/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/190124.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 Thursday, January 24, 2019, Vol. 20, No. 017 Headlines F R A N C E * FRANCE: Disrupted by Snow, Braces for More Cold Weather G R E E C E GREECE: Bailout Inspectors Back in Athens to Review Progress L U X E M B O U R G NETS TOPCO 3: Fitch Assigns B+ LT IDR, Outlook Stable NETS TOPCO 3: S&P Affirms 'B' Long-Term ICR, Outlook Stable PALLADIUM SEC: DBRS Confirms BB (high) Rating on Series 147 Notes N E T H E R L A N D S STEINHOFF EUROPE: LSW GmbH Claims It Is Owed EUR291.4MM P O R T U G A L BANCO COMERCIAL: Fitch Rates Additional Tier 1 Notes B-(EXP) BANCO COMERCIAL: Moody's Rates Add'l. Tier 1 Notes 'Caa1(hyb)' MILLENNIUM BCP: S&P Rates Additional Tier 1 Capital Notes 'CCC+' U N I T E D K I N G D O M ADIENT GLOBAL: Moody's Lowers CFR to B2, Outlook Negative ALPAMARE UK: Waterpark to Continue to Trade Following CVA HOMEBASE: Sandbach Branch Set to Close on April 11 HOUSE OF FRASER: Mike Ashley's Truce with Intu Saves Four Stores PATISSERIE VALERIE: Owner Taps KPMG as Administrators PATISSERIE VALERIE: Cafe Chain Collapses Due to Fraud X X X X X X X X * Brexit Delays Entice Sterling Investors to Rejoin The Market * Eurozone Faces 'Game of Political Chicken', Credit Suisse Says ********* =========== F R A N C E =========== * FRANCE: Disrupted by Snow, Braces for More Cold Weather --------------------------------------------------------- The Latin American Herald reports that snowfall brought northern France and the capital to a standstill with roads gridlocked, hundreds of buses canceled and the iconic Eiffel Tower's temporary closure, according to local transport authorities. Paris, much of northern France, and the southern Pyrenees region -- a mountain range that separates Spain and France -- awoke blanketed in snow, which caused major disruption in the capital after the national meteorological service placed 24 of the country's 101 departments on a code orange weather warning, according to The Latin American Herald. Meteo-France said up to 5 centimeters (1.9 inches) of snow was expected due to a cold weather front battering the country from west to east which would be followed by a second front that could bring up to 15 centimeters of snow with sustained low temperatures, the report notes. The Pyrenees could see between 20-40 cm of snow. The French Road Safety Observatory explained that conditions were "delicate" on roads in the departments of Ariege and the western Pyrenees, and barred trucks exceeding 19 tons from circulating on the main motorways in Andorra on the N320 and N22 from the communes of L'Hospitalet and Puymorens, the report relays. Paris metropolitan transport police said that 150 of its bus routes would not be operating until further notice, the report notes. Overground trains into the city were also affected, the report relays. The Ministry of Transport reduced the maximum speed limit within the Paris region to 80 kilometers (50 miles) an hour, the report says. In the early hours, snow caused disruption on the A29 and A13 highways in Normandy and on the A16 and A26 in Hauts, both regions in northern France, the report says. Several departments in the north suspended school transport services, the report adds. =========== G R E E C E =========== GREECE: Bailout Inspectors Back in Athens to Review Progress ------------------------------------------------------------ The Associated Press reports that representatives of Greece's bailout creditors are in Athens to review progress on measures demanded in return for relief on the country's massive national debt. The AP says the inspectors started meetings Jan. 22 with senior government officials to review issues including delayed privatization projects, a plan to help banks reduce a high amount of non-performing loans, and measures to protect low-income families from property foreclosures. According to the AP, eurozone ministers are expected to decide in March whether to grant relief measures to Greece including the payout of some of the profits made by the European Central Bank on Greek bonds. Greece's third international bailout ended in August but the country is still struggling to manage its national debt, which reached EUR335 billion ($380 billion) in the third quarter of 2018, or 182 percent of GDP, the AP notes. =================== L U X E M B O U R G =================== NETS TOPCO 3: Fitch Assigns B+ LT IDR, Outlook Stable ----------------------------------------------------- Fitch Ratings has assigned Nets Topco Lux 3 Sarl a final Long- Term Issuer Default Rating at 'B+' with a Stable Outlook. This follows the announcement that Nets has completed its acquisitions of German merchant acquirer Concardis and Polish digital payments company Dotpay. Fitch has also affirmed the senior secured facility ratings and senior secured notes ratings at 'BB'/'RR2'/72%. Fitch is withdrawing the ratings of Nets Holdco 4 APS as it is undergoing a reorganisation. Accordingly, Fitch will no longer provide ratings or analytical coverage KEY RATING DRIVERS Concardis and Dotpay Acquisitions Complete: Nets' latest acquisitions of Concardis and Dotpay, which signalled management's intention to actively participate in the consolidation of payments services in Europe, successfully closed in January 2019, in line with expected terms. The acquisitions will give the company exposure to fast-growing markets that have more catch-up potential than the Nordics; in new markets such as Germany and Austria, cash transactions still represent 60%-75% of all transactions compared with 30%-35% in Sweden and Denmark. Term Loan Add-On Anticipated: The company is now considering a EUR100 million term loan B add-on in order to repay drawings under its revolving credit facility (RCF) and fund excess cash to the balance sheet. Fitch views the transaction as leverage- neutral. The EUR240 million RCF will be available for the company to fund bolt-on acquisitions, of which Fitch has included around DKK700 million per annum in its base case forecasts. Preliminary 2018 Results Weaker than Expected: Nets' revenue and EBITDA generation in 2018 were lower than expected primarily due to weakness in the merchant services business. This was impacted by the loss of a large customer, which is viewed as a one-off event, as well as by some pricing pressure in acquiring new merchants. Some client banks taking in-house their processing services also led to revenue pressure in financial & network services although this was offset by strong volume growth. Given this underperformance in 2018, Fitch has revised down its growth forecasts in the merchant services division, which results in a slower pace of deleveraging for the business. Nordic Market Remains Attractive: Nordic governments have been implementing a range of policy measures intended to encourage the digitisation of their economies. The Nordics are among the most advanced digital societies, with some of the highest adoptions of cashless payments in Europe. Fitch believes the growth of mobile and e-commerce transactions, due to the switch from cash to card payments, will support Nets' growth. The Nordic payment services market is further supported by favourable macroeconomic conditions, with expected annual GDP growth of between 2% and 3% over the next five years. High Leverage: The latest add-on transaction is expected to be leverage-neutral for Nets and Fitch expects funds from operations (FFO) adjusted gross leverage to be 7.7x after the add-on transaction is completed. With its downward leverage sensitivity at 8.0x, Nets has limited headroom to deliver on its business plan and de-leverage via earnings growth. However, Fitch believes that the company's 'B+' rating is still appropriate given the strong visibility on cash flows, which are supported by a recurring revenue base and high EBITDA margins. Fitch expects free cash flow (FCF) margins to remain strong at around 8%-10% from 2019 to 2021. Ongoing Payments Industry Consolidation: Nets has a strong record of M&A and Fitch expects it to participate in the continued industry consolidation on an opportunistic basis. Such acquisitions will add scale and allow Nets to expand into additional markets, although leverage could increase in the event of a larger debt-funded transaction. Given these expectations, Fitch has factored in about DKK700 million a year of bolt-on acquisitions into its rating case, to be funded primarily from internal cash generation. DERIVATION SUMMARY Nets is well positioned in the Nordic payment services market, occupying leading positions in Denmark, Norway and Finland. Its full-service offering across the entire payment value chain is unique among peers and is a key competitive advantage allowing for operating leverage and high margins. Nets' EBITDA margin was 36.7% in 2017, which compares favourably with peers First Data Corp. (26%) and Paysafe (27%), although it is lower than Italian payment provider Latino Italy SpA (Nexi) (39%). The key rating constraint for Nets is its high gross leverage, which is 7.7x on an FFO basis, adjusted for its latest acquisitions. This is higher than First Data, which had 5.6x FFO adjusted gross leverage as of June 2018 and in line with that of Nexi. Nexi (B+) may be the most comparable rated peer. Nets has a leading position in the Nordics, which will be followed by the DACH region following the acquisition of Concardis, but Nexi has a faster potential growth in the less mature Italian market, with a strong position in merchant acquiring and payment processing. Nets' strong FCF generation abilities mitigate this; FCF margins are between 5% and 10%. Fitch also projects FFO adjusted gross leverage to fall towards 7.5x by 2021, supported by revenue and margin growth. KEY ASSUMPTIONS Fitch's Key Assumptions Within Its Rating Case for the Issuer - Revenue CAGR growth of 4.4% for 2018 - 2021, driven by steady growth in the merchant and corporate services business as well as by bolt-on acquisitions but which is offset by lower financial and network services revenue in 2019 and 2020 - EBITDA margin improvement towards 38.1% in 2021, supported by operating leverage of the business as well a business shift mix towards higher-margin merchant services - Capex intensity of 8%-8.5% of total revenue - M&A spend of DKK700 million per annum from 2019 onwards - No extraordinary dividends payments - Special items of DKK250 million - DKK400 million per annum from 2019-2021 RATING SENSITIVITIES Developments That May, Individually or Collectively, Lead to Positive Rating Action - Successful expansion of the merchant services division increasing market share in Nordics ex-Denmark and leading to mid- to high-single-digit revenue growth and margin expansion towards 40% - FFO adjusted gross leverage below 6.0x - FFO fixed charge cover above 3.0x Developments That May, Individually or Collectively, Lead to Negative Rating Action - Failure to expand merchant services resulting in low-single-digit revenue growth and no improvement in EBITDA margins - FFO adjusted gross leverage sustainably above 8.0x - FFO fixed charge cover below 2.2x LIQUIDITY AND DEBT STRUCTURE Liquidity Supported by FCF Generation: As part of the current refinancing, the company is paying down in full its EUR240 million RCF, providing additional liquidity sources for the business. Additionally, Fitch forecasts positive FCF generation between 2019 and 2021, which should add to the company's cash buffer over time. NETS TOPCO 3: S&P Affirms 'B' Long-Term ICR, Outlook Stable ------------------------------------------------------------ S&P Global Ratings affirmed its 'B' long-term issuer credit rating on Nets Topco 3 S.ar.l. (previously named Evergood Lux 3 S.a.r.l), the parent of leading Nordic payment service provider Nets A/S. The outlook is stable. S&P said, "At the same time, we assigned our 'B' long-term issue rating to the proposed incremental EUR100 add-on million term loan and affirmed our 'B' issue rating on the group's existing first-lien term loan and RCF, issued by financing subsidiary Nets Holdco 4 ApS (previously named Evergood 4 ApS). The recovery rating is '3', indicating our expectation of meaningful (50%-70%; rounded estimate: 55%) recovery prospects for creditors in the event of a payment default. "In addition, we affirmed our 'BB-' issue rating on Nassa Topco's EUR400 million secured notes, of which EUR220 million is outstanding. The recovery rating is '1', reflecting our expectation of almost full recovery (rounded estimate: 95%) in the event of default. "The rating continues to reflect Nets very high leverage, which we now expect will decline marginally to about 9.0x in 2019 from about 9.2x in 2018 pro-forma the Concardis merger. This compares with about 8.5x in our previous forecast last July. Our revised forecast takes into account the company's EUR100 million incremental debt as well as a downward revision of our projections for Nets' organic revenues; we currently anticipate a 1.5% revenue decline in 2018, versus a 3.0% revenue increase in our previous base case." The weaker top line in 2018 results from: -- Negative foreign exchange rates (about 2 percentage points); -- Non-recurring revenue losses in the Merchant Services segment, caused by the loss of a key account and P2P (peer- to-peer) scheme migration; and -- Competitive price pressures, notably in Merchant Services in the Swedish market. S&P said, "Revenues in the Merchant Services segment declined by about 2% in constant currencies (compared with 4% growth in our previous forecast). Although we believe that price pressure could persist in 2019, we expect this segment's revenues in the Nordics to recover with low-single-digit growth in 2019 in the absence of the above-mentioned non-recurring revenue losses. "Nets closed its acquisitions of Germany-based Concardis on Dec. 31, 2018, and Poland-based Dotpay on Jan. 4, 2019. We expect these acquisitions will create additional sources of revenue growth, as Nets expands its geographical footprint to continental Europe, which we believe will lead to mid-single-digit growth of its consolidated organic revenues by end-2019. The enlarged company gains about Danish krone (DKK) 680 million in EBITDA in 2019, representing about 17% of pro forma EBITDA in the same year (excluding integration and transformational costs). "We expect Nets' recent acquisitions to create opportunities for solid revenue growth, as these additional geographies are less penetrated than the Nordics. For example, in Germany, cash transactions represent 60% of all payment transactions, versus about 30% in Denmark. Furthermore, Concardis brings capabilities within merchant acquiring and e-commerce, further enhanced by its previous acquisitions of online payment method specialist RatePay, and merchant processor Mercury. "With the two acquisitions, Nets' revenue streams from merchant services will increase to about 44% of revenues pro forma 2019, compared with 33% on a stand-alone basis. We continue to expect that financial network services--which entail processing services of payment cards primarily for banks (pro forma 25%), and corporate services (including e-billing services for corporates [pro forma 31%]) -- will remain important pillars for Nets' integrated value chain proposition in the Nordics. "Furthermore, we expect that Nets will continue to have adequate liquidity and post positive FOCF. We assume the latter will improve gradually toward 5% of debt in 2020, thanks to revenue growth, stronger EBITDA, and synergies from the acquisitions. "At the same time, our rating on Nets is constrained by its limited scale in a global context, in particular compared with U.S. peers such as Vantiv. Although the now-enlarged group has enhanced its geographical diversification, the majority of its revenues still stem from the relatively mature and highly competitive Nordic market (notably Sweden, where there is price pressure). Moreover, the company's aggressive financial policy, evidenced by the very high leverage, further constrain the rating. "The stable outlook reflects our expectation that Nets' revenues and EBITDA will increase in 2019, primarily thanks to the successful integration of recent acquisitions and, to some extent, from a rebound in the Nordics that will fuel a gradual decline in debt-to-EBITDA to about 8.0x in 2020. The company's adequate liquidity and positive FOCF generation will underpin this recovery. "We could lower the rating if revenues or EBITDA declined further with no immediate signs of recovery, for instance because of competitive pressure. We could also consider a downgrade if FOCF approached breakeven (excluding working-capital changes related to clearing activities), or if we negatively re assessed the group's liquidity position to less than adequate. "We could raise the rating if revenues and margins improve faster than we forecast, resulting in EBITDA interest coverage above 3.0x, FOCF to debt above 5%, and leverage declining to about 7x, all on a sustainable basis." PALLADIUM SEC: DBRS Confirms BB (high) Rating on Series 147 Notes ----------------------------------------------------------------- DBRS Ratings GmbH confirmed its rating of BB (high) (sf) to the Series 147 Fixed to Floating Rate Instruments due 2024 (the Notes) issued by Palladium Securities 1 S.A. acting in relation to Compartment 147-2014-22 (the Issuer). The confirmation follows an annual review of the transaction. The Issuer is a public limited liability company (societe anonyme) incorporated under the laws of the Grand Duchy of Luxembourg. The transaction is a credit-linked note of two corporate fixed-rate bonds (the Collateral). The Collateral comprises 28.3 million euro-denominated bonds issued by Assicurazioni Generali S.p.A. (5.125% bonds due September 16, 2024; ISIN: XS0452314536) and 22.15 million British pound- denominated bonds issued by ENEL Finance International NV (5.625% bonds due 14 August 2024; ISIN: XS0452188054), which together represent the full issue amount of the Palladium Series 147 Notes EUR 56.6 million. The note holders and other transaction counterparties have recourse only to the assets in Compartment 147-2014-22, in accordance with Luxembourg law. The transaction uses an asset swap to transform the payout profile of the collateral security. The note holders are effectively exposed to the risk that either of the two bonds that constitute the Collateral or the Hedging Counterparty defaults. The transaction documents do not contain any downgrade provisions with respect to the Hedging Counterparty. As such, DBRS considers the Notes to be also exposed to the risk of default of the Hedging Counterparty. Deutsche Bank AG, London Branch acts as the Hedging Counterparty. Under the asset swap: -- The Hedging Counterparty sells the par amount of EUR 56.6 million of the Collateral (28.3 million euro-denominated bonds issued by Assicurazioni Generali S.p.A. and 22.15 million British pounds-denominated bonds issued by ENEL Finance International NV) to the Issuer and received a payment on 10 February 2015 (the Trade Date). -- The Issuer passes the interest payments received from the Collateral to the Hedging Counterparty as and when they occur. -- The Hedging Counterparty makes the interest payments as specified in the Asset Swap Agreement to the Issuer. The Notes pay interest annually on 10 February, beginning in 2016 and ending in 2024. -- The Hedging Counterparty pays a fixed rate of 2.3% per annum for the first two years of the transaction. The subsequent payments on the Notes will be a fixed 0.5% of interest plus a floating bonus interest subject to a bonus threshold. The bonus interest is equal to the five-year EUR constant maturity swap (CMS) less 0.5% as calculated each year, with a maximum rate of 3.75% and a minimum rate of 0.50% per annum. The bonus threshold, in respect of each interest rate period, is determined by the euro-U.S. dollar exchange rate being below or equal to EUR 1.40. The fixed-rate and floating bonus interest rate in aggregate is equal to an interest rate of five- year EUR CMS (subject to a minimum of 1.00% and a maximum of 4.25%). -- At the scheduled maturity, the Hedging Counterparty will receive the Collateral from the Issuer and will pay EUR 56.6 million. The significant counterparties to the Issuer are various subsidiaries and affiliates of Deutsche Bank AG as listed below. DBRS maintains private ratings on these counterparties, which are not published. -- Deutsche Bank AG, London Branch acts as the Hedging Counterparty, Initial Purchaser of the Notes, Calculation Agent, Paying Agent, Selling Agent and Arranger and pays the fees and expenses of the Issuer. -- Deutsche Bank Luxembourg S.A., a wholly owned subsidiary of Deutsche Bank AG, acts as Custodian, Luxembourg Paying agent and Servicer. -- Deutsche Trustee Company Limited acts as Trustee. DBRS maintains Internal Assessments on the ratings of the corporate fixed-rate bonds that make up the Collateral. As per DBRS criteria, an Internal Assessment is an opinion on the creditworthiness of an Issuer based on either: (1) public rating(s) issued and maintained by other credit rating agencies (CRAs) that are registered in accordance with jurisdictional regulations, (2) DBRS analysis or (3) a combination of other CRA ratings and DBRS analysis. DBRS Internal Assessments are typically not made publicly available. The Internal Assessments are being monitored on an ongoing basis to evaluate credit risk. In addition to the credit profiles of the Collateral and the Hedging Counterparty, the rating of the Notes is based on DBRS's review of the following items: -- The transaction structure. -- The transaction documents. -- The legal opinions addressing, but not limited to, true sale of the Collateral, bankruptcy remoteness of the Issuer, the asset segregation of the Compartment, enforceability of the contracts and agreements and no tax to be withheld at the Issuer level. DBRS did not address the following: -- The pricing of the Asset Swap; that is, whether there will be sufficient cash flows from the Collateral to fully compensate the Hedging Counterparty for its obligations. As the Hedging Counterparty is contractually obliged to make the payments as specified under the Asset Swap Agreement, the risk that it defaults is addressed by the DBRS private rating. -- Cash flow analysis to assess the returns due to the note holders, as the returns is reliant on the swap counterparty. The transaction can terminate early on the occurrence of an event of default, mandatory cancellation or cancellation for taxation and other reasons. Events of default occur under, but are not limited to, the following scenarios: -- Failure to pay any amount due on the Notes beyond the grace period. -- The Issuer fails to perform its obligations under the Series Instrument. -- An order by any competent court ordering the dissolution of the Issuer or the Company for whatever reason that includes, but is not limited to, bankruptcy, fraudulent conveyance and merger. Mandatory cancellation includes: -- The Collateral becomes repayable other than by the discretion of the relevant Collateral Obligor in accordance with the terms of the Collateral. -- The Collateral becomes, for whatever reason, capable of being declared due and payable prior to its stated maturity. -- The Collateral defaults. Similarly, cancellation for taxation, etc., includes: -- The Issuer becomes required to withhold tax on the next payment date. -- Termination of the Hedging Agreement. Under the Series Instrument, the amount payable to the note holders is determined as the market value of the Collateral minus the Early Termination Unwind Costs. The Early Termination Unwind Costs are determined as the sum of: (1) The amount of (a) all costs, taxes, fees, expenses (including loss of funding), etc., incurred by the Hedging Counterparty (positive amount) or (b) the gain realized by the Hedging Counterparty (negative amount) as a result of the cancellation of the Asset Swap; and (2) Legal and other costs incurred by the Issuer, Trustee, Custodian and Hedging Counterparty. It should be noted that the DBRS rating assigned to this security does not address changes in law or changes in the interpretation of existing laws. Such changes in law or their interpretation could result in the early termination of the transaction and the note holders could be subjected to a loss on the Notes. Notes: All figures are in euros unless otherwise noted. ===================== N E T H E R L A N D S ===================== STEINHOFF EUROPE: LSW GmbH Claims It Is Owed EUR291.4MM -------------------------------------------------------\ Inside Retail reports that Steinhoff International Holdings has detailed the application put forward by the company of former business partner Andreas Seifert to block the voluntary administration of its European business. According to the report, the furniture conglomerate said the application alleges that Steinhoff Europe owed LSW GmbH a total of EUR291.4 million as of Dec. 14, 2018, and seeks to "challenge certain provisions of the [Steinhoff Europe voluntary arrangement]". While no other claim was made against the business, the voluntary administration cannot go forward without first settling LSW's claims, Inside Retail relates. Inside Retail says Steinhoff previously had agreed to sell its shares in the POCO furniture business to entities controlled by Seifert for EUR270 million, though these dealings were called a "big mistake" by former chief executive Marcus Jooste, and led in large part to the company's current financial difficulties. While the group expects to publish its audited financial statements for 2017 and 2018 by April 18, 2019, initially delayed due to the PwC investigation into its accounting irregularities being more complex than initially anticipated, this date could be pushed further back should the application cause a further delay in the Steinhoff Europe voluntary administration. Steinhoff's management team notes that, for the time being, it is currently prioritising the resolution of this application, as well as finalising the voluntary administration and annual financial statements, while assisting PwC with its investigation, adds Inside Retail. Steinhoff International Holdings NV's registered office is located in Amsterdam, Netherlands. =============== P O R T U G A L =============== BANCO COMERCIAL: Fitch Rates Additional Tier 1 Notes B-(EXP) ------------------------------------------------------------ Fitch Ratings has assigned Banco Comercial Portugues, S.A.'s (BCP, BB/Stable/bb) planned additional Tier 1 (AT1) notes an expected rating of 'B-(EXP)'. The final rating is contingent upon the receipt of final documents conforming to information already received. KEY RATING DRIVERS The notes are CRD IV-compliant perpetual, deeply subordinated, fixed-rate resettable AT1 debt securities. The notes have fully discretionary non-cumulative interest payments and are subject to partial or full write-down if the bank's standalone or consolidated common equity Tier 1 (CET1) ratios fall below 5.125%. The principal write-down can be reversed and written up at issuer's discretion provided certain conditions are met. The rating assigned to the securities is four notches below BCP's 'bb' Viability Rating (VR), in accordance with Fitch's criteria for assigning ratings to hybrid instruments. This notching reflects the instruments' higher expected loss severity relative to the bank's VR due to their deep subordination (two notches). In addition, the notching also reflects higher non-performance risk given fully discretionary coupon payments and mandatory coupon restriction features (two notches). Fitch expects the non-payment of interest on this instrument will occur ahead of the bank or the consolidated group breaching the notes' 5.125% CET1 write-down trigger, if for example BCP's total capital ratio approaches the supervisory review and evaluation process (SREP) requirement, set at 12.31% for 2018, since existing buffers over this requirement are comparatively thinner. However, BCP's consolidated fully-loaded CET1 and total capital ratios were respectively 11.8% and 13.4% at end-September 2018, providing moderate buffers over requirements. Based on the existing buffers and Fitch's expectations over BCP's capital ratios evolution, Fitch has limited the notes' notching for non- performance risk to two notches. RATING SENSITIVITIES The AT1 notes' expected rating is primarily sensitive to changes in BCP's VR. The rating is also sensitive to changes in their notching from BCP's VR, which could arise if Fitch changes its assessment of the probability of their non-performance relative to the risk captured in the VR. This may reflect a change in capital management in the group or an unexpected shift in regulatory buffer requirements, for example. BANCO COMERCIAL: Moody's Rates Add'l. Tier 1 Notes 'Caa1(hyb)' -------------------------------------------------------------- Moody's Investors Service has assigned a Caa1(hyb) rating to the Additional Tier 1 non-viability contingent capital securities issued by Banco Comercial Portugues, S.A. (BCP) (Ba3 positive, b1 bca). The Caa1(hyb) rating assigned to the notes is based on BCP's standalone creditworthiness and is positioned three notches below the bank's b1 adjusted baseline credit assessment (BCA): one notch below to reflect high loss severity under our Advanced Loss Given Failure (LGF) analysis; and a further two notches below to reflect the higher payment risk associated with the non- cumulative coupon skip mechanism, as well as the probability of the bank-wide failure. RATINGS RATIONALE The assigned Caa1(hyb) rating reflects: (1) BCP's BCA and Adjusted BCA of b1; (2) Moody's Advanced Loss Given Failure (LGF) analysis, resulting in a position three notches below the bank's Adjusted BCA; and (3) Moody's assumption of a low probability of government support for loss-absorbing instruments, resulting in no uplift. The notes are unsecured and perpetual, and have a non-cumulative optional and a mandatory coupon-suspension mechanism. The positioning of BCP's Additional Tier 1 securities three notches below the bank's adjusted BCA reflects both the high loss-given- failure that these securities are likely to face in a resolution scenario, due to their deep subordination, small volume and limited protection from residual equity and the higher risk associated with the non-cumulative coupon skip mechanism, which could precede the bank reaching the point of non-viability. The notes bear a fixed rate of interest until their first reset date, and thereafter a reset rate based upon 5 year mid-swaps plus a margin. This reference rate may be substituted by an alternative reference rate under certain circumstances described in the prospectus. The securities' principal is subject to a partial or full write-down on a contractual basis if the bank's or group's Common Equity Tier 1 (CET1) capital ratio falls below 5.125%, which Moody's views as close to the point of non- viability. At end-June 2018, BCP's consolidated phased-in CET1 ratio stood at 11.7%, while its standalone CET1 ratio stood at 13.4%. WHAT COULD CHANGE THE RATING UP/DOWN Any changes in the b1 adjusted BCA of the bank would likely result in changes to the Caa1(hyb) rating assigned to these securities. In addition, any increase in the probability of a coupon suspension would also lead us to reconsider the rating level. Upward pressure on BCP's standalone BCA could be driven by clear evidence that the bank's risk-absorption capacity is improving, along with a sustainable recovery in the bank's asset risk profile and recurring domestic earnings. Conversely, downward pressure on the bank's standalone BCA could arise if: (1) the bank fails to maintain its risk-absorption capacity due to asset quality weakening and/or additional provisioning efforts in excess of its capital generation capacity; and/or (2) a deterioration in the bank's liquidity profile. PRINCIPAL METHODOLOGY The principal methodology used in this rating was Banks published in August 2018. MILLENNIUM BCP: S&P Rates Additional Tier 1 Capital Notes 'CCC+' ---------------------------------------------------------------- S&P Global Ratings said that it assigned its 'CCC+' long-term local currency issue rating to the proposed Fixed Rate Additional Tier 1 capital notes (AT1 notes) to be issued by Portugal-based bank Millennium BCP (BCP). At the same time, S&P affirmed the 'BB/B' long- and short-term issuer credit ratings on BCP. The outlook remains stable. BCP plans to issue about EUR400 million AT1 notes, subject to market conditions. In accordance with S&P's methodology on hybrid capital ("Bank Hybrid Capital And Nondeferrable Subordinated Debt Methodology And Assumptions," published Jan. 29, 2015), it has assigned its 'CCC+' rating to the AT1 notes, five notches below its 'bb' assessment of BCP's stand-alone credit profile (SACP). S&P derived this rating by notching downward from the SACP to reflect the following terms and features of the proposed AT1 notes: -- Two notches to reflect subordination risk; -- Two notches to take into account the risk of nonpayment at the full discretion of the issuer, and the hybrid's expected inclusion in Tier 1 regulatory capital; and -- One notch to reflect the proposed issue's mandatory contingent capital clause leading to principal write down if the Common Equity Tier 1 ratio of the issuer and/or the group falls below 5.125%. S&P notes that coupon suspension is mandatory if the amount of distributable items is insufficient to cover coupon payments or if the bank does not comply with the minimum regulatory solvency requirements. At this stage, S&P views these risks for BCP as limited because: -- S&P estimates that distributable items at end-September 2018 will cover annual AT1 coupon payments by about 20x, and it anticipates that distributable items will gradually increase on the back of the more sustained economic recovery and moderate decrease in credit losses in Portugal; and -- The bank's Common Equity Tier 1 ratio of 11.8% (both phased- in and fully loaded) as of end-September 2018 is well above the 8.81% minimum level set by the regulator under the Supervisory Review and Evaluation for 2018. S&P said, "We classify the proposed notes as having intermediate equity content, subject to the receipt of regulatory approval for inclusion in the bank's regulatory Tier 1 capital and our receipt of the final documentation. The instruments meet the conditions for intermediate equity content as set in our respective criteria because they are perpetual--with a first call date five years from issuance--and provide loss-absorption capacity on a going concern basis via a coupon deferral at the bank's discretion. The proposed notes do not incorporate a coupon step-up. "We estimate that the issuance of about EUR400 million AT1 notes would improve our assessment of the bank's capital by about 60 basis points. Incorporating the proposed notes into our analysis, we now forecast BCP's risk-adjusted capital ratio will reach about 6.8% by end-2019, compared to 6.4% at end-2017. Our forecasts also incorporate the recently announced acquisition of Polish bank, Euro Bank S.A. (Eurobank). While we view positively BCP's capital strengthening, it is not currently sufficient to change our view of the bank's capitalization, which we still see as moderate compared to the risks it faces. In addition, in our view, BCP's quality of capital remains constrained by the large proportion of minority interests and deferred tax assets in its total adjusted capital, which are high in both absolute and relative terms. The issuance will allow BCP to fill 0.9% of its AT1 bucket. "The stable outlook on BCP reflects our expectation that the ratings will remain unchanged over the next 12 months. We anticipate that the bank will continue to focus on reducing its high stock of problematic assets, aided by the more benign economic environment in Portugal, to reach a nonperforming exposure (NPE) ratio of about 10% by end-2019. However, we consider that the NPE stock will remain high compared to that of both domestic and international peers. "Our stable outlook also assumes that BCP will gradually enhance its capitalization, on the back of strengthened returns and the proposed recent issuance of hybrid instruments. In particular, we believe that its domestic operations will remain profitable, aided by improving credit losses. That said, we believe that BCP's profitability will remain primarily supported by the performance of its international units, particularly Poland-based Bank Millennium. However, the latter will experience some capital depletion over the next 12 months following BCP's acquisition of Eurobank. In addition, we believe that BCP will not engage in overly aggressive growth under its new strategic plan. "We could upgrade BCP if it proved able to significantly reduce its stock of problematic assets, thereby closing the asset quality gap versus its closest peers, while maintaining adequate NPE coverage, or substantially improved its capitalization, all else remaining equal. Conversely, we could lower the ratings if, contrary to our current expectations, BCP's capitalization weakened considerably, or if the acquisition of Eurobank resulted in a material impairment of the group's financial profile or posed significant managerial challenges." ========================== U N I T E D K I N G D O M ========================== ADIENT GLOBAL: Moody's Lowers CFR to B2, Outlook Negative --------------------------------------------------------- Moody's Investors Service downgraded Adient Global Holdings Ltd's Corporate Family Rating and Probability of Default Rating to B2, and B2-PD from Ba3, and Ba3-PD, respectively. In a related action Moody's downgraded the senior secured debt rating to Ba2 from Baa3 and downgraded the senior unsecured rating to B3 from B1. The Speculative Grade Liquidity Rating was downgraded to SGL-4 from SGL-3. The rating outlook is negative. Moody's took the following rating actions on Adient Global Holdings Ltd: The following ratings were downgraded: Corporate Family Rating, to B2 from Ba3; Probability of Default, to B2-PD from Ba3-PD; $1.5 billion senior secured revolving credit facility due 2021, to Ba2 (LGD2) from Baa3 (LGD2); $1.2 billion (remaining amount) senior secured term loan facility due 2021, to Ba2 (LGD2) from Baa3 (LGD2); Euro dollar guaranteed senior unsecured notes due 2024, to B3 (LGD4) from B1 (LGD4); U.S. dollar guaranteed senior unsecured notes due 2026, to B3 (LGD4) from B1 (LGD4); Speculative Grade Liquidity Rating: to SGL-4 from SGL-3. Rating Outlook: changed to Negative, from Stable RATINGS RATIONALE The downgrade of Adient's CFR to B2 reflects Moody's view that continued operating performance deterioration and broad management changes reflect cost and launch execution challenges that will take time and significant effort to overcome, leading to sustained weaker credit metrics and negative free cash flow beyond fiscal 2019. Management recently indicated that the company's adjusted EBITDA for the first quarter of fiscal 2019 declined 34% year-to-year to an estimated $175 million (including equity income from unconsolidated affiliates). Moody's believes that the decline reflects continued incremental deterioration in Adient's consolidated performance from a challenging first quarter 2018 that was hurt by major operational difficulties from new launches and was the weakest quarter in fiscal 2018 in terms of consolidated operating profit. Moody's also believes that the first quarter's performance portends much weaker free cash flow generation in fiscal 2019 compared to negative $34 million in fiscal 2018, and a longer time frame required to correct the company's operating inefficiencies. While the weak performance will likely return financial maintenance covenant pressure under the recently amended bank credit facility, Moody's assumes Adient will be able to obtain covenant relief at a reasonable cost. The underperformance within Adient's consolidated operations will continue to drive higher reliance on the joint venture income than initially anticipated at the time of the spin-off. While the equity income from Adient's unconsolidated affiliates was lower than historical levels for fiscal 2018, the rate of conversion into dividends improved. Yet, these joint-ventures are likely to experience the similar global automotive industry pressures as Adient. Adient's new CEO appears to have taken hold of the operational and product pricing issues, identified areas of required improvement, and has replaced a significant number of leadership positions. Yet, certain operational challenges in fiscal 2018 are continuing into fiscal 2019, as the company continues to execute high levels of new product launches. Further, uncertain macroeconomic conditions in China and Europe may drive weaker global automotive demand, challenging Adient's top line in 2019. Moody's estimates that Adient's debt/EBITDA in fiscal 2019 will remain well over 5x while EBITA/interest will remain under 2x. Positively, the B2 CFR is supported by Moody's belief that Adient will continue to maintain a strong and competitive market position as the leading global supplier of automotive seating products. Moody's expects Adient will maintain a strong global market share, a balanced geographic exposure across North America, Europe, and Asia, and moderate customer concentrations with longstanding relationships. Adient's profit woes reflect the company's commitment to delivering quality seating products to its customer base on a timely basis even if it means absorbing incremental costs. These actions are supportive of customer relationships that are critical to new business growth over the long-term and, favorably, customers continue to award programs to Adient. Yet, Moody's also believes that, even after working through the company's operational challenges, Adient's mix of product offerings are unlikely to return profit levels to pre- 2018 levels over the next two years. The negative rating outlook reflects the challenges to quickly restoring margins to competitive levels and uncertainty over the timing of Adient's operational recovery following the company's recent string of guidance misses. The downgrade of Adient's Speculative Grade Liquidity Rating to SGL-4 from SGL-3 reflects the heightened potential for a covenant violation within the next year based on Moody's projections for continued weak operating performance. Moody's believes that the company's first quarter profit guidance portends much greater negative free cash flow generation over the next 12 months as the company manages through operational difficulties and global automotive industry conditions soften. Moody's estimates that cash on hand ($687 million as of September 30, 2018) and the undrawn $1.5 billion revolving credit facility provide sufficient capacity to meet operational needs and there are no meaningful debt maturities until 2021, supporting some financial flexibility over the next 12 months. As a result, Moody's would consider an upgrade to SGL-3 if the company obtains covenant relief. Adient recently entered into a EUR200 million accounts receivable transfer and servicing arrangement. As of September 30, 2018, $142 million was funded under the program. While not expected, if the company is unable to maintain and extend these receivable programs, additional borrowings under the revolving credit facility would be required to meet liquidity needs. The ratings could be downgraded with the expectation of material deterioration of automotive demand, the loss of or meaningful decline in volume from a major customer, or if the company is unable to demonstrate progress improving operating performance over the next 12 months. A deterioration in liquidity or if Moody's expects weak free cash flow performance to worsen could also lead to a downgrade. An upgrade is unlikely over the next 12 months. However, the ratings could be upgraded if the company demonstrates improved operating performance that leads to an expectation of positive free cash flow generation and a reduction in debt-to-EBITDA below 5x (excluding consideration for equity income from joint ventures). A revision the company's capital structure that supports additional financial flexibility while the company executes its turnaround could lead to a stable outlook. The principal methodology used in these ratings was Global Automotive Supplier Industry published in June 2016. ALPAMARE UK: Waterpark to Continue to Trade Following CVA --------------------------------------------------------- John Edwards at The Scarborough News reports that Alpamare UK said it has secured a Company Voluntary Arrangement (CVA) to meet its debt obligations. "The fact that the CVA proposal has been accepted is very positive news for Alpamare, as it allows us to continue trading as before," the report quotes Director Dr Anton Hoefter as saying. "With the new Wellness at Alpamare opening soon, we will be able to offer something new and unique for Scarborough and enhance the attractiveness of the waterpark even further." Concerns about the future of Alpamare surfaced last week when it was revealed that British Gas Trading had brought a winding-up petition against the waterpark, The Scarborough News recounts. That was due to be heard on Jan. 23 but will not take place because of the agreement, the report notes. According to the report, Dr. Hoefter confirmed that the main creditors were British Gas and Benchmark Leisure and that no local suppliers have been affected by the CVA. The attraction has confirmed that the waterpark will not open all year round under restructuring, The Scarborough News adds. Alpamare UK operates a waterpark in Scarborough's North Bay. HOMEBASE: Sandbach Branch Set to Close on April 11 -------------------------------------------------- StokeonTrentLive reports that Homebase has revealed one of its branches is to close. StokeonTrentLive relates that the struggling chain announced last summer that around 40 of its 241 stores would be shutting over the next 16 months -- putting 1,500 jobs at risk. It was part of a rescue deal drawn up to save the 39-year-old retailer from collapsing into administration after it emerged that almost three quarters of branches were losing money, the report says. According to the report, the company voluntary arrangement (CVA) won more than 95 per cent approval from landlords and other creditors, including suppliers such as Crown Paints and Dulux owner Akzo Nobel. The brand -- which still has an outlet in Newcastle -- has now confirmed the Sandbach shop will shut on April 11, StokeonTrentLive discloses citing a CheshireLive report. It was not one of the original stores included on the closure list, the report notes. StokeonTrentLive understands the talks have been taking place with the landlords since the 2018 announcement with the outcome that the current lease will not be renewed. The company is said to be keen to redeploy staff where possible, the report notes. The news comes after the store at Wolstanton Retail Park was also closed last year although that was not part of the nationwide cull, StokeonTrentLive adds. Homebase is a home improvement and garden retailer. It operates 249 stores across the UK and Ireland as at May 31, 2018. HOUSE OF FRASER: Mike Ashley's Truce with Intu Saves Four Stores ---------------------------------------------------------------- Jack Torrance at The Telegraph reports that four House of Fraser stores slated for closure have been saved after Mike Ashley and shopping centre landlord Intu struck a truce following months of fractious negotiations. Mr. Ashley, who owns the department store chain, had threatened to pull all 17 of his retail empire's shops from Intu centres, The Telegraph says. He accused the company of being "unwilling to help retailers save stores and jobs" after it refused to meet his demands for rent cuts, the report relates. However, the two sides have reached an "interim agreement" that will save the shops at Intu's centres in Norwich, Nottingham, Lakeside in Essex and the Metrocentre in Gateshead open and 1,000 jobs, The Telegraph notes. As reported by the Troubled Company Reporter-Europe on Aug. 14, 2018, James Davey at Reuters related that Sports Direct, the British sportswear retailer controlled by tycoon Mike Ashley, snapped up House of Fraser from the department store group's administrators for GBP90 million (US$115 million). Earlier on Aug. 10, House of Fraser appointed Ernst and Young as administrators after talks with investors and creditors failed to find "a solvent solution" for the business, Reuters disclosed. PATISSERIE VALERIE: Owner Taps KPMG as Administrators ----------------------------------------------------- Reuters reports that British cafe chain owner Patisserie Holdings Plc appointed audit firm KPMG as administrators after it was unable to renew its bank facilities in the aftermath of an accounting scandal. The troubled company said it did not have sufficient funding and that its Chairman Luke Johnson extended an unsecured, interest- free loan to ensure that the staff was paid wages for January, according to Reuters. As reported in the Troubled Company Reporter-Latin America on Oct. 15, 2018, Eric Pfanner and David Hellier at Bloomberg News report that Patisserie Holdings Plc Chairman Luke Johnson proposed lending the troubled U.K. cake-shop owner GBP20 million (US$26.3 million) to stave off collapse amid a deepening accounting scandal. The company said in a statement on Oct. 12 the owner of Patisserie Valerie expects to enter into a GBP10 million loan agreement with Mr. Johnson, who also holds a 37% stake, Bloomberg relates. The company, as cited by Bloomberg, said the chairman will also commit to a further GBP10 million bridge loan. PATISSERIE VALERIE: Cafe Chain Collapses Due to Fraud ----------------------------------------------------- Jonathan Eley at The Financial Times reports that Patisserie Valerie, the cafe chain chaired by noted entrepreneur Luke Johnson that was undone by widespread accounting fraud, has crashed into administration after last-ditch talks with banks failed to secure a financial lifeline. The FT relates that the restaurant group said the collapse was a "direct result" of the fraud, which produced accounts showing GBP28 million in cash rather than the GBP9.8 million in net debt that was actually on its books. The irregularities were first revealed in October, but last week the company said the damage was worse than initially feared with "thousands of false entries," the FT relays. "Regrettably the business does not have sufficient funding to meet its liabilities as they fall due," the company said in a stock exchange statement after days of negotiations with its two main lenders, HSBC and Barclays, failed to secure an extension to its banking facilities, according to the FT. In a separate statement KPMG, which will act as administrators, said 70 of the chain's stores and concessions would close immediately, resulting in "a significant number of redundancies," the FT reports. Patisserie Valerie, whose first shop was opened in London's Soho in 1926 by Belgian-born Madame Valerie, employs almost 3,000 staff at cafes in high streets, shopping centres and train stations. It also has concessions in some branches of Debenhams and a supply agreement with supermarket J Sainsbury. "Our intention is to continue trading across the profitable stores, as collectively the brands have a strong presence on the high street and have proven very popular with consumers," the FT quotes Blair Nimmo, joint administrator, as saying. "At the same time, we will be seeking a buyer for the business and are hopeful of a good level of interest." According to the FT, Patisserie Valerie said Mr. Johnson, its executive chairman and a major shareholder, had personally extended an unsecured, interest-free loan "to help ensure that the January wages are paid to all staff working in the ongoing business". Mr Johnson's loan to pay the wages is GBP3 million. Mr. Johnson and his venture capital firm, Risk Capital Partners, acquired a majority stake in Patisserie Valerie from three Italian brothers in 2006, when it had just a handful of sites, the FT recounts. His group built it into a high-flying Aim-listed company selling cake and pastries from more than 200 stores, with a market capitalisation of almost GBP600 million at the time the fraud was uncovered. In October, the company's banking facilities were frozen after a winding-up petition was issued by HM Revenue & Customs against one of its trading subsidiaries, the FT recalls. Finance director Chris Marsh was suspended and later resigned, as did chief executive Paul May a month later. Mr. Marsh was also arrested by the Serious Fraud Office, but released on bail without charge. The FT notes that Mr. Johnson lent Patisserie Valerie GBP20m and organised a further cash injection from equity investors, after which he said the "immediate crisis had passed". Steve Francis, a turnround expert, was recruited with a mandate to restructure the group's operations. He and his team will be retained while KPMG seeks a buyer, the FT notes. The FT adds that professional services group PwC was retained to investigate the chain's book-keeping. The Financial Reporting Council is also looking into the accounting, and the conduct of Grant Thornton, Patisserie Valerie's previous auditor. The company last week warned its profitability was below revised estimates and that the fraud was more widespread than believed, involving "thousands of false entries" in its ledgers, the report says. The shares, suspended at 429p, have not traded since and are now almost certainly worthless. Investors who supported the emergency share issue, priced at 50p, are also unlikely to see any money returned to them, the FT adds. Patisserie Valerie -- https://www.patisserie-valerie.co.uk/ -- operates a chain of cafÇs in the United Kingdom. The chain specialises in hand-made cakes, and its menu includes continental breakfasts, lunches and teas and coffees. As reported in the Troubled Company Reporter-Latin America on Oct. 15, 2018, Eric Pfanner and David Hellier at Bloomberg News report that Patisserie Holdings Plc Chairman Luke Johnson proposed lending the troubled U.K. cake-shop owner GBP20 million (US$26.3 million) to stave off collapse amid a deepening accounting scandal. The company said in a statement on Oct. 12 the owner of Patisserie Valerie expects to enter into a GBP10 million loan agreement with Mr. Johnson, who also holds a 37% stake, Bloomberg relates. The company, as cited by Bloomberg, said the chairman will also commit to a further GBP10 million bridge loan. =============== X X X X X X X X =============== * Brexit Delays Entice Sterling Investors to Rejoin The Market -------------------------------------------------------------- EFE News, citing Dow Jones Newswires, reports that the British pound has become more appealing to some investors as they bet that the probability of extending the Brexit negotiating period, or a second referendum on the United Kingdom's divorce from the European Union, is becoming more likely. Some are also betting on a lower chance of a so-called hard Brexit, where the UK leaves the European Union without an agreement in place, hurting the pound, according to EFE News. * Eurozone Faces 'Game of Political Chicken', Credit Suisse Says ---------------------------------------------------------------- Anna Isaac and Ben Wright at The Telegraph report that the end of quantitative easing will increase the risk of countries defaulting on their debt and may start a "game of political chicken" in the eurozone if Italy needs a Greek-style bailout, Credit Suisse has warned. The Telegraph says government debt levels have climbed since the financial crisis on the back of an unprecedented period of low interest rates. In the years since 2008, central banks have been printing money, known as quantitative easing, but are now winding up those schemes. The global debt burden now stands at 225pc of GDP, the highest level since World War II. The world is awash with $247 trillion of debt, including $63 trillion owed by central governments, The Telegraph 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 * * *