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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, December 12, 2018, Vol. 19, No. 246


                            Headlines


C Z E C H   R E P U B L I C

ENERGO-PRO AS: S&P Lowers ICR to 'B+' on Slow Deleveraging


F R A N C E

LA FINANCIERE ATALIAN: S&P Lowers ICR to B on High Leverage


G E R M A N Y

DEA DEUTSCHE: Fitch Keeps 'BB' LT IDR on Rating Watch Positive


I R E L A N D

BASTA: Desand Buys Business of Examinership
IRISH NATIONWIDE: Central Bank Imposes Fines on Former Head
OAK HILL VII: Moody's Assigns B3 Rating to Class F Notes


L U X E M B O U R G

ALTICE EUROPEAN: Moody's Lowers CFR to B2, Outlook Negative


P O R T U G A L

CAIXA ECONOMICA MONTEPIO: Fitch Affirms B+ Long-Term IDR


R U S S I A

TRANSTELECOM CJSC: Fitch Withdraws B+ LT Issuer Default Rating


S P A I N

KUTXA HIPOTECARIO II: Fitch Hikes Class B Notes Rating From BB+


U N I T E D   K I N G D O M

CARPETRIGHT PLC: Losses Deepen Due to Store Closure Costs
CROSSRAIL LTD: Gov't Announces Further Bailout of GBP2.15 Bil.
DIAMOND BANK: Fitch Lowers LT Issuer Default Rating to CCC
INTERSERVE PLC: Confirms Rescue Financing Talks
PIZZAEXPRESS FINANCING 1: Moody's Cuts CFR to Caa1, Outlook Neg.

TALKTALK TELECOM: Fitch Alters Outlook on BB- LT IDR to Negative


U Z B E K I S T A N

RAVNAQ-BANK: S&P Puts 'CCC+/C' ICRs on CreditWatch Developing
TURKISTON BANK: S&P Cuts ICRs to CCC+/C on Low Liquidity Buffers


                            *********



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C Z E C H   R E P U B L I C
===========================


ENERGO-PRO AS: S&P Lowers ICR to 'B+' on Slow Deleveraging
----------------------------------------------------------
S&P Global Ratings lowered its long-term issuer credit rating on
the Czech electricity multi-utility ENERGO-PRO a.s. (Energo-Pro)
to 'B+' from 'BB-'. The outlook is stable.

At the same time, S&P lowered its issue rating on Energo-Pro's
existing senior unsecured debt to 'B+' from 'BB-'.

S&P said, "The downgrade reflects our view that Energo-Pro's
EBITDA will be about EUR140 million in 2018, about 10% below our
previous expectations, potentially recovering to EUR150 million
in 2019. The company is exposed to significant hydrological risks
and country risk factors in its key markets, including increased
volatility of foreign exchange rates, which in our view
effectively offsets the benefits of diversification. We view
Energo-Pro's business as relatively volatile, and therefore, in
our analysis we focus on gross debt without netting any cash. We
forecast Energo-Pro's adjusted funds from operations (FFO) to
debt in the 14%-18% range in 2018-2019 (corresponding to 12%-15%
at the level of Energo-Pro's 100% parent, DK Holding Investments
s.r.o. [DKHI]). The ratio is unlikely to recover above 20% before
2020, in our view."

Energo-Pro continues to be predominantly a hydro generation and
electricity distribution network operator, with operations in
Georgia (43% of 2017 EBITDA), Bulgaria (39%), and Turkey (18%).
The company currently operates 34 hydro power plants (HPPs), and
one gas-fired thermal power plant that provides ancillary
services. In 2017, the group derived about 67% of EBITDA from
regulated activities under the regulatory asset base (RAB)
regime, 22% from activities under feed-in tariffs, and most of
the remaining 11% from non-regulated electricity generation
activities and, to a much lesser extent, trading activities. At
year-end 2017, Energo-Pro posted EBITDA of EUR112 million and
adjusted gross debt of EUR603.4 million, compared with a RAB of
EUR332 million. Energo-Pro accounts for 95% of EBITDA of its 100%
parent DKHI, which also controls construction of two new HPPs in
Turkey and other smaller assets.

Energo-Pro continues to face country risks, including increasing
volatility of emerging market currencies and the evolving nature
of the regulatory frameworks in the key markets where it
operates. Energo-Pro is exposed to foreign exchange risk in
Georgia and Turkey, while the Bulgarian lev is pegged to the
euro. The Georgian lari has depreciated about 10% versus the euro
since the beginning of 2018, adjusting down cash inflows from
Georgian subsidiaries. The Turkish lira has also exhibited
significant volatility in 2018. Since the beginning of the year,
the lira has dropped more than 30% against the euro, however, at
its peak in September, lira depreciation reached 65%. Energo-Pro
is currently protected from lira fluctuations because of dollar-
denominated tariffs. Although not S&P's base case, it cannot rule
out pressure on dollar tariffs in case of contract
renegotiations.

Electricity distribution regulatory frameworks in Georgia and
Bulgaria aim to achieve cost recoverability and create incentives
to invest, but they are subject to uncertainties, ongoing reforms
-- mainly in Georgia -- and heavy political influence on
regulations in Bulgaria, which remains a material constraint for
Energo-Pro. Georgia is undergoing significant regulatory changes
aimed at the liberalization of certain industry segments to be
aligned more with the EU's third energy package but S&P sees some
uncertainties related to the practical implementation of this
strategy.

Energo-Pro's investment program is relatively modest at about
EUR60 million annually in 2018-2019, and is predominantly focused
on rehabilitation of distribution grids. S&P said, "We understand
it is fully covered with operating cash flow and won't require
additional debt. Still, at the DKHI level, we expect free
operating cash flow (FOCF) to be negative because of heavy
investments in two new Turkish HPP projects (total amount of $780
million), which are scheduled to be commissioned from 2020. The
projects are partly funded with debt at the group entities
outside Energo-Pro and partly covered with distributions from
Energo-Pro. We view Energo-Pro as a core subsidiary of DKHI.
Although we understand that the bond documentation restricts
Energo-Pro's distributions for DKHI's development projects in
Turkey at EUR100 million, we believe that being the group's
largest cash source, Energo-Pro is not fully insulated from the
group. We understand that Energo-Pro's distributions or dividends
to DKHI can be used for group-level capex or debt service. As a
result, we do not expect Energo-Pro to be rated above the group
credit profile (GCP) which we currently assess at 'b+'."

S&P said, "The stable outlook reflects our expectations that the
DKHI group will be able to recover its FFO to debt to above 12%
(corresponding to a ratio of about 15% at Energo-Pro) in the next
two years, but with weak consolidated FOCF generation on the back
of sizable investments in hydro projects in Turkey. We assess
this as being commensurate with the 'b+' group credit profile. We
base our rating on Energo-Pro on the DKHI consolidated GCP,
because we consider Energo-Pro as a core entity in the DKHI group
and the main source of cash flow generation. We view Energo-Pro's
business as relatively volatile, with significant hydrological
risks and country risk factors in the key markets affecting
EBITDA generation."

S&P could lower the GCP and subsequently the rating on Energo-Pro
if:

-- FFO to debt does not recover to above 12%, on average
   (corresponding to a ratio of about 15% at Energo-Pro).

-- It engages in a large-scale debt-financed acquisition or
    overruns its capex budget, thereby materially increasing its
    leverage.

-- The group experiences higher earnings volatility than S&P
     expects, for example stemming from very poor hydro
     conditions, adverse regulatory intervention, or fluctuation
     in currency rates.

-- The group's liquidity materially weakens (which S&P currently
    does not expect).

S&P said, "We currently view upside as limited, because of
relatively large debt and negative FOCF at the consolidated group
level, which would likely prevent deleveraging in the next two
years. Rating upside would require consolidated FFO to debt
sustainably above 20% and at least adequate liquidity. We would
also view the track record of predictability and visibility of
the Bulgarian and Georgian regulatory frameworks without any
political interference and successful implementation of the
group's sizable hydro projects in Turkey as positive for the
rating."



===========
F R A N C E
===========


LA FINANCIERE ATALIAN: S&P Lowers ICR to B on High Leverage
-----------------------------------------------------------
S&P Global Ratings said that it lowered its long-term issuer
credit rating on France-based La Financiere Atalian SAS (Atalian)
to 'B' from 'B+'. The outlook is stable.

S&P said, "At the same time, we lowered the issue rating on the
company's senior debt to 'B' from 'B+'. The recovery rating is
unchanged at '4', indicating our expectation of average recovery
(30%-50%; rounded estimate 35%) in the event of a payment
default.

"The downgrade reflects our expectation that Atalian's leverage
will be higher and funds from operations (FFO) to debt weaker
than we previously forecast, with debt to EBITDA remaining above
5x and FFO to debt below 10% (our respective downgrade
thresholds) in 2018 and 2019.

The company's top-line growth over the past 12 months has
remained supported by both acquisitions and organic growth of 2%-
4% range. However, EBITDA margins have been hit by the change in
the CICE ("credit d'impìt pour la competitivite et pour
l'emploi") employment and competitiveness tax credit rate (about
a 20-basis-point reduction). In addition, new contracts in the
U.K. are not yet operating at full profitability and a number of
large French contracts were renewed at lower margins.

Furthermore, in the third quarter, the company drew EUR20 million
on its EUR98 million revolving credit facility (RCF) and
increased its factoring facility drawings by an additional
EUR25.5 million to EUR153 million. Proceeds of which were used to
fund working capital outflows and bolt-on acquisitions. Atalian
experienced significantly negative changes in working capital
year to date to September 30, 2018. This is partially explained
by one-off developments such as French social security late
payments in the first quarter, but also delays in customers'
invoicing. Although we do anticipate deleveraging in 2019, it
will now be at a slower pace. This is because of Atalian's higher
debt (including factoring), lower EBITDA margins, and S&P's
expectation of costs associated with the integration of
additional acquisitions over next 12 months.

The issuer credit rating reflects the company's operations in a
highly fragmented and competitive market, with limited barriers
to entry, low margins, and significant exposure to wage
inflation. S&P views the recent acquisitions, including U.K.-
based Servest Limited, as favorable given they reduce the
company's exposure in France (about 45% of the combined group's
revenues) and provide further access to the U.K market (about
20%-25% of the combined group's revenues). Although the
acquisitions will also enable the group to diversify its customer
base further and produce coverage, this market remains very
competitive and subject to price pressure, which could continue
to challenge the company's ability to increase margins.

S&P said, "We expect leverage to be around 7.2x at year-end 2018
if we include Servest and other acquisitions on a pro forma 12-
month basis, improving to mid-6.0x range in 2019. Gross reported
debt will be about EUR1.5 billion, including the existing EUR625
million and EUR604 million senior notes, EUR153 million factoring
facility, EUR20 million drawings under the RCF, and other
financial debt of about EUR25 million. We add back to Atalian's
reported debt our estimate of operating-lease liabilities of
about EUR56 million for the combined group, and pension
obligations of about EUR24 million. We also deduct our estimate
of EUR110 million of surplus cash expected for the end of 2018 to
arrive at the overall adjusted debt figure of about EUR1.4
billion."

S&P's base-case scenario assumes:

-- GDP growth of 1.6% in both 2018 and 2019 in France; 1.3% in
    2018 and 1.3% in 2019 in the U.K.; and 2.0% and 1.7% in the
    eurozone.

-- The combined group's pro forma revenue will increase to about
     EUR3.0 billion-EUR3.1 billion in 2018 and about EUR3.2
     billion in 2019.

-- S&P said, "We expect Atalian's revenue (excluding Servest) to
    rise by about 14% in 2018, much higher than GDP growth, as
     growth is supported by acquisitions (full-year contribution
     of the previous year's acquisition and additional
     acquisitions completed in 2018). We also incorporate moderate
     organic growth of the international business and 1.5%-2.0%
     growth in the French market."

-- Adjusted EBITDA margins of around 6% in 2018, constrained by
    integration costs, starting costs of new contracts, and the
    negative impact from the lower CICE rate. S&P expects margins
    to improve from 2019, however, supported by synergies and
    higher operating margins of Servest and recent acquisitions,
    but held back by negative pricing pressure in the French
    market.

-- S&P estimates integration and restructuring costs of EUR8
    million-EUR10 million in 2018.

-- Capex of about EUR50 million per year, which represents about
    1.5% of the group's combined revenue.

-- Earn-out payments of about EUR10 million per year.

-- Working capital outflow of about EUR70 million in 2018 due to
     the timing of French social security payments, seasonal
     delays relating to customer invoicing, and strong revenue
     growth in the U.K. S&P expects more normalized levels of
     around EUR25 million outflow in 2019.

-- Factoring drawings of approximately EUR25 million in 2019.

-- Dividend payment of about EUR18 million in 2018 and EUR5
    million per year thereafter.

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

-- Adjusted debt to EBITDA of about 7.2x by year-end 2018
    (including pro forma 12-month contribution from Servest),
    improving to mid-6.0x by the end of 2019.

-- Adjusted FFO to debt of about 8.5%-9.0% at the end of 2018,
    improving to around 9.0%-9.5% in 2019.

-- Minimal to no adjusted free operating cash flow (FOCF) to
    debt in 2018, and about 3.5%-4.0% in 2019.

S&P said, "The stable outlook reflects our expectation that
despite Atalian remaining acquisitive, adjusted leverage will
decline to 6.0x-6.5x and FOCF will return to positive by year-end
2019 as a result of EBITDA growth, realization of synergies, and
lower integration costs.

"We could lower the rating if we anticipated that Atalian would
post weaker-than-expected EBITDA margins resulting in FOCF
remaining negative in 2019 or FFO cash interest coverage
declining below 2x. We could also take a negative rating action
if the group attempted further material debt-funded acquisitions,
or undertook exceptional shareholder distributions beyond our
expectations, resulting in significantly increased leverage, or
if our liquidity assessment weakened.

"We could raise the rating if Atalian's credit metrics improved
following the purchase of Servest and additional debt-funded
acquisitions that we expect the company to make over the next 12
months. In particular, we could raise the rating if adjusted debt
to EBITDA improved to around 5.0x and FFO to debt increased to
around 12% on a sustained basis. This could happen if the group's
profitability and cash flow generation improved significantly
because of higher-than-expected synergies from acquisitions and
improved working capital management."



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G E R M A N Y
=============


DEA DEUTSCHE: Fitch Keeps 'BB' LT IDR on Rating Watch Positive
--------------------------------------------------------------
Fitch Ratings has maintained DEA Deutsche Erdoel AG's (DEA) Long-
Term Issuer Default Rating (IDR) of 'BB' on Rating Watch Positive
(RWP). Fitch has also maintained DEA's senior unsecured rating of
'BB' and the 'BB' rating for senior unsecured notes issued by DEA
Finance SA on RWP.

The RWP is pending DEA's announced merger with Wintershall
Holding GmbH (Wintershall), a subsidiary of BASF SE (A+/Stable).
The rating action reflects Fitch's view that the business profile
of the combined entity will be stronger than DEA's due to the
larger scale of operations and a more diversified asset base,
mainly in investment grade-rated countries.

Fitch will resolve the RWP after the closing of the transaction,
which could occur in more than six months from now. Currently the
closing of the transaction is expected by BASF and DEA in 1H19.
Its assessment of the rating will take into account the funding
structure of the combined entity.

KEY RATING DRIVERS

Wintershall DEA Merger: On September 27, 2018, BASF and
LetterOne, DEA's parent, signed an agreement to combine their oil
and gas businesses, Wintershall and DEA, in a joint venture (JV),
which would operate under the name Wintershall DEA. The agreement
followed the letter of intent signed in December 2017.

It is envisaged that LetterOne will transfer all its shares in
DEA to Wintershall in exchange for new shares in Wintershall DEA.
BASF and LetterOne will initially hold 67% and 33% stakes,
respectively, in Wintershall DEA. BASF will increase its
shareholding in the combined entity to 72.7% following the
conversion of its preference shares in Wintershall DEA, which
reflect the value of Wintershall's transportation business, into
ordinary shares.

Larger Scale, Improved Diversification: In 2017, the combined
business had pro-forma sales of EUR4.7 billion and EBITDA of
EUR2.8 billion. Overall, production volumes of Wintershall and
DEA, including equity affiliates, amounted to 575 thousand
barrels of oil equivalent per day (kboe/d) in 2017, of which 125
kboe/d was from DEA. Based on proven reserves (1P) of 2.2 billion
barrels of oil equivalent (boe) at end-2017, excluding volumes
from equity-accounted JVs, the reserve-to-production ratio of the
combined business would be around 10 years. Wintershall DEA will
operate mainly in Norway, Russia, Germany and Argentina.

Business Profile to Strengthen: Fitch expects that the larger
scale of operations and enhanced geographical diversification of
the combined company will improve its credit profile. Wintershall
DEA will also hold a majority of assets in investment grade-rated
countries. Details on the envisaged funding structure of the
combined entity are yet to be determined, but Fitch expects
Wintershall DEA to have financial profile that is at least as
strong as DEA's. Fitch also believes that the merged entity will
benefit from easier access to funding. This supports its
assessment that the proposed transaction will have a positive
effect on DEA's credit profile.

No Risk from Change of Control: DEA Finance SA's outstanding
EUR400 million guaranteed notes and DEA's USD2.3 billion reserve-
based lending (RBL) facility contain change-of-control
provisions. Fitch believes that the refinancing risk associated
with these provisions is low, given the positive impact of the
transaction on DEA's credit profile and the notes' trading levels
(above par) after the merger announcement.

Strong Performance, Limited Size: Fitch expects DEA to achieve
funds from operations (FFO) adjusted net leverage of 2.2x in
2018, down from 3.0x in 2016. The improvement is underpinned by
the company's strong performance in a high oil price environment.
In 2020 Fitch expects its leverage to return to around 3.0x due
to lower oil and gas price assumptions, among other factors.
DEA's rating is negatively affected by limited size of the
company's production and asset diversification, while its
projected financial profile based on Fitch's assumptions is quite
robust.

New Major Producing Region: Sierra Oil and Gas, an independent
Mexican upstream company recently acquired by DEA, positions
Mexico as a key operating country for DEA. After the transaction
is finalised, the company will have a third exploration and
production region in addition to Europe and North Africa. Zama
field, the most important asset in which Sierra Oil and Gas has a
stake, is in the pre-development stage and will contribute to
production in the medium term. Fitch assumes that most of the
consideration for the acquisition will be covered by DEA's
current ultimate shareholder.

DERIVATION SUMMARY

DEA's 2017 production of 125 kboe/d (40% liquids) mainly came
from Norway and Germany. Its geographical and asset
diversification are superior to smaller EMEA peers', such as
Kosmos Energy Ltd (B+/Stable; production of 19 kboe/d), which
usually have a more concentrated asset base in countries with a
weaker operating environment, and are more comparable to QEP
Resources, Inc. (BB/RWN) with 2017 output of 146 kboe/d. This
factor, coupled with leverage and the production size, is
commensurate with the mid 'BB' rating category. Following the
completion of the merger, the scale of operations and
geographical diversification of oil and gas output will improve
significantly.

The rating of Wintershall DEA will depend on the detailed capital
structure of the transaction and leverage of the combined entity,
which is yet to be determined.

No parent/subsidiary linkage, country ceiling or operating
environment considerations are applicable to the ratings.

KEY ASSUMPTIONS

Fitch's Key Assumptions Within Its Rating Case for the Issuer

  - Brent oil price of USD65/bbl in 2019, USD62.5/bbl in 2020 and
    USD60/bbl in 2021

  - Gas prices (NBP) of USD7/mcf in 2019, USD6.75/mcf in 2020 and
    USD6.75/mcf in 2021

  - EUR/USD exchange rate at 1.1 in 2019 and thereafter

RATING SENSITIVITIES

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

  - Completion of merger with Wintershall leading to an
    improvement in the credit profile

Here are rating sensitivities for DEA in case the merger with
Wintershall does not go through.

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

  - Large debt-financed acquisition

  - FFO net leverage consistently above 4.0x

LIQUIDITY

Healthy Liquidity: Cash and cash equivalents of L1E Finance GmbH,
the top consolidating company within the restricted group for
DEA's bonds, were EUR125 million against limited short-term debt
at September 30, 2018. L1E Finance's net debt stood at EUR1.4
billion at end-September 2018. Fitch assumes that DEA's creditors
will not trigger the change-of-control clauses due to the
positive impact of the proposed deal on the business profile of
the combined entity and DEA's good access to funding, should the
company decide to refinance its debt.



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I R E L A N D
=============


BASTA: Desand Buys Business of Examinership
-------------------------------------------
Michael O'Dwyer at The Irish Times reports that a group of
building industry players, including the daughter of former
developer Liam Maye, has bought the Basta locks and ironmongery
brand out of examinership.

Basta, which went into examinership in July, employed 48 people,
The Irish Times discloses.

Desand, an Irish company, has acquired the brand, its goodwill
and the company's stock but is not acquiring the business, or its
staff, The Irish Times relates.

According to The Irish Times, it said it would continue to trade
as Basta "as this continues to be one of the strongest brands in
the sector for over 60 years".


IRISH NATIONWIDE: Central Bank Imposes Fines on Former Head
-----------------------------------------------------------
Joe Brennan at The Irish Times reports that the Central Bank has
fined Irish Nationwide Building Society's (INBS) former head of
commercial lending, Tom McMenamin, EUR23,000 and barred him from
a senior role in a financial firm for 18 years after he admitted
involvement in a serious of regulatory breaches in the run-up to
the financial crisis.

Mr. McMenamin was one of four senior executives at INBS that have
been subject to an ongoing public inquiry into matters at INBS
between August 2004 and the end of September 2008, when the State
was forced to step in and guarantee its six main lenders, The
Irish Times discloses.

According to The Irish Times, the Central Bank said Mr. McMenamin
has admitted to participating in multiple breaches of financial
services law by INBS, including not properly documenting
commercial loan applications, not following loan approval
processes, and not following processes in relating to the size of
loans relative to a property's value.  Other violations included
not monitoring commercial loans and the company's credit
committee failure to discharge its functions, The Irish Times
notes.

INBS cost Irish taxpayers EUR5.4 billion in bailouts before its
assets were merged with fellow-failed lender Anglo Irish Bank in
2011 to form Irish Bank Resolution Corporation (IBRC), The Irish
Times relates.  IBRC was subsequently put into liquidation two
years' later, The Irish Times recounts.


OAK HILL VII: Moody's Assigns B3 Rating to Class F Notes
--------------------------------------------------------
Moody's Investors Service announced that it has assigned the
following definitive ratings to notes issued by Oak Hill European
Credit Partners VII Designated Activity Company:

EUR240,000,000 Class A Senior Secured Floating Rate Notes due
2031, Definitive Rating Assigned Aaa (sf)

EUR31,100,000 Class B-1 Senior Secured Floating Rate Notes due
2031, Definitive Rating Assigned Aa2 (sf)

EUR12,500,000 Class B-2 Senior Secured Fixed Rate Notes due 2031,
Definitive Rating Assigned Aa2 (sf)

EUR25,200,000 Class C Senior Secured Deferrable Floating Rate
Notes due 2031, Definitive Rating Assigned A2 (sf)

EUR27,200,000 Class D Senior Secured Deferrable Floating Rate
Notes due 2031, Definitive Rating Assigned Baa3 (sf)

EUR24,300,000 Class E Senior Secured Deferrable Floating Rate
Notes due 2031, Definitive Rating Assigned Ba3 (sf)

EUR10,000,000 Class F Senior Secured Deferrable Floating Rate
Notes due 2031, Definitive Rating Assigned B3 (sf)

RATINGS RATIONALE

Moody's definitive ratings of the rated notes reflect the risks
due to defaults on the underlying portfolio of loans given the
characteristics and eligibility criteria of the constituent
assets, the relevant portfolio tests and covenants as well as the
transaction's capital and legal structure. Furthermore, Moody's
is of the opinion that the collateral manager, Oak Hill Advisors
(Europe), LLP ("Oak Hill"), has sufficient experience and
operational capacity and is capable of managing this CLO.

Oak Hill VII is a managed cash flow CLO. At least 90% of the
portfolio must consist of secured senior loans or senior secured
bonds and up to 10% of the portfolio may consist of unsecured
senior obligations, second-lien loans, high yield bonds and
mezzanine obligations. The portfolio is expected to be
approximately 75% ramped up as of the closing date and to be
comprised predominantly of corporate loans to obligors domiciled
in Western Europe. The remainder of the portfolio will be
acquired during the ramp-up period in compliance with the
portfolio guidelines.

Oak Hill will manage the CLO. It will direct the selection,
acquisition and disposition of collateral on behalf of the Issuer
and may engage in trading activity, including discretionary
trading, during the transaction's four and a half years
reinvestment period. Thereafter, purchases are permitted using
principal proceeds from unscheduled principal payments and
proceeds from sales of credit risk obligations, and are subject
to certain restrictions.

In addition to the seven classes of notes rated by Moody's, the
Issuer will issue EUR41.4M of subordinated notes S-1 and S-2
which will not be rated.

The transaction incorporates interest and par coverage tests
which, if triggered, divert interest and principal proceeds to
pay down the notes in order of seniority.

Methodology Underlying the Rating Action:

The principal methodology used in these ratings was "Moody's
Global Approach to Rating Collateralized Loan Obligations"
published in August 2017.

The Credit Ratings of the notes issued by Oak Hill European
Credit Partners VII Designated Activity Company were assigned in
accordance with Moody's existing Methodology entitled "Moody's
Global Approach to Rating Collateralized Loan Obligations" dated
August 31, 2017. Please note that on November 14, 2018, Moody's
released a Request for Comment, in which it has requested market
feedback on potential revisions to its Methodology for
Collateralized Loan Obligations. If the revised Methodology is
implemented as proposed, the Credit Rating of the notes issued by
Oak Hill European Credit Partners VII Designated Activity Company
may be neutrally affected. Please refer to Moody's Request for
Comment, titled " Proposed Update to Moody's Global Approach to
Rating Collateralized Loan Obligations" for further details
regarding the implications of the proposed Methodology revisions
on certain Credit Ratings.

Factors that would lead to an upgrade or downgrade of the
ratings:

The rated notes' performance is subject to uncertainty. The
notes' performance is sensitive to the performance of the
underlying portfolio, which in turn depends on economic and
credit conditions that may change. Oak Hill's investment
decisions and management of the transaction will also affect the
notes' performance.

Moody's modeled the transaction using CDOEdge, a cash flow model
based on the Binomial Expansion Technique, as described in
Section 2.3 of the "Moody's Global Approach to Rating
Collateralized Loan Obligations" rating methodology published in
August 2017.

Moody's used the following base-case modeling assumptions:

Target Par Amount: EUR 400,000,000

Diversity Score: 44

Weighted Average Rating Factor (WARF): 2850

Weighted Average Spread (WAS): 3.4%

Weighted Average Coupon (WAC): 4.5%

Weighted Average Recovery Rate (WARR): 42.5%

Weighted Average Life (WAL): 8.5 years



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


ALTICE EUROPEAN: Moody's Lowers CFR to B2, Outlook Negative
-----------------------------------------------------------
Moody's Investors Service downgraded the corporate family ratings
of Altice Luxembourg S.A., Altice France S.A. and Altice
International S.a.r.l., to B2 from B1, as well as their
probability of default ratings to B2-PD from B1-PD.

Altice Luxembourg is the holding company for the majority of
Altice Europe N.V.'s assets. Altice France is the principal
vehicle used to fund the group's telecom operations in France,
owning the SFR brand. Altice International is the vehicle used to
fund the group's other international operations, such as Portugal
Telecom, HOT in Israel, Altice Dominicana in the Dominican
Republic, and Teads.

The ratings on the debt instruments issued by Altice Luxembourg,
Altice France and Altice International and their financing
subsidiaries have also been downgraded by one notch.

All ratings remain on negative outlook.

"The downgrade reflects our expectation of declining revenue and
EBITDA over the next 12 months mainly driven by intensified
competitive pressure in France's telecom sector," says Laura
Perez, a Moody's Vice President -- Senior Credit Officer -- and
lead analyst for Altice.

"Altice is reducing debt by selling infrastructure assets that
Moody's believes are critical such as towers and fibre, which is
positive for the group's liquidity at a time when its cash flow
generation is weak. However, the group's underlying leverage will
remain high after taking into account the pro-rata consolidation
of its off-balance sheet vehicles and the greater economic
operational liabilities from the tower sales. Furthermore,
selling these infrastructure assets increases the group's
complexity and reduces its operational flexibility when compared
with a full ownership model," adds Mrs. Perez.

RATINGS RATIONALE

The group's operating performance has been below Moody's
expectations. Moody's expects revenues and EBITDA to continue
declining over the next 12 months, mainly driven by intensified
competition, especially in France. Moody's also does not see the
group's revenue stabilizing until 2020 and it remains subject to
execution risk.

The strong net subscriber additions in France over the last nine
months to September 2018 has come at a high financial cost, with
revenues and EBITDA down by 5% and 7% given strong reduction in
prices and increased retention costs together with the one-off
impact of VAT. Moody's projects the pressure on top-line revenues
in France to slow down next year benefiting from a larger
customer base and reduced pressure on ARPU. At the same time,
Moody's expects revenues in Portugal to decline modestly driven
by competitive pressures and structural declines in traditional
business segments.

The group recently sold part of its infrastructure assets that
Moody's believes are critical to accelerate debt reduction. The
transactions included the sale of half of its towers in France,
75% of its towers in Portugal and all of its towers in the
Dominican Republic to financial investors for a total
consideration of EUR2.4 billion. The group also recently
announced the proposed sale of a minority equity stake of 49.99%
in its SFR FTTH joint venture to a consortium of infrastructure
funds for a total cash consideration of EUR1.8 billion.

SFFR FTTH will not be consolidated in Altice's accounts and it
will have a EUR1.8 billion capex facility available to fund the
fibre deployment. However, Moody's sees SFR FTTH as a strategic
asset for Altice France with strong links with the group, and
therefore will also analyze SFR FTTH JV on a pro-rata basis.

Moody's believes the key benefit of the announced EUR4.2 billion
disposal of tower and fibre assets is to strengthen the company's
liquidity and to improve headroom under covenants, at a time of
low cash flow generation. Moody's forecasts free cash flow
generation to be negative in 2018 and free cash flow to debt to
remain modest at 0%-2% over the next 24 months.
While Moody's expects Altice Luxembourg's gross adjusted leverage
(pro-forma for the group reorganization) to decline from 5.8x in
2018 to 5.1x by 2020 driven by these disposals, the group's
underlying leverage will remain high at an estimated 5.5x-5.6x,
after taking into account greater economic operational
liabilities from towers and the pro-rata consolidation of off-
balance sheet vehicles.

Moody's believes that the group's reduction in financial debt is
partially offset by the increased operational liabilities and
dividend leakage arising from the tower sales; together with the
pro-rata consolidation of off-balance sheet vehicles.
Furthermore, Moody's believes that the announced sale of fibre
assets increases the complexity of the group's structure, reduces
operational flexibility and creates event risk over the long-term
as Altice may buy back these assets once it develops sufficient
financial flexibility.

While adjusted leverage levels at Altice France and Altice
International are more moderate than at the parent, Altice
Luxembourg, their ratings have been downgraded to reflect the
growing complexity of the group structure, the overhang that the
high leverage at the parent represents for the subsidiaries, and
the potential use of Altice France and Altice International's
leverage capacity for corporate purposes including dividend
distributions.

The B2 rating continues to reflect (1) the scale of the business
and its strong market positions in different countries; (2) the
high quality asset base; and its ability to provide a convergent
product offer; (3) the group's high margin of 40% ; (4) the long-
dated debt maturity profile, with no significant debt maturities
until 2022; (5) its significant operational challenges,
especially in France, including revenue stabilization, customer
churn reduction and operational restructuring in highly
competitive markets, (6) its complex financial structure with
distinct funding credit pools for its various business units and
its aggressive financial policy.

RATIONALE FOR NEGATIVE OUTLOOK

The negative outlook reflects Moody's view that Altice continues
to face operational challenges including revenue stabilization in
France, given recent intensified competitive pressure, as well as
in Portugal. At the same time, the group's management will be
stretched as the company looks to dispose of assets to reduce
debt. Moody's also notes that Altice's capital structure has a
modest equity cushion, estimated at 10% of the group's enterprise
value.

WHAT COULD MOVE THE RATING UP/DOWN

While Moody's will not make an adjustment on Altice's leverage
metrics to reflect the estimated economic impact of the sale of
infrastructure assets, the rating agency will require stronger
credit metrics for the B2 rating level to reflect (1) the
estimated economic impact of the tower disposals and the pro-rata
consolidation of SFR FTTH; (2) the growing complexity of the
group's structure after the sale of infrastructure assets in
Moody's view; and (3) the intensified competitive pressure in
France, which diminishes visibility on long-term earnings.

Downward pressure on the ratings may develop if Altice
Luxembourg's underlying operating performance weakens beyond
current expectations, with sustained declines in revenues and
deteriorating KPIs (including churn and ARPU) in France and
Portugal, leading to a deterioration in the group's credit
fundamentals, such as (1) Moody's adjusted leverage remaining
consistently above 5.5x; (2) there is a significant deterioration
in free cash flow generation; (3) there are material setbacks in
achievement of synergies in existing company businesses, (4)
there are material debt-financed acquisitions at either the
Altice Luxembourg or Altice Europe N.V. level; (5) there are
signs of a deterioration in liquidity.

Moody's sees no near-term upward pressure on the rating, although
such pressure may develop over time if the company demonstrates
sustained improvement in underlying revenues and KPIs (e.g.
churn, ARPU) with growing EBITDA in main markets, especially in
France, leading to an improvement in credit metrics such as: (1)
Moody's adjusted leverage be sustained below 5.0x; (2)
significant improvement in free cash flow generation on a
consistent basis; and (3) a strong liquidity profile with no
refinancing risks.

The triggers at Altice France and Altice International have been
aligned with those of Altice Luxembourg to reflect the overhang
that debt at the parent represents for those subsidiaries.

The principal methodology used in these ratings was
Telecommunications Service Providers published in January 2017.

Altice Luxembourg S.A is a Luxembourg-based holding company,
which through its subsidiaries Altice International S.a.r.l. and
Altice France operates a multinational telecommunications and
cable business. SFR has its operations mainly in France, while
Altice International's main markets are Dominican Republic,
Israel and Portugal.

Over last twelve months to September 2018, Altice Luxembourg
generated, pro-forma for the reorganization of the group, revenue
and EBITDA of EUR14.1 and EUR5.6 billion respectively. France is
the main market for the group representing approximately 70% of
the its revenue and EBITDA.

Downgrades:

Issuer: Altice Luxembourg S.A.

  Probability of Default Rating, Downgraded to B2-PD from B1-PD

  Corporate Family Rating, Downgraded to B2 from B1

  Senior Unsecured Regular Bond/Debenture , Downgraded to Caa1
  from B3

Issuer: Altice Financing S.A.

  Backed Senior Secured Regular Bond/Debenture, Downgraded to B2
  from B1

  Senior Secured Regular Bond/Debenture, Downgraded to B2 from B1

  Senior Secured Bank Credit Facility, Downgraded to B2 from B1

Issuer: Altice Finco S.A.

  Backed Senior Unsecured Regular Bond/Debenture, Downgraded to
  Caa1 from B3

  Senior Unsecured Regular Bond/Debenture, Downgraded to Caa1
  from B3

Issuer: Altice International S.a.r.l.

  Probability of Default Rating, Downgraded to B2-PD from B1-PD

  Corporate Family Rating, Downgraded to B2 from B1

Issuer: Altice France S.A.

  Probability of Default Rating, Downgraded to B2-PD from B1-PD

  Corporate Family Rating, Downgraded to B2 from B1

  Backed Senior Secured Regular Bond/Debenture, Downgraded to B2
  from B1

  Senior Secured Regular Bond/Debenture, Downgraded to B2 from B1

  Senior Secured Bank Credit Facility, Downgraded to B2 from B1

Outlook Actions:

Issuer: Altice Luxembourg S.A.

  Outlook, Remains Negative

Issuer: Altice France S.A.

  Outlook, Remains Negative

Issuer: Altice Financing S.A.

  Outlook, Remains Negative

Issuer: Altice Finco S.A.

  Outlook, Remains Negative

Issuer: Altice International S.a.r.l.

  Outlook, Remains Negative



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


CAIXA ECONOMICA MONTEPIO: Fitch Affirms B+ Long-Term IDR
--------------------------------------------------------
Fitch Ratings has affirmed Caixa Economica Montepio Geral, caixa
economica bancaria, S.A.'s Long-Term Issuer Default Rating at
'B+' and Viability Rating at 'b+'. The Outlook on the Long-Term
IDR is Stable. At the same time, Fitch has placed CEMG's long-
term senior unsecured debt 'B+' rating on Rating Watch Negative.

KEY RATING DRIVERS

IDR AND VR

CEMG's ratings primarily reflect low capital buffers in relation
to weak asset quality metrics, weak operating profitability and
stable, albeit price-sensitive, funding. The ratings also
incorporate the actions taken by the bank to restore capital
ratios and accelerate the implementation of its strategic plan.

The new management team has set ambitious targets to reduce
problem assets to levels more in line with peers. However the
appointment of a new CEO is taking longer than expected and the
circumstance that the chairman of the board cumulates his and the
CEO positions reflects a less developed corporate governance than
at other rated domestic peers.

CEMG's asset quality metrics are weak. The bank's IFRS 9 stage 3
loans (impaired loans) to gross loans ratio was high at about 16%
at end-June 2018. Including foreclosed assets and investments in
properties the Fitch-calculated problem asset ratio was higher at
about 23%, which is the weakest among rated domestic peers. The
stock of problem assets is gradually declining, due to lower
inflows into impaired loans, asset deconsolidation and larger
recoveries thanks to the improved economic environment in
Portugal. Fitch expects the strengthened loan loss allowance
coverage of impaired loans of about 51% at end-June 2018 should
facilitate asset sales without resulting in material capital
erosion.

Fitch considers CEMG's capital base highly vulnerable to moderate
asset quality shocks. CEMG restored its capital position in 2016-
2017 but improvements have stalled in 2018 to date. The bank
still has limited buffers over its 2018 Supervisory Review and
Evaluation Process requirements of 9.4% for the common equity
Tier 1 (CET1) ratio and 12.9% for the total capital ratio, when
these are examined in relation to its still high capital
encumbrance by problem assets and weak ability to generate
capital. At end-September 2018, CEMG's phased-in CET1 and total
capital ratios were 13.4% (11.2% fully loaded) and 13.5% (11.3%
fully loaded), respectively. Unreserved problem assets (including
impaired loans, investment properties and foreclosed assets) were
still very high at around 1.6x the fully loaded CET1 capital at
end-June 2018, indicating the bank's vulnerability to asset
quality shocks.

CEMG's core profitability is weak and highly variable through the
economic and interest rate cycles. In 9M18, the positive trend
seen in 2017 stalled as total revenue declined by about 23% yoy.
This primarily resulted from a sharp reduction in revenue earned
on the bank's fixed income portfolio. However, significantly
lower loan impairment charges and lower operating expenses helped
CEMG maintain a small positive operating profit in 9M18. Cost
efficiency has improved compared with 2016 and 2015, due to a
sharp decline in operating costs. Improving its profitability
will be key to strengthening CEMG's capital generation.

Fitch considers CEMG's funding and liquidity as being sensitive
to changes in creditor sentiment, despite having been fairly
stable during the last financial crisis. Fitch views CEMG's
deposit base as more price-sensitive than peers' and the bank
continues to fund at higher spreads. Customer deposits are the
bank's main funding source, at about 73% of total funding at end-
June 2018. Other funding sources are primarily in the form of
repurchase agreements, central bank funding and covered bonds.
The loans to deposits ratio was acceptable at 110% at end-June
2018 reducing from about 123% at end-2015.

SENIOR DEBT

The senior unsecured debt programme ratings are in line with the
bank's Short- and Long-Term IDRs at 'B' and 'B+' respectively.
The 'RR4' Recovery Rating on long-term instruments reflects
Fitch's view of average recovery prospects for these instruments
under the creditor hierarchy currently in force.

The RWN on CEMG's long-term senior unsecured debt programme
ratings reflects Fitch's view that recovery prospects for the
bank's senior unsecured creditors would weaken if the
government's proposed draft law, transposing the senior non-
preferred amendment to the EU Bank Recovery and Resolution
Directive (BRRD) into the Portuguese legislation, is passed as
currently drafted. The draft law introduces full depositor
preference, which means that corporate and institutional deposits
in Portugal would be preferred to senior unsecured claims in a
resolution or liquidation alongside retail and SME deposits.
Based on CEMG's current liability structure, losses for CEMG's
senior unsecured creditors in resolution or liquidation would
likely be below average or poor. Fitch expects the law to be
approved by parliament by year-end.

SUPPORT RATING AND SUPPORT RATING FLOOR

The Support Rating (SR) of '5' and Support Rating Floor (SRF) of
'No Floor' for CEMG reflect Fitch's belief that senior creditors
of the bank cannot rely on receiving full extraordinary support
from the sovereign in the event that the bank becomes non-viable.
The EU's Bank Recovery and Resolution Directive (BRRD) and the
Single Resolution Mechanism (SRM) for eurozone banks provide a
framework for resolving banks that is likely to require senior
creditors to participate in losses, if necessary, instead of - or
ahead of - a bank receiving sovereign support.

RATING SENSITIVITIES

IDR AND VR

Rating upside is limited due to a still large, although
declining, stock of problem assets and weak operating
profitability. An upgrade would be contingent on the bank
improving substantially profitability metrics and asset quality
and materially reducing capital encumbrance from problem assets.

The ratings could be downgraded if the improving asset quality
trend stalls, weakening the bank's low capital buffers further or
if CEMG fails to improve recurring operating profitability.

SENIOR DEBT

CEMG's long-term senior unsecured debt programme rating would be
downgraded, by at least one notch, and Recovery Rating to 'RR5',
if the law introducing full depositor preference is approved by
parliament as currently drafted (i.e. including full depositor
preference in the country), to reflect the then weaker recovery
prospects for senior bondholders.

The extent of the downgrade could be as large as two notches if
Fitch instead viewed recovery prospects for senior unsecured
bondholders as being poor (as reflected in a 'RR6' Recovery
Rating), rather than below-average.

SUPPORT RATING AND SUPPORT RATING FLOOR

An upgrade of the SR and upward revision of the SRF would be
contingent on a positive change in the sovereign's propensity to
support it. While not impossible, this is highly unlikely, in
Fitch's view.

The rating actions are as follows:

CEMG:

Long-Term IDR: affirmed at 'B+'; Outlook Stable

Short-Term IDR: affirmed at 'B'

Viability Rating: affirmed at 'b+'

Support Rating: affirmed at '5'

Support Rating Floor: affirmed at 'No Floor'

Senior unsecured debt long-term programme rating 'B+'/'RR4';
placed on RWN

Senior unsecured debt short-term programme rating affirmed at
'B'



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


TRANSTELECOM CJSC: Fitch Withdraws B+ LT Issuer Default Rating
--------------------------------------------------------------
Fitch Ratings has affirmed CJSC Transtelecom Company's (TTK)
Long-Term Foreign- and Local-Currency Issuer Default Rating (IDR)
at 'B+'. The Outlook is Stable. Fitch has simultaneously
withdrawn all of TTK's ratings.

Fitch has withdrawn the ratings as TTK has chosen to stop
participating in the rating process. Therefore, Fitch will no
longer have sufficient information to maintain the ratings.
Accordingly, Fitch will no longer provide ratings or analytical
coverage for TTK.

Key Rating Drivers

Stable Positions in Competitive Markets: TTK has established
positions in the inter-operator segment and around a 5% market
share of the Russian retail broadband as of 2Q18, with around 1.7
million broadband customers. The company is likely to sustain its
competitive position given its extensive backbone network laid
along railways across Russia. Control over this expansive
infrastructure positions TTK as a significant wholesale operator
and also allows it to offer competitive broadband service in its
covered territories. The network remains under-utilised, which
allows the company to seek revenue growth opportunities.

Intense Competition: TTK operates in highly competitive and
intrinsically volatile markets, which is likely to pressure the
company's revenue. The traditional wholesale segment remains in a
long-term decline, as a result of falling voice traffic and the
continuing build-out of own infrastructure by large telecoms
operators, in its view. TTK is the fifth-largest player in the
competitive broadband segment, with a 5% market share. The five
largest players control around 70% of the market and scale is
increasingly beneficial as fixed-mobile convergent services
become more important. TTK's focus on international data capacity
as well as introduction of new retail services should help
support overall company revenue.

Change in Wholesale Mix: TTK has been exploring new opportunities
for providing international data capacity. The company's recently
upgraded network connections to Russia's European and Asian
neighbouring countries provides opportunities for recurring
indefeasible right of use (IRU) proceeds from international
operators, over the next few years. Such projects have good
financial visibility as the capex for the construction of new
capacity can be funded from the sale of IRUs. Therefore, Fitch
believes execution risk is low and the new projects should have a
positive impact on TTK's financial performance.

Stable Leverage: Fitch expects TTK's funds from operations (FFO)
adjusted net leverage to remain stable at 3.5x-3.6x . The company
is committed to deleveraging, but Fitch expects its free cash
flow (FCF) generation to be constrained by slightly declining
revenue, and increasing capex due to the Yarovaya law.

Stable Margins: The company remains focused on improving cost
efficiency, which will contribute to slightly stronger margins.
Fitch expects TTK's EBITDA margin to increase by around 0.5pp by
2020 from 22.6% in 2017. The constraining factors for further
margin increase include higher operating expenses in the retail
segment due to increasing subscriber acquisition costs and
limited average revenue per user (ARPU) upside due to intense
competition.

Derivation Summary

The ratings of TKK benefit from its established positions in the
inter-operator segment and improved positions in the broadband
segment as the fifth-largest operator in Russia by subscriber.
Compared with the Russian mobile operators PJSC Mobile
TeleSystems (BB+/Negative), PJSC MegaFon (BB+/Stable) and VEON
Ltd (BB+/Positive) and the fixed-line telecoms incumbent operator
Rostelecom (BBB-/Stable), TTK has smaller scale and a weaker
competitive position in the retail segment.

TTK is rated at the same level as LLC T2 RTK Holding (Tele2;
B+/Stable), the smallest of the four Russian facilities-based
mobile operators, holding a 16% subscriber market share at end-
2017. Tele2 has higher leverage at 4.7x FFO adjusted net
leverage. However, TTK's wholesale segment is intrinsically more
volatile than retail revenue and TTK operates an asset-light
model business model, which is a constraint on the ratings.

Key Assumptions

  - Low single-digit revenue decline in 2018-2021

  - EBITDA margin at 22.5% in 2018, gradually rising to 23% in
    2020-2021

  - Capex at 11% of revenue in 2018, growing to 18% in 2021

  - RUB0.4 billion of recurring cash proceeds from IRUs per year
    included in FFO in 2018-2021

  - Regular dividends of RUB0.3 billion in 2018, gradually
    increasing to RUB0.4 billion in 2021

  - No M&A

KEY RECOVERY RATING ASSUMPTIONS

  - The recovery analysis assumes that TKK would be considered a
    going concern in bankruptcy and that the company would be
    reorganised rather than liquidated.

  - Fitch has assumed a 10% administrative claim.

  - The going-concern 2017 EBITDA estimate of RUB4.6 billion
    reflects Fitch's view of a sustainable, post-reorganisation
    EBITDA level, upon which Fitch bases the valuation of the
    company.

  - The going-concern EBITDA is 15% below 2017 EBITDA, assuming
    likely operating challenges at the time of distress.

  - An enterprise value multiple of 4x is used to calculate a
    post-reorganisation valuation and reflects a conservative
    mid-cycle multiple.

  - Fitch calculates the recovery prospects at 'RR1'/'100%' but
    the Recovery Rating for the senior unsecured debt is limited
    to 'RR4' due to country considerations. That results in
    'B+'/'RR4'/'50%' rating for the instruments, with no uplift
    from the IDR of 'B+'.

RATING SENSITIVITIES

Rating sensitivities are no longer relevant given the rating
withdrawals

Liquidity and Debt Structure

Adequate Liquidity: TTK's liquidity is comfortable with RUB4
billion of committed credit lines with Russian banks covering
RUB3 billion of short-term debt maturities as of end-2017.



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


KUTXA HIPOTECARIO II: Fitch Hikes Class B Notes Rating From BB+
---------------------------------------------------------------
Fitch Ratings has upgraded AyT Kutxa Hipotecario II, FTA's class
A and B notes, affirmed the class C and removed them all from
Rating Watch Positive (RWP), as follows:

Class A (ES0370154009) upgraded to 'AAAsf' from 'AA+sf'; off RWP;
Outlook Stable

Class B (ES0370154017) upgraded to 'Asf' from 'BB+sf'; off RWP;
Outlook Stable

Class C (ES0370154025) affirmed at 'CCCsf'; off RWP; Revise RE to
95% from 100%

The transactions comprise residential mortgages originated and
serviced by Kutxabank, S.A. (BBB+/Stable/F2).

KEY RATING DRIVERS

Counterparty Criteria Updated

Fitch placed the notes on RWP on June 18, 2018 following the
publication of its Structured Finance and Covered Bonds
Counterparty Rating Criteria Exposure Draft, and in particular
the change in the way commingling risk is addressed. Based on the
current criteria, Fitch views commingling risk as immaterial in
this transaction, so that the agency no longer sizes for losses
in the analysis.

Deposit Ratings Assigned

The notes' ratings were previously capped at 'AA+sf' due to
counterparty exposure to Banco Santander. On July 17, 2018 Fitch
assigned deposit ratings of 'A'/'F1' to Banco Santander.
Following the assignment of the deposit ratings, Fitch's
counterparty risk analysis is based upon the deposit rating
instead of the Issuer Default Ratings of 'A-'/'F2'. Consequently
the notes' ratings are no longer capped at 'AA+sf'.

Credit Enhancement (CE)

Fitch has calculated CE available to support the class A, B and C
notes as 21.9%, 9.4% and 4.3%, respectively. The transaction is
currently amortising sequentially and the reserve fund balance is
below the target level, but increasing.

Pool Balance Inconsistency

Fitch's analysis is based on the pool balance obtained from
aggregating the loan-level data as described in the European RMBS
Rating Criteria. As of the cut-off date the pool balance reported
in the loan-level data for non-defaulted loans is approximately
EUR1.3 million less than that reported in the investor reports.
This has a negative effect upon the class C notes' rating.

Regional Concentration

The transaction is exposed to significant regional concentration
risk in Pais Vasco (46.5% of pool by property count). This has
been reflected in higher foreclosure frequency multiples as
described in the European RMBS Rating Criteria.

RATING SENSITIVITIES

A downgrade of Spain's IDR and Country Ceiling could result in a
reduction in the highest achievable rating (currently 'AAAsf').

Counterparty downgrades, followed by insufficient remedial
action, could result in downgrades.

Deterioration in asset performance beyond those captured in
Fitch's analysis, could result in negative rating action.

DATA ADEQUACY

Fitch has checked the consistency and plausibility of the
information it has received about the performance of the asset
pools and the transactions. There were no findings that affected
the rating analysis. Fitch has not reviewed the results of any
third party assessment of the asset portfolio information or
conducted a review of origination files as part of its ongoing
monitoring.

Fitch did not undertake a review of the information provided
about the underlying asset pools ahead of the transactions'
initial closing. The subsequent performance of the transactions
over the years is consistent with the agency's expectations given
the operating environment and Fitch is therefore satisfied that
the asset pool information relied upon for its initial rating
analysis was adequately reliable.

Overall, Fitch's assessment of the information relied upon for
the agency's rating analysis according to its applicable rating
methodologies indicates that it is adequately reliable.



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


CARPETRIGHT PLC: Losses Deepen Due to Store Closure Costs
---------------------------------------------------------
Camilla Hodgson at The Financial Times reports that troubled
flooring retailer Carpetright plc said on Dec. 11 it had deepened
its losses in the first half of the year as costs relating to
store closures and its restructuring programme and weak trading
hit earnings.

Carpetright's loss before tax in the six months to Oct. 27 came
in at GBP11.7 million compared to a loss of GBP600,000 in the
same period last year, while sales fell 16% to GBP191 million,
the FT discloses.

According to the FT, the retailer blamed costs associated with
store closures and the company's attempted turnround for the dive
in earnings, as well as "weakening consumer demand" and the spate
of unusually warm weather that Europe experienced over the period
for weaker trading.

Earlier this year, Carpetright agreed a deal with creditors to
allow it to reduce rents and close stores as part of an emergency
package to avoid total collapse, the FT recounts.  It said it
would close or exit leases of at least 92 shops, the FT notes.

Over the six months, Carpetright said it had closed 65
underperforming UK stores and that it was on track to deliver
GBP19 million in cash savings this year, the FT relays.
The company also slashed its net debt to GBP12.4 million, from
GBP53 million in the year ending in April, as a result of June's
equity raise and cost savings and efficiency driving measures,
the FT states.


CROSSRAIL LTD: Gov't Announces Further Bailout of GBP2.15 Bil.
-------------------------------------------------------------
Gill Plimmer and Jim Pickard at The Financial Times report that
the opening of Crossrail has been thrown into further doubt as
the government announced a further bailout of up to GBP2.15
billion for London's new east-west railway line and suggested it
may not open until 2020 at the earliest.

Sadiq Khan, the mayor of London, said that Transport for London
would seek to repay the money through two existing business taxes
in the capital.  It marks the third financial rescue in a year
and could take the project's budget to about GBP17.6 billion, the
FT relates.

The London mayor has appointed KPMG to investigate the cost
overruns but the consultancy was auditor to the project until
2015, raising conflict of interest fears, the FT discloses.

According to the FT, the National Audit Office is planning to
investigate Crossrail, and Mr. Khan said that the KPMG reports
and minutes of board meetings would all be published in the
interests of transparency.

Crossrail was originally estimated at GBP15.9 billion in 2007 but
increased to GBP17.8 billion in 2009 before the coalition revised
it to GBP14.8 billion, the FT notes.
The latest rescue package will include a GBP1.3 billion loan from
government and GBP100 million cash from the Greater London
Authority, the FT states.  The government will also loan an
additional GBP750 million to TfL for contingencies, which
replaces a GBP350 million loan provided by the government in
October, according to the FT.


DIAMOND BANK: Fitch Lowers LT Issuer Default Rating to CCC
----------------------------------------------------------
Fitch Ratings has downgraded Diamond Bank Plc's Long-Term Issuer
Default Rating (IDR) to 'CCC' from 'B-' and Short-Term IDR to 'C'
from 'B'. Diamond's National Long-Term Rating has been downgraded
to 'B(nga)' from 'BB+(nga)'.

The two-notch downgrade of Diamond's Long-Term IDR reflects
uncertainty over its solvency and liquidity in view of very weak
asset quality, highly vulnerable capital position as well as
tight foreign currency (FC) liquidity ahead of an upcoming
maturing USD200 million Eurobond in May 2019. The bank has some
contingency plans, such as the sale of its UK subsidiary, but
execution may be challenging, especially considering the recent
resignation of four board members.

KEY RATING DRIVERS

IDRS, VR, SENIOR DEBT, NATIONAL RATINGS

Diamond's IDRs are driven by its standalone credit profile, as
defined by its Viability Rating (VR). Diamond's VR is highly
influenced by very weak asset quality, which renders its capital
position highly vulnerable to any further deterioration. The VR
also reflects limited FC liquidity.

Stage 3 loans under IFRS 9, including past due not impaired,
which better captures asset quality in its view, accounted for a
very large of 37% of gross loans at end-1H18, compared with a
reported impaired loans ratio (under IAS39) of 13% for the same
period. Diamond's stage 2 loans were a further 23% of gross
loans, mostly comprising restructured loans. Diamond has the
highest share of problem loans (total stage 2 and stage 3 loans
as a proportion of gross loans) among Nigerian rated banks. Loan
loss allowance cover is very low at 19% of stage 3 loans.

Fitch views Diamond's capital buffers as limited, given very weak
asset quality, despite a relatively high Fitch Core Capital (FCC)
ratio of 17.5% at end-1H18. In its view capital remains highly
vulnerable given the bank's low loan loss allowances. Higher
reserve coverage would erode considerably the bank's capital
base. Unreserved stage 3 loans were 110% of FCC at end-1H18.

Diamond has a small buffer over its 15% regulatory total capital
adequacy ratio requirement (Total CAR at 16.3% at end-9M18).
Fitch understands that Diamond has received the approval from the
Central Bank of Nigeria (CBN) to obtain a national banking
licence, and therefore lower its minimum total capital
requirements to 10%. However, this is subject to the completion
of the sale of the UK subsidiary.

Diamond's FC liquidity improved in 2017, in line with easing FC
liquidity conditions in Nigeria. However, FC liquidity remains
tight, as Diamond's FC loans/customer deposits ratio reached 180%
at end-1H18. The bank has a number of large bullet repayments due
in the short term, including its USD200 million Eurobond maturing
in May 2019, USD100 million from Afrexim due in March 2019, and
USD70 million from the International Finance Corporation due in
July 2019. The bank had about USD300 million of liquid assets
held as unrestricted cash and cash equivalents and loans to
foreign banks at end-1H18.

Fitch understands that the bank aims to negotiate the refinancing
of international financial institution funding, while the
improved cash flows from the oil loan book and the disposal of
its subsidiary in the UK will be the main contributors to
redeeming the Eurobond. However, the refinancing has not yet been
agreed, while subsidiary disposal has yet to be approved by the
Prudential Regulation Authority in the UK and cash flows from the
troubled oil sector are uncertain. Therefore Fitch sees
significant execution risk with this plan. Although FC supply has
improved, Fitch does not expect Diamond to be able to swap
significant volumes of local currency to repay foreign currency
obligations.

Diamond's Long-Term IDR also considers governance shortfalls
following the resignation of four members of the board in October
2018, including the chairman (only appointed in 2018) and three
non-executive directors, raising questions around effective
oversight and ongoing operational capability of the bank. It may
also create difficulties in refinancing its obligations with
existing lenders.

Diamond's National Ratings reflect its creditworthiness relative
to the country's best credit and relative to peers operating in
Nigeria. The Long-term National Rating has been downgraded by
several notches due to its weaker credit profile.

Diamond's senior unsecured debt has been downgraded to
'CCC'/'RR4', reflecting its assessment that average recoveries
are a plausible outcome for senior bondholders in the event of a
default, albeit this is sensitive to changes in assumptions.

SUPPORT RATING AND SUPPORT RATING FLOOR

Diamond's Support Rating (SR) and Support Rating Floor (SRF)
reflect uncertainty over the ability of the authorities to
support banks, particularly in FC. In addition, there are no
clear messages from the authorities regarding their willingness
to support the banking system. Its view is that senior creditors
cannot rely on receiving full and timely extraordinary support
from the authorities should a bank become non-viable. Therefore,
the SRF of all Nigerian banks is 'No Floor' and all Support
Ratings are '5'.

RATING SENSITIVITIES

IDRS, NATIONAL RATINGS AND SENIOR DEBT

Diamond's IDRs are sensitive to any change in its VR. The VR is
sensitive to further weakening of precarious asset quality,
including a migration of Stage 2 loans to Stage 3 and from
further reserving shortfalls of Stage 3 loans, eroding capital.
The VR is also sensitive to any increase in the probability for
being able to meet FC obligations. The VR is also sensitive to
continuing governance weaknesses stemming from the resignation of
four directors.

Rating upside is unlikely in the short term given the bank's very
fragile financial position. An upgrade of the bank's VR may
result from reduced execution risk in meeting FC obligations or a
structural shift in capitalisation, increasing Diamond's ability
to build loan loss allowances.

Diamond's National Ratings are sensitive to a change in its
creditworthiness relative to other Nigerian issuers.

The rating actions are as follows:

  Long-Term IDR downgraded to 'CCC' from 'B-'

  Short-Term IDR downgraded to 'C' from 'B'

  Viability Rating downgraded to 'ccc' from 'b-'

  Support Rating affirmed at '5'

  Support Rating Floor affirmed at 'No Floor'

  National Long-Term Rating downgraded to 'B(nga)' from
  'BB+(nga)'

  National Short-Term Rating affirmed at 'B(nga)'

  Senior unsecured long-term Rating downgraded to 'CCC'/'RR4'
  from 'B-'/'RR4'


INTERSERVE PLC: Confirms Rescue Financing Talks
-----------------------------------------------
Gill Plimmer at The Financial Times reports that Interserve, one
of the biggest suppliers of services to the UK government, has
confirmed that it is in rescue financing talks that will see
retail shareholders virtually wiped out and creditors take
control as it seeks to avoid becoming another Carillion.

Shares in the company, which employs 75,000 people worldwide and
45,000 in the UK, plunged more than 70% after the news on
Dec. 10, the FT relates.

According to the FT, Interserve said its stakeholders were
supportive and it was engaged in a debt-for-equity swap that
would result in "material dilution for current Interserve
shareholders".  It said it intended to announce the plans early
next year, the FT notes.

Banks including RBS, HSBC and BNP Paribas, together with Emerald
Asset Management and Davidson Kempner Capital, are engaged in
negotiating the deal, the FT discloses.

Interserve constructs and maintains government buildings, and
provides a string of services from nursing in people's homes to
managing probation for the Ministry of Justice.  It has a
turnover of GBP3.2 billion -- 70% of that comes from the UK
government, the FT states.

The Labour party has called for a temporary ban on Interserve
bidding for public contracts while the discussions take place,
the FT relays.

Interserve, the FT says, has been struggling with servicing its
nearly GBP650 million of debt after moving into areas in which it
had no expertise, including energy from waste plants and
probation services.

A GBP834 million rescue package was agreed in March, but while
the cash boost allowed the company to keep trading, interest
costs have been mounting -- from GBP28.4 million in 2017 to GBP56
million in 2018, rising to GBP80 million next year, the FT
relays.


PIZZAEXPRESS FINANCING 1: Moody's Cuts CFR to Caa1, Outlook Neg.
----------------------------------------------------------------
Moody's Investors Service downgraded the long-term corporate
family rating of PizzaExpress Financing 1 plc to Caa1 from B3.
Concurrently, the rating agency has downgraded the probability of
default rating to B3-PD from B2-PD, the rating on the GBP200
million senior unsecured notes due August 2022 to Caa2 from Caa1
of PizzaExpress Financing 1 plc, and the rating on the GBP465
million senior secured notes due August 2021 to B3 from B2 of
PizzaExpress Financing 2 plc. The outlook on all ratings is
negative.

"The downgrade to the ratings of PizzaExpress reflects declining
profitability and therefore deteriorating credit metrics during
2018. While we expect the negative like-for-like sales trend in
the company's home market to abate somewhat next year, fierce
competition and sustained cost pressure means a turnaround during
2019 is unlikely", says David Beadle, a Moody's Senior Credit
Officer and lead analyst for PizzaExpress.

RATINGS RATIONALE

The company's current struggles reflect the weak and highly
competitive operating environment in the UK Casual Dining
industry and the continued cost pressures faced by operators in
it, as well as challenges in key overseas markets of
PizzaExpress, notably rising competition in China. The
combination of these factors means that the company's reported
EBITDA of GBP56.6 million is 16.4% lower than in the first nine
months of 2017.

Moody's expects pressure on the company's like-for-like revenues
to ease in 2019, and for some improvement in International
performance. However, the rating agency still expects cost
pressures to weigh on profit margins. As such, Moody's Base Case
for 2019 includes further year on year deterioration in company
reported EBITDA to around GBP75 million, against the rating
agency's expectation of around GBP80 million in 2018. These
levels are well below the GBP94.6 million recorded by the company
in 2017.

At the end of September 2018, PizzaExpress had Moody's-adjusted
gross leverage of 7.1x, up from 6.6x in December 2017, and above
the 7.0x downward rating trigger. Moody's now expects this credit
metric to trend towards 7.5x in 2019, and considers this may
cause the company difficulties in effecting a timely and cost
effective refinancing in due course.

Moody's expects PizzaExpress to generate minimal free cash flow
generation during 2019. This is because the company will continue
to roll out new restaurants overseas, and to a lesser extent at
home. The rating agency does though acknowledge that PizzaExpress
has already curtailed the rate of expansion to reflect the lower
level of internally generated cash flow arising from falling
profitability and has flexibility to reduce or delay it further
if necessary to maintain an adequate liquidity profile.

RATIONALE FOR THE NEGATIVE OUTLOOK

The negative outlook reflects Moody's expectation that in the
next 12-18 months, the company's UK LFL revenues will at best be
modestly positive, margins will remain under pressure; and that
the company's Moody's-adjusted debt-to-EBITDA ratio will remain
above 7.0x, putting pressure on the company's ability to effect a
successful and timely refinancing.

WHAT COULD CHANGE THE RATING UP/DOWN

Upward pressure on the rating is unlikely in the short term but
could materialise if the company shows signs of returning towards
previous levels of profitability such that Moody's-adjusted
debt/EBITDA would be trending towards 6.5x on a sustainable
basis. A successful refinancing of the capital structure would
also likely be a pre-requisite for an upgrade.

Negative pressure could arise if prospects for a recovery in the
company's profitability towards pre 2018 levels do not emerge, if
the company's liquidity deteriorated, or if the likelihood of a
default increases further.

PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was Restaurant
Industry published in January 2018.

CORPORATE PROFILE

Founded in 1965 and headquartered in London, PizzaExpress is the
leading operator in the UK casual dining market measured by
number of restaurants. As at September 2018 it operated 477 sites
in the UK and Ireland as well as 150 international sites,
principally in China. For the 52 weeks period ending September
30, 2018, the company reported revenues of GBP540 million and
EBITDA of GBP83.5 million. PizzaExpress was acquired by Hony
Capital in a GBP895 million LBO in August 2014.


TALKTALK TELECOM: Fitch Alters Outlook on BB- LT IDR to Negative
----------------------------------------------------------------
Fitch Ratings has revised TalkTalk Telecom Group Plc's Outlook to
Negative from Stable while affirming the Long-Term Issuer Default
Rating at 'BB-'.

The Negative Outlook reflects that funds from operations (FFO)
adjusted net leverage is likely to exceed Fitch's downgrade
threshold in FY19 (financial year ending March) while organic
deleveraging capacity remains constrained by weak margins,
exceptional costs and investment requirments and susceptible to
competitive market dynamics and execution risks. TalkTalk's key
performance indicators depict an improving revenue picture and
increasing subscriber base stability; however, leverage is
unlikely to sustainably improve to within the rating's threshold
on an organic basis unless the company continues to make progress
in realigning its cost structure. TalkTalk's sizeable position in
the UK broadband market remains supportive of the company's scale
and credit profile.

Key Rating Drivers

Leverage Exceeding Rating Threshold: Fitch's base case forecasts
for TalkTalk indicate that FFO adjusted net leverage may
temporarily increase to 4.0x by FY19 , above the company
downgrade threshold of 3.8x, from 3.7x at FY18. The increase is
primarily driven by a reduction in FFO as result of increases in
cash taxes and elements of the company's restructuring and
network upgrade costs that Fitch views as recurring in nature.

Scope for Deleveraging from FY20: TalkTalk has scope to reduce
leverage to below 3.8x from FY20 due to improving FCF as a result
of cost- driven EBITDA improvements and reductions in capital
expenditure. Fitch's base case forecasts incorporate around 1pp
EBITDA margin improvement from FY20 and FFO adjusted net leverage
stabilising at around 3.7x. Fitch expects the company to review
its dividend payout once leverage has reached 2.0x net debt to
EBITDA (based on TalkTalk's definition).

Sizeable Position, Low Margins: TalkTalk has around 4.2 million
broadband subscribers in the UK and a market share that Fitch
estimates to be just over 16%. The company focuses on the value-
for-money segment of the UK telecoms market and operates a
national telecoms infrastructure with local access that is
largely achieved through the purchase of regulated wholesale
products from incumbent BT Group Plc. The company's current scale
drives a business model with fairly low operating and pre-
dividend free cash flow (FCF) margins (6%-7%% and 1%-3%
respectively over the next two years). This leaves little room
for manoeuvre and exposes the financials to competitive risks in
the sector.

Slowing Growth, Competitive Market: Fitch estimates that growth
in total UK broadband market lines by December 2018 will slow to
around 2% from an average of 4% over the preceding four years.
The slowdown makes growing TalkTalk's subscriber base harder as
it increasingly depends on the churn of other operators and
sustaining its existing customer base. Many of TalkTalk's
competitors operate sizeable convergent telecoms platforms,
targeting multiple market segments with investments in exclusive
content and stronger operating margins.

Gradually Improving KPIs: TalkTalk's 1H19 results indicate that
company has sustained improvements in a number of operational
areas such as market share, churn, on-net subscriber additions,
growth in higher-margin elements of the corporate segment and
reductions in operating expenses. The improvements are likely to
be sustainable over the next two to three years and provide a
stable revenue basis to improve the company's cost structure.

Cost Structure Realignment: TalkTalk's current cost structure is
too heavy given its scale, investment requirements and costs to
grow and retain market share.  The company has successfully
repositioned its strategy to focus primarily on fixed broadband
and is in the process of upgrading its network. This should allow
TalkTalk to simplify operations and reduce costs. However, these
will take time to implement and feed into the company's financial
metrics. In the meantime, exceptional restructuring and network-
related costs are likely to weigh on cashflow generation and
organic deleveraging capacity over the next 18 to 24 months.

Long-Term Business Model Unknowns: The continued growth of fibre-
based broadband lines creates some uncertainties on TalkTalk's
future product mix and cost structure. Fibre-based local access
lines, while benefiting from higher average revenue per user
(ARPU), also have higher regulated wholesale costs. The growth of
fibre could imply TalkTalk's business model may change to
incorporate a greater mix of variable costs with lower operating
margins. The company should be able to offset lower margins
through reduced network capex at the FCF level. Visibility of the
eventual outcome for TalkTalk is currently low and dependent on
regulated prices and commercial trade-offs between wholesale-
based products and own local access network build.

Derivation Summary

TalkTalk's rating reflects a sizeable broadband customer base and
the company's positioning in a large but niche, value-for-money
segment. The company's operating margins are below the average of
the telecoms sector. This largely reflects an unbundled local
exchange network architecture and dependence on regulated
wholesale products for 'last-mile' connectivity. The company is
less exposed to trends in cord 'cutting' or 'shaving' where
consumers trade down or cancel pay-TV subscriptions in favour of
alternative internet or wireless-based services. However,
TalkTalk business model faces some uncertainties in its long-term
cost structure as a result of increasing fibre-based products and
evolving regulation.

Peers such as BT Group Plc (BBB/Stable), Sky Plc (BBB-/RWP) and
Virgin Media Inc. (BB-/Stable) benefit from various combinations
of full local loop network access ownership, and / or greater
revenue diversification as a result of scaled positions in
multiple products segments, such as mobile and pay-TV, and higher
operating margins.

Key Assumptions

Fitch's Key Assumptions Within Its Rating Case for the Issuer

  - Revenue growth under IFRS15 of 1% to 2% per year from FY19 to
    FY22;

  - EBITDA margin of 15.2% in FY19, increasing to 16.3% in FY20
    and remaining broadly stable thereafter;

  - Capex-to-sales ratio of around 7% in FY19 and declining
    gradually to 6% by FY22;

  - Dividends of GBP25 million per annum in FY19 and FY20;

  - Fibre rollout investments of GBP20 million to GBP30 million
    per year; and

  - A blended operating lease multiple of 5.3x.

RATING SENSITIVITIES

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

  - Strong operational performance, accompanied by a financial
    policy track record in managing fibre-to-the premise (FTTP)
    investments and dividend distributions, leading to high-
    single digit pre-dividend FCF margin

  - Comfortable liquidity headroom and FFO fixed charge cover
    above 3.0x

  - FFO adjusted net leverage sustainably below 3.3x

  - Sufficient improvement in its cost structure and KPIs  in the
    next 12 to 18 months leading to EBITDA growth and leverage
    reductions, which may result in the Rating Outlook being
    revised to Stable

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

  - A material deterioration in KPIs or an increase in
    competitive intensity in the UK broadband market

  - A contraction in pre-dividend FCF margin to low single digits

  - Shrinking liquidity headroom or FFO fixed charge cover being
    sustained below 2.5x

  - FFO adjusted net leverage sustained above 3.8x

Liquidity and Debt Structure

Satisfactory Liquidity: As of September 2018, TalkTalk had access
to total committed revolving credit facilities of GBP640 million
(undrawn GBP 318 million). The company's debtor securitisation of
GBP75 million is fully drawn and Fitch expects the TalkTalk to
roll this over when it comes due in September 2019. Fitch expects
TalkTalk to remain FCF-positive in its base case forecasts.



===================
U Z B E K I S T A N
===================


RAVNAQ-BANK: S&P Puts 'CCC+/C' ICRs on CreditWatch Developing
-------------------------------------------------------------
S&P Global Ratings placed its 'CCC+/C' long- and short-term
issuer credit ratings on Uzbekistan-based Ravnaq-bank on
CreditWatch with developing implications.

The CreditWatch placement reflects S&P's view that a positive or
negative rating action is quite likely over the next few weeks,
depending on the bank's compliance with the regulatory
requirement on the minimum amount of authorized equity. According
to the regulation, banks in Uzbekistan should have share capital
of not less than UZS100 billion by Jan. 1, 2019 (equivalent to
$12 million as of Dec. 4, 2018). Ravnaq-bank's authorized capital
was UZS84 billion on Dec. 4, 2018, and further share capital
improvements are pending shareholder injections.

The bank's vulnerability is further exacerbated by forecast
aggressive loan growth of 80% in 2018, which in the context of
tight competition and developing risk management practices, could
result in higher-than-expected losses. S&P said, "At the same
time, we understand that the rapid expansion is partly driven by
the high-inflation environment and rapidly expanding banking
sector. In addition, we note that Ravnaq-bank is growing its
exposures from a low base while it has received UZS61 billion of
capital injections this year (out of a planned UZS77 billion for
2018)."

S&P also views negatively that the bank's loan growth in 2018 put
pressure on its liquidity. This leaves Ravnaq-bank potentially
vulnerable to unexpected funding volatility, which is the common
risk factor for smaller Uzbek banks. Ravnaq-bank's net broad
liquid assets to short-term customer deposits declined to a still
adequate 20% as of Dec. 1, 2018, from 41% at year-end 2017.

S&P said, "Finally, the bank is in its early development stage
and still relies heavily on its influential owners' ties and
relationships, which helps to form and maintain the client base,
in our view. Our rating on Ravnaq-bank continues to reflect our
belief that the bank is vulnerable and dependent upon future
shareholder injections to comply with regulations, as well as on
favorable business, financial, and economic conditions to meet
its financial commitments.

"We aim to affirm, raise, or lower our rating on Ravnaq-bank in
the next few weeks, depending on the bank's compliance with the
requirement to increase its authorized capital to the new minimum
requirement of UZS100 billion.

"We could lower the ratings if the controlling shareholder does
not provide sufficient capital support to allow Ravnaq-bank to
satisfy the minimum capital requirements, leading to regulatory
action that restricts the bank's activities or, in a worst-case
scenario, suspends its banking license.

"We could raise the ratings if, in our view, Ravnaq-bank is able
to comply with the new regulatory capital requirement, provided
the bank's creditworthiness does not deteriorate and its business
and liquidity positions remain stable.

"We might affirm, or even raise the ratings, if the regulator is
willing to relax the new capital requirement or provide a waiver
if a capital injection is expected shortly after the Jan. 1
deadline, and the risk of noncompliance therefore becomes less
acute."


TURKISTON BANK: S&P Cuts ICRs to CCC+/C on Low Liquidity Buffers
----------------------------------------------------------------
S&P Global Ratings said that it had lowered its long- and short-
term issuer credit ratings on Turkiston Bank to 'CCC+/C' from
'B-/B'. The outlook is negative.

S&P said, "The downgrade reflects our view that, despite recent
capital increases to meet the minimum required capital amount by
Jan. 1, 2019, the bank experienced such a rapid loan growth at
the expense of liquidity that now significant downside pressure
is coming from maintenance of lower liquidity cushions than
previously observed, which leaves the bank more vulnerable to
unexpected funding pressure. We also think that its capital
position weakened despite the shareholders' capital because of
its very aggressive loan growth and the purchase of a significant
amount of fixed assets."

Turkiston Bank received Uzbekistani sum (UZS) 63 billion worth of
capital injections in 2018, and this equity support enabled it to
meet the regulatory requirement for the minimum amount of
authorized capital. Thus, S&P understands that the bank reported
share capital of UZS101 billion on Nov. 22, 2018, to meet the
requirements of the presidential decree for all banks that set a
minimum requirement of UZS100 billion starting from Jan. 1, 2019.

However, since the beginning of 2018, Turkiston Bank has also
aggressively expanded its loan book, and recently made a material
investment in illiquid fixed assets. These management actions
have noticeably erased the benefits of the capital strengthening
measures and weigh on the bank's liquidity profile and capital
position, in S&P's view. The purchase of fixed assets in
particular resulted in almost 40% of the bank's capital being
immobilized on Nov. 22, 2018, which limits the ability of the
capital to absorb potential losses and exposes the capital to the
risk of changes in property value that might impact the actual
amount of capital.

In addition to the aggressive reduction in liquid assets, the
bank has increased its reliance on potentially volatile and more
confidence-sensitive short-term wholesale funds since the
liberalization of the sum in September 2017. Thus, short-term
interbank funding formed 34% of total liabilities on Nov. 22,
2018. This further impairs the bank's capacity to meet unexpected
funding outflows, in S&P's view. Turkiston Bank's stable funding
ratio was 78% and net broad liquid assets-to-short-term customer
deposits ratio was negative 39% on the same date, compared with
97% and negative 4%, respectively, at year-end 2017. Both ratios
are worse in comparison with other rated peers, and indicate
significant deficiencies in the bank's asset and liability
management, in S&P's view.

S&P said, "We understand that the bank's management intends to
restore the liquidity profile and reduce reliance on interbank
funding. However, we see risks that during the time it will take
to restore funding and improve the liquidity profile, the bank
remains vulnerable to unexpected funding pressure, which is a
common threat for small financial institutions in Uzbekistan.

"The negative outlook reflects our concerns that, over the next
12 months, the bank will remain vulnerable to liquidity stress in
case of unexpected funding pressures if it fails to increase its
liquidity cushion and materially reduce its reliance on short-
term wholesale funding resources.

"We could lower the ratings over the next 12 months if Turkiston
Bank experiences sharp unexpected funding and liquidity pressures
in the absence of shareholders' support, with visible risk of and
scenarios of default. We could also lower the ratings if
deterioration of asset quality not supported by shareholder
capital injections results in the bank's being at risk of failing
to comply with the capital requirements.

"We could consider a revision of the outlook to stable if
Turkiston Bank is able to restore materially and sustainably its
liquidity position with, in particular, a S&P Global Ratings-
adjusted ratio of broad liquid assets to short-term wholesale
funding above 100%. However, we consider this scenario as remote
currently."



                            *********

Monday's edition of the TCR delivers a list of indicative prices
for bond issues that reportedly trade well below par.  Prices are
obtained by TCR editors from a variety of outside sources during
the prior week we think are reliable.  Those sources may not,
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is compiled on the Friday prior to publication.  Prices reported
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Each Tuesday edition of the TCR contains a list of companies with
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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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Copyright 2018.  All rights reserved.  ISSN 1529-2754.

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