/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/220311.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Friday, March 11, 2022, Vol. 23, No. 45 Headlines B E L A R U S BELARUSBANK: S&P Lowers ICRs to 'CCC/C', On Watch Negative DEVELOPMENT BANK OF BELARUS: S&P Cuts ICR to 'CCC', On Watch Neg. I R E L A N D BOSPHORUS CLO V: Fitch Affirms 'B-' Rating on Class F Notes GRAND HARBOUR 2019-1: Fitch Raises Rating on Class F Notes to 'B' I T A L Y CASTOR SPA: Fitch Gives Final 'B+' Rating to Senior Sec. Notes P O R T U G A L BANCO MONTEPIO: Fitch Alters Outlook on 'B-' LT IDR to Positive R U S S I A RADIO FREE: Moscow Tax Authorities File Involuntary Bankruptcy SOGAZ INSURANCE: S&P Suspends 'CCC+' Issuer Credit Rating [*] RUSSIA: Banks Seek Distressed Buyers of Russian Loans [*] RUSSIA: OKs Steps Towards Nationalizing Assets of Foreign Cos U K R A I N E [*] UKRAINE: IMF Approves US$1.4 Billion of Emergency Funding U N I T E D K I N G D O M CALEDONIAN MODULAR: Goes Into Administration, 200+ Jobs at Risk NORTHERN POWERHOUSE: Everbright Acquires The Queens Hotel SAN LORENZO: Geoff Knowles Buys Business Out of Administration X X X X X X X X [*] BOOK REVIEW: Hospitals, Health and People [*] Fitch: Significant Economic Shock to CIS+ Region on Ukraine War - - - - - ============= B E L A R U S ============= BELARUSBANK: S&P Lowers ICRs to 'CCC/C', On Watch Negative ---------------------------------------------------------- S&P Global Ratings, on March 9, 2022, lowered its long- and short-term issuer credit ratings on JSC Savings Bank Belarusbank and Belagroprombank JSC to 'CCC/C'. The ratings on both banks remain on CreditWatch with negative implications, where they were placed on March 1, 2022. S&P said, "The rating action on the banks follows the lowering of the foreign and local currency sovereign credit ratings on Belarus to 'CCC/C' from 'B/B' on March 4, 2022. We now consider it likely that, absent an unforeseen positive development, Belarus will default on its commercial debt over the next 12 months. We also revised downward our transfer and convertibility assessment on Belarus to 'CCC' from 'B' at the same date. "The downgrade of the two banks reflects our view of mounting economic, balance-of-payments, and financial stability risks following the imposition of strong international sanctions on Belarus, which stem from its involvement in Russia's military intervention against Ukraine. According to independent reports, Belarus has been supporting Russia by allowing it to use Belarusian territory as a staging post and to fire ballistic missiles against Ukraine. In response to Belarus' role in the ongoing conflict, the EU, the U.S., and the U.K., among others, have implemented unprecedented financial and economic sanctions on Belarus. These include measures against two Belarusian commercial banks: Bank Dabrabyt and Belinvestbank. Two other banks -- BelVeb and Sberbank -- are also affected, as they are subsidiaries of Russian parent banks that were sanctioned. "The extent of economic damage to Belarus is difficult to quantify, but we expect it to be very significant. In the past, Russia has provided substantial financial support to Belarus. We believe that current or future restrictions against Russia--which have materially undermined its external liquidity -- will likely restrict its ability and willingness to extend further financial support to Belarus." The increased involvement of Belarus in the Ukraine conflict could lead to more severe sanctions, including the exclusion of some banks from financial messaging system SWIFT (Society for Worldwide Interbank Financial Telecommunication), which could in turn affect the domestic financial sector. In addition, the financial performance of Belarusbank and Belagroprombank is closely tied to that of the sovereign because these banks have relied on support from the government in the past. S&P believes that this will likely substantially increase the default risk of financial institutions in Belarus. CreditWatch S&P said, "The ratings remain on CreditWatch negative to indicate that we could lower them further over the next few weeks. We expect to resolve the CreditWatch placement once we have more clarity on the technical ability and/or willingness of financial institutions to honor their financial obligations in full and on time." Ratings List BELAGROPROMBANK JSC DOWNGRADED TO FROM BELAGROPROMBANK JSC Issuer Credit Rating CCC/Watch Neg/C B/Watch Neg/B BELARUSBANK DOWNGRADED TO FROM BELARUSBANK Issuer Credit Rating CCC/Watch Neg/C B/Watch Neg/B DEVELOPMENT BANK OF BELARUS: S&P Cuts ICR to 'CCC', On Watch Neg. ----------------------------------------------------------------- S&P Global Ratings lowered its long-term foreign and local currency issuer credit ratings on the Development Bank of the Republic of Belarus to 'CCC' from 'B'. At the same time, S&P lowered the short-term ratings to 'C' from 'B'. In addition, S&P placed all these ratings on CreditWatch with negative implications. On March 4, 2022, S&P lowered its sovereign credit ratings on Belarus to 'CCC' from 'B' and placed them on CreditWatch negative. In S&P's view, the fully state-owned Development Bank of the Republic of Belarus (DBRB) has an integral link with the government of Belarus, and it equalizes its ratings on DBRB with those on Belarus. S&P said, "We placed the ratings on CreditWatch negative to indicate that we could lower them further following a similar action on the sovereign or if a default or distressed exchange by the bank appears inevitable. "We expect to resolve the CreditWatch placement over the next few weeks, once we have more clarity on the impact of sanctions on Belarus and on the willingness of the Belarusian government or the bank to honor its debt obligations in full and on time. "The downgrade of DBRB mirrors our rating action on Belarus on March 4, 2022. In our view, international sanctions imposed on Belarus due to its involvement in Russia's military conflict with Ukraine are severe, and we expect them to tighten further. Although the full macroeconomic impact is difficult to quantify at the moment, we expect the sanctions to significantly disrupt the Belarusian economy and create financial stability and balance-of-payments risks. "Historically, DBRB has remained one of the most important state-owned enterprises in the country, implementing a variety of policies and projects on behalf of the government. In our view, the institution has a critical role for and integral link with the government of Belarus. Consequently, we equalize our ratings on DBRB with those on Belarus." DBRB itself is currently under both EU and U.S. sanctions. The sanctions on Belarus have been progressively tightened since the disputed August 2020 presidential election in response to some of the government's actions, including a heavy-handed response to peaceful protests in 2020 and the forced landing in May 2021 of a civilian Ryanair flight to arrest an opposition activist. The sanctions prohibit any dealings by the EU or U.S. entities with any new DBRB debt with a maturity over 90 days. Furthermore, on March 9, 2022, the EU agreed to extend the scope of sanctions applicable to Belarus owing to its involvement in the Ukraine military conflict. Among other measures, the EU has moved to restrict SWIFT services provision to the development bank. The aforementioned measures restrict DBRB's access to international capital markets. Although DBRB largely lost market access earlier following the disputed August 2020 presidential election, the institution planned to at least partially compensate for those developments by issuing bonds in Russia as well as borrowing from Russian financial institutions. In our view, the ability of Russian counterparties to support DBRB's borrowing needs in this way is increasingly questionable, given the mounting economic and financial stability risks in Russia. S&P said, "We also expect that the loan book quality of DBRB could notably deteriorate in the near future. The bank is exposed to a range of sectors within the Belarusian economy, some of which have been directly affected by sanctions. We expect other parts of the loan book to also be affected amid the broader significant deterioration in economic performance in both Belarus and Russia. "As with the Belarusian government, we now believe that absent an unforeseen positive development, it is increasingly likely DBRB could default over the next 12 months." ============= I R E L A N D ============= BOSPHORUS CLO V: Fitch Affirms 'B-' Rating on Class F Notes ----------------------------------------------------------- Fitch Ratings has upgraded Bosphorus CLO V DAC's class D and E notes, while affirming the rest. It has also removed class B to F notes from Under Criteria Observation (UCO). The Outlooks are Stable. DEBT RATING PRIOR ---- ------ ----- Bosphorus CLO V DAC A-1 XS2073812336 LT AAAsf Affirmed AAAsf A-2 XS2082334249 LT AAAsf Affirmed AAAsf B-1 XS2073813060 LT AAsf Affirmed AAsf B-2 XS2073813730 LT AAsf Affirmed AAsf C XS2073814381 LT A+sf Affirmed A+sf D XS2073814977 LT BBBsf Upgrade BBB-sf E XS2073816162 LT BBsf Upgrade BB-sf F XS2073816329 LT B-sf Affirmed B-sf X XS2073812252 LT AAAsf Affirmed AAAsf TRANSACTION SUMMARY Bosphorus CLO V DAC is an arbitrage cash flow collateralised loan obligation (CLO). The portfolio is managed by Cross Ocean Adviser LLP and the transaction reinvestment period will end in June 2024. KEY RATING DRIVERS CLO Criteria Update The rating actions mainly reflect the impact of Fitch's recently updated 'CLOs and Corporate CDOs Rating Criteria' published on 17 September 2021 including the shorter risk horizon incorporated in Fitch's stressed portfolio analysis. The analysis considered modelling results for the current and stressed portfolios based on a trustee report dated 31 January 2022. The rating actions are based on Fitch's updated stressed portfolio analysis, which applied the agency's collateral quality matrix specified in the transaction documentation. The transaction has two Fitch collateral quality matrices based on a top 10 obligor concentration limit of 20%, and fixed-rate obligation limits at 0% and 7.5%. Fitch relied on both matrices in its analysis and applied a haircut of 1.5% to the weighted average recovery rate (WARR) as the calculation per transaction documentation is not in line with Fitch's latest CLO criteria. The Stable Outlook on all rated notes reflects Fitch's expectation of sufficient credit protection to withstand potential deterioration in the credit quality of the portfolio in stress scenarios commensurate with their ratings. Deviation from Model-Implied Ratings: The ratings of the class B-1, B-2, D and E notes are one notch below their respective model-implied ratings. The deviations reflect the length of the remaining reinvestment period until June 2024, during which the portfolio can change significantly, due to reinvestment or negative portfolio migration. Stable Asset Performance: The transaction's metrics indicate stable asset performance. As of the trustee report dated 31 January 2022, the transaction's aggregate collateral balance (including defaulted assets at recovery value) is below target par by 0.35% and apart from marginally failing the Fitch weighted average rating factor (WARF) test, the transaction is passing all other Fitch-related collateral-quality, portfolio-profile and coverage tests. 'B'/'B-' Portfolio: Fitch assesses the average credit quality of the transaction's underlying obligors at the 'B'/'B-' level. The WARF as calculated by the trustee was 33.85, which is slightly above the maximum covenant of 33.75. Fitch calculates the WARF at 25.17 under its updated criteria. High Recovery Expectations: Senior secured obligations comprise 99% of the portfolio. Fitch views the recovery prospects for these assets as more favourable than for second-lien, unsecured and mezzanine assets. Diversified Portfolio: The portfolio is well-diversified across obligors, countries and industries. The top 10 obligor concentration is 17.3%, and no obligor represents more than 1.96% of the portfolio balance as calculated by Fitch. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: -- An increase of the default rate (RDR) at all rating levels by 25% of the mean RDR and a decrease of the recovery rate (RRR) by 25% at all rating levels in the stressed portfolio would result in downgrades of up to four notches, depending on the notes. -- Downgrades may occur if the build-up of the notes' credit enhancement (CE) does not compensate for a larger loss expectation than initially assumed, due to unexpectedly high levels of defaults and portfolio deterioration. Factors that could, individually or collectively, lead to positive rating action/upgrade: -- A reduction of the RDR at all rating levels by 25% of the mean RDR and an increase in the RRR by 25% at all rating levels in the stressed portfolio would result in upgrades of up to five notches, depending on the notes. -- Except for the tranches rated at the highest 'AAAsf', upgrades may occur in case of better-than- expected portfolio credit quality and deal performance that leads to higher CE and excess spread available to cover losses in the remaining portfolio. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. DATA ADEQUACY Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring. The majority of the underlying assets or risk-presenting entities have ratings or credit opinions from Fitch and/or other nationally recognised statistical rating organisations and/or European securities and markets authority-registered rating agencies. Fitch has relied on the practices of the relevant groups within Fitch and/or other rating agencies to assess the asset portfolio information or information on the risk-presenting entities. Overall, and together with any assumptions referred to above, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. GRAND HARBOUR 2019-1: Fitch Raises Rating on Class F Notes to 'B' ----------------------------------------------------------------- Fitch Ratings has upgraded Grand Harbour CLO 2019-1 DAC's class D to F notes, affirmed the class A to C notes, and removed the class B-1 to F notes from Under Criteria Observation (UCO). The Outlooks are Stable Outlooks. DEBT RATING PRIOR ---- ------ ----- Grand Harbour CLO 2019-1 DAC A XS2020626953 LT AAAsf Affirmed AAAsf B-1 XS2020628140 LT AAsf Affirmed AAsf B-2 XS2020629114 LT AAsf Affirmed AAsf C XS2020629460 LT A+sf Affirmed A+sf D XS2020630120 LT BBBsf Upgrade BBB-sf E XS2020630807 LT BBsf Upgrade BB-sf F XS2020652108 LT Bsf Upgrade B-sf TRANSACTION SUMMARY Grand Harbour CLO 2019-1 DAC is a cash flow CLO mostly comprising senior secured obligations. The transaction is actively managed by Fidelity Investments Limited, and will exit its reinvestment period on 15 March 2024. KEY RATING DRIVERS CLO Criteria Update and Cash Flow Modelling: The rating actions mainly reflect the impact of Fitch's recently updated 'CLOs and Corporate CDOs Rating Criteria' published on 17 September 2021, which also included a change in the weighted average rating factors (WARF) as a result of the updated probability of default assumptions. The analysis considered modelling results for the current and stressed portfolios based on the 20 January 2022 trustee report. The rating actions are based on Fitch's updated stressed portfolio analysis, which applied the agency's collateral quality matrix specified in the transaction documentation. The transaction has four Fitch collateral quality matrices based on 15.0% and 26.5% top 10 obligor concentration limits, and 0% and 10% fixed rate obligation limits. Fitch's analysis was based on the two matrices specifying the 15% top 10 obligor concentration limit as the agency considered these as the most relevant, based on current and historical portfolios for this CLO. The Stable Outlook on the class A to F notes reflects Fitch's expectation of sufficient credit protection to withstand potential deterioration in the credit quality of the portfolio in stress scenarios commensurate with their ratings. Deviation from Model-implied Ratings: With the exception of the class A and C notes, the notes' ratings are one notch below their respective model-implied ratings. The deviations reflect the long remaining reinvestment period until March 2024, during which the portfolio can change significantly due to reinvestment or negative portfolio migration. Stable Asset Performance: The transaction's metrics indicate stable asset performance. As of the 20 January 2022 trustee report, the aggregate portfolio amount was 0.64% above the original target par amount. The transaction passed all collateral quality, coverage and portfolio profile tests. Exposure to assets with a Fitch-derived rating of 'CCC+' and below (excluding non-rated assets) is 3.1% as calculated by the trustee. 'B'/'B-' Portfolio: Fitch assesses the average credit quality of the transaction's underlying obligors at the 'B'/'B-' level. The WARF as calculated by the trustee was 32.02, which is below the maximum covenant of 34. Fitch calculates the WARF at 24.66 under the updated criteria. High Recovery Expectations: Senior secured obligations comprise 99.01% of the portfolio. Fitch views the recovery prospects for these assets as more favourable than for second-lien, unsecured and mezzanine assets. Diversified Portfolio: The portfolio is well-diversified across obligors, countries and industries. The top 10 obligor concentration is 16.09%, and no obligor represents more than 1.92% of the portfolio balance as calculated by Fitch. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: -- An increase of the default rate (RDR) at all rating levels by 25% of the mean RDR and a decrease of the recovery rate (RRR) by 25% at all rating levels in the stressed portfolio would result in downgrades of up to three notches, depending on the notes. -- Downgrades may occur if the build-up of the notes' credit enhancement (CE) following amortisation does not compensate for a larger loss expectation than initially assumed, due to unexpectedly high levels of defaults and portfolio deterioration. Factors that could, individually or collectively, lead to positive rating action/upgrade: -- A reduction of the RDR at all rating levels by 25% of the mean RDR and an increase in the RRR by 25% at all rating levels in the stressed portfolio would result in upgrades of up to four notches, depending on the notes. -- Except for the tranches rated at the highest 'AAAsf', upgrades may occur in case of better-than- expected portfolio credit quality and deal performance, and continued amortisation that leads to higher credit enhancement and excess spread available to cover losses in the remaining portfolio. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. DATA ADEQUACY Grand Harbour CLO 2019-1 DAC Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring. The majority of the underlying assets or risk presenting entities have ratings or credit opinions from Fitch and/or other Nationally Recognized Statistical Rating Organizations and/or European Securities and Markets Authority registered rating agencies. Fitch has relied on the practices of the relevant groups within Fitch and/or other rating agencies to assess the asset portfolio information or information on the risk presenting entities. Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action Overall, and together with any assumptions referred to above, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. ========= I T A L Y ========= CASTOR SPA: Fitch Gives Final 'B+' Rating to Senior Sec. Notes -------------------------------------------------------------- Fitch Ratings has assigned Castor S.p.A.'s senior secured notes (SSNs) a final 'B+' rating with a Recovery Rating of 'RR3'. The rating action follows the full implementation of Castor's financial structure. It also follows the receipt of the final financial documentation of the SSNs. Changes to the financial documentation versus the draft previously received include an increase in the margin on the SSNs. The impact of the modification is not material and does not change Fitch's previous rating assessment. KEY RATING DRIVERS Interest Coverage: Despite the slightly higher interest costs, Fitch's interest coverage ratios remain within Fitch's sensitivities for a 'B' Long-Term Issuer Default Rating (IDR). Fitch now expect its EBITDA/interest paid ratio at 2.7x in 2022, improving to around 3.5x by 2024. Fitch forecasts its funds from operations (FFO) interest cover ratio at 2.3x in 2022, rising towards 2.8x by 2024. Recoveries Unchanged: Due to an unchanged capital structure, Fitch's Recovery Rating remains at 'RR3' with 53% recoveries for the SSNs. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- Total debt/EBITDA below 5.5x or FFO gross leverage below 6.0x; -- EBITDA/interest paid sustained above 3.8x or FFO interest coverage sustained above 3.0x; -- Increase in Fitch-defined EBITDA margin, with better-than expected cost efficiency; -- Disciplined approach to M&A and to acquiring new products to enhance margins and pricing power, with limited or no additional debt. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- Failure to reduce total debt/EBITDA to below 7.0x or FFO gross leverage to below 7.5x; -- Cash flow from operations less capex/total debt less than 5%; -- EBITDA/interest paid below 2.5x or FFO interest coverage below 2.0x; -- Business disruptions, including rapid decreases of managed loans in credit management or material pricing power erosion in risk intelligence. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. =============== P O R T U G A L =============== BANCO MONTEPIO: Fitch Alters Outlook on 'B-' LT IDR to Positive --------------------------------------------------------------- Fitch Ratings has revised Caixa Economica Montepio Geral, Caixa economica bancaria, S.A.'s (Banco Montepio) Outlook to Positive from Negative, while affirming the bank's Long-Term Issuer Default Rating (IDR) at 'B-' and Viability Rating (VR) at 'b-'. The Outlook revision reflects significant progress in organically reducing problem assets since end-2019, despite the challenges the pandemic posed to the operating environment in Portugal, and Fitch's expectation that this trend will continue in the near future. The Outlook change also reflects capital ratios being restored above regulatory requirements, even when excluding regulatory forbearance. It also takes into consideration that short-term risks to Portugal's economic prospects have receded sufficiently to allow the outlook on the 'bbb-' operating environment score for domestic banks to be revised to stable from negative. Fitch has withdrawn Banco Montepio's Support Rating of '5' and Support Rating Floor of 'No Floor' as they are no longer relevant to the agency's coverage following the publication of its updated Bank Rating Criteria on 12 November 2021. In line with the updated criteria, Fitch has assigned Banco Montepio a Government Support Rating (GSR) of 'No Support' (ns). KEY RATING DRIVERS IDRS AND VR Banco Montepio's ratings continue to reflect the bank's weaker asset quality than peers', despite a reduction of impaired loans in 2021, resulting in higher levels of problem assets and more vulnerable capitalisation, given high capital encumbrance from unreserved problem assets. The ratings also reflect weak and potentially volatile profitability, given Banco Montepio's moderate franchise. Banco Montepio's VR is one notch below the 'b' implied VR, due to the bank's still vulnerable capitalisation and leverage, which Fitch scores at 'b-'. Banco Montepio's regulatory capital metrics improved in 2021, as its total capital ratio reached 15.1% at end-2021 (13.8% at end-2020), due to good execution of the bank's de-risking plan. This creates a modest buffer above its overall capital requirements of 13.9% in 2021 and 14% in 2022, including combined buffer requirements. Capital buffers remain low compared with domestic and international peers' and relative to the bank's higher risk profile. The bank's fully loaded capital ratios were about 90bp lower at end-2021 than phased-in ratios, due to IFRS9 phase-in. Fitch continues to view Banco Montepio's capitalisation as highly vulnerable to the bank's large stock of unreserved problem assets. Fitch estimates unreserved problem assets (including net impaired loans, net foreclosed assets, investment properties and holdings of restructuring funds) were about 1.05x the bank's fully loaded common equity Tier 1 (CET1) capital at end-2021. This makes capital ratios vulnerable to potential losses from assets-quality shocks. Nevertheless, Fitch expects the bank to continue to implement its de-risking plan, supporting an improvement in its capitalisation. Fitch believes corporate governance has improved, as evident in the bank's continued progress on its recovery plan, notably in branch network reduction and asset-quality clean-up. Banco Montepio's non-performing loans (similar to IFRS9 stage 3 loans) ratio has improved significantly but remains high, at about 8% at end-2021 (pro-forma for the already announced sale of secured impaired loans), 240bp lower than at end-2020, due to active management of its stock of legacy assets. Fitch estimates a problem asset ratio of about 12% when including real-estate foreclosed assets, higher than most southern European banks'. Fitch expects Banco Montepio's impaired loans ratio to continue to decrease in 2022 and to remain below 8% beyond end-2022. Fitch does not expect significant inflows of new impaired loans from loans that were previously under moratorium, as performance to date has been resilient and better than anticipated. Banco Montepio's core operating profitability is weak, driven by high loan impairment charges (LICs), lack of scale and limited business diversification as well as low operating efficiency. Nevertheless, due to lower LICs, the bank managed to post a small profit in 2021, and Fitch estimates operating profit was 0.4% of risk-weighted assets (RWAs) in 2021. Management has been able to deliver on the bank's operating efficiency plan targets (branch closure and staff reduction), which Fitch believes will support a structural improvement in profitability from 2022. Improving profitability will also require normalisation of LICs and franchise development through the roll-out of additional services and more efficient commercial and IT tools. Customer deposits are Banco Montepio's main funding source. Its liquidity profile remains sensitive to changes in creditor sentiment and to the Portuguese operating environment, but has proved fairly stable recently even in a period of stress. Access to wholesale markets is less established and more price-sensitive than peers', but it will be pivotal to the bank meeting its minimum requirement for own funds and eligible liabilities (MREL) within next two or three years. The bank's liquidity was acceptable at end-2021, as it benefited from large targeted longer term refinancing operations drawings, modest upcoming maturities and fairly large holdings of cash and sovereign debt. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: -- Banco Montepio's ratings could be downgraded if an unexpected severe economic setback in Portugal leads to negative financial repercussions on the bank's credit profile, notably a reversal of its improving problem asset trend. This would likely add renewed pressure to the bank's capitalisation. A fully-loaded CET1 ratio below 9.5% or capital encumbrance by unreserved problem assets of around 175%-200% would likely lead to a downgrade, unless Banco Montepio can restore these ratios to current levels or better. -- The ratings could also be under pressure if Banco Montepio returns to being loss-making, despite improved asset quality, which would reflect worse-than-expected structural weaknesses. Factors that could, individually or collectively, lead to positive rating action/upgrade: -- The Positive Outlook on Banco Montepio's Long-Term IDR indicates that an upgrade is likely in the medium term, notably if the bank continues to execute its restructuring plan in line with Fitch's expectations, thus improving its capital position. Reduced capital encumbrance from net impaired loans and foreclosed real-estate assets to 80%-90% of fully-loaded CET1 capital, driven by a sustained reduction in the problem assets ratio to close to 10%, while maintaining capital ratios at least at current levels is the most likely trigger for an upgrade. -- A longer record of improved profitability with an operating profit consistently above 0.25% of RWAs would also be positive for the banks' ratings. OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS DEPOSIT RATINGS Banco Montepio's long-term deposit ratings of 'B' is one notch above the Long-Term IDR, reflecting the deposits' lower vulnerability to default than senior debt, given Fitch's expectation that the bank would be resolved in a manner that protects depositors if it fails, and also because of full depositor preference in Portugal. Banco Montepio will be subject to MREL, although its final requirements have not yet been made public. The uplift to deposit rating above the Long-Term IDR reflects Fitch's expectation that Banco Montepio will build up its MREL buffer over the next 12-18 months. SENIOR PREFERRED AND SENIOR NON-PREFERRED DEBT The senior preferred debt and senior non-preferred debt ratings are notched down twice from the bank's IDR at 'CCC' and have 'RR6' Recovery Ratings. This is because of full depositor preference in Portugal and the bank's very thin senior and subordinated debt buffers relative to net problem assets, which remains large relative to the bank's capital base. This means that losses for senior creditors would likely be very large in a default. The short-term senior preferred debt rating of 'B' is in line with Banco Montepio's Short-Term IDR because short-term bank issue ratings incorporate only Fitch's assessment of the default risk on the instrument and do not factor in recovery prospects. SUBORDINATED DEBT Banco Montepio's subordinated notes' 'CCC' long-term ratings are notched down twice from the VR, in line with Fitch's baseline notching for subordinated Tier 2 debt. The notching reflects the notes' poor recovery prospects ('RR6' Recovery Rating) if the bank becomes non-viable. Fitch does not apply additional notching for incremental non-performance risk relative to the VR since there is no coupon flexibility included in the notes' terms and conditions. GSR Banco Montepio's 'ns' GSR reflects Fitch's view that although external extraordinary sovereign support is possible it cannot be relied upon. Senior creditors can no longer expect to receive full extraordinary support from the government in the event that the bank becomes non-viable. The EU's Bank Recovery and Resolution Directive and the Single Resolution Mechanism for eurozone banks provide a framework for resolving banks that requires senior creditors participating in losses, if necessary, instead of or ahead of a bank receiving sovereign support. OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: -- The long-term deposit rating could be downgraded if the bank's Long-Term IDR is downgraded or if Fitch no longer expects Banco Montepio to be able to build its MREL buffer over time with more junior instruments. -- The senior preferred and senior non-preferred debt ratings could be downgraded if Banco Montepio's Long-Term IDR is downgraded. -- The subordinated debt rating could be downgraded if the bank's VR is downgraded. Factors that could, individually or collectively, lead to positive rating action/upgrade: -- The senior preferred and senior non-preferred debt ratings could be upgraded if Banco Montepio's Long-Term IDR is upgraded or if the amount of senior non-preferred and subordinated liabilities issued and maintained by Banco Montepio increases while the bank continues to work out its legacy problem assets. This is because in a resolution, losses could be spread over a larger debt layer resulting in smaller losses and higher recoveries for senior bondholders. -- The long-term deposit rating could be upgraded if the bank's Long-Term IDR is upgraded. -- The subordinated debt rating could be upgraded if the bank's VR is upgraded. -- An upward revision of the GSR would be contingent on a positive change in the sovereign's propensity to support the bank. In Fitch's view, this is highly unlikely, although not impossible. VR ADJUSTMENTS The business profile score of 'b+' is below the 'bb' category implied score, due to the following adjustment reason: business model (negative). The capitalisation & leverage score of 'b-' is below the 'bb' category implied score, due to the following adjustment reason: reserve coverage and asset valuation (negative). The funding & liquidity score of 'bb-' is below the 'bbb' category implied score, due to the following adjustment reason: non-deposit funding (negative). BEST/WORST CASE RATING SCENARIO International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. ESG CONSIDERATIONS Banco Montepio has an ESG Relevance Score of '4' for governance structure, reflecting negative implication on ratings from weaker corporate governance than those of its domestic peers, although the bank has been making progress. Alleged disagreements between Banco Montepio's previous management team and the bank's majority shareholder, MGAM, led to the nomination and appointment of a new management team, within a new governance framework, since March 2018. The stabilisation of the bank's management and board of directors took longer than expected and was completed early 2020. Fitch believes this protracted process had weighed on the bank's strategic execution until end-2020. Banco Montepio's governance structure is relevant to the bank's ratings in conjunction with other factors. Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. =========== R U S S I A =========== RADIO FREE: Moscow Tax Authorities File Involuntary Bankruptcy -------------------------------------------------------------- Alexander Gladstone at The Wall Street Journal reports that Radio Free Europe/Radio Liberty has suspended its operations in Russia after local tax authorities in Moscow initiated bankruptcy proceedings against its Russian entity. According to the Journal, RFE/RL, a U.S. government-funded organization known for broadcasting uncensored news during the Cold War throughout the Soviet Union and Eastern Bloc countries, said that the involuntary filing was part of a series of "Kremlin attacks" that has intensified since Russian forces began their invasion of Ukraine. SOGAZ INSURANCE: S&P Suspends 'CCC+' Issuer Credit Rating --------------------------------------------------------- S&P Global Ratings, on March 9, 2022, suspended the 'CCC+' issuer credit and financial strength ratings on Sogaz Insurance. The Council of the European Union introduced asset freeze measures against Sogaz Insurance, among other entities, on Feb. 28, 2022. S&P said, "We suspended our ratings on Sogaz Insurance because the company has been included on the European Union's asset freeze list. We will consider the suspension status of the ratings on Sogaz and might reinstate them if the freeze is lifted, all else being equal. "On March 7, 2022, we downgraded Sogaz Insurance to 'CCC+' and placed the ratings on CreditWatch developing." [*] RUSSIA: Banks Seek Distressed Buyers of Russian Loans --------------------------------------------------------- Davide Barbuscia and Yoruk Bahceli at Reuters report that banks are having conversations with potential buyers on how to get rid of their exposure to Russian corporate loans, but sanctions fears and pricing uncertainty are limiting trading activity and the ability of buyers to act, several banking sources said. According to Reuters, two bankers said punishing Western sanctions on Moscow in the aftermath of its invasion of Ukraine have prompted some distressed debt buyers to approach banks holding Russian loans to sound out their appetite to potentially sell that exposure at a discount. Another banker said he had an opportunity to buy some Russian companies' loans but dismissed the offer because of fears that more sanctions could further limit the ability to recover value, Reuters notes. The discussions, though tentative, highlight foreign banks' uncertainty on how to manage their exposure to Russia, which according to Bank for International Settlements data is to the tune of US$120 billion, Reuters states. According to Reuters, one of the sources said he was approached by distressed debt desks at two U.S. banks last week to discuss any potential interest in selling loans, but he said he was sceptical talks would lead anywhere. "I think they might say they're interested, it's exciting for distressed markets, but I think we're some way off from seeing any real liquidity," Reuters quotes the banker as saying, speaking on condition of anonymity as the talks are private. Global banks have experience with sanctions but the curbs on Russia are unmatched in their scale, speed and complexity and may yet grow, prompting banks to adopt extreme caution in all of their dealings involving Russian entities and assets, Reuters discloses. A loan banker at a U.S. lender said that while there had been some talks on transacting Russian bank debt in the secondary market, activity was limited also because of lack of clarity on how any deal would be settled, Reuters notes. In addition to sanctions risk, activity is further constrained because it is difficult to put a price on Russian assets, as some hope drops are temporary and prefer to hold tight rather than sell at huge discounts, some sources said, Reuters relays. According to Reuters, the discussions are not limited to bank loans: funds specialising in distressed debt have also been looking at buying Russian bonds, said a lawyer in London who said his firm was contacted by funds looking at such trades. [*] RUSSIA: OKs Steps Towards Nationalizing Assets of Foreign Cos ----------------------------------------------------------------- Reuters reports that Russia's ruling party, United Russia, said on March 9 that a government commission had approved the first step towards nationalising assets of foreign firms that leave the country in the wake of economic sanctions over Ukraine. According to Reuters, United Russia added in a statement on the Telegram messaging app that the commission on lawmaking activity had supported a bill allowing for firms more than 25% owned by foreigners from "unfriendly states" to be put into external administration. "This will prevent bankruptcy and save jobs," Reuters quotes United Russia as saying. United Russia said according to the proposed bill companies who had announced they were leaving Russia could refuse to go into administration if within five days they resumed activities or sold shares, providing that the business and employees remained, Reuters relates. It added otherwise, a court would appoint a temporary administration for three months, after which the shares of the new organisation would be put up for auction and the old one would be liquidated, Reuters notes. ============= U K R A I N E ============= [*] UKRAINE: IMF Approves US$1.4 Billion of Emergency Funding ------------------------------------------------------------- BBC News reports that the International Monetary Fund (IMF) has approved US$1.4 billion (GBP1.1 billion) of emergency funding for Ukraine, as it fights against a Russian invasion. It comes as the IMF predicts Ukraine will see a deep recession this year, BBC News states. More than 2 million people are estimated to have left the country since the war started two weeks ago, BBC News discloses. Earlier this week, the World Bank approved a US$732 million financial package for Ukraine and is planning more economic assistance for the coming months, BBC News relates. "The Russian military invasion of Ukraine has been responsible for a massive humanitarian and economic crisis," BBC News quotes IMF managing director Kristalina Georgieva as saying in a statement. Ms. Georgieva, as cited by BBC News, said the money was aimed to meet the country's urgent spending needs and help ease the huge economic impact of the war. "The tragic loss of life, huge refugee flows, and immense destruction of infrastructure and productive capacity is causing severe human suffering and will lead to a deep recession this year. Financing needs are large, urgent, and could rise significantly as the war continues," she added. The funds will be disbursed under IMF's Rapid Financing Instrument, BBC News states. This means it will largely come without conditions that are usually placed on borrower countries, according to BBC News. The IMF financing comes on top of a US$723 million World Bank economic package, which was announced earlier this week, BBC News notes. That package was made up of grants and loans, including a US$100 million pledge from the UK, BBC News discloses. The World Bank said it was continuing to work on a $3 billion package of support for the coming months, according to BBC News. It also promised extra help for neighbouring countries that are taking in the estimated 2 million refugees -- who are mostly women, children and the elderly -- fleeing Ukraine. =========================== U N I T E D K I N G D O M =========================== CALEDONIAN MODULAR: Goes Into Administration, 200+ Jobs at Risk --------------------------------------------------------------- Gregg Pitcher at Construction News reports that Midlands-based contractor Caledonian Modular has collapsed, leaving more than 200 jobs at risk. The offsite manufacturing specialist, which had a turnover of GBP45.3 million in its most recent published accounts, gave notice on Companies House on March 10 that it had entered administration, Construction News relates. NORTHERN POWERHOUSE: Everbright Acquires The Queens Hotel --------------------------------------------------------- Owen Hughes at BusinessLive reports that the buyer of one of Llandudno's biggest seafront hotels has been revealed -- with a major investment in the site now planned. The Queens Hotel has been closed since March 2020 after earlier falling into administration following the collapse of Northern Powerhouse Developments(NPD), run by Gavin Woodhouse, BusinessLive relates. He is now being investigated by the Serious Fraud Office, BusinessLive discloses. The hotel was one of four North Wales sites that were part of the NPD group -- alongside Llandudno Bay and Belmont in Llandudno and Caer Rhun Hall in the Conwy Valley, BusinessLive notes. To fund the scheme, people invested in 125 year leases on individual rooms at the hotels, BusinessLive states. Attempts to sell the sites had been complicated by these leases attached to individual rooms at the hotels but last year, Everbright Hotels bought the Belmont and Llandudno Bay in a deal with administrators Kroll, BusinessLive recounts. The Belmont has now reopened. The Queens Hotel was due to be auctioned by Allsop last month with a guide price of GBP200,000 to GBP250,000 along with the Queens Lodge (guide price GBP50,000 - GBP100,000) but was sold ahead of that auction, according to BusinessLive. Now Everbright has been confirmed as the buyer, BusinessLive discloses. They say a major investment will now take place, according to BusinessLive. Leaseholders have the option to relinquish their leases but at a fraction of their original investment with NPD -- or can retain the lease, BusinessLive states. The Queens Hotel Leaseholders Committee (QHLC), a group set up to try and resolve the situation with the hotel and lodge, warned keeping the leases could mean extra costs for leaseholders, BusinessLive discloses. According to BusinessLive, a spokesman for the QHLC said: "We formed the QHLC in September 2021 with a view to finding the best solution to a situation of a hotel and lodge that had been in administration for over two years since the collapse of the Woodhouse companies. "We represented 59 out of 65 leaseholders and kept them updated with our findings at all times. When an offer for the leases was made in January 2022, it was put to all leaseholders with the majority accepting the offer. QHLC added that the decision to accept or decline an offer for an individual lease remained with each leaseholder, BusinessLive notes. SAN LORENZO: Geoff Knowles Buys Business Out of Administration -------------------------------------------------------------- Tom Keighley at ChronicleLive reports that the new owner of long-established Gosforth restaurant San Lorenzo says he is hoping to restore its glory days after saving it from administration. According to ChronicleLive, the restaurant's parent company Lorenzo (North East) has gone into administration, causing the closure of its Washington site. But the Gosforth restaurant and a former Pizza Express which is undergoing refurbishment have been bought by barrister and long-term customer Geoff Knowles, ChronicleLive relates. The move saves 15 jobs at the site, ChronicleLive discloses. The Lounge is expected to open next week, subject to licensing paperwork, ChronicleLive states. Last week, business recovery firm FRP Advisory was appointed as administrators to Lorenzo (North East) Limited, the company which ran both the Gosforth and Washington restaurants, ChronicleLive recounts. FRP says the business had encountered difficulties as a result of Covid restrictions hampering trade and staffing challenges, including the ability to recruit and retain workers -- a problem reported across the hospitality industry, ChronicleLive states. =============== X X X X X X X X =============== [*] BOOK REVIEW: Hospitals, Health and People --------------------------------------------- Author: Albert W. Snoke, M.D. Publisher: Beard Books Softcover: 232 pages List Price: $34.95 Order your personal copy today at http://www.beardbooks.com/beardbooks/hospitals_health_and_people.html Hospitals, Health and People is an interesting and very readable account of the career of a hospital administrator and physician from the 1930's through the 1980's, the formative years of today's health care system. Although much has changed in hospital administration and health care since the book was first published in 1987, Dr. Snoke's discussion of the evolution of the modern hospital provides a unique and very valuable perspective for readers who wish to better understand the forces at work in our current health care system. The first half of Hospitals, Health and People is devoted to the functional parts of the hospital system, as observed by Dr. Snoke between the late 1930's through 1969, when he served first as assistant director of the Strong Memorial Hospital in Rochester, New York, and then as the director of the Grace-New Haven Hospital in Connecticut. In these first chapters, Dr. Snoke examines the evolution and institutionalization of a number of aspects of the hospital system, including the financial and community responsibilities of the hospital administrator, education and training in hospital administration, the role of the governing board of a hospital, the dynamics between the hospital administrator and the medical staff, and the unique role of the teaching hospital. The importance of Hospitals, Health and People for today's readers is due in large part to the author's pivotal role in creating the modern-day hospital. Dr. Snoke and others in similar positions played a large part in advocating or forcing change in our hospital system, particularly in recognizing the importance of the nursing profession and the contributions of non-physician professionals, such as psychologists, hearing and speech specialists, and social workers, to the overall care of the patient. Throughout the first chapters, there are also many observations on the factors that are contributing to today's cost of care. Malpractice is just one example. According to Dr. Snoke, "malpractice premiums were negligible in the 1950's and 1960's. In 1970, Yale-New Haven's annual malpractice premiums had mounted to about $150,000." By the time of the first publication of the book, the hospital's premiums were costing about $10 million a year. In the second half of Hospitals, Health and People, Dr. Snoke addresses the national health care system as we've come to know it, including insurance and cost containment; the role of the government in health care; health care for the elderly; home health care; and the changing role of ethics in health care. It is particularly interesting to note the role that Senator Wilbur Mills from Arkansas played in the allocation of costs of hospital-based specialty components under Part B rather than Part A of the Medicare bill. Dr. Snoke comments: "This was considered a great victory by the hospital-based specialists. I was disappointed because I knew it would cause confusion in working relationships between hospitals and specialists and among patients covered by Medicare. I was also concerned about potential cost increases. My fears were realized. Not only have health costs increased in certain areas more than anticipated, but confusion is rampant among the elderly patients and their families, as well as in hospital business offices and among physicians' secretaries." This aspect of Medicare caused such confusion that Congress amended Medicare in 1967 to provide that the professional components of radiological and pathological in-hospital services be reimbursed as if they were hospital services under Part A rather than part of the co-payment provisions of Part B. At the start of his book, Dr. Snoke refers to a small statue, Discharged Cured, which was given to him in the late 1940's by a fellow physician, Dr. Jack Masur. Dr. Snoke explains the significance the statue held for him throughout his professional career by quoting from an article by Dr. Masur: "The whole question of the responsibility of the physician, of the hospital, of the health agency, brings vividly to mind a small statue which I saw a great many years ago.it is a pathetic little figure of a man, coat collar turned up and shoulders hunched against the chill winds, clutching his belongings in a paper bag-shaking, tremulous, discouraged. He's clearly unfit for work-no employer would dare to take a chance on hiring him. You know that he will need much more help before he can face the world with shoulders back and confidence in himself. The statuette epitomizes the task of medical rehabilitation: to bridge the gap between the sick and a job." It is clear that Dr. Snoke devoted his life to exactly that purpose. Although there is much to criticize in our current healthcare system, the wellness concept that we expect and accept today as part of our medical care was almost nonexistent when Dr. Snoke began his career in the 1930's. Throughout his 50 years in hospital administration, Dr. Snoke frequently had to focus on the big picture and the bottom line. He never forgot the importance of Discharged Cured, however, and his book provides us with a great appreciation of how compassionate administrators such as Dr. Snoke have contributed to the state of patient care today. Albert Waldo Snoke was director of the Grace-New Haven Hospital in New Haven, Connecticut from 1946 until 1969. In New Haven, Dr. Snoke also taught hospital administration at Yale University and oversaw the development of the Yale-New Haven Hospital, serving as its executive director from 1965-1968. From 1969-1973, Dr. Snoke worked in Illinois as coordinator of health services in the Office of the Governor and later as acting executive director of the Illinois Comprehensive State Health Planning Agency. Dr. Snoke died in April 1988. [*] Fitch: Significant Economic Shock to CIS+ Region on Ukraine War ------------------------------------------------------------------- The war in Ukraine and Western sanctions against Russia are significant shocks for CIS+ sovereigns, Fitch Ratings says. Direct exposures to Russia's economy and contagion channels vary, but economic spillovers will be material across the region. Uncertainty over the course of the conflict and the ultimate scope and duration of sanctions leads to uncertainty about the magnitude of disruption to intra-regional trade and financial flows as well as transport and logistics links. But the severity of the sanctions already announced make it inevitable Russia's economy will contract in 2022, putting pressure on CIS+ economies through trade, remittances and tourism channels. Belarus is most exposed to Russia, which accounted for around 40% of its exports and 50% of its imports in 2021. Close economic and financial links were reflected in Fitch's recent downgrade of Belarus to 'CCC', combined with new sanctions on Belarus and the possibility of additional measures. Apart from Belarus, Russia and Ukraine, Fitch has not taken rating actions on other CIS+ sovereigns since the war began. Exchange-rate flexibility is a shock absorber for most of them, but currency weakness adds to inflation (as will higher food prices) and aggravates the impact from the generally high foreign-currency component of government debt and deposit dollarisation. Outside Belarus, near-term external financing risks are mitigated by large external buffers (Kazakhstan, Turkmenistan, Azerbaijan and Uzbekistan) and multilateral support (Georgia and Armenia). Energy and gold producers should benefit from higher prices, but Kazakhstan is highly reliant on Russian infrastructure, and Turkmenistan's exports are sold under long-term contracts. CIS+ governments have criticised recent Russian actions without joining the sanctions regime and some may find it a challenge to balance maintaining existing political ties with Russia against external economic pressures. Georgia has applied for EU membership. The CIS+ regions include: Belarus Armenia Azerbaijan Turkmenistan Georgia Kazakhstan Uzbekistan, Republic of ********* 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 2022. 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 * * *