/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/181219.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Wednesday, December 19, 2018, Vol. 19, No. 251 Headlines B E L G I U M SARENS BESTUUR: S&P Lowers ICRs to 'B' on Weak Performance B U L G A R I A MAX TELECOM: Declared Insolvent by Sofia Court Over Debt F R A N C E ALTICE FRANCE: Bank Debt Trades at 4% Off SFR GROUP: $1.4-Bil. Bank Debt Trades at 7% Off SFR GROUP: $2.15-Bil. Bank Debt Trades at 7% Off I R E L A N D JO'BURGER: Challenging Trading Conditions Prompt Liquidation R U S S I A O1 PROPERTIES: S&P Cuts Long-Term ICR to CCC, On Watch Negative S E R B I A RUDNIK: Metalac Acquires Assets for EUR1.3 Million SERBIA: S&P Alters Outlook to Positive & Affirms 'BB/B' SCRs U K R A I N E MHP SE: S&P Affirms 'B' Issuer Credit Rating, Outlook Stable U N I T E D K I N G D O M BLIPPAR: Enters Administration Following Funding Dispute BLUE INC: Enters Administration, Seeks Buyer TRAVELEX HOLDINGS: S&P Affirms 'B-' Rating, Outlook Negative TUNSTALL HOLDINGS: Bank Debt Trades at 3% Off ********* ============= B E L G I U M ============= SARENS BESTUUR: S&P Lowers ICRs to 'B' on Weak Performance ---------------------------------------------------------- S&P Global Ratings lowered to 'B' from 'B+' its long-term issuer credit ratings on Belgium-based heavy crane rental provider Sarens Bestuur N.V. (Sarens) and its finance subsidiary Sarens Finance Co. N.V. The outlook is stable. S&P said, "At the same time, we lowered to 'B+' from 'BB-' our issue rating on the EUR250 million senior unsecured debt issued by Sarens Finance Co. N.V. Although we calculate recovery prospects as being comfortably above 85%, we continue to cap the recovery rating at '2', reflecting the unsecured nature of the notes." The downgrade reflects Sarens' weaker-than-expected operating performance so far this year, resulting in continually sluggish credit metrics. S&P said, "We now expect the group's S&P Global Ratings-adjusted debt-to-EBITDA ratio to near 5.8x in 2018, versus our previous forecast of close to 5.0x. Furthermore, we anticipate the group's leverage will recover toward 5.5x in 2019, instead of nearing 4.5x under our previous assumptions. Our current forecasts are not within the 4x-5x range we consider commensurate with our 'B+' rating." Contributing factors include lower-than-anticipated EBITDA, material underperformance of the group's Oceania business in Australia, and elevated capital expenditures (capex). In the first nine months of 2018, sales declined by 2.6% to EUR434 million. Reported EBITDA increased slightly by 2.6% to EUR87.5 million, but it is much lower than our previous expectation. Despite strong revenue growth from the sizable contract with Chevron, the TCO project, Sarens continues to experience challenging conditions in its key end markets in 2018, especially in Western Europe, North America, Africa, and Asia, as large projects have finalized, coupled with the continued postponement of new projects. S&P notes that there has been an ongoing shift in Sarens' key markets from the traditional metals and mining- and oil and gas-driven projects to power plants and civil works. This transition comes with the challenge to adapt fleet accordingly and to continuously improve market diversification and cost efficiency. However, we note that Sarens' profitability improved in the first nine months of 2018, with a reported EBITDA margin at above 20% (above 23% excluding Oceania), due to the higher proportion of own turnover and lower subcontracting costs given the progress achieved at the TCO project and the start of the equipment rental. Pronounced underperformance of Oceania's business in Australia has resulted in negative EBITDA and cash outflow of more than EUR15 million in 2018. The board decided to discontinue operations in Oceania through a controlled wind-down that will result in up to EUR7 million restructuring costs in 2019. Deteriorated operating performance and persisting high capex are weighing on the group's credit metrics and liquidity. S&P said, "As a result, we estimate that headroom under Sarens' financial covenants will be minimal at the end of 2018. We note that Sarens has progressed in amending and extending its existing revolving credit facility (RCF) and global lease facility due in November 2019, with covenants to be reset with more headroom." Sarens continues to build out the TCO project, which continues to ramp up through 2018 and 2019, resulting in good revenue growth. However, the contract is very front-loaded in terms of the investment required to build out Sarens' operations on the ground. As a result, Sarens invested heavily through 2017 and 2018, resulting in negative free operating cash flow (FOCF). S&P expects capex to return to more normalized levels and FOCF to turn positive from 2019. Sarens' investments should be credit- positive in the longer term, as it enables the group to capture significant revenues as the TCO contract continues to ramp up. S&P said, "We assess Sarens' business risk profile as being in the weaker end of our fair category. The increased exposure to large contracts (such as TCO and Hinkley point C) creates increased client concentration risk. Sarens is a leading global provider of large crane equipment, servicing a diverse range of industries and end-markets. The group owns one of the world's most extensive fleets of large cranes and has a strong reputation in the market. "We consider that there are high barriers to entry for potential competitors in the niche market of crane rental due to the requirement of high capital investments and specific know-how for providing heavy, project-specific lifting solutions. Sarens is exposed to several particularly cyclical and volatile end-markets such as oil and gas, mining, and wind, which has resulted in revenue contraction and an absolute EBITDA decline in the past when demand has suddenly fallen. The group's recent rapid expansion into regions that we consider carry higher risk (e.g. the Middle East, Northern Africa, and Asia) could increase the volatility of demand in the future. "The stable outlook reflects our view that Sarens will generate EBITDA of above EUR135 million in 2018 and 2019, with adjusted debt to EBITDA gradually improving toward 5.5x and FOCF turning positive in 2019, supported by markedly lower capex. The stable outlook also reflects our expectation of the successful execution of the amending and extending of the group's existing facilities, with improved maturity profile and headroom under financial covenants. "We could lower the rating if Sarens' operating performance were to substantially weaken, for example, due to issues in developing the TCO project or persisting significant decline in other key end markets, so that leverage does not improve as per our base- case scenario. More specifically, we could lower the rating if FOCF were to remain negative in 2019. Finally, if the amending and extending its existing facility turned out to be unsuccessful, or if the liquidity were to weaken or headroom under potentially new covenants were to become tight again, we could also lower the ratings. "We could raise the rating if Sarens were to overperform our base case and deleverage to less than 5x adjusted debt to EBITDA on a sustained basis, accompanied by supportive near- to medium-term macroeconomic and industry conditions. An upgrade would also hinge on continuously positive FOCF generation, and that the group sustained at least adequate liquidity and headroom under financial covenants." =============== B U L G A R I A =============== MAX TELECOM: Declared Insolvent by Sofia Court Over Debt -------------------------------------------------------- SeeNews reports that documents filed with the commercial register showed the Sofia city court on Dec. 17 declared local telecommunications operator Max Telecom insolvent in a case instituted at the request of local M Sat Cable over a BGN116.2 million (US$67.3 million/EUR59.4 million) debt. According to SeeNews, data from the court ruling showed that in January 2017, the two companies reached an agreement that Max Telecom would repay its outstanding liabilities to M Sat Cable, which totalled BGN67.6 million at the time, in two installments over the next two months. However, the court found that Max Telecom failed to make the two payments and subsequently accumulated further debt, SeeNews notes. The court also considered a claim by Nokia Solutions and Networks and confirmed that Max Telecom has an unpaid debt to the company amounting to BGN2.3 million, dating from 2016, SeeNews relates. Max Telecom is owned by private investor Daniel Kupsin and local company MT Management. =========== F R A N C E =========== ALTICE FRANCE: Bank Debt Trades at 4% Off ----------------------------------------- Participations in a syndicated loan under which Altice France Est [Altice Blue One SAS] is a borrower traded in the secondary market at 95.75 cents-on-the-dollar during the week ended Friday, November 30, 2018, according to data compiled by LSTA/Thomson Reuters MTM Pricing. This represents a decrease of 1.79 percentage points from the previous week. Altice France pays 275 basis points above LIBOR to borrow under the $900 million facility. The bank loan matures on January 31, 2026. Moody's rates the loan 'B1' and Standard & Poor's gave a 'B+' rating to the loan. The loan is one of the biggest gainers and losers among 247 widely quoted syndicated loans with five or more bids in secondary trading for the week ended Friday, November 30. Altice France Est SAS provides cable operator services. The company was incorporated in 2002 and is based in Lampertheim, France. The company operates as a subsidiary of Altice S.A. SFR GROUP: $1.4-Bil. Bank Debt Trades at 7% Off ----------------------------------------------- Participations in a syndicated loan under which SFR Group SA [ex-Numericable SAS] is a borrower traded in the secondary market at 92.92 cents-on-the-dollar during the week ended Friday, November 30, 2018, according to data compiled by LSTA/Thomson Reuters MTM Pricing. This represents a decrease of 1.68 percentage points from the previous week. SFR Group pays 275 basis points above LIBOR to borrow under the $1.418 billion facility. The bank loan matures on June 22, 2025. Moody's rates the loan 'B1' and Standard & Poor's gave a 'B' rating to the loan. The loan is one of the biggest gainers and losers among 247 widely quoted syndicated loans with five or more bids in secondary trading for the week ended Friday, November 30. SFR Group SA, now known as Altice France SA, is a France-based company, a cable operator having its activities in France. SFR GROUP: $2.15-Bil. Bank Debt Trades at 7% Off ------------------------------------------------ Participations in a syndicated loan under which SFR Group SA [ex-Numericable SAS] is a borrower traded in the secondary market at 93.5 cents-on-the-dollar during the week ended Friday, November 30, 2018, according to data compiled by LSTA/Thomson Reuters MTM Pricing. This represents a decrease of 1.5 percentage points from the previous week. SFR Group pays 300 basis points above LIBOR to borrow under the $2.150 billion facility. The bank loan matures on January 6, 2026. Moody's rates the loan 'B1' and Standard & Poor's gave a 'B' rating to the loan. The loan is one of the biggest gainers and losers among 247 widely quoted syndicated loans with five or more bids in secondary trading for the week ended Friday, November 30. SFR Group SA, now known as Altice France SA, is a France-based company, a cable operator having its activities in France. ============= I R E L A N D ============= JO'BURGER: Challenging Trading Conditions Prompt Liquidation ------------------------------------------------------------ Irish Independent reports that Jo'Burger Group has confirmed that it has gone into liquidation, closing some of Dublin's best-known restaurants. "A combination of factors including challenging trading conditions have forced this move," Irish Independent quotes the company as saying in a statement posted on social media. Owned by businessman Joe Macken, the group operated outlets in the city centre, Rathmines and Smithfield, Irish Independent discloses. Its Crackbird, Hey Donna, Bar Giuseppe and Jo'Burger restaurants have closed, Irish Independent relates. =========== R U S S I A =========== O1 PROPERTIES: S&P Cuts Long-Term ICR to CCC, On Watch Negative --------------------------------------------------------------- S&P Global Ratings lowered to 'CCC' from 'B-' its long-term issuer credit rating on Russian real estate investment group O1 Properties Ltd. and kept the rating on CreditWatch with negative implications. S&P said, "We also lowered to 'CCC-' from 'CCC+' our issue ratings on the senior unsecured notes issued by O1 Properties Finance plc and O1 Properties Finance JSC and guaranteed by O1 Properties Ltd. We kept these ratings on CreditWatch negative. "The downgrade reflects our expectation of a heightened risk of debt restructuring over the next six to 12 months, given our forecast of negative funds from operations (FFO) in 2018-2019. As of June 30, 2018, O1 had already reported a year-to-date negative FFO of around US$18 million, resulting from sizable interest expenses on its significant debt of around US$3.2 billion, including our adjustments, on June 30, 2018. "We believe that O1's capital structure is currently unsustainable and we expect that it will remain so in 2019, in the absence of a significant favorable change. We forecast O1's debt-to-debt-plus-equity ratio will hover close to 85% in 2018- 2019, which is among the highest in our EMEA peer group." O1's debt mostly consists of bank loans secured by properties, and of bonds, including the rated and unsecured US$350 million Eurobond due 2021. O1's debt increased during first-half 2018 after the group assumed a sizable liability from its previous shareholder (US$183 million on June 30, 2018). The group also reports around US$147 million of contingent liabilities, including around US$103 million of guarantees, and a US$44.3 million liability related to one of its projects, for which it has booked a provision. At the same time, during the first half of 2018, the value of O1's portfolio declined to US$3.3 billion from US$3.6 billion. Of this fall, US$159 million (4.4% of the portfolio value) related to portfolio revaluation, and the remainder to the disposal of two business centers, Avrasis and Zarechie, in first-half 2018. S&P said, "We understand that during 2019 the group will have to refinance its significant upcoming maturities of around US$610 million for 2020 and US$762 million for 2021 (including the rated US$350 million Eurobond) and to consider all options to extend and restructure significant portions of its debt burden. Depending on the outcome of potential negotiations, we may view any debt maturity extension as de facto restructuring: If debt is extended without adequate offsetting compensation such as an amendment fee or increased coupon, we would likely consider the maturity extension as a distressed exchange. "Furthermore, we understand that O1 faces a risk of debt acceleration due to change of ownership after private company Riverstretch Trading and Investments (RT&I) became the major shareholder earlier this year. As announced in August 2018, the group is seeking its bondholders' consent to waive the change of ownership clause that triggers immediate redemption of all debt. On Dec. 13, 2018, O1 announced another extension of the timeline for solicitation of consent from the US$350 million bondholders, with the next bondholders meeting now scheduled for Feb. 4, 2019. We understand that if O1 Properties fails to reach an agreement with its bondholders, this may trigger immediate debt acceleration and cross default with O1 Properties' other debt. "Finally, we factor into our overall rating assessment the negative impact of the Russian ruble devaluation on O1 Properties' operations, resulting in an aggravated currency mismatch. We understand that 40% of all rental agreements are in rubles, and part of other rental agreements include an embedded ruble-to-dollar exchange rate cap, which we understand is currently below the spot exchange rate. "We understand that O1 is currently rebalancing the currency mix of its debt burden toward rubles. Specifically, in October 2018 it converted a U.S. dollar loan on White Square project (US$572 million) into rubles and euros (70%/30%). Before year-end 2018, O1 also intends to convert into rubles one more loan of US$189 million. As a result, we expect that the share of hard currency- denominated liabilities will reduce to around 75% of the total loan and bond portfolio, from around 81% in December 2018, but will remain significant, in our view. In a hypothetical scenario of forced conversion of debt into rubles without adequate compensation of lenders, we would consider such a conversion as a distressed exchange. "Importantly, we believe that O1 is facing the risk of breaching its loan-to-value and debt service coverage covenants, and has approached the lender group to relax its covenant package. We understand from management that the group was in compliance with its main covenants at end of the first half 2018, but headroom was very tight, or for some covenants nonexistent. "On a positive note, we understand that the new controlling shareholder may inject capital over 2019 to help restore the group's position. That said, we estimate that support from the shareholder is likely to be subject to successful finalization of discussions with the lenders. "We continue to rate O1 Properties' senior unsecured bonds one notch below the issuer credit rating, as they rank behind a significant amount of secured debt (representing around 70% of debt by our estimates). O1 Properties' reported capital structure consisted of $2,240 million of secured debt and $855 million of unsecured debt as of June 30, 2018. "The CreditWatch indicates the possibility that we could lower the rating by one or more notches over the next 30 to 90 days if we are convinced the group will consider a distressed exchange, or if O1 fails to obtain the waiver on ownership change and is required to repay its debt immediately and in full. In addition, we may consider a downgrade if unfavorable market conditions further weaken the group's credit metrics to levels no longer commensurate with the current rating. "We would likely affirm our rating on O1 Properties if we receive confirmation that the change of ownership will not trigger acceleration of debt repayment. "Although unlikely at this stage, we would raise the rating to 'B-' if the debt-to-debt-plus-equity ratio approaches 75% on a sustainable basis, coupled with interest coverage by EBITDA not less than 1.5x. This should be complemented by adequate liquidity and a realistic plan to repay or refinance the significant maturities due 2020-2021. An upgrade would also be contingent on there being no residual legal risks related to the previous shareholder." =========== S E R B I A =========== RUDNIK: Metalac Acquires Assets for EUR1.3 Million -------------------------------------------------- SeeNews reports that Serbian blue-chip cookware manufacturer Metalac has acquired the office building, production plant and storage facilities of bankrupt textile company Rudnik for EUR1.3 million (US$1.4 million). According to SeeNews, Metalac said its offer for the purchase of the assets was deemed most favorable at an auction for the sale of the assets on Dec. 13. The assets include a total of 18,000 square meters of storage and production facilities, a restaurant and two power transformer stations, SeeNews discloses. Rudnik was privatized in 2006 and was declared insolvent in 2010, SeeNews recounts. SERBIA: S&P Alters Outlook to Positive & Affirms 'BB/B' SCRs ------------------------------------------------------------ On Dec. 14, 2018, S&P Global Ratings revised its outlook on Serbia to positive from stable. At the same time, S&P affirmed its 'BB/B' long- and short-term foreign and local currency sovereign credit ratings. OUTLOOK The outlook revision reflects Serbia's solid economic growth outlook and largely prudent fiscal stance, amid prospects for delivery of further growth-enhancing reforms (including labor market reforms and additional privatization) under the new nonfinancial 30-month policy-coordination arrangement with the IMF that the government signed in July 2018. The improved outlook also reflects steps taken by the central bank to augment the credibility and effectiveness of its monetary policy and inflation-targeting regime; in S&P's view, inflation expectations are now well-anchored, the exchange rate regime remains relatively flexible, and the largely foreign-owned banking system has been put on stronger financial footing, with nonperforming loans (NPLs) declining significantly and lending growth gathering pace. S&P said, "We could raise our rating on Serbia in the next 12 months if strong growth continues, while public debt keeps declining and external imbalances remain contained. "Conversely, we could revise the outlook to stable if slowdown in the eurozone and tighter global financial conditions weaken Serbia's growth momentum, or cause external imbalances to recur; or if fiscal performance deteriorated putting Serbia's public debt on an upward path." RATIONALE S&P's ratings on Serbia are supported by its educated workforce, the favorable outlook for foreign direct investment (FDI), and the government's commitment to operating primary budgetary surpluses. Since 2015, Serbia has been paying down net external debt in absolute terms, while the size of the export sector has nearly doubled over the past decade to an estimated 52% of GDP by the end of this year. While some of this reflects the weakness of the domestic economy between 2009 and 2015, there is a clear relationship between large-scale foreign equity investment in key manufacturing and services sectors, and the strength of merchandise and services export growth. The services sector has operated under a surplus for eight consecutive years, with a surplus of about 2.5% of GDP last year. Moreover, since 2015, net FDI has more than financed Serbia's current account deficits, enabling Serbia to reduce net external debt outright. The sovereign ratings on Serbia are constrained by its relatively low wealth levels; its sizable net external liability position; and still-high general government debt burden, a major part of which is denominated in foreign currency. Our ratings also reflect the banking sector's extensive euroization, which, in our view, constrains monetary policy flexibility, despite authorities' improved track record on delivering low and stable inflation. Institutional and Economic Profile: Despite low wealth levels and weak institutions, the new IMF arrangement should support reform momentum. -- Serbia's investments, private consumption, and exports will likely support economic growth of about 3.3% in 2018-2021. -- That said, wealth levels remain low, with structural bottlenecks constraining faster income convergence with the EU. -- The EU accession process as well as the policy-coordination arrangement with the IMF could help advance reforms in Serbia, while locking in macroeconomic stability. The Serbian economy's medium-term growth prospects look positive. In 2018, real GDP growth is likely to reach a 10-year high of 4.2% or slightly above on the back of double-digit growth of investments, high export growth, and sustainable private consumption owing to improving labor market conditions. Absent headwinds from a sharp slowdown in Europe, we expect the economy to expand by an average of 3% annually in 2019-2021 due to healthy investment growth, driven by the acceleration of public investments, the pickup in bank lending, and strong confidence supported by macroeconomic stability. S&P expects private consumption will also boost growth as employment levels increase, wage growth accelerates, lending to households recovers, and the inflow of worker remittances benefits from continued growth in Germany and Austria. At the same time, Serbia's potential growth rates remain hampered by unfavorable demographic trends, with the population shrinking by 0.5% per year -- one of the fastest paces in the Western Balkans; relatively low labor participation; a large and only modestly reformed public sector; and material infrastructure gaps. Moreover, the effectiveness of Serbia's public institutions remains constrained by a weak judiciary, relatively high levels of perceived corruption, and low public governance standards (especially if compared with the EU average). Absent the forecast strong growth, Serbia's U.S. dollar GDP per capita (S&P's preferred income measure) will fluctuate around its pre-2008 crisis levels of a modest $7,200-$7,300 -- well below than that of the country's EU neighbors. In this context, policy action--namely toward rightsizing the public sector, addressing the shadow economy, and improving the independence of the court system--if taken, could remove some existing hurdles to economic development, leading to higher GDP growth rates than we currently expect. From that perspective, Serbia's new policy-coordination arrangement with the IMF could help spur growth of Serbia's private sector and speed up income convergence with the EU while preserving macroeconomic stability. Among other targets, the program focuses on reforming public employment and wage systems, improving governance in state-owned enterprises (SOEs) and financial institutions, reducing informality, and raising labor force participation. Serbia's increasingly centralized institutional settings and the resulting political stability have supported commitment to fiscal consolidation and could amplify future reform efforts. The ruling party -- the Serbian Progressive Party -- currently controls the parliament, the presidency, and the majority of local councils (including in the capital city of Belgrade), and benefits from relatively high public support. At the same time, the increasing control of and restrictive actions toward independent mass media as well the politicization of the civil service have resulted in weaker checks and balances between key institutions. This might undermine policy predictability, resulting in weaker investor confidence. S&P anticipates, however, that Serbia's EU aspirations will likely constrain further power consolidation, even though the accession process might be lengthy and complex. Serbia was granted EU candidate status in 2012, and since then has opened 16 out of 35 chapters of the Acquis Communautaire, with two already temporarily closed. Meeting the conditions of some chapters will likely require difficult political decisions. On top of the typical areas of concern for EU candidates, such as weaknesses with respect to the rule of law, Serbia will face unique issues regarding its relations with Kosovo and trade agreements with Russia, which might trigger a public referendum and an early parliamentary election. Flexibility and Performance Profile: Prudent policy mix has reduced Serbia's fiscal and external imbalances significantly. -- Serbia's external position has been improving on the back of expanding export capacity. -- Public finances are now at a more sustainable level, with recent fiscal adjustment locked in by the new IMF arrangement. -- S&P believes Serbia's national bank has gained credibility due to effective inflation control. Serbia remains exposed to balance of payments risks, given its large net external liability position and persistent current account deficits. However, S&P notes a pronounced positive trend, with external imbalances shrinking and the composition of current account financing improving. Strong FDI-induced merchandise and service exports has been the key driver behind this: between 2010 and 2017, in U.S. dollar terms, total exports almost doubled to about $22 billion (52% of 2017 GDP) -- one of the strongest performances in the region. Goods export growth kept high pace in the first nine months of 2018 at about 8%, including manufacturing exports of about 10%, despite softer growth momentum in the eurozone and lack of visibility on FIAT's production plans after its existing investment agreement expires. Buoyant exports should mitigate pressures coming from expanding domestic demand, higher global energy prices, and tightening global monetary conditions, in S&P's view. Serbia's cost competitiveness is high, with the average wage at just one- quarter of the EU average. With a deepening integration into the European automotive industry's supply chains, Serbia's exports- oriented manufacturing sector will likely continue to benefit from high levels of FDI. Additionally, S&P notes the solid performance of the country's information and communication technology (ICT) sector, which could also bolster Serbia's export capacity. The value of ICT exports has been expanding annually by over 20% on average in recent years and exceeded a sizable $1 billion in 2017 (about 2.4% of GDP). Throughout S&P's forecast horizon, it expects the economy to continue to run current account deficits of about 5% of GDP, not least due the strength of the ongoing investment cycle. Yet external deficits of this magnitude are significantly lower those reported in 2011-2014 (about 8%-9% of GDP on average), when wide fiscal deficits were pressuring Serbia's current account position. S&P said, "Importantly, we expect that FDI net inflows will fully finance the current account deficits, as was the case in the past three years. Under this assumption, external debt net of public and financial sector external assets (narrow net external debt is our preferred measures of external indebtedness) will stabilize at slightly above one-half of current account receipts (CARs) in 2018 and beyond -- a sizable reduction compared with a relatively high 82% in 2012. With external debt now dominated by the public sector following years of private-sector deleveraging, we expect that gross external financing needs (annual payments to nonresidents) should remain roughly equal to CARs plus usable reserves." At the same time, Serbia's net external liability position is quite large, owing to the accumulated stock of inward FDI (over 130% of CARs). Although FDI generally presents a much smaller risk than external debt, it still exposes the economy to potential swings in investor confidence, resulting in balance of payments pressure in case of accelerated repatriation of profits and equity. Serbia's fiscal outlook remains strong. S&P said, "We project another year of general government headline fiscal surplus in 2018 (about 0.6% of GDP) spurred by tax-rich demand-driven growth and one-off non-tax revenues. Given the government's recent strong record of fiscal prudence, we believe that going forward fiscal deficits should remain within 1% of GDP or slightly lower even against a background of moderating growth." Over the past few years, the government reversed the upward trajectory of public debt. In 2017 alone, debt to GDP dropped by about 10 percentage points. That said, public debt net of liquid assets remains relatively high (slightly above 51% of GDP in November 2018), especially considering Serbia's income levels. Serbia's policy challenge is to rebuild fiscal buffers by reducing debt further, while contained fiscal risks coming from the large and only modestly formed public sector. Large SOEs -- namely Elektroprivreda Srbije, Srbijagas, and enterprises in the mining and petrochemical industries -- still suffer from weak corporate governance and vested interests, persistent energy arrears, and redundant employment. Progress in restructuring these SOEs has been relatively modest, but could receive a boost from the recently completed sale of Serbia's copper smelter (RTB Bor). Additionally, with almost 75% of general government debt denominated in foreign currency, principally euros and U.S. dollars, Serbia's public debt is sensitive to exchange rate shocks. Although the recent appreciation of the Serbian dinar has been beneficial for its debt metrics, monetary normalization in the eurozone could put pressure on the currency and inflate government debt as well as its interest bill. S&P notes improvements in Serbia's monetary flexibility. The National Bank of Serbia (NBS) has proved its operational independence and earned credibility over the past five years. Effective actions under the inflation targeting regime allowed it to anchor inflation expectations, despite a historically high exchange rate pass-through, resulting in low-single-digit inflation since late 2013. After picking up to 3.1% in 2017 due to a supply shock, headline inflation bottomed out in early 2018 on the high base effect and recovered to 2.2% in October owing to higher oil and food prices. Strengthening domestic demand and expected hikes in administered prices will likely spur headline inflation through 2021, yet we expect it to stay within the NBS' target band of 3Ò1.5%. Serbia's exchange rate regime is relatively flexible to allow the economy to adjust to changing external conditions, while at the same time avoiding sharp swings in the real effective exchange rate. Due to the still-extensive euroization of the economy, NBS intervenes occasionally in the foreign exchange market to smooth short-term exchange rate volatility. Appreciation pressures led the NBS to intervene by purchasing about EUR1.6 billion (on a net basis) in the first 10 months of 2018. S&P nevertheless acknowledges the authorities' efforts to deepen the local currency debt markets, with the government stepping up dinar- denominated issuance and extending the maturity of the dinar yield curve to 10 years. The profitability of Serbia's banking system is recovering, and bank lending has started to accelerate since 2017. This has been supported by sustained progress in the reduction of NPLs. Their nominal stock has more than halved, dropping below 6.4% of total loans in September 2018 from more than 23% in 2015, reflecting the government's and the NBS' concentrated regulatory efforts and accelerated NPL write-offs. Despite notable systemwide improvements, the asset quality of state-owned banks remains slightly weaker. Nevertheless, S&P considers that the banking sector, otherwise predominantly foreign-owned (about 70% of the total assets), remains adequately capitalized and liquid. 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 Outlook Action; Ratings Affirmed To From Serbia Sovereign Credit Rating BB/Positive/B BB/Stable/B Ratings Affirmed Serbia Transfer & Convertibility Assessment BB+ Senior Unsecured BB ============= U K R A I N E ============= MHP SE: S&P Affirms 'B' Issuer Credit Rating, Outlook Stable ------------------------------------------------------------ S&P Global Ratings affirmed its 'B' issuer credit rating on Ukraine-based poultry, grain, and meat producer MHP SE. The outlook remains stable. S&P also affirmed its 'B' issue ratings on the company's senior unsecured debt. The issue ratings are in line with the issuer credit rating on MHP, reflecting limited structural subordination in the group's capital structure. The ratings affirmation follows MHP's recent announcement that it has signed an agreement to acquire a 90.69% equity stake in Slovenia-based poultry meat producer and exporter Perutnina Ptuj. S&P said, "We understand that MHP will fund the acquisition with a combination of on-balance-sheet cash and additional bank debt. We understand MHP has made a mandatory offer for the remaining minority shares in the company, thus likely resulting in a full takeover. We expect the transaction to close by the end of this year subject to regulatory approval from the European Union and Slovenian competition authorities." S&P said, "Given that the transaction is partly funded by debt, we forecast MHP's credit metrics to weaken at transaction close. We note that there is currently limited headroom for further deterioration in credit metrics, given the very thin cushion under the group's maximum net leverage covenant of 3.0x. That said, for 2019 we anticipate solid earnings growth driven by higher revenues and stable profitability supporting solid deleveraging through the year. By year-end 2019, S&P Global Ratings-adjusted debt-to-EBITDA should thus reach about 2.6x, similar to the level in 2017. We believe that MHP has the flexibility to lower capital expenditure (capex) by delaying the launch of one of its new production facilities at the Vinnytsia poultry complex to fiscal year 2020 (ending Dec. 31), which is a key supportive factor for our assessment of the group's liquidity profile, despite the very thin covenant headroom. We therefore forecast that the group should be able to restore sufficient headroom under its financial covenants, while maintaining strong positive free operating cash flow." Reporting about EUR257 million in revenues and EUR24 million in EBITDA for 2017, Perutnina Ptuj is a vertically integrated poultry meat producer and exporter. Predominantly based in Slovenia, the group also has production facilities in the neighboring Balkan countries of Croatia, Romania, Serbia, Bosnia and Herzegovina, and Macedonia. Similar to MHP, Perutnina Ptuj exports about 66% of its production, primarily to EU member states. S&P said, "While we consider the acquisition to be in line with MHP's strategy of expanding production and export capacity outside Ukraine and establishing a physical presence in the EU, one of its key export markets, we assess it as having only a modest beneficial impact on its overall business position in the near term. This is because of Perutnina's relatively small size compared to MHP's revenue and earnings base, representing about 19% of the group's total revenue and 6% of its EBITDA for 2018 on a pro forma basis. Moreover, business upside remains constrained by MHP's concentration in Ukraine (where about 90% of its production capacity will still be located after the transaction), a country bearing very high risk for corporate entities. "We forecast the combined group to have an adjusted EBITDA margin of about 29%-30% in 2019 (compared with 36% in 2017), as a result of Perutnina's operating margins slightly diluting the group's profitability, some integration costs, and loss of export-related VAT reimbursements (about $53 million in fiscal 2017) from the Ukrainian government. "We believe that Perutnina's lower margins than MHP reflect its higher labor cost base and lower self-sufficiency in terms of grain production. This shows higher reliance on external procurement to feed its livestock, which exposes Perutnina's margins to input cost volatility. We have also factored MHP's intentions to invest about $200 million in Perutnina's asset base over the next three-to-four years. We have not factored in other acquisitions but we understand that MHP will likely retain its appetite for external growth as it aims to become the leading poultry meat producer in the EU. "Our 'B' rating on MHP continues to encompass our view that the group successfully passes our sovereign stress test, including a transfer and convertibility (T&C) scenario assessment, enabling us to rate it one notch above the 'B-' long-term sovereign foreign currency rating on Ukraine. Our rating on MHP is capped at one notch above the T&C on Ukraine, owing to its export- oriented business and the fact that a substantial proportion of the group's physical assets (90% after the transaction closes) are based in the country. If MHP did not pass the T&C scenario assessment, we would cap the rating on MHP at the level of the T&C assessment of Ukraine. "The stable outlook reflects our view that MHP's profitable business expansion and lower capex needs should continue to generate positive free cash flows in 2019. We think this should also enable it to deleverage to around 2.6x adjusted debt to EBITDA by year-end 2019 while maintaining an adjusted interest coverage ratio of about 4.5x. We believe MHP's stand-alone business should continue to generate higher earnings, thanks notably to the contribution from the ramp-up of the new Vinnytsia facility, although we see Perutnina making a limited earnings contribution in the near term. "We would lower the ratings on MHP if we observed significant operational headwinds in its Ukrainian business or major integration problems with Perutnina that would negatively affect the group's cash flows in 2019. This would notably prevent the group from restoring sufficient cushion under financial covenants. "We would also lower the ratings on MHP if we lowered our T&C assessment on Ukraine. Although the group successfully passed our stress test on a foreign currency sovereign default, we note that the issuer credit rating on MHP is capped at one notch above that on Ukraine. Therefore, if the T&C assessment on Ukraine was one notch lower, we would lower the ratings on MHP." Rating upside is remote in the near term as it is contingent on the combination two factors: -- A higher assessment of MHP's stand-alone credit profile; and -- A higher T&C assessment for Ukraine. S&P said, "We could consider revising upwards our assessment of the group's stand-alone credit profile if we see MHP managing to generate FFO to debt of 30%-45%, with EBITDA interest coverage rising above 6.0x, with restoration of an ample liquidity cushion under its financial covenants. We believe this currently unlikely to happen as the company is investing in increasing its production capacities and its geographical diversification. Under such a scenario, an upgrade is also contingent on a higher T&C assessment on Ukraine. This is because our issuer credit rating on MHP is capped at one notch above that on Ukraine." =========================== U N I T E D K I N G D O M =========================== BLIPPAR: Enters Administration Following Funding Dispute -------------------------------------------------------- Matthew Field at The Telegraph reports that UK technology start-up Blippar has fallen into administration after rowing investors failed to reach a deal that could have given it a funding lifeline amid heavy losses. The augmented reality start-up, which was once hailed as a British tech "unicorn" valued at GBP1 billion, has stopped trading and appointed administrators, The Telegraph relates. David Rubin & Partners were appointed administrators on Dec. 17, The Telegraph discloses. "The appointment of Administrators has arisen effectively as a result of an alleged dispute over continued funding," The Telegraph quotes Paul Appleton -- paul@drpartners.com -- partner at David Rubin & Partners, as saying. "Following their appointment, the Administrators are now exploring all possible options for the future of the business for the benefit of all Stakeholders." According to The Telegraph, the company's future had fallen into uncertainty following tens of millions of pounds in losses and a dispute between investors, who include Nick Candy's Candy Ventures, Qualcomm Ventures and Khazanah, a Malaysian state- backed fund. Blippar had endured heavy financial losses over plans to expand into artificial intelligence and computer vision, losing GBP35 million in 2017 and shutting down offices in Silicon Valley, The Telegraph states. Blippar had also tried to sell its business, including to Snap Inc. earlier this year, The Telegraph recounts. Although talks did not progress, The Telegraph notes. BLUE INC: Enters Administration, Seeks Buyer -------------------------------------------- Business Sale reports that Blue Inc., a prominent high street clothing chain, has collapsed into administration just days before Christmas. Blue, a popular menswear retailer renowned for brands like Twisted Soul, enlisted the support of administrators less than two years after launching a CVA to advise on the future of the business, Business Sale relates. A new owner is now sought for the company, with offers from interested parties invited immediately, Business Sale states. According to Business Sale, corporate recovery specialists Begbies Traynor have been approached to handle the administration of the business, and said in a corporate statement: "We can confirm that Blue Inc. entered administration on Monday, December 10, 2018. The remaining 31 stores will continue trading while discussions are in progress regarding the future of the brand. We cannot make any further comments at this time." The business cited weak footfall in stores and insufficient funds as the primary reason for its collapse into administration, which is likely to negatively impact shareholders Padma Textiles and Uniserve with multimillion-pound losses, Business Sale discloses. In the 18 months leading to July 2017, the company reported losses of GBP15.6 million, despite in 2014 being tipped for a GBP60 million float when the company was led by former Marks & Spencer chair Lord Stuart Rose, Business Sale notes. TRAVELEX HOLDINGS: S&P Affirms 'B-' Rating, Outlook Negative ------------------------------------------------------------ S&P Global Ratings affirmed its 'B-' rating on Travelex Holdings. S&P also affirmed the 'B-' issue rating on the group's EUR360 million bonds and 'B+' rating on its EUR90 million super senior revolving credit facility. The 2018 trading performance of U.K.-based Travelex Holdings Limited has been broadly flat compared with 2017, and free operating cash flow (after payment to minority interests) continues to be minimal. Absent a material increase in EBITDA, the group's high debt burden (including parent company debt) and tightening covenant headroom in the next 12 months represent credit risks. However, the controlling shareholders' proposed plan of a new holding structure, if implemented, could provide some support to the rating as Travelex will become part of a larger group. S&P said, "The affirmation follows our review of Travelex's trading performance in the first nine months of 2018; while the group's revenues remained flat, at about GBP552 million (as the benefits of organic revenue growth were offset by adverse currency swings), its reported EBITDA improved by GBP17 million to GBP52 million. This improvement was due to increased demand in the Middle East, lower exceptional costs, and Travelex exiting airports with onerous leases. However, despite this increase, we forecast Travelex to have negligible free operating cash flow (FOCF; after payment of minority interests) in 2018 and minimal positive FOCF in 2019, absent any event risks. "We analyse Travelex as part of BRS Ventures & Holdings Ltd. (BRSV), controlled by Dr. B.R. Shetty. While BRSV does not generate any revenues, the holding company holds an additional $490 million cash-pay loan (current outstanding of about $460 million). Although Travelex does not provide any upstream guarantees to this debt -- and any potential to upstream dividends is limited given the restrictions set under the current EUR360 million bond documentation -- we include the loan at BRSV in our leverage calculation as it was incurred specifically for the acquisition of Travelex." Historically, the shareholders of BRSV have made cash injections and supported Travelex's financial needs. Currently, the shareholder's proposed reorganization plan includes setting up a financial holding company structure (Finablr Group) that would control UAE Exchange and Travelex, although both companies would be managed separately. No public information about the revenues, EBITDA, or total debt for the proposed combined entity is available. However, S&P notes that the cash interest for the $490 million BRSV loan was serviced by UAE Exchange, which could be viewed as a proxy for the proposed entity's cash generating ability. The successful implementation of this holding company requires approval from various stakeholders including regulators in different geographies. Additional information on the development of this plan may influence the resolution of its current negative outlook on the rating and S&P expects material progress toward this plan within the next six months. Travelex's retail segment (contributing 75% of the core group revenue, calculated as Travelex's statutory revenue adjusted to include revenues from non-consolidated joint-ventures and French operations) operates in a very competitive environment. Increased price transparency results in retail customers shopping around to get the best value and relying less on buying foreign exchange (FX) at airports. On the one hand, Travelex's global reach, network of vaults and sub-vaults, and long-standing relationships with commercial banks -- including RBS, Bank of America and Barclays -- means it can source various FX currencies at attractive rates. However, it pays high rents to be present at prime locations such as the airports, increasing the overall cost. This means Travelex cannot offer retail customers a competitive exchange rate. Travelex is also exposed to the cyclical travel industry, ongoing trends of reducing the share of cash as a payment method, and risks from currency swings, which combined, result in moderate profitability. These weaknesses are partly offset by the company's position as the largest nonbank provider of travel money worldwide, good product and regional diversification, and strong franchise. S&P said, "The negative outlook reflects our view that Travelex has limited headroom for operating underperformance, either due to event risks or underlying business volatility, over the next 12 months even as the group undertakes its reorganization. "We could lower the ratings if we believed that Travelex's capital structure was no longer sustainable, for example if our ratio of reported EBITDA interest coverage at the restricted group level declined below 1.5x for a sustained period, or if FOCF turned negative and further financial support from its main shareholder seemed unlikely. Additionally, we could take a negative rating action if the group's liquidity were to weaken and headroom under the RCF were to tighten such that a risk of a covenant breach within the next 12 months seemed likely." An outlook revision to stable will depend on the successful completion of the proposed reorganization of the Travelex group within the Finablr group, such that the combined group's credit metrics improved from the present stand-alone ratios of BRSV. This ratio improvement will have to be in both set of ratios (that is, including and excluding our operating lease adjustment) including a reported EBITDA to cash interest ratio sustainably above 2.0x. Additionally, any positive rating action would encompass stable or increasing revenue and EBITDA for 2019 despite the U.K.'s exit from the EU, as well as Travelex's ability to maintain adequate liquidity including at least 15% headroom under its RCF covenant. Travelex operates in the retail FX industry and provides FX services across the value chain to retail and wholesale customers. Travelex operates over 1,200 stores in 26 countries. It also processes and delivers FX to large commercial banks, travel agents, U.K. supermarkets, hotels, and casinos. It also acts as an agent for VAT refund providers such as Global Blue and Fintrax Group (Franklin Ireland). The group has developed a network of over 1,000 ATMs at both on-airport and off-airport locations around the world. Travelex operates in a complex regulated environment, wherein any regulatory breaches could significantly damage group operations. For the first nine months of 2018, the group reported revenues of about GBP552 million. -- International travel is a key driver of demand for retail FX (75% of the group's core group revenue), which, in turn depends on consumer confidence. The world GDP is forecast to increase by 3.6% in 2019 and 2020. -- S&P said, "Furthermore, we also consider the pressure on Travelex's revenues due to the ongoing shift of consumers to digital payments, particularly in the developed economies. However, we forecast the demand for foreign currencies in emerging markets will continue to be robust." -- S&P takes into account the movements in currency exchange rates in its revenue forecast, as currencies of different countries are akin to inventory for Travelex. -- Key foreign currency exchange rates for 2019, including: GBP1 to A$1.7893; GBP1 to EUR1.1278; GBP1 to Yen 150.9224; GBP1 to US$1.3181; GBP1 to Brazilian real (BRL) 5.1406; and GBP1 to Turkish lira (TRY) 7.2495. However, S&P notes the potential of increased volatility in these exchange rates, specifically due to the uncertainty relating to Brexit. -- As per S&P Global Ratings' exchange rate forecasts, the Brazilian real is expected to deteriorate for the next two- to-three years. -- Demand for the wholesale segment tends to be more volatile and is significantly influenced by foreign currency orders from the Central Bank of Nigeria. -- Overall, after the nine months trading performance, S&P expects Travelex to post revenues of GBP730 million-GBP740 million at end-2018 (2% growth compared with 2017) and to remain flat or marginally decline in 2019. -- On the back of better prospects from emerging markets, S&P forecasts a slightly higher EBITDA contribution from retail further coupled with lower exceptional costs; it sees the -- - reported margins improving to 8%-9% for 2018 and 2019. -- S&P anticipates a positive inflow of working capital of around GBP5 million-GBP10 million for 2018 and 2019. Based on these assumptions, S&P arrives at the following credit measures: -- Adjusted debt to EBITDA of about 5.5x in 2018 and 5.4x in 2019, excluding noncash-pay shareholder loans and preferred shares of about GBP957 million but including BRSV's debt of GBP312 million. Adjusted debt to EBITDA (excluding operating lease adjustment) of 12.0x in 2018 and 11.4x in 2019. -- Reported (unadjusted for operating leases) EBITDA cash interest coverage at the restricted group of about 1.8x in 2018 and 2019. -- S&P uses reported coverage ratios because its lease adjustments result in artificially improved metrics due to the high share of short-term lease commitments. -- Despite positive working capital and a low capital expenditure (capex) forecast, S&P calculates minimal cash available for any debt repayments. TUNSTALL HOLDINGS: Bank Debt Trades at 3% Off --------------------------------------------- Tunstall Holdings Ltd. is a borrower traded in the secondary market at 97.17 cents-on-the-dollar during the week ended Friday, November 30, 2018, according to data compiled by LSTA/Thomson Reuters MTM Pricing. This represents a decrease of 1.35 percentage points from the previous week. Tunstall Holdings pays 500 basis points above LIBOR to borrow under the $90 million facility. The bank loan matures on October 15, 2020. Moody's and Standard & Poor's has no rating on the loan. The loan is one of the biggest gainers and losers among 247 widely quoted syndicated loans with five or more bids in secondary trading for the week ended Friday, November 30. Tunstall Group Holdings Limited is a holding company operating through its subsidiaries that offer telecare and telehealth solutions. The company offers non-intrusive telecare sensors that work with lifeline home units to manage the risks to a person's health and home environment; and solutions for grouped housing schemes that enable communication and management of risks. The company was incorporated in 2005 and is based in Whitley, United Kingdom. Tunstall Group Holdings Limited operates as a subsidiary of Tgh Acquisitions Ltd. ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than US$3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/booksto order any title today. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Europe is a daily newsletter co- published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA. Marites O. Claro, Rousel Elaine T. Fernandez, Joy A. Agravante, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2018. All rights reserved. ISSN 1529-2754. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Europe subscription rate is US$775 per half-year, delivered via e-mail. 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