue of its Order No. OD-2716, dated
October 19, 2018, appointed a provisional administration to
Joint-stock Company East-Siberian Transport Commercial Bank 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 were suspended.

The current development of the bank's status has been detailed in
a press statement released by the Bank of Russia.

Joint-stock Company East-Siberian Transport Commercial Bank is a
member of the deposit insurance system.  The revocation of the
banking license is an insured event as stipulated by Federal Law
No. 177-FZ "On the Insurance of Household Deposits with Russian
Banks" in respect of the bank's retail deposit obligations, as
defined by law.  The said Federal Law provides for the payment of
indemnities to the bank's depositors, including individual
entrepreneurs, in the amount of 100% of the balance of funds but
no more than a total of RUR1.4 million per depositor.


MARI EL: Fitch Affirms BB Long-Term IDRs, Outlook Stable
--------------------------------------------------------
Fitch Ratings has affirmed the Russian Republic of Mari El's
Long-Term Foreign- and Local-Currency Issuer Default Ratings at
'BB'. The Outlook is Stable. The agency has also affirmed the
republic's Short-Term Foreign-Currency IDR at 'B'. Mari El's
outstanding senior unsecured debt ratings have been affirmed at
'BB'.

The affirmation reflects Fitch's view regarding the republic's
stable fiscal performance with a close to balanced budget leading
to stabilisation of direct risk. The ratings also factor in Mari
El's modest budget with some refinancing pressure, socio-economic
metrics that are below the national median and a weak
institutional framework for Russian subnationals.

KEY RATING DRIVERS

Fiscal Performance Assessed as Neutral

Fitch rating case expects Mari El will record stable fiscal
performance in 2018-2020, with an operating margin close to 8%,
which will be fully sufficient to cover interest expenses. This
will be underpinned by gradual tax revenue growth, in line with
an expected recovery of the Russian economy, and by ongoing
transfers from the federal government. Fitch expects the
administration will keep expenditure under control in line with
inflation, which will limit the deficit before debt variation at
below 2% of total revenue over the medium term.

In 8M18, Mari El collected 63% of revenue budgeted for the full
year and incurred 67% of budgeted expenditure for the same year,
which led to a moderate interim budget deficit of RUB862 million.
Fitch expects that acceleration of federal budget transfers in
2H18 will lead to the deficit narrowing; however, the full-year
balance will likely remain negative, albeit at a moderate 1.5% of
total revenue.

Fitch expects that the republic's tax capacity will remain below
the national average and that federal transfers will constitute a
significant proportion of Mari El's budget, averaging about 40%
of revenue annually in 2018-2020. The modest size of the
republic's budget and local economy results in a lower self-
financing ability to absorb potential shocks than 'BB' rated
national peers. This makes the republic's budget highly dependent
on financial support from the federal government.

Mari El recorded an exceptionally strong 14% operating margin in
2017, with a modest surplus before debt variation (2012-2016:
average deficit 7.7% of total revenue). Current revenue grew 14%,
driven by high corporate income tax (CIT) proceeds due to a large
one-off payment. CIT proceeds reached RUB5.4 billion in 2017,
which was 1.6x higher than a year before. Fitch expects tax
revenue proceeds to fall back in 2018 to near historical
averages, in turn leading to a lower operating balance.

Debt and Liquidity Assessed as Neutral

According to Fitch rating case Mari El will maintain direct risk
at below 60% of current revenue (2017: 55.8%) and the direct risk
payback ratio (direct risk-to-current balance) will be around 15
years over the medium term. The republic's direct risk moderately
increased during 8M18 to RUB14.2 billion (2017: RUB13.5 billion).

Mari El is exposed to a refinancing peak in 2019, when about RUB4
billion of bank and budget loans (30% of total risk) are due.
This leads to high dependence on access to capital market to
service its debt. To reduce refinancing pressure Mari El
participated in the budget loans restructuring programme
initiated by the federal government at end-2017. Under the
programme, the maturity of RUB6.3 billion budget loans has been
extended until 2024. This improved the weighted average life of
the region's debt to about three years, which is still short
compared with international peers'.

Management and Administration Assessed as Neutral

As with most Russian local and regional governments (LRGs),
regional budget policy is strongly dependent on the decisions of
the federal authorities. The region receives a steady flow of
subsidised budget loans and earmarked transfers from the federal
budget for capital and current expenditure. The administration
has a socially-oriented fiscal policy and aims to fulfil all
social obligations. At the same time, the regional
administration's practices are bound by financial covenants that
were imposed by the Ministry of Finance in exchange for low-cost
budget loans.

Mari El's administration follows a prudent budgetary policy aimed
at optimising expenditure and stabilising debt levels. It intends
to balance its budget in 2019-2020, which should lead to absolute
debt reduction. However, the republic's forecasting ability is
limited by an unstable institutional framework for Russian LRGs.

Institutional Framework Assessed as Weakness

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

Economy Assessed as Weakness

Mari El's socio-economic profile has historically been weak, with
a GRP per capita at 74% of the Russian region median, which
restricts the republic's tax base. Fitch does not expect notable
changes in the republic's socio-economic profile. According to
the administration's base case scenario, Mari El's economy will
demonstrate a moderate recovery in line with the national trend.

RATING SENSITIVITIES

A rating upgrade may result from continuing sound operating
performance, and extension of the debt repayment profile that
leads to a convergence of the direct risk payback ratio with the
weighted average life of debt.

Conversely, weak budget performance with a close to zero current
margin accompanied by direct risk increasing above 70% of current
revenue could lead to a downgrade.


UDMURTIA: Fitch Withdraws B+ Senior Unsecured Debt Ratings
----------------------------------------------------------
Fitch Ratings has withdrawn Russian Republic of Udmurtia's Long-
Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) of
'B+' with Stable Outlooks and Short-Term Foreign-Currency IDR of
'B'. Fitch has also withdrawn Udmurtia's senior unsecured debt
ratings of 'B+'.

KEY RATING DRIVERS

Not applicable.

RATING SENSITIVITIES

Not applicable.

RATING WITHDRAWALS

Fitch has chosen to withdraw Republic of Udmurtia's ratings for
commercial reasons. The issuer has chosen to stop participating
in the rating process. Therefore, Fitch will no longer have
sufficient information to maintain the ratings. Accordingly, the
agency has withdrawn the republic's ratings without affirmation
and will no longer provide ratings or analytical coverage for the
Republic of Udmurtia.



=========
S P A I N
=========


CATALONIA: Fitch Affirms BB Long-Term IDRs, Outlook Stable
----------------------------------------------------------
Fitch Ratings has affirmed the Autonomous Community of
Catalonia's Long-Term Foreign- and Local-Currency Issuer Default
Ratings (IDRs) at 'BB' with Stable Outlooks. Fitch has also
affirmed the region's Short-Term Foreign-Currency IDR at 'B'. The
ratings on the EMTN programme and outstanding senior unsecured
bonds have also been affirmed at 'BB' and 'B', respectively.

The affirmation reflects Catalonia's still weak, but improving
fiscal performance in 2017, a moderately high direct debt burden
and financial support from the central government. The Stable
Outlook incorporates Fitch's rating case that the region's fiscal
performance will gradually improve, with direct debt slightly
declining towards 280-290% of current revenue by 2020.

KEY RATING DRIVERS

Institutional Framework (Neutral/Stable)

Fitch introduced in February 2013, an investment grade rating
floor for Spanish regions at 'BBB-', mainly based on fiscal and
financial discipline as well as the availability of financial
mechanisms to refund debt. For Catalonia, Fitch decided in
November 2015 to suspend the rating floor due to a lack of
cooperative relationship between the regional and central
government.

The introduction of the Budgetary Stability Law (BSL) has meant
an increase of control by the central government, which also
widened the number of targets to comply with. Autonomous
communities need to meet deficit targets, but also spending
limits, debt limits and supplier payment term limitations. The
support includes the absolute priority of debt servicing by law
as per article 135 of the Spanish Constitution; access to state
liquidity mechanisms, and the BSL, which enforces fiscal
discipline on local and regional governments.

The formation of new regional and also national governments
earlier this year has led to an improvement in their relationship
such that the central government authorised the conversion of
EUR2.7 billion of Catalonia's short-term debt into long-term
debt. In September 2018, the central government also agreed to
financially compensate Catalonia for past underfunding.

Fiscal Performance (Weakness/Stable)

In 2017, Catalonia had a positive operating balance for the first
time in 10 years - EUR495 million compared to a EUR290 million
deficit in 2016. Operating spending grew 4.9% in 2017 to EUR23.52
billion in part due to hiring in education and healthcare.
Operating revenue reached EUR24 billion in the same period, and
integrates a EUR1.8 billion tax settlement from 2015.

Fitch considers that the recovery of the Spanish economy as well
as its positive impact on the Catalan labour market should be the
main driver behind the robust growth on operating revenue in the
medium term (4.0% average growth under Fitch's rating case).

Debt (Weakness/Stable)

At the end of 2017, financial outstanding direct debt was
EUR68.55 billion versus EUR48.13 billion at the end of 2013. At
end 2017, as much as EUR54.45 billion was borrowed under the
central government's mechanisms, offering a favourable calendar
of amortisation, and therefore the average life of debt was
estimated at 4.2 years compared with 5.1 years recorded at the
end of 2013.

Economy (Strength/Stable)

GDP data show that there has been very little impact of
Catalonia's political crisis on its economy. With a nominal GDP
estimated at around EUR223 billion, Catalonia represented 19.2%
of the Spanish economy, with a population of about 7.6 million,
or 16% of Spain's. Catalonia's nominal GDP grew 4.4% in 2017
compared with 4.0% for Spain, according to the National
Statistics Agency. Furthermore, Catalonia's housing prices are
still much above that of Spain's (22.7% above in the second
quarter of 2018) and grew 6.2% versus 3.8% for Spain. Tourism
activity is still very supportive for the Catalan economy with an
estimated 57.2 million overnight stays in 2017 or 16.8% of the
national total.

Management (Weakness/Negative)

The regional government has strong intention to comply with the
different targets set by the central governmental though there
might be some pressure to increase spending. The newly formed
government does not have a majority at the regional parliament
and there has been some tension between the two main pro-
independence parties of the coalition.

RATING SENSITIVITIES

Negative rating action would stem from another wave of
deterioration in the relationship with the central government.

An upgrade to 'BB+' could take place if direct debt becomes lower
than 250% of its current revenue.

KEY ASSUMPTIONS

Fitch assumes that the state will continue providing support to
the Spanish autonomous communities over the medium term, in
particular, through the liquidity mechanism.

Discussions on the regional financial system are ongoing in
Spain, and there could be changes over the medium term. However,
Fitch does not factor in such changes into Catalonia's IDRs.


GENERALITAT DE CATALUNYA: Moody's Affirms Ba3 Issuer Ratings
------------------------------------------------------------
Moody's Investors Service has changed the outlook on the
Generalitat de Catalunya's ratings to stable from negative and
affirmed its long-term issuer and senior unsecured ratings at
Ba3. Moody's also affirmed the Senior Unsecured MTN rating at
(P)Ba3, the short term rating at (P)NP and, commercial paper at
NP. Finally, Moody's changed Catalunya's baseline credit
assessment (BCA) to caa1 from caa2.

The outlook change to stable reflects: (i) the rating agency's
view that the deterioration in the region's economy after the
unilateral declaration of independence from Spain has been
limited; (ii) that Catalunya benefits from Spain's economic
growth, putting the region on the path towards fiscal
consolidation, reducing its deficit levels and debt metrics.

RATINGS RATIONALE

RATIONALE FOR OUTLOOK CHANGE TO STABLE

The outlook change to stable from negative on Catalunya's ratings
reflects Moody's view that a significant deterioration in the
region's economy after the unilateral declaration of independence
in October 2017 has been limited. While Moody's notes a slowdown
in the region's domestic demand growth in the last quarter of
2017, its effects on the annual real gross domestic product (GDP)
growth was limited, as the region grew by 3.3% vs. 3.1% at the
national level in 2017. The industry sector, which accounts for
20% of the region's GDP (vs. 16% at the national level), remained
seemingly intact, growing above the national level and further
evidenced by a strong industrial production index. As a result,
the rating agency notes that Catalunya continues to be the
largest regional economy in Spain and contributes 19% of Spain's
GDP.

Moody's notes that positive economic growth in Spain is helping
the region's fiscal consolidation, improving gross operating
performance and reducing deficit levels. In addition, although
regional debt levels should continue to increase through 2020,
the ratio of net direct and indirect debt to operating revenue
should decrease, as Spain's strong GDP growth bolsters regional
tax revenue at a faster pace than debt stock growth.

RATIONALE FOR AFFIRMATION OF Ba3 RATING

The affirmation of the Ba3 long-term issuer and debt ratings is
the combination of an improvement in Catalunya's standalone
credit profile, as reflected in the upgrade of its BCA to caa1
from caa2, and the high extraordinary support received from the
central government.

The upgrade of the Generalitat de Catalunya's BCA mainly reflects
a lower-than-expected impact from political tensions on the
region's economy. However, the BCA also reflects the region's
financial performance, which remains weak, despite improving in
2017. In 2017, Catalunya's financial performance resulted in a
negative gross operating balance (-2% of operating revenue), high
financing deficit (-6.4% of operating revenue) and very high debt
burden, reflected by a net direct and indirect debt to operating
revenue of 285% in 2017, compared with the average for Moody's-
rated regions of 197%. Moody's believes that expenditures will
continue to increase in the coming years, as the regional
government's main focus is on the region's self-determination
with no structural reforms planned for this term.

Moody's views positively the high support received from the
central government to date mainly via the "Fondo de Liquidez
Autonomico" (FLA). Moody's expects that this support will
continue to be forthcoming. The region has received a total of
EUR57 billion of liquidity support from the central government's
different sources since 2012, which is equivalent to around 80%
of Catalunya's outstanding direct debt. The rating agency expects
that an additional EUR8 billion will be financed through the FLA
in 2019. In addition, the central government recently allowed the
Generalitat de Catalunya to convert EUR2.7 billion of its short-
term debt into long-term debt, which can therefore be refinanced
under the FLA, reducing the refinancing risk of its EUR4.7
billion of outstanding short-term debt.

WHAT COULD CHANGE THE RATINGS UP/DOWN

Moody's would consider upgrading Catalunya's rating if its fiscal
and financial performance significantly improved. Additionally, a
strengthening of support from the central government could also
lead to an upgrade.

In contrast, downward pressure on the rating could materialise if
Catalunya's policy changes reversed its fiscal consolidation or
if the region's fiscal performance deteriorated. In addition, a
downgrade of the sovereign rating, or any indication of weakening
government support, would likely lead to a downgrade of
Catalunya's rating.

The specific economic indicators, as required by EU regulation,
are not available for this entity. The following national
economic indicators are relevant to the sovereign rating, which
was used as an input to this credit rating action.

Sovereign Issuer: Spain, Government of

GDP per capita (PPP basis, US$): 38,381 (2017 Actual) (also known
as Per Capita Income)

Real GDP growth (% change): 3% (2017 Actual) (also known as GDP
Growth)

Inflation Rate (CPI, % change Dec/Dec): 1.1% (2017 Actual)

Gen. Gov. Financial Balance/GDP: -3.1% (2017 Actual) (also known
as Fiscal Balance)

Current Account Balance/GDP: 1.8% (2017 Actual) (also known as
External Balance)

External debt/GDP: [not available]

Level of economic development: High level of economic resilience

Default history: No default events (on bonds or loans) have been
recorded since 1983.

On October 17, 2018, a rating committee was called to discuss the
rating of the Catalunya, Generalitat de. The main points raised
during the discussion were: The issuer's economic fundamentals,
including its economic strength, have materially increased. The
issuer's fiscal or financial strength, including its debt
profile, has materially increased.

The principal methodology used in these ratings was Regional and
Local Governments published in January 2018.



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


KERNEL HOLDING: Fitch Affirms B+ LT IDR, Outlook Stable
-------------------------------------------------------
Fitch Ratings has affirmed Ukrainian commodity processor Kernel
Holding S.A.'s Long-Term Issuer Default Rating at 'B+' with
Stable Outlook.

The ratings incorporate a leverage spike and weak operating
results expected for financial year ended June 2018 due to a
challenging operating environment. However, Fitch also expects a
rebound in profits and an improvement in leverage, due to
Kernel's expansion plans and strong support from the group
relationship banks. Kernel is also at an advanced stage of
obtaining further funding from the European Investment Bank to
cover its FY19 capex. Fitch sees limited execution risk in
Kernel's expansion plans.

KEY RATING DRIVERS

Challenging Sunflower Oil Market: Kernel has suffered since FY15
from an excess of crushing capacity in Ukraine over seeds supply,
which created a challenging environment to procure seeds,
increased costs and compressed margin for sunflower oil
producers. Kernel's sunflower oil margin is estimated by Fitch to
decrease to USD50-USD55 per tonne for FY18 from USD164 per tonne
in FY14. In addition, international sunflower oil prices in 2017-
18 dropped to historically low levels. While the pressure on
Kernel's profit has been exacerbated by the low margins with
which competing international traders are ready to operate, Fitch
believes that the stronger 2018 harvest in Ukraine should better
balance supply and demand during FY19 and support a recovery of
Kernel's margin.

FY18 Profits Low Point: Extrapolating from 9M18 results, Fitch
projects that Kernel's FY18 consolidated EBITDA would suffer a
drop of approximately 30% from FY17's USD321 million. This stems,
in addition to challenges in the sunflower oil unit, from similar
demand and supply dynamics in the grain trading business and from
lower yield of the land bank acquired during FY17.

Capex to Support EBITDA Recovery: Kernel is responding to the
difficult operating environment with a major expansion plan
whereby it targets to achieve USD500 million EBITDA by FY21,
mainly through the ability to trade and process larger volumes of
grain and sunflower oil. The plan includes strengthening its
procurement and processing capability in the currently less-
invested region of western Ukraine, increasing the efficiency of
its processing facilities, adding more farmland, storage and port
capacity, as well as investing in renewable energy. Fitch
projects a consistent increase of processed volumes and, assuming
also a mild increase of international prices from historical
lows, a gradual recovery of Kernel's EBITDA margin towards the
mid-teens (from below 10% that Fitch expects for FY18).

Temporary Cash Flow Absorption: Kernel's expansion plan will see
capex peak in FY18 and FY19 at an overall USD500 million. The
group also acquired two farming businesses for USD203 million in
2017, including around USD42 million of acquired net working
capital. Fitch projects deeply negative free cash flow (FCF) for
FY18 and FY19 of USD140 million and close to USD200 million,
respectively. A bond issued in 2017 covered FY17 and FY18 cash
requirements and Kernel is in the process of arranging a USD250
million bank facility with a multilateral lending institution to
cover FY19 funding requirements. The final phase of capex
outflows are scheduled for FY20 but this is likely to be covered
by internal cash flow, allowing Kernel to return a positive FCF
position.

Leverage Peaks in FY18:  As a result of debt increase and the
likely slow recovery of EBITDA, Fitch projects Kernel's readily
marketable inventories (RMI)-adjusted funds from operations (FFO)
net leverage would about double to close to 3.0x in FY18 from a
year ago. This level is still consistent with the group's 'B+'
IDR. At the same time, higher throughput volumes as well as sales
of renewable energy to the grid by using Kernel's own biomass,
should enable FCF to turn positive by 2020 and support de-
leveraging. However, underperformance in EBITDA could stall this
recovery.

Favourable Long-Term Trends: Through its leadership as integrated
agricultural commodity exporter from Ukraine, Kernel is well-
placed to continue taking advantage of the country's fertile
farmland, favourable climate and geographical position as well as
its low, albeit increasing, labour cost. Ukrainian crops enjoy
scope for demand growth globally, due to their non-GMO quality,
the limited ability of other regions (the Americas and the Middle
East) to increase these crops and the projected long-term growth
of their global consumption. Together with other local producers,
Kernel is investing to increase farm yields through mechanisation
and leverage the country's availability of some of the most
fertile land in the world.

Moderate Reliance on Domestic Environment: Kernel's Local-
Currency (LC) IDR is above Ukraine's LC IDR of 'B-', reflecting
Fitch's assessment that the group's moderate dependence on the
local operating environment, with majority of revenue from
exports and a strong infrastructure enabling it to ensure
continuity of supply, will not compromise the group's operating
performance. Also, Kernel has limited reliance on Ukraine's
constrained banking system and its major funding sources consist
of a USD500 million Eurobond issued in January 2017, USD300
million PXF facilities provided by international banks and a new
USD250 million term loan to be provided by a multilateral lending
institution, hence confirming its good access to external
liquidity.

Rating Sustainability above Country Ceiling: Kernel's Foreign-
Currency (FC) IDR is two notches above Ukraine's Country Ceiling
of 'B-' due to its expectation that the group will maintain
substantial offshore cash balances and a comfortable schedule of
repayments for its FC debt, resulting in a hard-currency debt
service ratio sustainably above 1.5x over FY18-20(FY17: 1.9x).
Maintaining the FC IDR on a par with the LC IDR remains premised
on Kernel obtaining committed long-term funding of at least a
three-year tenor to fund its further investments in FY19, given
its expectation that internally generated cash flow will not be
sufficient to cover them.

Moderate Commodity Diversification: Kernel is focused on only few
commodities, primarily sunflower oil and meal, corn, wheat and
barley, and it remains largely reliant on Ukraine for sourcing
them. This exposes it to risks of a contraction in the Ukrainian
harvest, but so far this has not materialised despite a weakening
in farmers' access to external financing over the past few years.
However, even if the harvest declines, Fitch believes Kernel
would be able to manage the risks due to its leading market
position, ownership of port and other infrastructure assets, and
its better access to external liquidity than many of its
Ukrainian competitors.

Asset-Heavy Business Model: Kernel has a stronger FFO margin
(FY17: 12.5%) than global agricultural commodity processors and
traders. This is due to its asset-heavy business model with
substantial processing operations (relative to trading) and
infrastructure assets, and integration into farming. Kernel's
asset structure and integration within operating segments allow
the group to retain leading market positions in sunflower oil and
grain exports, and are positive for its credit profile. Fitch
expects Kernel to strengthen its competitive advantage in Ukraine
once it completes it 2017-2020 investment plan. These
initiatives, including a new trading unit in Switzerland, will
enhance Kernel's integrated business model and enable the group
to better compete with major foreign traders that also operate in
the country.

DERIVATION SUMMARY

Kernel is less leveraged than France-based sugar industry leader
Tereos SCA (BB / Stable) and Latin American player Biosev S.A.
(B+ / Stable). Similarly to Tereos, Kernel is an asset-heavy
commodity processor and enjoys an EBITDA margin well above 10%.
Nevertheless, the operating environment in Ukraine contributes to
Kernel's lower ratings than international and Brazilian peers'.

Kernel has a much smaller business scale and diversification than
international commodity traders and processors such as Cargill
Incorporated (A / Stable) and Archer Daniels Midland Company (A /
Stable).

KEY ASSUMPTIONS

Fitch's Key Assumptions within its Rating Case for the Issuer

  - EBITDA to fall approximately 30% in FY18 to below USD250
    million, before increasing to USD460 million in FY22

  - Potential medium-term funding needs related to capex and
    acquisitions covered by new debt of at least three-year tenor

  - Capex averaging USD240 million a year in FY19-22, including
    construction of new port terminal capacity, a crushing plant
    in western Ukraine and other investments

  - Stable dividends at USD20 million a year

  - Maintenance of substantial offshore cash balances (minimum
    USD100 million)

Average Senior Secured Notes Recoveries

The 'B+'/'RR4' senior secured rating for the USD500 million bond
reflects high recoveries (91%), albeit capped at 'RR4' because of
the Ukrainian jurisdiction for senior secured noteholders in the
event of default-The enterprise value (EV) of Kernel and the
resulting recovery for its creditors would be maximised in a
restructuring under its going-concern approach rather than in a
liquidation. The bond ranks after the debt incurred at operating
companies, which is partly secured by inventories.

RATING SENSITIVITIES

Developments That May, Individually or Collectively, Lead to
Positive Rating Action

  - An upgrade of the ratings to the 'BB' rating category is
    unlikely in the next three years. Nonetheless, factors that
    Fitch considers relevant for potential positive rating action
    include steady growth in Kernel's operational scale (as
    measured by FFO), improvement of diversification by commodity
    and sourcing market, and maintaining a conservative capital
    structure.

Developments That May, Individually or Collectively, Lead to
Negative Rating Action

  - Liquidity score dropping below 1.0x over the next 24 months
    (9M18: 1.1x) due to operating underperformance or shift in
    debt structure towards short-term debt;

  - Concerns that the company does not have sufficient
    availability of trade finance lines to cover its operational
    activity

  - RMI-adjusted FFO adjusted net leverage above 3.5x and RMI-
    adjusted FFO fixed charge cover below 2.0x (FY18 projection:
    2.1x) on a sustained basis; and

  - For FC IDR only - a hard-currency debt service ratio below
    1.5x as calculated in accordance with Fitch's methodology
    Rating Non-Financial Corporates Above the Country Ceiling,
    for a sustained period.

LIQUIDITY AND DEBT STRUCTURE

Tight, Well-Managed Liquidity: Kernel's main funding sources
consist of three-year pre-export facilities of USD200 million and
USD100 million, secured respectively on sunflower and on grain
inventories. These are used through the seasonal cycle and Fitch
views them sufficient to cover the projected scope of operations
over FY19 but could need increasing in FY20 or FY21 when volumes
traded should increase more significantly or in the event
commodity prices rise more materially.

Additionally, Kernel uses various committed and uncommitted,
partly secured short term hard-currency and Ukrainian hryvnia-
denominated revolving facilities. The majority of its other debt
consists of a USD500 million bond due in January 2022.  Fitch
calculates a liquidity ratio of 1.1x at end-March 2018.  In its
liquidity calculation for commodity processors Fitch includes
short-term receivables and payables and, as a source of
liquidity, RMI, which Fitch discounts by 30% in the case of
Kernel.

SUMMARY OF FINANCIAL STATEMENT ADJUSTMENTS

  - Fitch restricted a portion of cash to take into account
    intra-year swings in the portion of working capital not
    covering RMI purposes (USD30 million in FY17).

  - Fitch also restricted USD4 million for cash deemed as blocked
    in security bank account by the company. Going forward, in
    addition to the cash linked to working capital swings, Fitch
    will restrict USD15 million in connection to cash to be
    placed by Avere with other brokers.


UKRAINE: S&P Affirms 'B-/B' Sovereign Credit Ratings
----------------------------------------------------
S&P Global Ratings, on Oct. 19, 2018, affirmed its 'B-/B' long-
and short-term foreign and local currency sovereign credit
ratings on Ukraine. The outlook is stable.

At the same time, S&P affirmed its 'uaBBB' Ukraine national scale
rating.

OUTLOOK

S&P said, "The stable outlook reflects our expectation that
Ukraine's existing extended fund facility (EFF) program with the
International Monetary Fund (IMF or the Fund) will be terminated
early but a new 14-month program will be secured in its place.
This will help anchor macroeconomic policymaking through
Ukraine's 2019 presidential and parliamentary elections. We also
expect that, as Ukraine makes some progress with conditionality
under the new arrangement, it will be eligible for additional
disbursements from international donors." This concessional
funding will aid Ukraine in issuing additional commercial debt to
meet its external repayments coming due over the next 12 months.

Ratings pressure could build if disruptions to funding from
external donors and/or the government's inability to tap capital
markets over the next few months called into question Ukraine's
ability to meet large external repayments over 2019.

S&P said, "Additionally, an adverse ruling in Ukraine's legal
battle with Russia over a Eurobond issued in December 2013, and
held by Russia, could have fiscal implications for Ukraine, in
our opinion. In a worst-case scenario, it might create technical
constraints for Ukraine's ability to repay its commercial debt,
which would pressure the ratings. We anticipate there will be
appeals to the Supreme Court in the U.K. following the recent
Court of Appeal decision in London to allow a full trial of the
case, further prolonging the overall proceedings. We note that
the government believes there is no potential for technical
constraints on debt service, even in the case of an adverse
ruling in the future.

"We could consider a positive rating action if economic growth
significantly outperforms our expectations, alongside
improvements in fiscal and external imbalances that would allow
the National Bank of Ukraine (NBU) to continue easing its capital
account restrictions, and if we conclude that the security
situation in the non-government-controlled areas in Ukraine's
east has stabilized and a further escalation is unlikely."

RATIONALE

S&P said, "Our ratings on Ukraine reflect the country's weak
economy in terms of per capita income and its challenging
institutional and political environment, which remains heavily
exposed to a lack of transparency at various government levels.
Moreover, our ratings are constrained by Ukraine's large external
refinancing risks, which necessitate continued compliance with
its IMF program. Despite fiscal consolidation efforts, the stock
of public debt is still large. It stems from costs associated
with the cleanup of Ukraine's banking sector and only gradual
progress in reducing the large pension fund deficit. Ukraine's
high consumer price inflation is another rating weakness. Despite
declining in recent months, it remains outside the NBU's target.
The monetary policy transmission mechanism is also still weak
because of the very high share of nonperforming loans (NPLs) in
the banking sector.

Institutional and Economic Profile: A new $3.9 billion IMF
program with a less demanding structural reform agenda is slated
to replace the existing program

-- Domestic demand continues to drive Ukraine's economic
     recovery. S&P projects real GDP growth of 2.8% on average
     over 2019-2021.

-- The slow pace of reform implementation is likely to result in
     the early termination of the existing IMF EFF program, but
     S&P anticipates another program, with a lighter emphasis on
    structural reforms, will be in place to see Ukraine through
    the 2019 election cycle.

-- The likely outcome of the two elections next year is still
    unclear; a large part of the electorate remains undecided.

Ukraine is in its third year of economic recovery after real GDP
contracted by 16% over 2013-2015. Domestic demand remains the
main growth driver. In particular, household consumption has
benefited from strong wage growth, falling unemployment, and
significant remittance inflows from abroad. Investments,
supported by government capital expenditure, are also growing by
double digits. Over 2013-2015, real investments contracted
cumulatively by over 41%, but have since rebounded, spurred by
the improved macroeconomic environment and higher global
commodity prices. The recovery in gross fixed capital formation
has led to a rebound in imports. Moreover, rising oil and gas
prices have increased Ukraine's import bill and the contribution
from net exports to growth remains negative. S&P notes that
Ukraine's industrial producers, particularly in steel and
aluminum, continue to partially rely on coal imports due to the
suspension of trade with the separatist-controlled areas in
eastern Ukraine since early 2017.

Ukrainian per capita wealth is low. Notwithstanding the nearly
20% average increase in nominal GDP since 2016, estimated per
capita GDP ($2,800 in 2018) is still 70% of its 2013-level and
the second lowest, after Tajikistan, in Europe and the
Commonwealth of Independent States. Low income levels explain
high net emigration. Over one million Ukrainians worked in Poland
last year, with several hundreds of thousands in other
neighboring countries. This has reportedly caused shortages of
qualified labor in western Ukraine, for instance, where a
successful automotive industry cluster has been establishing
itself over the past few years. S&P projects GDP growth will
average 2.8% over our forecast horizon through 2021 supported by
domestic demand. Absent accelerated reform momentum, however,
such a growth rate is unlikely to help Ukraine's income levels
converge, even with the less advanced members of the EU. The
authorities have achieved some important reforms: The NBU's
independence has been preserved; previously implemented gas
tariff hikes have eliminated losses at state-owned oil and gas
company, Naftogaz, and markedly reduced public deficits; pension
reforms have been implemented; and financial stability has been
strengthened after the country's largest bank, Privatbank, was
nationalized in 2016.

And yet the pace of reforms under the IMF's EFF (signed in 2015)
has slowed and reviews have stalled since March 2017. The
establishment of an anti-corruption court (ACC) and the
adjustment of domestic gas tariffs have proved stumbling blocks.
Over the summer, the authorities adopted legislation on the ACC
and made further changes to bring the law in line with the Venice
Commission's recommendations. The ACC will process cases brought
forward by the National Anti-Corruption Bureau of Ukraine. The
importance of and need for an independent ACC has been
highlighted by the IMF and is underpinned by Transparency
International's Corruption Perception Index, where Ukraine ranks
at 130 of 180 countries.

Another key issue is related to gas tariffs. Under the already
adopted energy tariff mechanism, Ukraine would have had to hike
gas tariffs last year, but did not, partially backtracking on an
already implemented reform. S&P said, "We understand that the
government and the IMF have now reached an agreement on tariff
increases with a first round 23.5% increase coming into effect on
Nov. 1. Alongside the ACC legislation, this agreed tariff hike
has paved the way for a new $3.9 billion IMF program, replacing
the $17.5 billion program that was set to conclude in March 2019.
We expect the new arrangement to be in place by the end of 2018
following parliament's adoption of the 2019 budget and the
approval of the IMF's management and executive board. We
understand that the new program aims to see Ukraine through the
difficult 2019 election period and will help anchor policies to
preserve macroeconomic stability." Given the political realities,
the program will be less ambitious in pursuing ongoing structural
reforms than the existing EFF.

While current opinion polls favor former prime minister Yulia
Tymoshenko and her Fatherland party, roughly one-half of
Ukraine's population is still undecided. After the parliamentary
election in October 2019, the process of building a coalition
will likely be complicated. The conditions of the new IMF
arrangement could then be challenged and potentially
renegotiated. However, given Ukraine's limited external financing
options and large foreign exchange redemptions over the next two
years, S&P anticipates broad compliance with program
requirements.

Prolonged political uncertainty in 2019 may delay progress in
finding a sustainable solution to the conflict in Ukraine's
separatist-controlled area in the Donbas. That said, S&P's base
case assumes no further escalation of this conflict, despite
frequent ceasefire violations and casualties. There is also the
possibility of an escalation of tensions in the Azov Sea
following the opening of the Kerch Strait bridge by Russia. The
ongoing external security risk created by this conflict is a
ratings constraint.

Flexibility and Performance Profile: Large external debt
repayments in 2019 will necessitate compliance with the IMF
program

-- The IMF program will be key to unlocking external financing,
    without which the government's ability to service its foreign
    currency debt obligations in 2019 is uncertain.

-- S&P anticipates budgetary deficits will remain broadly in
    line with program stipulations in 2018 and 2019 despite the
    upcoming elections.

-- Inflation has inched closer to the NBU's target following six
    key policy rate hikes over the past year.

Ukraine faces substantial external debt repayments in 2019 and
2020. The government has about $5.5 billion (about 4.5% of GDP)
of debt obligations, including interest, coming due in both 2019
and 2020. In addition, repayments toward government foreign
currency debt in the domestic market total about $3 billion (2.3%
of GDP) in 2019. Given that local banks, which are the major
participants in the domestic debt market, have their own foreign
currency redemptions in 2019, rollover ratios of government
foreign currency-denominated domestic debt may be less than 100%.
S&P also notes that banks own nearly 30% of their assets in
government bonds. Non-resident participation in the domestic bond
market is currently negligible but could increase once a sales
link (such as Clearstream) to the global bond market is
established. This is scheduled for early 2019.

S&P said, "We assume that Ukraine will draw about $3 billion in
2019 from the new IMF program. These inflows would go directly to
boosting the foreign currency reserves at the central bank and
would not be available for sovereign foreign currency debt
repayments. However, we assume that the new arrangement would
also unlock additional donor financing of about EUR1 billion from
EU macrofinancial assistance and $800 million in World Bank
guarantees. We also assume proceeds from fresh sovereign Eurobond
issuance will cover external financing needs, as will some
proceeds from hryvnia-denominated bond issuance in the domestic
bond market. Together, these funds should help Ukraine meet its
external foreign currency debt repayment needs in 2019.

"Absent the IMF funding and additional donor funds tied to the
IMF program, we continue to see a risk of marked deterioration in
Ukraine's external financing, given its large refinancing needs.
We believe the government is unlikely to be able to raise the
full amount of foreign currency financing it needs in 2019 in the
domestic bond market."

The government's 2019 foreign currency redemptions are sizable
relative to the size of the NBU's foreign currency reserves,
which were $16.6 billion as of September 2018. Despite the NBU's
net foreign currency purchases through 2018, reserves have
declined so far this year on the back of public sector net
foreign currency redemptions. S&P said, "We estimate that the
central bank's reserves at present cover under three months of
current account payments. We think these factors increase the
likelihood that the government will remain compliant with the
stipulations of the new program, at least until the parliamentary
elections in the fall of next year."

S&P said, "Ukraine's external profile remains a key rating
weakness. Alongside large foreign currency redemptions in 2019
and 2020, we also anticipate a widening of the current account
deficit toward 4% of GDP by 2021 from about 3% in 2018 in line
with a rising import bill and despite continued strong remittance
inflows. Strong domestic demand, volatile commodity prices, and
risks to external trade from rising global protectionism underpin
these deficits. We project that these deficits will be largely
covered by concessional lending to the public sector by
international financial institutions, portfolio debt inflows and,
less so, net foreign direct investment inflows." This funding mix
will result in Ukraine's external debt net of liquid financial
sector assets staying at a high 120% of CARs, with gross external
financing needs averaging 135% of CARs and usable reserves over
our forecast horizon."

The general government fiscal deficit narrowed in 2017 to 1.6% of
GDP thanks to revenue outperformance -- aided by strong domestic
demand and inflation -- as well as budget underspending.
Budgetary execution in 2018 so far has been close to balance,
though spending could pick up toward year-end. S&P said, "We
therefore project a general government deficit at 2.5% of GDP in
2018. The draft 2019 budget pencils in a general government
deficit of 2.3%. We believe there is limited scope for pre-
election spending given the government's reliance on external
financing. On the revenue side, a proposed capital exit tax could
potentially replace corporate tax. We understand that the
authorities are currently considering the impact this could have
on revenue intake, and is planning offsetting measures to
mitigate any identified revenue shortfalls. The aim is to
maintain the budget within the threshold desired by the IMF."

S&P said, "Overall, we believe that, through 2021, the government
will maintain its general government deficit at or below the IMF
program's target of 2.5% of GDP. Over our forecast horizon, we
also expect a mildly positive impact on Ukraine's public finances
from the 2017 pension reform, which gradually increases, to 35,
the years of service required to retire without a penalty. As the
reform falls short of an outright increase in the statutory
retirement age and some provisions may reduce incentives to work
until 65, we believe Ukraine needs to make further adjustments if
it is to see the large pension-fund deficit sustainably decline."

Naftogaz's financial performance has helped Ukraine's fiscal
position. Thanks to gas tariff hikes implemented under the IMF
program in previous years, Naftogaz has reported surpluses and
has recently paid dividends into the state budget. Still, further
hikes to tariffs, as agreed under the IMF program, could more
sustainably improve Naftogaz's financial position. Moreover, the
Stockholm Court of Arbitration recently ruled in favor of
Naftogaz in a lawsuit over undersupplied gas under the Naftogaz-
Gazprom gas transit contract. Once the financial damages awarded
to Naftogaz ($4.6 billion; 4% of GDP) in this case are netted
against the claims that Gazprom has against Naftogaz--from
another ruling of the Stockholm court in the so-called "take or
pay" case--Gazprom will still owe Naftogaz about $2.6 billion (2%
of GDP). S&P said, "Due to the favorable ruling of the Stockholm
court, we no longer believe that contingent liabilities are a
significant risk to Ukraine's debt profile. We note, however,
that the gas transit contract with Gazprom expires at the end of
2019. With plans at the European level to pursue the North Stream
2 pipeline project, which would allow Gazprom to boost its direct
gas exports to Europe, we think Naftogaz and therefore the
sovereign could lose an important source of foreign currency
revenues as well as budgetary support."

General government debt to GDP is on a downward path because of
Ukraine's lower fiscal deficit and strong nominal GDP growth.
Despite another recapitalization of nationalized PrivatBank in
2017, Ukraine's debt ratio in 2017 fell to around 72% of GDP (81%
in 2016). In line with S&P's macroeconomic and fiscal baseline
projection, it forecasts that this ratio could decline further to
about 57% by 2021. However, the forecast remains highly sensitive
to future exchange rate developments, since around 70% of
Ukrainian government debt is denominated in foreign currency.

There is a residual risk for Ukraine's government balance sheet
from the $3 billion Eurobond issued and bought by Russia in 2013,
which was not restructured. S&P said, "We understand that a
recent London court's decision to grant a full trial for the case
is likely to ensure that a conclusion of the case may be years
out. An adverse ruling and Ukraine's potential refusal to pay in
full could eventually lead to legal constraints on Ukraine's
ability to repay its commercial debt, although we note that the
Ukraine government does not see this as a risk."

Ukrainian banks continue to grapple with very high NPLs. In June
2018, the system's NPL ratio stood at 55.7%. S&P said, "We note
this figure is exacerbated by PrivatBank, which has NPLs
amounting to about 85% of its loan portfolio, due to its
corporate loan book being almost entirely composed of related-
party lending. This compares with NPLs of around 25% for
Ukrainian private banks. The government has recently agreed on a
strategy for state-owned banks, which includes a gradual cleanup
and eventual privatization of at least two of the four--
Oschadbank and PrivatBank. With the restructuring of all four
state-owned banks progressing, we do not expect any additional
recapitalization needs from the central government over the next
year. A high share of NPLs points to the weak credit standing of
Ukrainian companies and households and the limited number of
clients with adequate creditworthiness. In our view, this still
limits the transmission mechanism of monetary policy. Overall, we
classify Ukraine's banking sector in group '10' ('1' being the
lowest risk, and '10' the highest) under our Banking Industry
Country Risk Assessment methodology."

S&P said, "We view the appointment of Yakiv Smolii as the
governor of the NBU as an important signal of central bank
independence and its ability to continue with the cleanup of the
financial sector and preserving financial stability. The NBU
continues to fight inflation, with six hikes to the key policy
rate to 18% since September 2017. Inflation has decelerated
from14.1% in January to 8.9% in September, moving closer to but
still outside the NBU's 2018 target of 6% +/- 2%. Given our
forecast of continued deprecation pressures on the Ukrainian
hryvnia and pass-through into domestic prices, we forecast that
inflationary pressures will persist over the medium term."
Broader macroeconomic stability, a more stable exchange rate, and
replenished foreign exchange reserves should also enable the NBU
to continue gradually easing its capital account restrictions.

In accordance with S&P's relevant policies and procedures, the
Rating Committee was composed of analysts that are qualified to
vote in the committee, with sufficient experience to convey the
appropriate level of knowledge and understanding of the
methodology applicable. At the onset of the committee, the chair
confirmed that the information provided to the Rating Committee
by the primary analyst had been distributed in a timely manner
and was sufficient for Committee members to make an informed
decision. After the primary analyst gave opening remarks and
explained the recommendation, the Committee discussed key rating
factors and critical issues in accordance with the relevant
criteria. Qualitative and quantitative risk factors were
considered and discussed, looking at track-record and forecasts.

The committee's assessment of the key rating factors is reflected
in the Ratings Score Snapshot above.

The chair ensured every voting member was given the opportunity
to articulate his/her opinion. The chair or designee reviewed the
draft report to ensure consistency with the Committee decision.
The views and the decision of the rating committee are summarized
in the above rationale and outlook. The weighting of all rating
factors is described in the methodology used in this rating
action.

  RATINGS LIST

  Ratings Affirmed

  Ukraine

   Sovereign Credit Rating                B-/Stable/B
   Ukraine National Scale                 uaBBB/--/--
   Transfer & Convertibility Assessment   B-
   Senior Unsecured                       B-
   Senior Unsecured                       D



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


DEBENHAMS PLC: Mulls Closure of 55 Stores to Cut Costs
------------------------------------------------------
Nicole Jeary at Investment Observer reports that Debenhams is
reportedly looking into potentially closing 55 stores as part of
a cost-saving drive.

The struggling retailer is set to report its full-year results on
Thursday, Oct. 25, Investment Observer discloses.

Back in September, Debenhams announced it had appointed KPMG to
help improve its performance, in a bid to reassure increasingly
anxious investors, Investment Observer relates.

This came amid speculation that the company was considering
entering a company voluntary arrangement (CVA) to allow store
closures and cut rents, Investment Observer notes.

Debenhams is one of many retailers that have struggled in an
increasingly challenging trading environment, Investment Observer
states.


NEW LOOK: Set to Close 120 Shops in China by End of 2018
--------------------------------------------------------
Sarah Butler at The Guardian reports that New Look is to close
all its 120 shops in China by the end of the year after
disappointing sales, as it continues to battle tough conditions
on the UK high street.

The fashion chain, which persuaded landlords to back the closure
of up to 60 of its 593 UK stores and rent reductions on dozens
more via an insolvency process in March, said it was reviewing
all its international markets, The Guardian relates.

According to The Guardian, the retailer said it had decided to
withdraw from China, where it employs 730 people, just over four
years after entering the country, because it had "not achieved
the necessary sales and profitability to support the significant
future investment required to continue operations".

New Look currently has more than 300 stores overseas as far
afield as Saudi Arabia, Libya, Malta and Poland, about two-thirds
of which are run directly and the rest via franchise partners,
The Guardian discloses.

Maureen Hinton, at the retail analysis firm GlobalData, said the
company was likely to consider closing the majority of its
directly-owned overseas stores, except those in Ireland, The
Guardian notes.

China is New Look's biggest overseas territory, in terms of store
numbers, followed by the Middle East, where the group has 63
franchise outlets, The Guardian states.

The chain is among a string of retailers to use a company
voluntary arrangement (CVA) to close stores or cut rents,
including Mothercare and Carpetright, as they face rising costs
and a shift towards online sales, The Guardian relays.


TURBO FINANCE 8: Moody's Rates Class E Notes (P)B3 (sf)
-------------------------------------------------------
Moody's Investors Service has assigned the following provisional
ratings to the Notes to be issued by Turbo Finance 8 plc:

GBP[ ]M Class A Notes due February 2026, Assigned (P)Aaa (sf)

GBP[ ]M Class B Notes due February 2026, Assigned (P)Aa2 (sf)

GBP[ ]M Class C Notes due February 2026, Assigned (P)Baa3 (sf)

GBP[ ]M Class D Notes due February 2026, Assigned (P)Ba3 (sf)

GBP[ ]M Class E Notes due February 2026, Assigned (P)B3 (sf)

Moody's has not assigned ratings to the subordinated GBP[ ]M
Class F Notes. The proceeds of the Class F Notes will be
partially applied to fund the reserve fund in the transaction.

RATINGS RATIONALE

The transaction is a static cash securitisation of hire purchase
agreements ("HP") and personal contract purchase agreements
("PCP") extended to obligors in the United Kingdom by FirstRand
Bank Limited (Baa3/P-3/Baa2(cr)/P-2(cr)) acting through its
London Branch ("FRB London"). This will be the eighth public
securitisation transaction in the United Kingdom sponsored by FRB
London. The sponsor will also act as the servicer of the
portfolio during the life of the transaction.

The portfolio of receivables backing the Notes consists of HP and
PCP agreements with individuals resident in the United Kingdom
collateralised by mostly used vehicles. PCP agreements include a
final balloon payment and permit obligors to return their vehicle
at the end of the contract in lieu of the balloon payment. This
obligor right creates residual value risk for the securitisation.
Residual value cash flows are [7.6]% in the initial portfolio. As
of July 31, 2018, the provisional portfolio consists of [52,917]
contracts, with a weighted average seasoning of [9] months and a
weighted average remaining term of [43] months.

The transaction's main credit strengths are the granular
portfolio, the static structure, significant excess spread and an
independent cash manager at closing. The reserve fund is fully
funded at closing and will be available to cover liquidity
shortfalls on Class A and B Notes interest throughout the life of
the transaction. Initially sized at [0.7]% of the original pool
balance, the reserve fund will amortise subject to a floor of
[0.5]% of the original pool balance. Upon either outstanding
principal balance of the rated notes is less than the reserve
fund required amount or the redemption of the rated notes, the
reserve fund will fully amortise. Furthermore, the Notes benefit
from credit enhancement provided by 14.8% subordination for Class
A, 9.0% subordination for Class B, 4.5% subordination for Class
C, 2.0% subordination for Class D and 1.3% subordination for
Class E. The transaction has a weighted-average APR of [11.6]% at
closing.

However, Moody's Notes some credit weaknesses such as residual
risk from PCP contracts, voluntary termination risk, fully
subordinated and deferrable interest payments on Class C to E
Notes, and the limited availability of the cash reserve to Class
C and E Notes. As in other similar transactions to private
individuals in the UK, the portfolio is exposed to the risk of
voluntary termination. In case of voluntary termination, the
obligor uses his option to return the vehicle to the originator
before contract maturity without further payment obligations as
long as the obligor made payments equal to at least one half of
the total financed amount. Interest on Class C to E Notes can be
deferred in case of a liquidity shortage at the Notes' interest
payment date. The Class C to E Notes do not benefit from the cash
reserve until it is released through the waterfall. Class C to E
Notes interest and principal is subordinated to interest and
principal payments on Classes A and B in the waterfall. Moody's
took this into account in its quantitative analysis.

Moody's analysis focused, among other factors, on (i) an
evaluation of the underlying portfolio; (ii) historical
performance information; (iii) the credit enhancement provided by
subordination, by the excess spread and the reserve fund; (iv)
the liquidity support available in the transaction, by way of
principal to pay interest and the reserve fund; (v) the
independent cash manager and (vi) the legal and structural
integrity of the transaction.

MAIN MODEL ASSUMPTIONS

Moody's determined the portfolio lifetime mean default of [6.0]%,
recoveries of [40]% and Aaa portfolio credit enhancement of
[16.5]% related to borrower receivables. The mean default rate
captures its expectations of performance considering the current
economic outlook, while the PCE captures the loss Moody's expects
the portfolio to suffer in the event of a severe recession
scenario. Mean default and PCE are parameters used by Moody's to
calibrate its lognormal portfolio loss distribution curve and to
associate a probability with each potential future loss scenario
in its ABSROM cash flow model to rate Auto ABS.

Portfolio expected defaults of [6.0]% are higher than the EMEA
Auto ABS average and are based on Moody's assessment of the
lifetime expectation for the pool taking into account (i)
historic performance of the loan book of the originator, (ii)
benchmark transactions, and (iii) other qualitative
considerations.

PCE of [16.5]% is higher than the EMEA Auto ABS average and is
based on Moody's assessment of the pool which is mainly driven by
historical portfolio performance and benchmarking. The PCE level
of [16.5]% results in an implied coefficient of variation of
[40.4]%.

Residual value risk credit enhancement ("RV CE")

Moody's determined the Aaa (sf) RV CE of 2.4% to account for the
residual value market risk. RV CE captures additional portfolio
losses which would arise on the securitised RV receivables
following a decline in the market prices of used cars in a severe
recession environment. PCP contracts permit obligors to return
their vehicle at the end of the contract in lieu of the final
payment, which is not a default and thus is not captured in the
loss assumptions for the receivables described in the previous
section. The sum of the RV CE and the credit enhancement for the
lessee receivables, as described, determines the total credit
enhancement that is needed to be consistent with each Notes
rating.

In deriving the RV CE Moody's assumes a haircut to the
portfolio's residual value cash flows of 46.0% for the Aaa(sf)
rated Notes taking into account (i) limited experience in RV
setting, (ii) no track record of car sales, and (iii) high
concentration of RV maturities. The haircut is higher than the
EMEA Auto ABS average and is based on Moody's assessment of the
pool which is mainly driven by (i) the originator's limited
experience to set residual values, (ii) lack historical portfolio
performance, and (iii) portfolio composition.

Auto Sector Transformation

The automotive sector is undergoing a technology-driven
transformation which will have credit implications for auto
finance portfolios. Technological obsolescence, shifts in demand
patterns and changes in government policy will result in some
segments experiencing greater volatility in the level of
recoveries, residual values and voluntary terminations compared
to that seen historically. For example Diesel engines have
declined in popularity and older engine types face restrictions
in certain metropolitan areas. Similarly the rise popularity of
Alternative Fuel Vehicles (AFVs) introduces uncertainty in the
future price trends of both legacy engine types and AFVs
themselves due to evolutions in technology, battery costs and
government incentives. Additional scenario analysis has been
factored into its rating assumptions for certain segments of the
portfolio.

METHODOLOGY

The principal methodology used in these ratings was 'Moody's
Global Approach to Rating Auto Loan- and Lease-Backed ABS'
published in October 2016.

The rating addresses the expected loss posed to investors by the
legal final maturity of the Class A to E Class B Notes. In
Moody's opinion, the structure allows for timely payment of
interest and ultimate payment of principal with respect to the
Class A and Class B Notes by the legal final maturity. Moody's
ratings address only the credit risks associated with the
transaction. Other non-credit risks have not been addressed but
may have a significant effect on yield to investors.

Moody's issues provisional ratings in advance of the final sale
of securities and the rating reflects Moody's preliminary credit
opinion regarding the transaction only. Upon a conclusive review
of the final documentation and the final Note structure, Moody's
will endeavour to assign a definitive rating to the Class A to E
Notes. A definitive rating may differ from a provisional rating.

FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE
RATINGS:

Factors that may cause an upgrade of the ratings of the Notes
include significantly better than expected performance of the
pool together with an increase in credit enhancement of Notes.

Factors that may cause a downgrade of the ratings of the Notes
include a worsening in the overall performance of the pool, or a
meaningful deterioration of the credit profile of the servicer or
originator.

The ratings address the expected loss posed to investors by the
legal final maturity of the Notes. In Moody's opinion, the
structure allows for timely payment of interest and ultimate
payment of principal with respect to the Class A Notes and Class
B Notes by legal final maturity and ultimate payment of interest
and principal with respect to the Class C, Class D and Class E
Notes. Moody's ratings address only the credit risks associated
with the transaction. Other non-credit risks have not been
addressed but may have a significant effect on yield to
investors.


NEWDAY PARTNERSHIP 2017-1: DBRS Confirms B Rating on Cl. F Notes
----------------------------------------------------------------
DBRS Ratings Limited confirmed its ratings of the Notes issued by
NewDay Partnership Funding 2017-1 plc (NewDay Partnership 2017-
1), NewDay Partnership Funding Loan Note Issuer VFN-P1 V1 (Sub
Series V1) and NewDay Partnership Funding Loan Note Issuer VFN-P1
V2 (Sub Series V2), as follows:

NewDay Partnership 2017-1:

-- AAA (sf) on the Class A Notes
-- AAA (sf) on the Class B Notes
-- AA (high) (sf) on the Class C Notes
-- A (sf) on the Class D Notes
-- BBB (sf) on the Class E Notes
-- B (sf) on the Class F Notes

Sub Series V1:

-- A (sf) on the Class A Loan Note
-- BB (sf) to the Class E Loan Note
-- B (sf) to the Class F Loan Note

Sub Series V2:

-- AAA (sf) on the Class A Loan Note
-- AAA (sf) on the Class B Loan Note
-- AA (high) (sf) on the Class C Loan Note
-- A (sf) on the Class D Loan Note
-- BB (sf) on the Class E Loan Note
-- B (sf) on the Class F Loan Note

The ratings address the timely payment of interest and ultimate
payment of principal on each Note's final redemption date. A
deferral of interest payments on the Notes is permitted and will
not result in an event of default.

The confirmations follow a review of the transactions and are
based on the following analytical considerations:

   -- Portfolio performance in terms of delinquencies and charge
      offs.

   -- Portfolio Principal Payment Rate, Charge-off Rate and Yield
      Rate assumptions.

   -- The credit enhancement (CE) available to the Notes to cover
      the expected losses at their respective rating levels.

The Notes are backed by co-branded high street retailer credit
card, store card receivables and installment credit loans
originated by NewDay Ltd. (NewDay or the Originator) in the
United Kingdom. All series are in their respective revolving
period.

PORTFOLIO PERFORMANCE AND ASSUMPTIONS

As of the July 2018 payment date, receivables more than 90 days
delinquent represented 0.9% of the outstanding portfolio balance.
At the same time, the Gross Charge-Off Rate was 3.4% and the
Monthly Payment Rate was at 26.7%. The performance is within
DBRS's expectations. DBRS has maintained the Gross Charge-Off
Rate, the Portfolio Yield Rate, and the Monthly Principal Payment
Rate assumptions.

CREDIT ENHANCEMENT

As all the series are in a revolving period, the CE to all the
Notes remains the same. In addition to subordination, CE is
provided in the form of a liquidity reserve and excess spread.

Citibank N.A./London Branch (Citibank) acts as the Account Bank
for all the transactions. DBRS's private rating of Citibank is
consistent with the Minimum Institution Rating criteria given the
rating assigned to the Notes, as described in DBRS's "Legal
Criteria for European Structured Finance Transactions"
methodology.

Notes: All figures are in British pound sterling unless otherwise
noted.


VUE INTERNATIONAL: S&P Alters Outlook to Neg. & Affirms 'B' ICR
---------------------------------------------------------------
S&P Global Ratings revised its outlook on U.K.-based cinema
operator Vue International Bidco PLC to negative from stable. At
the same time, S&P affirmed its long-term issuer credit rating on
Vue at 'B'.

S&P said, "We affirmed our 'BB' issue rating on Vue's GBP60
million super senior revolving credit facility (RCF). The
recovery rating on the RCF remains '1+', indicating our
expectation of full recovery in the event of a payment default.

"We also affirmed our 'B' rating on the company's EUR120 million
term loan B, GBP300 million fixed-rate notes, and EUR360 million
floating rate notes. We revised the recovery rating on the term
loan and notes upward to '3' from '4', indicating our expectation
of meaningful recovery prospects (50%-70%, rounded estimate 60%)
in the event of a payment default."

The outlook revision to negative reflects that Vue's
profitability weakened during the first nine months of the fiscal
year ended Nov. 30, 2018 and we believe the group's credit
metrics might not recover in fiscal 2019, such that S&P Global
Ratings-adjusted leverage could stay high at about 9.5x-10x and
reported EBITDA cash interest coverage could reduce to less than
2x.

S&P said, "We forecast that Vue's adjusted leverage (including
operating leases and shareholder loans) will reach about 10x in
fiscal 2018, up from 9.4x in 2017 and 8.6x in 2016, and reported
EBITDA interest coverage will be at around 2.2x. This is because
in 2017 and the first nine months of fiscal 2018, admissions in
Germany and Italy reduced due to the weak local film slate. At
the same time, the group's administrative, staff, and rent costs
increased, mainly due to the acquisition of new sites in the U.K.
and Ireland, which eroded Vue's profitability. We forecast that
in fiscal 2018 the group's adjusted EBITDA margin will weaken to
about 32%, down from about 34% in 2017 and an average of 36% in
2014-2016. Vue managed to increase its market share and grow
admissions ahead of the general market in the U.K. and Poland,
but lower average ticket prices will likely result in the group's
total box office revenue decreasing by about 2% in 2018 versus
2017.

"We expect Vue's operating performance will recover in 2019-2020
as admissions in the weaker performing German and Italian markets
restore to historical average levels. Given the group's high
operating leverage, this should help margins to recover in these
regions, and reported EBITDA to grow to about GBP120 million-
GBP140 million. Growth will likely continue in Poland and the
Netherlands, and we expect broadly stable admissions in the U.K.
due to Vue's attractive pricing proposition. We also believe Vue
will prudently manage its cost base and there won't be any
further noticeable increases in staff, rent, or exceptional
costs." As a result, the group's leverage will gradually reduce
toward 9x-9.5x and interest coverage will improve toward 3x.

However, the group's ability to achieve EBITDA growth and
deleveraging will be subject to a number of risks. Vue's revenues
and profits depend heavily on the success of the new film slate,
which is hard to predict, and are exposed to seasonality and the
timing of major releases. S&P said, "We believe the mature
markets in the U.K. and Germany will remain highly competitive,
and there will be continued pressure on pricing. We also note the
secular challenges that the cinema industry is facing against
other out-of-home entertainment alternatives such as sport and
music events and theme parks, as well as video-on-demand and
over-the-top television, which are becoming increasingly
popular."

S&P said, "Overall, we believe Vue's operating performance and
financial metrics may be subject to higher volatility compared
with larger peers, such as U.S.-based AMC Entertainment and U.K.-
based Cineworld. In our view, these companies benefit from their
large size and international presence and have more power to
negotiate lower film rental costs with major film studios and
better purchasing terms with concessions suppliers. They are also
more focused on developing subscription-based loyalty programs,
which help offset fluctuations in admissions, while Vue drives
admissions by implementing targeted pricing initiatives. In our
view, both models could halt box office revenue growth over the
short-term and their medium-term impact on profitability remains
to be seen, but the subscription model provides a higher degree
of stability to revenue streams and cash flows."

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

-- U.K. real GDP growth of 1.3% in 2018 and 2019, and about 2.0%
    and 1.7% in the eurozone. Vue's operating performance doesn't
    directly correlate with macroeconomic indicators and mainly
    depends on the quality and timing of film releases.

-- Revenue growth of 0.5%-1% to about GBP800 million in fiscal
    2018 (year ending in November), reflecting higher admissions
    and increased market share in the U.K. and Poland, partly
    offset by lower admissions in Germany and Italy and lower
    average ticket prices. In 2019-2020, S&P forecasts total
     revenue to increase at about 2%-3% per year. This will
     reflect continued growth in admissions in Poland and the
     Netherlands, a recovery in Germany and Italy, and broadly
     stable performance in the mature U.K. market.

-- Adjusted EBITDA margin (including the uplift from operating
    leases) to weaken to about 32% in fiscal 2018, compared with
    34% in 2017, due to higher administrative, staff and rental
    costs. In 2019-2020, S&P expects the margin will improve to
    about 34%-35% on the back of the group's tight control over
    operating costs and recovering admissions in Germany
    recovering to historical average levels.

-- Capital expenditure (capex) of about GBP35 million in 2018
    (including the acquisitions of Showtime in Ireland) up to
    GBP50 million in 2019 (including acquisitions of new sites in
    Poland).

-- No material debt-funded acquisitions.

-- No shareholder distributions.

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

-- Adjusted debt to EBITDA of about 10x in fiscal 2018, reducing
    toward 9x-9.5x in 2019-2020.

-- Reported EBITDA cash interest coverage (excluding the effect
    of the operating lease obligations and shareholder
    instruments) remaining above 2x in 2018-2019 and improving to
    around 3x in 2020.

-- Reported EBITDAR (EBITDA plus rent) to rent and cash interest
    expenses improving toward 1.5x in fiscal 2020.

-- Reported free operating cash flow (FOCF) of about GBP5
    million-GBP20 million in 2018-2019.

S&P said, "The negative outlook reflects our view that over the
next 12 months Vue may be unable to grow its reported EBITDA
sufficiently to support positive FOCF generation, keep reported
EBITDA cash interest coverage above 2x, and may not see adjusted
leverage recovering toward 9.0x-9.5x. This could happen if
admissions and box office revenues in Germany and Italy remain
subdued because of an unsuccessful film slate; profitability in
the U.K. market reduces amid high competition, pricing pressure,
and softening consumer demand; or if the group's operating costs
continue to increase ahead of revenue growth, eroding
profitability.

"We could lower the rating if, in fiscal 2019, Vue's reported
EBITDA does not recover and adjusted EBITDA margins remain close
to 30%, and if the group doesn't generate positive FOCF, reported
EBITDA cash interest coverage slips below 2x, or the group's
fixed charge coverage ratio deteriorates. Weakening liquidity
could also put pressure on the rating.

"We could revise the outlook to stable if Vue's profitability
improves in fiscal 2019 on the back of recovering admissions in
Germany and Italy and if the group prudently controls its
operating costs, such that the adjusted EBITDA margin increases
toward 35%. The stable outlook would also require Vue to continue
generating positive FOCF, and liquidity to remain adequate."



                            *********

Monday's edition of the TCR delivers a list of indicative prices
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                            *********


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

Troubled Company Reporter-Europe is a daily newsletter co-
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Marites O. Claro, Rousel Elaine T. Fernandez, Joy A. Agravante,
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Editors.

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

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