/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/190111.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 Friday, January 11, 2019, Vol. 20, No. 008 Headlines C Y P R U S OCEAN RIG: S&P Discontinues 'B-' Long-Term Issuer Credit Rating F R A N C E STELLAGROUP: S&P Assigns Prelim 'B' LT Issuer Credit Rating R U S S I A ECONOMBANK: Amendments to DIA Role in Bankruptcy Measures OK'd K2 BANK: Recognized as Bankrupt by Karachay-Cherkess Court MOSCOW BILL: Recognized as Bankrupt by Moscow Court U N I T E D K I N G D O M DEBENHAMS PLC: In Refinancing Talks, Won't Rule Out CVA HARDY AMIES: Enters Administration, Seeks Potential Buyers JAGUAR LAND: To Cut 10% of Global Workforce After Sales Fall * UK: Ofgem Says Too Many Energy Suppliers Unsustainable X X X X X X X X * BOOK REVIEW: Crafting Solutions for Troubled Businesses ********* =========== C Y P R U S =========== OCEAN RIG: S&P Discontinues 'B-' Long-Term Issuer Credit Rating --------------------------------------------------------------- S&P Global Ratings discontinued its 'B-' long-term issuer credit rating on Cayman Islands-domiciled drilling company Ocean Rig UDW Inc. S&P also discontinued its 'B' issue rating and '2' recovery rating on Ocean RIG 2 INC.'s senior secured debt. This follows the acquisition of the company by Transocean Ltd. Ocean Rig is now a fully owned subsidiary of the Transocean group and all debt at Ocean Rig has been repaid. =========== F R A N C E =========== STELLAGROUP: S&P Assigns Prelim 'B' LT Issuer Credit Rating ----------------------------------------------------------- S&P Global Ratings assigned its preliminary 'B' long-term issuer credit rating to Stellagroup, the intermediate parent company of Stella Group, a building material manufacturer headquartered in France. The outlook is stable. S&P said, "At the same time, we assigned our preliminary 'B' issue rating to the proposed EUR290 million Term Loan B due 2026 to be issued by Stellagroup. The preliminary recovery rating is '3', reflecting our expectation of meaningful recovery (50%-70%; rounded estimate: 60%) in the event of a payment default. "At this stage, the proposed transaction includes shareholder loans, preferred equity shares, and other debt-like instruments throughout the corporate group, which we capture in our financial analysis, including our leverage and coverage calculations. The final ratings will depend on our receipt and satisfactory review of all final documentation and final terms of the transaction. The preliminary ratings should therefore not be construed as evidence of the final ratings. "If we do not receive the final documentation within a reasonable time, or if the final documentation and terms of the transaction depart from the materials and terms reviewed, we reserve the right to withdraw or revise the ratings. Potential changes include, but are not limited to, utilization of the proceeds, maturity, size, and conditions of the facilities, financial and other covenants, security, and ranking. "The 'B' rating incorporates our assessment of Stella's fair business risk profile with our opinion that the group has a highly leveraged capital structure as a result of its private- equity ownership. PAI Partners is acquiring Stella from ICG, financing the deal with a EUR290 million senior secured term loan B. The contemplated structure will also include a EUR56 million payment-in-kind (PIK) instrument held by ICG, along with a contribution from PAI in the form of equity and non-common-equity instruments totaling EUR308 million. "We consider that financial leverage at acquisition is high, with the S&P Global Ratings-adjusted debt to EBITDA ratio at about 6.5x over the next 12-18 months (5.5x excluding the PIK instrument, which we regard as debt). We also expect that Stella can maintain high margins and generate material free cash flows." Stella is a leading manufacturer of rolling shutters, metallic grills, and curtains for store protection in France. It operates across five brands: La Toulousaine, with respect to garage doors, sectional doors, gates, grilles and shutters, and Profalux, Eveno, Sofermi, and Flip, in rolling shutters, blinds, and garage doors. The group has five production sites in France and around 860 employees. For 2018, S&P expects Stella will report a turnover of EUR230 million and EBITDA of EUR55 million, including the acquisition of Flip on a pro forma basis, which closed in October last year. Stella has leading positions in the rolling shutter market, its main market, with an estimated 17% share, thanks to the integration of new businesses, such as Sofermi in 2017. Stella is also a market leader through La Toulousaine in the more mature metallic gates and curtains market. Stella's brands are well recognized by professionals, independent retailers, and installers in the industry and associated with high-quality products and services. S&P sees the market as highly fragmented, since it comprises mainly small local manufacturers and assemblers. Due to its strong local and regional presence and optimized manufacturing footprint, Stella can process orders and produce tailor-made rolling shutters and gates relatively quickly, with fast delivery across all key geographic areas of France. Stella controls most of the production chain and is vertically integrated. Its flexible model provides a cost advantage and enables high profitability, with EBITDA margins at 23%-24%, compared with broader building material producers and its direct competitors, which are mainly assemblers rather than manufacturers. The current management team has been able to integrate and develop acquired businesses into the group's manufacturing processes, such that the operating margins of these brands have improved significantly over recent years. Although Stella has a wide range of products and expertise in the rolling shutters and garage-door markets, the group operates exclusively in France. Rolling shutters represent the majority of sales (approximately 70%) and all other products follow the renovation/residential or replacement/non-discretionary industrial end markets. S&P said, "Although we consider that renovation and maintenance activity is more resilient than new- build construction through the credit cycle, we see Stella's reliance on this market and its small size relative to that of wider building materials producers as constraints to its business profile. With around EUR230 million of reported revenues and EUR55 million of EBITDA in 2018, Stella is one of the smallest companies we rate in the building materials industry." S&P said, "Our assessment of Stella's financial risk profile is mainly constrained by the group's high debt, which we estimate at about EUR359 million at closing of the acquisition in January 2019. This results in S&P Global Ratings-adjusted debt to EBITDA of about 6.5x over 2019-2020. This stems from the group's private-equity ownership and potentially aggressive strategy in using debt and debt-like instruments to maximize shareholder returns in the takeover transaction and during the investment horizon. Our debt adjustments include the EUR56 million PIK instrument held by the non-controlling sponsor ICG and about EUR13 million of existing debt in the new structure. We also consider that yet-to-be finalized convertible bonds and preference shares held by PAI Partners qualify for equity treatment under our methodology, in light of its expected pricing, equity-stapling clause, and highly subordinated and default-free features. "We project strong free cash flows of at least EUR20 million on a recurring basis in the coming years, since the company generates high margins and has only moderate capital investment needs. Although we do not deduct cash from debt in our calculation owing to Stella's private-equity ownership, we consider that excess cash flows offer some headroom for deleveraging. Moreover, the company's interest coverage ratios support the ratings, with EBITDA interest coverage at about 3.0x and funds from operations (FFO) covering cash interest payments by about 4.0x. "The stable outlook reflects our expectation that Stella will continue to expand and realize efficiencies from recent acquisitions, while sustaining high margins and free cash flows of at least EUR20 million per annum, with S&P Global Ratings- adjusted debt to EBITDA at about 6.5x (5.5x excluding the PIK instrument) over 2019-2020. "We could lower the rating if Stella's profitability and cash flow generation weakened due to deteriorated market conditions or operational issues. We could also lower the rating if the company adopted more aggressive financial policies--including debt- financed dividend recapitalizations or acquisitions--that resulted in a sizeable increase in leverage or interest coverage ratios declining toward 2x with low prospects for improvement. "In our view, an upgrade over the next 12 months is unlikely, given the group's high leverage and potentially aggressive financial policy from the private-equity sponsor. However, we could raise the rating in the long term if the company reported adjusted leverage sustainably below 5x (including the PIK instrument) and FFO to debt stayed above 12%. In addition, a strong commitment from the private equity sponsor to maintain leverage commensurate with a higher rating would be important considerations for an upgrade." =========== R U S S I A =========== ECONOMBANK: Amendments to DIA Role in Bankruptcy Measures OK'd -------------------------------------------------------------- The Bank of Russia, in December 2018, approved amendments to the Plan for Participation of the State Corporation Deposit Insurance Agency (hereinafter, the Agency) in Bankruptcy Prevention Measures for Joint-stock Commercial Bank for Reconstruction and Development Econombank (investor is PJSC Metkombank), which include the financial rehabilitation plan. According to the financial model envisaged by the financial rehabilitation plan, the bank will step up lending to legal entities and shaping a portfolio of securities. The plan also stipulates a set of measures to reduce problem debts of JSC Econombank. As a result of bankruptcy prevention measures, the bank's performance indicators will recover to the respective regulation values. The investor also plans to merge with JSC Econombank. The current development of the bank's status has been detailed in a press statement released by the Bank of Russia. K2 BANK: Recognized as Bankrupt by Karachay-Cherkess Court ---------------------------------------------------------- The provisional administration to manage K2 Bank (JSC (hereinafter, the Bank) appointed by virtue of Bank of Russia Order No. OD-2277, dated August 31, 2018, following the banking license revocation, in the course of its inspection of the Bank's financial standing established signs suggesting that the Bank's executives conducted operations aimed at siphoning off assets by purchasing low-quality securities and extending bank guarantees to legal entities of dubious creditworthiness or those knowingly unable to meet their liabilities. On November 13, 2018, the Arbitration Court of the Karachay- Cherkess Republic recognized the Bank as insolvent (bankrupt). Pavel Epifanov of Union Self-regulated Organisation of Arbitration Managers of the North West has been appointed to act as a receiver. The Bank of Russia submitted the information on the financial transactions bearing the evidence of criminal offence conducted by the Bank's executives to the Prosecutor General's Office of the Russian Federation, the Ministry of Internal Affairs of the Russian Federation and the Investigative Committee of the Russian Federation for consideration and procedural decision making. The current development of the bank's status has been detailed in a press statement released by the Bank of Russia. MOSCOW BILL: Recognized as Bankrupt by Moscow Court --------------------------------------------------- The provisional administration to manage JSCB Moscow Bill Bank (JSC) (hereinafter, the Bank) as appointed by virtue of Bank of Russia Order No. OD-2150, dated August 17, 2018, following banking license revocation, conducted an investigation of the Bank's financial standing and identified operations aimed at its deliberate bankruptcy through the purchase of low-quality securities. On November 26, 2018, the Arbitration Court of the City of Moscow recognized the Bank as insolvent (bankrupt). The State Corporation Deposit Insurance Agency was appointed as a receiver. The Bank of Russia submitted the information on the financial transactions bearing the evidence of criminal offence conducted by the Bank's executives to the Prosecutor General's Office of the Russian Federation, the Ministry of Internal Affairs of the Russian Federation and the Investigative Committee of the Russian Federation for consideration and procedural decision making. The current development of the bank's status has been detailed in a press statement released by the Bank of Russia. =========================== U N I T E D K I N G D O M =========================== DEBENHAMS PLC: In Refinancing Talks, Won't Rule Out CVA ------------------------------------------------------- Ashley Armstrong at The Telegraph reports that Debenhams has refused to rule out a company voluntary arrangement or raising more equity as the chain begins refinancing talks with lenders following a steep slide in sales. According to The Telegraph, the struggling department store suffered a 5.7% fall in like-for-like sales in the 18 weeks to Jan 5 -- worse than analysts had feared. However, the retailer escaped a much-feared profit warning after identifying a further GBP30 million of cost savings by accelerating the closure of a distribution centre and imposing a hiring freeze at head office, The Telegraph relates. Debenhams revealed that it had begun talks with its banks to refinance about GBP520 million of debt facilities that are due to mature by 2020, The Telegraph discloses. HARDY AMIES: Enters Administration, Seeks Potential Buyers ---------------------------------------------------------- Business Sale reports that for the second time in its 73-year history, men's tailor and fashion house Hardy Amies has fallen into administration. The brand, with a store in London's Savile Row, previously entered administration in 2008, but was rescued in a deal soon after, Business Sale recounts. According to Business Sale, financial services firm Menzies LLP has been called in to handle the administration process, with business recovery partners Freddy Khalastchi -- fkhalastchi@menzies.co.uk -- and Jonathan Bass -- jbass@menzies.co.uk -- appointed as joint administrators. The administrators said that although the company had been trading at a loss for a long period of time, they were seeking new owners for the luxury retailer's UK operations and intellectual property rights in due course, Business Sale relates. The administrators are expecting new ownership to take on the business, and are even inviting offers from collectors and museums in the hopes that the brand's fashion archives will be taken in and put on display to the public, Business Sale discloses. JAGUAR LAND: To Cut 10% of Global Workforce After Sales Fall ------------------------------------------------------------ Alan Tovey at The Telegraph reports that Britain's biggest car maker Jaguar Land Rover is to axe thousands more jobs after being hit by falling sales in China and declining demand for diesel cars. According to The Telegraph, Chief executive Ralf Speth has announced 4,500 positions across the company's global workforce, or around 10%, will be cut, on top of the 1,500 jobs lost last year. The redundancies are part of a GBP2.5 billion cost-saving plan over the next 18 months after the company reported a GBP354 million half-year loss, The Telegraph notes. In the year to December, JLR sold just under 600,000 vehicles, a 4.6% fall on the previous year, The Telegraph relates. Sales in China tumbled 21.6%, The Telegraph discloses. In the month of December alone, sales shrank 42.4%, The Telegraph states. * UK: Ofgem Says Too Many Energy Suppliers Unsustainable -------------------------------------------------------- Jillian Ambrose at The Telegraph reports that the energy industry regulator has admitted that there are too many unsustainable energy suppliers providing gas and electricity to British homes after it encouraged a stampede of startups into the market. According to The Telegraph, the chairman of Ofgem, Martin Cave, said customers had faced a string of energy company failures, "unacceptable" pricing tactics and "shoddy customer service" as the market has grown to more than 80 suppliers. Mr. Cave told an industry conference that the "downsides" of the market's growth meant that "arguably too many suppliers have come into the market with unsustainable business models", The Telegraph relates. =============== X X X X X X X X =============== * BOOK REVIEW: Crafting Solutions for Troubled Businesses --------------------------------------------------------- Authors: Stephen J. Hopkins and S. Douglas Hopkins Publisher: Beard Books Hardcover: 316 pages List Price: US$74.95 Own your personal copy at http://www.amazon.com/exec/obidos/ASIN/1587982870/internetbankrup t Crafting Solutions for Troubled Businesses: A Disciplined Approach to Diagnosing and Confronting Management Challenges, by Stephen J. Hopkins and S. Douglas Hopkins, will change the way you think about the problems of businesses in distress. The book will be of great value to turnaround management practitioners, lenders facing loan covenant defaults, Board Members of struggling companies who need a basis for evaluating and assisting their management to realistically confront problems, and private equity firm management facing problems with portfolio companies or seeking to identify turnaround investment opportunities. ********* 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 2019. 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. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter Chapman at 215-945-7000. * * * End of Transmission * * *