/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/190123.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, January 23, 2019, Vol. 20, No. 016 Headlines B E L G I U M NYRSTAR NV: Appoints New Executive Chairman and Interim CFO H U N G A R Y TAKAREK MORTGAGE: Moody's Ups Deposit Ratings to Ba3 I T A L Y ITALY: Netherlands Blasts Italy Budget Truce, Doubts Nos. Add Up R U S S I A VSK INSURANCE: Fitch Affirms BB- Sr. Unsec. Rating, Outlook Neg. S P A I N MTN GROUP: Moody's Confirms Ba1 CFR, Outlook Negative T U R K E Y ISTANBUL TAKAS: Fitch Affirms BB LT FC IDR, Outlook Negative U N I T E D K I N G D O M CHAPELLE JEWELLERY: Calls in Duff & Phelps as Administrators DIXONS CARPHONE: Mobile Sales Continue to Fall FLYBE GROUP: Gets GBP1 Million Raise in Public Subsidies FLYBE GROUP: Largest Shareholder Threatens to Block Virgin deal HMV RETAIL: Sports Direct Tycoon in Talks to Rescue Music Chain HOUSE OF FRASER: Sales Drop 60% in Run-Up to Christmas PATISSERIE VALERIE: Lenders Fear Loans Could Be Wiped Out * Fitch Takes Action on 15 Tranches from 2 Eurosail Deals * Fitch Takes Action on 28 Tranches from 3 Eurosail Deals X X X X X X X X EUROPE: Restricts Steel Imports to Counter US Trade Policies ********* ============= B E L G I U M ============= NYRSTAR NV: Appoints New Executive Chairman and Interim CFO ----------------------------------------------------------- Neil Hume at The Financial Times reports that Nyrstar, the debt- laden metals and mining group, has announced management changes, appointing an executive chairman and an interim chief financial officer. The FT relates that the Belgian-listed company, which is working on a deal to restructure its debts, said Martyn Konig had agreed to take up the role of executive chairman, while Roman Matej had been appointed CFO, replacing Michel Abaza who has left the group. The decision to make Mr. Konig executive chairman will allow Nyrstar's chief executive Hilmar Rode to focus on the day-to-day running of the company without being distracted by the discussions over debt, the FT discloses citing people familiar with the situation. According to the FT, Nyrstar said Mr. Matej, who has been at the company for eight years, would be working closely with restructuring experts from Alvarez & Marsal on a review of the company's capital structure. Nyrstar is scrambling to restructure its debts ahead of big bond repayment due later in the year, the FT notes. Analysts think a debt-for-equity swap is inevitable, says the FT. The company's biggest shareholder is commodity trader Trafigura. About Nyrstar Headquartered in Belgium, Nyrstar N.V. is a global multi-metals business, with a market leading position in zinc and lead and growing positions in other base and precious metals, such as copper, gold and silver. As reported in the Troubled Company Reporter-Europe on Nov. 30, 2018, S&P Global Ratings said that it affirmed its 'CCC+' long- term issuer credit rating on Belgian zinc producer Nyrstar N.V. The outlook remains negative. S&P said, "At the same time, we lowered to 'CCC-' from 'CCC' our issue rating on Nyrstar's EUR500 million senior unsecured notes due 2024 and EUR340 million senior unsecured notes due 2019. We revised downward the recovery rating on these unsecured notes to '6' from '5', indicating our expectation of negligible recovery (0%-10%; rounded estimate: 5%) in the event of a payment default." The affirmation follows Nyrstar's announcement that its largest shareholder, Trafigura, has provided it with a new $650 million committed working capital facility maturing in June 2020. The affirmation reflects S&P's view that while the new facility alleviates some immediate liquidity concerns, it does not resolve them completely. For example, Nyrstar still needs to address the maturity of the EUR340 million notes in September 2019, and cannot use the $650 million facility to repay them. Nyrstar continues to work with its financial advisors on different alternatives for a more sustainable capital structure. With limited visibility on the outcome, S&P continues to see a distressed exchange offer as possible, leading to a selective default. Alternatives include extending the maturity date of the EUR340 million notes without appropriate compensation to the noteholders, or converting some of the debt to equity. Nyrstar's reported gross debt on Sept. 30, 2018, was EUR1.2 billion, or EUR1.9 billion on an S&P Global Ratings-adjusted basis. ============= H U N G A R Y ============= TAKAREK MORTGAGE: Moody's Ups Deposit Ratings to Ba3 ---------------------------------------------------- Moody's Investors Service has upgraded the long-term local and foreign-currency deposit ratings of Takarek Mortgage Bank Co. Plc. to Ba3 from B1 and changed the outlook to positive from stable. Concurrently, the rating agency has upgraded the bank's baseline credit assessment to b1 from b3, its adjusted BCA to b1 from b2 and its long-term Counterparty Risk Ratings to Ba2 from Ba3. The bank's long-term Counterparty Risk Assessment was also upgraded to Ba1(cr) from Ba2(cr). TMB's short-term Not Prime deposit ratings and CRRs and its short-term Not Prime(cr) CRA have been affirmed. The upgrade of TMB's deposit ratings with a positive outlook is driven by the rating agency's assessment (1) of the bank's anticipated financial profile following the near-term transformation of the bank into a specialized mortgage institution, firmly embedded within the Hungarian credit cooperatives sector, and (2) the sector's evolving and strengthening credit risk profile on the back of the implementation of the new strategic plan adopted by its central bank Magyar Takarekszovetkezeti Bank Zrt (TakarekBank), which will result in more uniform implementation of decision making and better managerial and risk control of the sector. RATINGS RATIONALE THE UPGRADE OF THE BCA BY TWO NOTCHES TO b1 The upgrade of TMB's BCA by two notches to b1 from b3 reflects Moody's assessment of the bank's anticipated financial profile following the near-term transformation of the bank into a specialized mortgage institution, which remains firmly embedded within the Hungarian credit cooperatives sector and directly owned by TakarekBank. According to the new strategy of the Hungarian credit cooperatives sector, TMB will transfer the assets of Takarek Commercial Bank, its subsidiary bank, to another entity within the Takarek group and continue to limit its operations solely to refinancing mortgages and issuing covered bonds. As a result of the transfer of assets, Moody's expects TMB's asset quality metrics to deteriorate at that point in time, in line with the weaker asset quality of the bank's mortgage book compared to its combined loan book. Over time, the rating agency expects Takarek Mortgage Bank's asset quality to improve, reflecting the increased volume of refinancing activity. The rating agency also expects TMB's profitability to remain weak, while its reliance on market funding will increase in line with its new operational mode. Though the consolidated profitability of TMB has improved in the first six months of 2018, the rating agency expects its profitability to be vulnerable during the early stages of the implementation of the new strategic plan. Moody's also expects the bank's reliance on market funds to increase in line with its new role. Despite these challenges, the two notches upgrade of the BCA to b1 from b3 acknowledges TMB's adequate capitalization. While the bank's capital levels, based on its consolidated financial statements, are low, a regulatory capital waiver applies and regulatory minima have to be met at the level of its parent TakarekBank with its regulatory Tier 1 ratio standing at an adequate 16.7% as of June 2018. TakarekBank is the central institution in charge of managing liquidity and solvency of all sector members and consolidates them in its financial statements. According to the law of the Integration Organization of Cooperative Credit Institutions, TakarekBank provides support to member institutions that experience capital pressures through temporary capital injections. ASSUMPTION OF FULL AFFILIATE SUPPORT REMAINS UNCHANGED The one notch upgrade of the adjusted BCA to b1 from b2 follows the upgrade of the bank's standalone BCA to b1 and incorporates unchanged full support assumptions from TakarekBank. This assessment is based on the close integration of TMB into the credit cooperatives sector and the new strategic plan under which TMB will become the sector's specialized mortgage bank. Until the new simpler organizational structure is implemented, Moody's considers that the current statutory sector support scheme provides for robust sector cohesion, benefitting TMB. Despite the rating agency's full support assumption, TMB's ratings do not benefit from uplift as a result of affiliate support based on Moody's assessment of the creditworthiness of the sector. DEPOSIT RATING UPGRADE INCORPORATES UNCHANGED RESULTS FROM ADVANCED LGF ANALYSIS AND GOVERNMENT SUPPORT ASSUMPTIONS TMB's deposit ratings were upgraded by one notch to Ba3 following the upgrade of the adjusted BCA to b1 and incorporate unchanged results from Moody's Advanced LGF analysis and one notch of rating uplift from moderate government support assumptions. Based on the high degree of integration into the sector, Moody's expects the bank to be included in the resolution perimeter of its parent TakarekBank and therefore applies the Advanced LGF analysis based on the sector's consolidated financials. The largely retail and SME deposit-based liability structure of TakarekBank results in Moody's assumption of a moderate amount of junior deposits, leading to no rating uplift for TMB's deposit ratings. Moody's maintains a moderate probability of support from the government of Hungary, which results in a one-notch of rating uplift for the bank's deposit ratings. This assessment is based on the credit cooperatives sector's significant household deposit market share of around 11% as of June 2018 and TMB's close integration into the Hungarian credit cooperatives sector. POSITIVE OUTLOOK ON DEPOSIT RATINGS The positive outlook captures Moody's expectation of an improvement in TakarekBank's credit profile following the successful implementation of the sector's restructuring which could lift TMB's adjusted BCA and consequently its long-term deposit ratings. WHAT COULD MOVE THE RATING UP/DOWN An upgrade of TMB's deposit ratings could be prompted by an upgrade of its adjusted BCA due to improvement in the credit profile of TakarekBank, and/or an increase in uplift resulting from the application of Moody's LGF analysis. TMB's deposit ratings could be downgraded owing to: (1) a downgrade of its BCA and adjusted BCA due to a lower assumption of affiliate support or a weaker assessment of the cooperative sector's creditworthiness, (2) significant changes in the bank's liability structure reducing the loss absorption buffer for depositors, or (3) a reduced assumption of government support. TMB's BCA could be downgraded if: (1) the deterioration in its asset quality is more material than the rating agency's current projection, its profitability challenges persist over time and/or TakarekBank's capital buffers decline materially. LIST OF AFFECTED RATINGS Issuer: Takarek Mortgage Bank Co. Plc. Upgrades: Long-term Counterparty Risk Ratings, upgraded to Ba2 from Ba3 Long-term Bank Deposits, upgraded to Ba3 Positive from B1 Stable Long-term Counterparty Risk Assessment, upgraded to Ba1(cr) from Ba2(cr) Baseline Credit Assessment, upgraded to b1 from b3 Adjusted Baseline Credit Assessment, upgraded to b1 from b2 Affirmations: Short-term Counterparty Risk Ratings, affirmed NP Short-term Bank Deposits, affirmed NP Short-term Counterparty Risk Assessment, affirmed NP(cr) Outlook Action: Outlook changed to Positive from Stable PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Banks published in August 2018. ========= I T A L Y ========= ITALY: Netherlands Blasts Italy Budget Truce, Doubts Nos. Add Up ---------------------------------------------------------------- Nikos Chrysoloras and John Hermse at Bloomberg News report that Dutch Finance Minister Wopke Hoekstra lashed out at the European Commission's truce with Italy over Rome's spending plans, in comments highlighting continuing discomfort within the euro area about the Italian budget. "It's a missed opportunity to do the right thing for the long run," Mr. Hoekstra said told Bloomberg News in an interview from Brussels. He made the comments after a meeting with his counterparts from the currency bloc in which he asked the commission to explain "in writing" how numbers add up in the compromise which was reached last month, Bloomberg News notes. The European Union's executive arm decided against launching a disciplinary procedure against Italy over its deficit and debt in December, after the country's populist government pledged to rein in some of its spending, Bloomberg News relays. Italian assets rebounded on the deal, as the protracted standoff had previously triggered a sell-off, damping economic activity and possibly tipping Europe's most indebted state into recession, Bloomberg News says. Brussels and Rome met each other half way for the compromise to be reached, as Italian populists held off on their most ambitious plans, while the commission turned a blind eye to Italy's failure to comply with the obligation to lower its structural deficit this year -- which excludes one-off expenditures and the effects of the economic cycle, Bloomberg News discloses. 'Unconvincing' Compromise "In my mind this was unconvincing by the commission side," Bloomberg News quoted Mr. Hoekstra as saying. "Important questions remain," he added, asking the commission to apply the bloc's rules "in full to everyone involved," he added. EU rules require countries with high debt levels to reduce their loads each year, Bloomberg News relays. "The rules are not there because I like them or whoever likes them; the rules are there because they are in the long-term interest of the European people and European countries," Mr. Hoekstra said, Bloomberg News notes. The commission's credibility in enforcing its fiscal rules has already been scrutinized in the past after the guardian of EU treaties opted against fining repeat-offenders Spain and Portugal and gave France more time to meet its targets on multiple occasions, Bloomberg News relays. In the meeting of EU finance ministers, however, the Dutch push to cast doubt over the Italian truce didn't garner explicit support from other countries, wary of reigniting debt-crisis era tensions, according to people familiar with the matter, Bloomberg News notes. Italy's Slowing Economy Adds Pressure on Populists Over Budget Pierre Moscovici, the EU commissioner in charge of economic and financial affairs, said that while negotiations with Italy hadn't been easy, not avoiding the crisis would have been "stupid for Italy as well as the euro zone," Bloomberg News says. "We are of course still monitoring the situation very closely," Moscovici told reporters after the meeting, Bloomberg News relays. "We're going to look very closely to the stability program delivered in April by Italy because we still have concerns not only about 2019 but also 2020 and 2021." Mr. Moscovici said he would "provide any detail to whoever asks for it" on the compromise over Italy, Bloomberg News relays. "Another way of proceeding would have led us to a crisis between Italy and the euro zone, which would have been bad for Italy, bad for the euro zone," he told reporters in Brussels. In the meantime, Italy's populist government is facing renewed criticism of its economic policies at home after the Bank of Italy signaled that the country may have slipped into a recession in 2018 and will have slower than forecast economic growth this year and next, Bloomberg News notes. A slowdown would make it difficult for Italy to keep its promise to the EU of containing the deficit, Bloomberg News adds. =========== R U S S I A =========== VSK INSURANCE: Fitch Affirms BB- Sr. Unsec. Rating, Outlook Neg. ---------------------------------------------------------------- Fitch Ratings has affirmed Russia-based VSK Insurance Joint Stock Company's Insurer Financial Strength Rating and senior unsecured rating at 'BB-'. The Outlook is Negative. All ratings have been removed from Rating Watch Negative, where they were placed on July 12, 2018. KEY RATING DRIVERS The removal from RWN reflects Fitch's view that the regulatory compliance risk related to Urban Group case has been eliminated for VSK. The Negative Outlook reflects VSK's significant outstanding exposure to surety business as this could again cause a deficit in the regulatory prudential metrics. The deficit should be manageable but would require potentially expensive short-term funding for VSK. The affirmation reflects VSK's strong operating profitability and weak risk-adjusted capital position. Like other Russian insurers, VSK establishes two parallel sets of technical reserves. The first is based on the inflexible regulatory methodology and is used for a number of prudential metrics. The second is set based on the actuarial best estimate and is used for financial reporting, both consolidated and standalone. The difference between the two reserving estimates is dramatic for the surety insurance, as the Central Bank of Russia (CBR) has required establishing surety regulatory claims case reserves at 100% of the sum insured. Based on the regulatory methodology, VSK estimated Urban Group's loss reserves at RUB9.6 billion on a gross basis and RUB7.2 billion on a net basis at end-2018. Initially, the setup of this reserve in July 2018 triggered a deficit in the regulatory coverage of technical reserves by certain classes of assets. To mitigate regulatory risks throughout 2H18, VSK withdrew RUB1.2 billion of dividends from its subsidiary Insurance Company Interi and attracted RUB2 billion of interest-free financing from its 49%-minority owner, PJSC Safmar Financial Investments, in July 2018. This financing was repaid in October 2018, when VSK managed to establish some cushion in its asset coverage metrics. This cushion was achieved due to improved operating cash flow after a 15% growth in gross written premiums (GWP) in 9M18 from 9M17. However, Fitch notes that this growth was accompanied by notable growth in the commission ratio to 35% from 27%. Additionally, in 3Q18, VSK acquired non-proportional reinsurance protection for its motor damage portfolio, which accounted for 25% of non-consolidated GWP in 9M18. It reduced the volume of net technical reserves eligible for asset coverage calculation. At present, VSK is comfortably compliant with the prudential asset coverage metrics, even with full Urban Group's reserve used in the formula. VSK's regulatory solvency margin was a comfortable 155% at end-9M18. Based on new clarifications from CBR, VSK now expects to be able to align the regulatory and actuarial reserves in 2Q19. Based on the best estimate actuarial approach, VSK estimated Urban Group's loss reserve at much lower RUB1.7 billion on a gross basis and RUB1.4 billion on a net basis at end-2018. Given RUB0.6 billion claims paid in 2H18, VSK therefore expects to record the incurred loss of Urban Group's case at RUB2.3 billion on a gross basis and RUB2.0 billion on a net basis in its 2018 reporting. The insurer expects that the loss will not prevent it achieving its RUB8.8 billion target for consolidated net profit in 2018. Fitch believes that the rapid business growth in 2H18 could have some moderately negative consequences for future underwriting results, but views the risks of VSK's capital depletion as low due to Urban Group's case. VSK continues to carry a few major concentrations to other groups of contractors, where a group is defined as contractors owned by the same beneficiaries. A bankruptcy of any of these groups could result in VSK having to set up regulatory reserves significantly exceeding those established for Urban Group, and the company facing a deficit in admissible assets from the point of view of the prudential regulation. However, as estimated by VSK at mid- December 2018, such bankruptcy would be unlikely to hit the insurer's IFRS-based capital. VSK believes it would be able to reduce the volume of net technical reserves to be covered by admissible assets through the purchase of extensive non-proportional reinsurance both for surety risks and the core portfolio. VSK also believes that some support could be provided by the shareholders on the asset side as it was done for Urban Group case in July 2018. The best estimate reserve for these top three exposures, as in Urban Group's case, is estimated by VSK at a much lower level of RUB1.7 billion, RUB1.1 billion and RUB0.5 billion. Each of the three exposures are unlikely to hit VSK's RUB25.7 billion consolidated capital (as at end-9M18), given RUB6.7 billion consolidated unaudited net profit in 9M18 and a track record of sound operating performance. However, Fitch notes that VSK's best estimate relies on the expectation that municipal funding would again be provided for construction projects with high completion rates, as in Urban Group's case. Fitch understands that it is unlikely that VSK could terminate the existing surety coverage prematurely unless there is any change in the regulatory environment. Fitch placed the ratings on RWN on July 12, 2018. The rating action followed a new requirement from July 10, 2018 by the CBR to establish claims case reserves at 100% of the total sum insured for surety insurance in residential construction. As a result, VSK had to establish claims case reserve for the surety policies covering Urban Group's developers in the gross amount of RUB9.8 billion (slightly revised from RUB9.7 billion) as of July 9, 2018, when the arbitration court of Moscow region adjudged the developers bankrupt. RATING SENSITIVITIES VSK's ratings could be downgraded if the insurer is impacted by any further major surety claims. The ratings could also be downgraded if VSK faces a sharp deterioration in its operating profitability with the combined ratio deteriorating to 105% or higher on a sustained basis or if VSK's capital strength, as assessed by Fitch, weakens significantly. The Outlook could be revised to Stable if VSK's outstanding exposure to surety risks reduced, eliminating any potential risk of non-compliance with prudential metrics. FULL LIST OF RATING ACTIONS -- IFS Rating affirmed at 'BB-', off RWN; Outlook Negative -- Long-Term Issuer Default Rating affirmed at 'BB-', off RWN; Outlook Negative -- Senior unsecured long-term rating affirmed at 'BB-', off RWN ========= S P A I N ========= MTN GROUP: Moody's Confirms Ba1 CFR, Outlook Negative ----------------------------------------------------- Moody's Investors Service has confirmed MTN Group Limited's Ba1 corporate family rating, Ba1-PD probability of default rating and the Aa3.za national scale corporate family rating. Moody's has also confirmed the Ba1 rating on all the senior unsecured notes issued by MTN Investments Limited. The rating outlook is negative. This action follows MTN's announcement on December 24, 2018 that MTN Nigeria's regulatory dispute with the Central Bank of Nigeria has reached an equitable resolution. This rating action concludes the review for downgrade initiated on September 6, 2018. RATINGS RATIONALE Moody's has confirmed MTN Group's Ba1 ratings following MTN's announcement that it has reached a settlement with respect to allegations by the CBN on MTN Nigeria's improper repatriation of $8.1 billion between 2007 and 2015. The resolution involves MTN Nigeria paying $52.6 million to CBN without admission of liability and CBN regularizing all disputed Certificates of Capital Importation. This settlement removes uncertainty and substantially reduces the downside risk to MTN's credit profile. There are no other conditions attached to the settlement and the $52.6 million has been paid by MTN Nigeria's internal cash sources. Moody's understands that MTN Nigeria has had no other adverse impact either financially or operationally from recent events. A degree of event risk however still remains, since the $2 billion tax dispute with the Nigerian Attorney General is outstanding. MTN Nigeria's internal assessment is that it has paid $700 million in taxes over the disputed period and that there is no shortfall in payments. A court hearing is scheduled for February 7, 2019 in the Nigeria High Court. Recent developments indicate heightened regulatory risk in Nigeria (B2 stable) for MTN, which is a key market for the Group and contributing one-third of group EBITDA for the last 12 months (LTM) ending June 30, 2018. The negative outlook reflects that downside risks may persist over the near time. This is exacerbated by limited visibility into the institutional decision-making in Nigeria that has led to recent allegations against MTN. There is uncertainty around the timing for any resolution related with the NAG matter, and general elections in Nigeria slated for February 16, 2019 and a transition to potentially a new government may create delays to a resolution. MTN currently has sufficient liquidity to repay approaching debt maturities over the next 12 to 18 months with the next sizable refinancing wall only in 2021. There is also sufficient covenant headroom under its revolving credit facilities, with the tightest being leverage ratio covenant (consolidated total net borrowings/adjusted consolidated EBITDA) at 1.6x as of June 30, 2018 compared to a threshold of 2.5x. Moody's adjusted consolidated debt/EBITDA stood at 3.0x as of June 30, 2018 (LTM) and is forecasted to be 2.8x for 2018YE. NEGATIVE OUTLOOK The negative outlook reflects Moody's view that MTN is currently exposed to heightened regulatory event risks in Nigeria. There is uncertainty around whether this is a temporary situation or a more permanent part of the domestic operating environment. Moody's guidance for a rating downgrade includes consolidated debt/EBITDA trending towards the 3.5x level, which Moody's forecasts will unlikely be reached even in a scenario where MTN Nigeria is required to pay a substantial amount as part of the tax dispute. Nevertheless, such an event could signal a higher degree of regulatory risk in Nigeria than what is currently incorporated in the Ba1 rating. Moody's will continue to monitor developments in Nigeria, which will shape its view on the ratings. WHAT COULD CHANGE THE RATING UP / DOWN In the absence of improving sovereign ratings within the major markets in which MTN operates (such as South Africa, Nigeria and Ghana), MTN's ratings are unlikely to be upgraded to Baa3. However, Moody's would consider an upgrade if MTN re-establishes a track record of dividends being up-streamed from key markets such that total debt to EBITDA on a consolidated or at MTN Holdings level were to trend towards 1.5x and MTN's consolidated EBITDA margin was on an improving trend. MTN Holdings is the holding company under MTN Group which directly or indirectly is the shareholder of all of MTN's operating companies. The ratings could be downgraded following (1) lower up-streaming of hard-currency dividends or cash flows from MTN's non-South African operations which might result in higher leverage and weaker liquidity developing over time at the MTN Holdings level; or (2) weakening of sovereign ratings or greater degree of regulatory risk in key markets. Quantitatively, downward pressure would arise if MTN's consolidated EBITDA margin was sustained below 35% and/or total debt to EBITDA on a consolidated basis or in MTN Nigeria or MTN South Africa or at MTN Holdings level were to trend towards 3.5x. LIST OF AFFECTED RATINGS Confirmations: Issuer: MTN Group Limited Probability of Default Rating, Confirmed at Ba1-PD Corporate Family Rating, Confirmed at Ba1 NSR Corporate Family Rating, Confirmed at Aa3.za Issuer: MTN (Mauritius) Investments Limited BACKED Senior Unsecured Regular Bond/Debenture, Confirmed at Ba1 Outlook Actions: Issuer: MTN Group Limited Outlook, Changed To Negative From Rating Under Review Issuer: MTN (Mauritius) Investments Limited Outlook, Changed To Negative From Rating Under Review The principal methodology used in these ratings was Telecommunications Service Providers published in January 2017. =========== T U R K E Y =========== ISTANBUL TAKAS: Fitch Affirms BB LT FC IDR, Outlook Negative ------------------------------------------------------------ Fitch Ratings has affirmed Istanbul Takas ve Saklama Bankasi A.S.'s Long-Term Foreign-Currency Issuer Default Rating at 'BB' with a Negative Outlook. KEY RATING DRIVERS IDRs, SUPPORT RATING, SUPPORT RATING FLOOR AND NATIONAL RATING Takasbank's Support Rating Floor, which underpins the bank's LTFC IDR, is aligned with the sovereign's LTFC IDR. The bank's Long- Term Local-Currency IDR of 'BB+' is also aligned with that of the sovereign, reflecting its support expectations and Turkey's ability to provide support in local currency. Takasbank's Support Rating of '3' and SRF of 'BB' reflect its view of a moderate probability of support from the Turkish sovereign in case of need. In its opinion, Takasbank has exceptionally high systemic importance for the Turkish financial sector and contagion risk from its default would be considerable given its inter-connectedness with the wider Turkish financial sector. The state's ability to provide extraordinary FC support to the banking sector, if required, may be constrained by limited central bank reserves (net of placements from banks) and the banking sector's sizable external debt. However, in its view, Takasbank's FC support needs, even in quite extreme scenarios should be manageable for the sovereign given Takasbank's business model, short-term and largely matched balance sheet as well as the bank's acceptable liquidity position. The affirmation of Takasbank's National Rating reflects Fitch's view of unlikely material weakening in the ability or propensity of the authorities to support the bank in local currency, resulting in unchanged creditworthiness relative to other domestic issuers. VR The VR of Takasbank, which is at the same level as the VRs of most large commercial Turkish banks, is underpinned its dominant franchise as the country's only clearing house, sound counterparty risk management, limited direct credit risk in its central clearing counterparty (CCP) activities (due to the availability of adequate default management resources), as well as by acceptable capitalisation, funding and liquidity profile. The VR also reflects considerable concentration risk in its CCP activities and incremental credit risk appetite in its non-CCP activities, notably its extensive treasury activities with Turkish counterparties. At end-3Q18, Takasbank's Tier 1 ratio reached 17.7% (from 15% at end-2017), supported by strong retained profits. Profitability remained sound, reflected in an operating profit/average equity ratio of 39%, primarily driven by higher treasury revenue, and to a lesser extent, increasing CCP revenue. Takasbank is Turkey's only CCP institution and is majority-owned by Borsa Istanbul, Turkey's main stock exchange. Borsa Istanbul in turn is majority-owned by the Turkish government (via the Turkish Wealth Fund). Takasbank operates under a limited banking licence, and is regulated by three Turkish regulatory bodies: the Central Bank of Turkey, the Banking Regulation and Supervision Agency and the Capital Markets Board. RATING SENSITIVITIES IDRs, SUPPORT RATING, SRF AND NATIONAL RATING Rating actions on Turkey's sovereign ratings are likely to be mirrored in Takasbank's ratings given the strong correlation of the bank's credit profile with sovereign, country and banking sector risks. Additionally, an indication that resources, in particular in FC, required to support Takasbank in a stress scenario are materially larger than currently estimated by Fitch, for instance as a result of a higher risk appetite in FC treasury activities, could put pressure on Takasbank's SRF and LTFC IDR. VR Takasbank's VR is primarily sensitive to further deterioration in the credit quality of the bank's counterparties or a further worsening of the domestic operating environment. In addition, Takasbank's VR remains sensitive to a material operational loss, or a materially increased risk appetite, for example, by growing rapidly in untested asset classes. Increasing risk appetite in the bank's treasury activities, particularly to lower credit-quality counterparties could also be rating-negative as would be a decrease of the regulatory total capital ratio below 12% (before any potential forbearance). The rating actions are as follows: Long-Term Foreign-Currency IDR: affirmed at 'BB'; Outlook Negative Short-Term Foreign-Currency IDR: affirmed at 'B' Long-Term Local-Currency IDR: affirmed at 'BB+'; Outlook Negative Short-Term Local-Currency IDR: affirmed at 'B' Viability Rating: affirmed at 'b+' Support Rating: affirmed at '3' Support Rating Floor: affirmed at 'BB' National Long-Term Rating: affirmed at 'AAA(tur)'; Outlook Stable ========================== U N I T E D K I N G D O M ========================== CHAPELLE JEWELLERY: Calls in Duff & Phelps as Administrators ------------------------------------------------------------ Business-Sale.com reports that Chapelle Jewellery & Watches has fallen into administration. Chapelle Jewellery, which has humble beginnings as a family-run business established almost 40 years ago, was forced to call in professional services company Duff & Phelps Ltd to handle the administration process, with partners Philip Duffy -- philip.duffy@duffandphelps.com -- and Sarah Bell -- sarah.bell@duffandphelps.com -- appointed as joint administrators, Business-Sale.com discloses. Business-Sale.com relates that Director of Duff & Phelps, Jim Saunders, commented on the administration stating that: "Whilst the current management team has spent the last two years working hard to enhance the store estate, brand proposition and driving significant operational efficiencies, economic uncertainty continues to weigh heavily on consume confidence. "In addition, retailers face rising business rates, national minimum wage increases and a paradigm shift in the retail landscape. "This has impacted most retailers and as a result of trading losses, Chapelle could no longer meet its ongoing liabilities." According to Business-Sale.com, the administrators were appointed for both Mortimer Management Group Limited and The Jewellery Outlet Limited, which together trade under the Chapelle name. In 2015, the company was sold to investment firm Hilco UK, which until recently owned HMV which also entered administration late last year, Business-Sale.com recounts. Business-Sale.com says the company ran 24 stores across the United Kingdom but was forced to shut three down due to the currently "extremely challenging" climate in the retail sector. Despite the negative landscape, the company has reported a turnover of more than GBP24 million and will continue to trade until a buyer is sought. Business-Sale.com adds that Chapelle's founders, Paul and Margaret Mortimer, commented on the situation, saying: "Chapelle was the leader in its field when we sold it in 2015. It could certainly still be profitable and successful again and we sincerely hope that a retail focused buyer can be found." Chapelle Jewellery & Watches is a Nottingham-based jewellery and watches company. DIXONS CARPHONE: Mobile Sales Continue to Fall ---------------------------------------------- BBC News reports that Dixons Carphone has reported a fall in mobile phone sales over the Christmas trading period, as fewer people signed up to two-year contracts. The electrical goods retailer said sales of mobiles were down 7% in the 10 weeks to 5 January, according to BBC News. The news reflects a growing trend in the phones market after Apple cut its sales forecast earlier this month, the report notes. However, Dixons had better fortune in other areas, with strong sales of smart tech, supersize TVs and in gaming, the report relays. 'Nasty Conditions' Laith Khalaf, a senior analyst at Hargreaves Lansdown, said: "It's easy to attribute Carphone's woes to the parlous state of the UK High Street, but while that's certainly not a helpful backdrop, it's actually dynamics in the mobile phone market which are doing the damage right now. "Consumers aren't switching phones as often as they used to, choosing instead to hang on to their old handsets and take out less profitable sim-only contracts," the report says. Overall, the company's like-for-like revenues were up 1%, the report discloses. "In pretty nasty conditions, these latest numbers from Dixons Carphone are as good as could be hoped," Mr. Khalaf added, the report relays. BBC News says that while mobile sales continued to slide, Dixons enjoyed a jump in sales of "supersize" TVs, which it defines as 65in and above. Sales of that size increased by 70%, while the company sold three times the amount of 75in sets over the peak period from a year earlier. Sales in gaming -- which covers several different elements, including computers, consoles, virtual reality and live gaming areas -- jumped by 60%. The company has opened 17 gaming areas in its shops and plans to have 140 by next year, the report notes. Dixons chief executive Alex Baldock said: "Peak trading was solid and in line with expectations, producing record sales against a tough backdrop, the report relays. "In UK mobile, performance was as expected and overall, our peak trading was disciplined and well-executed, with stable gross margins. "In UK electricals we grew sales, despite a challenging backdrop and a declining market," the report relays. The company added that its full-year profit guidance of GDP300 million was unchanged and that international like-for-like sales rose by 5%, with especially strong figures in Sweden, Denmark and Greece, the report relays. Julie Palmer, partner at business consultancy Begbies Traynor, said: "Dixons Carphone will breathe a sigh of relief as it avoided becoming the latest retailer to suffer from a poor Christmas trading performance, as the harsh economic winter has affected the sector, the report notes. "Yet, the firm's sales grew by only 1% as lower customer footfall and increased competition, particularly online, have taken their toll," she added. Last May, the company announced plans to close 92 of its 700 stores, the report points out. FLYBE GROUP: Gets GBP1 Million Raise in Public Subsidies -------------------------------------------------------- Josh Spero at The Financial Times reports that troubled UK regional airline Flybe was given an increase of GBP1 million in public subsidies by ministers and local authority officials as it struggled to stay afloat because of poor results and large debts. According to the FT, the government allowed the airline to switch a flight route from Gatwick airport to Heathrow, where it could offer more services by using its existing landing slots at London's main international hub. Both the Department for Transport and the airline said the decision was made to benefit passengers because the carrier could offer more frequent flights at a bigger airport with better long- haul connections, the FT relays. The FT relates that the move, which was announced in November, led to a higher subsidy because of the increased flight frequency at a more expensive airport. It also freed up valuable flight slots at Gatwick, which Flybe subsequently sold as part of its efforts to raise cash. The carrier no longer has any slots at Gatwick, the report says. As well as the slots, it has also sold and leased back a hangar at its Exeter headquarters for GBP5 million and released $5 million secured against one of its aircraft, the FT notes. The airline was sold to a consortium including Virgin Atlantic, which valued the company's equity at GBP2.2 million, in January, the FT recalls. The consortium injected GBP10 million as a bridge loan to help the company's capital position. However, the sale has upset at least one large shareholder, the FT says. According to the FT, Hosking Partners, which owns 19 per cent of Flybe, has sent a letter to the board threatening a legal challenge, saying the sale undervalued the company. The letter was first reported by Sky News, the FT notes. The FT relates that Flybe said it had been "faced with a very tough decision based on Flybe's current difficult liquidity position and the expectation that this pressure will Continue . . . Flybe will be responding directly to letters received from shareholders." The FT says Flybe had operated three daily services from Newquay in Cornwall to Gatwick, south of London, from October 2014 under what is called a public service obligation, which supports uncommercial air routes with state subsidies. The contract is with Cornwall council but the Department for Transport has to sign off on the agreement and the subsidy level, the report relates. The FT notes that in October, the government and Cornwall council announced that Flybe would continue the Newquay to Gatwick route for another four years, with a maximum GBP2.4 million subsidy split equally between government and council. But less than two months later in November, transport secretary Chris Grayling said the route would run from Newquay to Heathrow four times daily from April 2019 instead, with Flybe receiving up to GBP3.4 million in subsidy, an increase of GBP960,000, according to the FT. Flybe had put in two bids for the route -- one for Newquay to Gatwick only and for Newquay to Gatwick, which could become Newquay to Heathrow if Flybe could repurpose its slots at the latter, the FT adds. About Flybe Flybe Group PLC Flybe Group plc -- https://www.flybe.com/ -- operates regional airline in Europe. The Company operates in two segments: Flybe UK, which comprises the Company's main scheduled United Kingdom domestic and the United Kingdom-Europe passenger operations and revenue ancillary to the provision of those services, and Flybe Aviation Services (FAS), which focuses on providing aviation services to customers, largely in Western Europe. The FAS supports Flybe's United Kingdom activities, as well as serving third-party customers. FLYBE GROUP: Largest Shareholder Threatens to Block Virgin deal --------------------------------------------------------------- Jack Torrance at The Telegraph reports that Flybe's largest shareholder is threatening legal action to block a Virgin Atlantic-led takeover of the airline after reportedly accusing its bosses of neglecting their duty as directors. The Telegraph relates that Hosking Partners, a London-based asset manager that owns almost a fifth of Flybe's shares, has written to its board and City watchdogs to complain about the cut price GBP2.2 million deal announced earlier this month. The offer from Connect Airways, a consortium including Virgin Atlantic, Southend Airport-owner Stobart Group and investment firm Cyrus Capital Partners, came at a major discount to the 16p the shares closed at the previous day, according to The Telegraph. Bosses said it was a necessary move to help combat the company's financial woes, The Telegraph notes. About Flybe Flybe Group PLC Flybe Group plc -- https://www.flybe.com/ -- operates regional airline in Europe. The Company operates in two segments: Flybe UK, which comprises the Company's main scheduled United Kingdom domestic and the United Kingdom-Europe passenger operations and revenue ancillary to the provision of those services, and Flybe Aviation Services (FAS), which focuses on providing aviation services to customers, largely in Western Europe. The FAS supports Flybe's United Kingdom activities, as well as serving third-party customers. HMV RETAIL: Sports Direct Tycoon in Talks to Rescue Music Chain --------------------------------------------------------------- Lucy Burton at The Telegraph reports that retail tycoon Mike Ashley is hoping to further his grip on the UK's battered high street by weighing up a rescue of Britain's 97-year-old music chain HMV. According to The Telegraph, Sky News reported that the Sports Direct founder, who has recently snapped up House of Fraser as well as the remnants of Evans Cycles, has held "serious" talks with key executives about buying the business out of administration. The discussions have taken place over the last fortnight, The Telegraph notes. As reported in the Troubled Company Reporter-Europe on Jan. 2, 2019, Reuters said music retailer HMV said on Dec. 28 it was calling in the administrators, blaming a worsening market for entertainment CDs and DVDs, to become the latest victim of brutal trading conditions in Britain's retail sector. According to Reuters, HMV said in a statement the accounting firm KPMG has been named as the administrator and intends to keep the business running while it seeks a potential buyer. KPMG said in a statement on Dec. 28 Will Wright, Neil Gostelow and David Pike from its Restructuring practice have been confirmed as joint administrators to HMV Retail Limited and HMV Ecommerce Limited. HOUSE OF FRASER: Sales Drop 60% in Run-Up to Christmas ------------------------------------------------------ Ashley Armstrong and Jack Torrance at The Telegraph report that Mike Ashley's hopes of turning House of Fraser into the "Harrods of the high street" have been dealt an early blow as sales at the struggling department store crashed in the run-up to Christmas. Sales at the department store have tumbled by 60pc over the 12 weeks to 18 December, according to figures by Kantar Worldpanel, seen by The Telegraph. Last month Mr. Ashley said that November had been "unbelievably bad" with retailers being "smashed to pieces," The Telegraph recalls. The retail tycoon bought the department store for GBP90 million out of administration last August and has since been battling with landlords for rent-free agreements in order to keep the shops open, The Telegraph states. PATISSERIE VALERIE: Lenders Fear Loans Could Be Wiped Out --------------------------------------------------------- Oliver Gill at The Financial Times reports that lenders to Patisserie Valerie fear multimillion-pound loans will be almost completely wiped out by the potential collapse of Luke Johnson's troubled bakery chain. The Daily Telegraph has learned that HSBC and Barclays have no security over Patisserie Valerie's assets, meaning that if is forced into insolvency by an accounting scandal, loans of almost GBP10 million will rank no higher than suppliers and other creditors. It comes as a fresh twist in a shocking saga dating back to October when the company revealed that "potentially fraudulent, accounting irregularities" had opened up a GBP40 million cash hole, The Telegraph says. Patisserie Valerie -- https://www.patisserie-valerie.co.uk/ -- operates a chain of cafes in the United Kingdom. The chain specialises in hand-made cakes, and its menu includes continental breakfasts, lunches and teas and coffees. * Fitch Takes Action on 15 Tranches from 2 Eurosail Deals --------------------------------------------------------- Fitch Ratings has upgraded two and affirmed 13 tranches of Eurosail Prime-UK 2007-A PLC, Eurosail-UK 2007-5 NP Plc and Eurosail-UK 2007-6 NC Plc. The transactions comprise non-conforming UK mortgage loans originated by Southern Pacific Mortgage Limited, Preferred Mortgages Limited (formerly wholly-owned subsidiaries of Lehman Brothers) and Alliance and Leicester limited. Fitch has upgraded the following classes: Issuer: Eurosail-UK 2007-6 NC Plc - Class A3a XS0332285971 to Asf from BBB+sf; Outlook Stable - Class B1a XS0332286862 to BBBsf from BB+sf; Outlook Stable Fitch has also affirmed the following classes: Issuer: Eurosail Prime-UK 2007-A PLC - Class A1 XS0328494157 at AAAsf; Outlook Stable - Class A2 (restructured) XS1074651628 at AAAsf; Outlook Stable - Class B (restructured) XS1074654481 at A+sf; Outlook Stable - Class C (restructured) XS1074654648 at BBsf; Outlook Stable - Class M (restructured) XS1074652782 at A+sf; Outlook Stable Issuer: Eurosail-UK 2007-5 NP Plc - Class A1a XS0328024608 at BBsf; Outlook Stable - Class A1c XS0328025241 at BBsf; Outlook Stable - Class B1c XS0328025324 at Bsf; Outlook Stable - Class C1c XS0328025597 at CCCsf Issuer: Eurosail-UK 2007-6 NC Plc - Class A2a XS0332285039 at AAAsf; Outlook Stable - Class C1a XS0332287084 at BBsf; Outlook Stable - Class D1a XS0332287597 at CCCSf KEY RATING DRIVERS Credit Enhancement (CE) Build-up Using both its surveillance and cash flow models, Fitch has concluded the current levels of credit enhancement (CE) are sufficient to withstand the rating stresses. At end-December 2018, CE for the class A notes of ES07A and ES0705 remained stable at 33% and 12% over the last 12 months, respectively. CEfor the class A notes for ES0706 increased over the last 12 months to 99.3% from 91%. Fitch expects CE to remain stable as the transactions amortise on a pro-rata basis, and also because their amortising reserve funds are currently at their target for ES07A and ES0705. CE build-up may be limited for ES0706 if the transaction switches to pro-rata amortisation. Overall this has resulted in two upgrades and 13 affirmations across the three transactions. Stable Asset Performance Loans that are three months or more in arrears have shown steady improvement post-global financial crisis. This measure has remained stable between December 2017 and December 2018, averaging around 1% for ES07A, 9% for ES0705 and 18% for ES0706, of their respective pool balances. The stronger performance observed for ES07A, in Fitch's opinion, can be attributed to the pool containing borrowers with limited adverse credit history at loan origination. The servicer reports the balance of loans in arrears in terms of loans with overdue monthly contractual payments, referred to as delinquencies, and loans with overdue monthly contractual payments and/or outstanding fees or other amounts due, known as amounts outstanding. Fitch has used the balances of loans reported with delinquencies in its analysis. Pro-Rata Amortisation Fitch expects ES07A and ES0705 to continue amortising on a pro- rata basis. ES0706 will be able to switch to pro-rata amortisation from sequential amortisation once the class A2 notes are fully redeemed (which is expected within the next two payment dates); however, amortisation may remain sequential as the delinquency trigger is close to being breached. Interest Only (IO) Concentration Tested The transactions have a material concentration of IO loans maturing within a three-year period during the lifetime of the transactions. For ES07A, 43% mature between 2030 and 2032; for ES0705 33% mature between 2030 and 2032 and for ES0706 32% mature between 2030 and 2032. As per its criteria, Fitch tested additional foreclosure frequency assumptions for the IO loans with maturities concentrated in a three-year period. The results of the additional foreclosure frequency assumption testing have not constrained the notes' ratings. RATING SENSITIVITIES Fitch is of the opinion that the prolonged low interest rate environment has supported borrower affordability. An increase in interest rates causing a payment shock could lead to a worsening of asset performance beyond Fitch's expectations, potentially leading to downgrades of the note ratings. There are a small number of owner-occupied IOloans that have failed to make their bullet payments at note maturity. The servicer has informed Fitch that alternative payment plans with these borrowers are currently being implemented. If this trend grows to a significant number, Fitch may apply more conservative assumptions in its asset and cash flow analysis. * Fitch Takes Action on 28 Tranches from 3 Eurosail Deals --------------------------------------------------------- Fitch Ratings has upgraded 19 and affirmed nine tranches of Eurosail 2006-4NP Plc, Eurosail-UK 2007-1 NC Plc and Eurosail-UK 2007-2 NP Plc. The transactions comprise non-conforming UK mortgage loans originated by Southern Pacific Mortgage Limited, Preferred Mortgages Limited (formerly wholly-owned subsidiaries of Lehman Brothers) and GMAC-RFC limited. Fitch has upgraded the following tranches: Issuer: Eurosail 2006-4NP Plc - Class B1a XS0274201507 to AAAsf from A+sf; Outlook Stable - Class C1a XS0274203891 to A+sf from BBB+sf; Outlook Stable - Class C1c XS0274213692 to A+sf from BBB+sf; Outlook Stable - Class D1a XS0274204196 to BB+sf from B+sf; Outlook Stable - Class D1c XS0274214310 to BB+sf from B+sf; Outlook Stable Issuer: Eurosail-UK 2007-1 NC Plc - Class A3a XS0284931853 to AAAsf from AA+sf; Outlook Stable - Class A3c 298800AJ2 to AAAsf from AA+sf; Outlook Stable - Class B1a XS0284932315 to A+sf from BBB+sf; Outlook Stable - Class B1c XS0284947263 to A+sf from BBB+sf; Outlook Stable - Class C1a XS0284933719 to BBBsf from BBB-sf; Outlook Stable - Class D1a XS0284935094 to BB+sf from B+sf; Outlook Stable - Class D1c XS0284950994 to BB+sf from B+sf; Outlook Stable - Class E1c XS0284956330 to B+sf from CCCsf; Outlook Stable Issuer: Eurosail-UK 2007-2 NP Plc - Class B1a XS0291433158 to AA-sf from Asf; Outlook Stable - Class B1c XS0291434123 to AA-sf from Asf; Outlook Stable - Class C1a XS0291436250 to A-sf from BBBsf; Outlook Stable - Class D1a XS0291441417 to B+sf from CCCsf; Outlook Stable - Class D1c XS0291442498 to B+sf from CCCsf; Outlook Stable - Class E1c XS0291443892 to CCCsf from CCsf Fitch has also affirmed the following tranches: Issuer: Eurosail 2006-4NP Plc - Class A3a XS0275909934 at AAAsf; Outook Stable - Class A3c XS0275917796 at AAAsf; Outlook Stable - Class E1c 29880JAX0 at CCCsf - Class M1a XS0275920071 at AAAsf; Outlook Stable - Class M1c XS0275921715 at AAAsf; Outlook Stable Issuer: Eurosail-UK 2007-2 NP Plc - Class A3a XS0291422623 at AAAsf; Outlook Stable - Class A3c XS0291423605 at AAASf; Outlook Stable - Class M1a XS0291424165 at AAAsf; Outlook Stable - Class M1c XS0291426889 at AAAsf; Outlook Stable KEY RATING DRIVERS Credit Enhancement (CE) Build-up Using both its surveillance and cash flow models, Fitch has concluded the current levels of credit enhancement (CE) are sufficient to withstand the rating stresses. At end-December 2018, CE for the class A notes of ES0604, ES0701 and ES0702 increased over the last 12 months to 67.3%, 58.7% and 52.9% from 60.1%, 52.8% and 48.7%, respectively. Fitch expects CE to continue building up as the transactions amortise sequentially, supported by non-amortising reserve funds, which are currently at their target. This has resulted in 19 upgrades and nine affirmations across the three transactions. Stable Asset Performance Loans that are three months or more in arrears have shown steady improvement post-global financial crisis. This measure has remained stable between December 2017 to December 2018, averaging around 10% for ES0604 and ES0702 and 22% for ES0701, of their respective pool balances. The servicer reports the balance of loans in arrears in terms of loans with overdue monthly contractual payments, referred to as delinquencies, and loans with overdue monthly contractual payments and/or outstanding fees or other amounts due, known as amounts outstanding. Fitch has used the balances of loans reported with delinquencies in its analysis. Sequential Payments to Continue Fitch expects all transactions to continue amortising on a sequential basis. Pro rata amortisation was stopped by a breach in the amounts outstanding trigger. Fitch does not expect this trigger to cure. Interest Only (IO) Concentration Tested The transactions have a material concentration of IO loans maturing within a three-year period during the lifetime of the transactions. For ES0604, 36% mature between 2029 and 2031; for ES0701 33% mature between 2029 and 2031 and for ES0702 43% mature between 2030 and 2032. As per its criteria, Fitch tested additional foreclosure frequency assumptions for the IO loans with maturities concentrated in a three-year period. The results of the additional foreclosure frequency assumption testing have not constrained the notes' ratings. Negative Swap Payments Fitch analysed the impact of negative payments being payable within the transactions' respective cross currency swap agreements. If EURIBOR decreases to the extent the all in rate payable by the swap counterparty (Barclays A+/F1 and Swiss Reinsurance A+) is negative, the issuer is expected to pay this amount to the swap counterparty. The margins payable by the swap counterparty range from 0.2% to 0.8% across all three transactions. Fitch analysed the impact on excess spread, stressing interest rates and foreign exchange spot rates in line with its criteria. Fitch found the reduction in excess spread to be immaterial to the note ratings. RATING SENSITIVITIES Fitch is of the opinion that the prolonged low interest rate environment has supported borrower affordability. An increase in interest rates causing a payment shock could lead to a worsening of asset performance beyond Fitch's expectations, potentially leading to downgrades of the note ratings. There are a small number of owner-occupied IO loans that have failed to make their bullet payments at note maturity. The servicer has informed Fitch that alternative payment plans with these borrowers are currently being implemented. If this trend grows to a significant number, Fitch may apply more conservative assumptions in its asset and cash flow analysis. =============== X X X X X X X X =============== EUROPE: Restricts Steel Imports to Counter US Trade Policies ------------------------------------------------------------ EFE News, citing Dow Jones newswires, reports that the European Union set restrictions on steel imports to manage disruptive US trade policies, making permanent a policy that has the unintended consequence of helping enforce President Trump's metals tariffs. Europe has faced surging imports since Trump announced a 25 percent tariff on almost all steel imports to the US in March, according to EFE News. The EU response balances protecting European steelmakers against avoiding harm to consumers, such as the auto makers, that rely on imports, the report notes. The EU safeguards approved impose quotas on 26 product categories and levy a 25 percent duty on imports exceeding those quotas, said the European Commission, the bloc's executive arm, the report relays. The EU also set country quotas on its major suppliers. The decision takes effect by Feb. 4, replacing provisional measures imposed in July, the report says. "The definitive measures aim to preserve traditional trade flows," the commission said in a statement after EU governments approved its plan, the report notes. The bloc seldom resorts to trade safeguards, which are intended as temporary relief from imports surging due to unforeseen developments, the report discloses. The steel measures come in response to US actions but are effectively driven by Chinese production flooding global markets and threatening producers world-wide, the report relays. Trump unilaterally curbed US steel imports, as Washington questioned international efforts to address Chinese overcapacity. Other major players followed, fearing exports would be redirected from the US to their markets, the report notes. Europe led the global response, despite criticizing the US move and challenging it at the World Trade Organization, the report says. "The EU is cooperating out of necessity with what the US started," said Laurent Ruessmann, a Brussels-based trade lawyer at Fieldfisher, the report notes. "The alternative is to get swamped by diverted trade flows," he added. European steel companies were largely happy about the safeguards, the report relays. But users of the metal, which goes into everything from buildings to wind turbines, slammed the EU for hurting European industries, the report notes. Brussels's compromise solution highlights the difficulties in adjusting to US policies reshaping global trade and comes as the bloc faces a slowing economy, the report discloses. Inaction would devastate steelmakers grappling with falling prices, while quota-based tariffs risk raising costs for vital industries like automotive, the report notes. "There's always a trade-off between different measures," an EU diplomat said of the safeguards, notes the report. "It's obviously a reaction to what has happened in the United States and we would have preferred not to have tariffs on steel at all," he added. Steelmakers had asked that quotas apply to countries rather than only products, as the temporary measures did, the report says. That triggered a rush to get steel into Europe, with countries including Turkey and Russia scooping up large portions of the quota before a reset in February, the report relays. In the first 10 months of 2018, EU steel imports jumped to a record, growing 12 percent annually and outpacing both demand and domestic deliveries, according to the European Steel Association, Eurofer, the report notes. In the same period, US imports fell 14 percent and global exporters diverted 60 percent of that steel to the EU, the report says. "Imports of steel into the EU have increased over the past year because European manufacturing output has grown substantially since the economic crisis," said Erik Jonnaert, secretary-general of the European Automobile Manufacturers' Association, the report discloses. Car makers, joined by other lobbying groups, oppose the safeguards, particularly a clause raising quotas by 5 percent annually, warning that the increase is too small and could trigger a supply shortage, the report relays. The initial quotas are calculated based on the average imports in 2015-2017, and the safeguards will expire July 16, 2021, the report notes. The pace of steel exports to Europe is exceeding the rush of Chinese metal that swamped the continent in 2015 and triggered a crisis for EU producers, the report notes. The EU responded with anti-dumping and antisubsidy measures to slow the influx, the report says. Trump's steel tariffs resurrected the pressure with a new wave of European imports and falling steel prices, the report relates. That prompted Brussels's reaction, even as some EU diplomats warned against following Trump's protectionist measures, the report says. "Generally speaking it is good, and it should help in stemming the enormous flow of product," said Roeland Baan, Chief Executive of Finland's Outokumpu Oyj, one of the world's largest stainless steelmakers, the report notes. Some European steel producers, including Baan, said the EU's safeguards are insufficient due to quota-waivers for some developing countries that are now big exporters, the report discloses. That fails to account for industrial policies by players like Indonesia, which has recently emerged as a major stainless steel exporter, the report relays. Indonesian exports to Europe, previously negligible, surged to a record high in the first 11 months of last year and equaled half of the total EU imports from the country during the last decade, Eurofer data show, the report says. Steel producers in countries facing quotas echoed criticism from their customers in the EU, the report relays. "We believe that any protectionist restrictions have a detrimental economic effect on all parties involved and prevent fair competition," said a spokeswoman for Russian steelmaker Severstral, the report notes. ********* 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 * * *