/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/100204.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, February 4, 2010, Vol. 11, No. 024 Headlines B E L G I U M KBC GROEP: To Sell Unprofitable Unit in Japan G E R M A N Y SPRINGER SCIENCE+BUSINESS: S&P Raises Corp. Credit Rating to 'B' I R E L A N D COMPANY K: Creditors Meeting Set for February 15 EIRLES TWO: S&P Withdraws 'CCC-' Rating on US$30 Mil. Notes EIRLES TWO: S&P Downgrades Rating on US$150 Mil. Notes to 'D' GALVINS WHOLESALE: Diageo Seeks EUR3.2 Mln Summary Judgment Orders HARTOPP INVESTMENTS: Appoints Kieran Wallace as Receiver HOUSE OF EUROPE: S&P Junks Rating on Class B Notes From 'BB-' M.T.N RYANS: Creditors Meeting Set for February 15 O'HERLIHY INVESTMENTS: Creditors Meeting Set for February 15 WESTILE LIMITED: Creditors Meeting Set for February 16 K A Z A K H S T A N * ALMATY: Fitch Affirms 'BB+' Long-Term Currency Ratings L U X E M B O U R G LYONDELL CHEMICAL: U.S. Plan Confirmation Hearing Set for April 15 N E T H E R L A N D S ING CAPITAL: Moody's Keeps B1 Trust Preferred Securities Rating INTERXION HOLDING: Moody's Assigns 'B1' Corporate Family Rating INTERXION HOLDING: S&P Assigns 'B-' Corporate Credit Rating R O M A N I A * ROMANIA: Fitch Changes Outlook to Stable; Affirms 'BB+' Rating R U S S I A AEROFLOT OAO: Russia Approves Merger with Six Small State Airlines ALROSA CO: S&P Reinstates 'B+' Long-Term Corporate Credit Rating S P A I N SANTANDER EMPRESAS: Moody's Junks Ratings on Two Classes of Notes S W E D E N GENERAL MOTORS: Spyker Confident on Saab Deal; Funding In Place U N I T E D K I N G D O M BENGAL BRASSERIE: In Administration; Lismore & Co. On Board BRITISH AIRWAYS: Union Renews High Court Action Over Work Changes CABLE & WIRELESS: Moody's Raises Corporate Family Rating to 'Ba2' CABLE & WIRELESS: S&P Retains CreditWatch Positive on 'BB-' Rating DIAMONDS & PEARLS: Files Notice to Appoint Administrator EMI GROUP: Terra Firma Founder Faces Dilemma if Citi Case Is Moved LEEANNES LIMITED: Country Collection Buys Assets; 15 Jobs Secured MADOFF SECURITIES: SFO Won't Take Action; Evidence Insufficient MANCHESTER UNITED: First Bond Issue Performed Poorly READER'S DIGEST: Delays Emergence on UK Pension Issue SCARLET TELEVISION: David Hughes Appointed as Administrator VANTIS PLC: Ernst & Young Casts Doubt Over SIB Liquidation * UK: Firms Braced for Bumpy Ride Despite Drop in Profit Warnings * UK: Financial Uncertainty Curbs Premiership Spending, KPMG Says X X X X X X X X * Global Firms Still Nervous About Recovery, E&Y Says * Upcoming Meetings, Conferences and Seminars ********* ============= B E L G I U M ============= KBC GROEP: To Sell Unprofitable Unit in Japan --------------------------------------------- KBC Groep NV may sell its unprofitable brokerage unit in Japan, Bloomberg News reports citing two people with knowledge of the matter. Bloomberg's sources said KBC is in advanced talks with several potential buyers to sell KBC Securities Japan, which employs about 100 equity research and trading staff in Tokyo. The unit has posted losses for the past three fiscal years in an industry that cut staff in Japan by 6 percent in the 12 months ended Dec. 31, Bloomberg relates citing research by Japan Securities Dealers Association and data filed by KBC with regulators in Tokyo. Kiyomi Ando, a Tokyo-based spokeswoman for KBC, said possible bidders for the KBC business could include the brokerage units of large Japanese banks, or lenders from overseas that are expanding equity research in Japan. Restructuring Agreement As reported by the Troubled Company Reporter-Europe on Nov. 20, 2009, The Financial Times said the KBC Groep reached an agreement with the European Commission on its restructuring. According to the FT, KBC will slim its balance sheet by nearly a fifth and reimburse EUR7 billion (US$10.5 billion) of state aid by 2013 through the winding down of its businesses and through asset disposals. The FT noted that while KBC will sell its merchant banking and private banking arms, float part of its Czech banking operation and forgo any acquisitions in the medium term, the group will retain banking and insurance operations in its core markets. The KBC restructuring will cut the bank's risk-weighted assets by 25% and entail no capital increase, the FT said. The group will pay back the EUR7 billion of state aid it received from the Belgian and Flemish governments through retained earnings, and by paying no dividend until 2011 at the earliest, the FT disclosed. About KBC Groep NV Headquartered in Brussels, Belgium, KBC Groep NV a.k.a KBC Group NV (EBR:KBC) -- http://www.kbc.com/-- is engaged in banking, insurance and wealth management for private banking clients, retail customers and medium-sized enterprises. It has expertise in asset management and the financial markets. The company's activity is composed of five divisions: the Belgium, the Central & Eastern Europe and Russia (CEER), the Merchant Banking, the European Private Banking, and the Shared Services & Operations business units. Each of these units has its own management committee and oversees both the banking and the insurance activities. The company is active in Belgium and in other selected countries, including Hungary, Poland, Slovakia, Czech Republic, Bulgaria, Romania, Serbia and Russia. KBC Groep NV also operates to a less extent in the United States and in Southeast Asia. The company has three subsidiaries: KBC Bank, KBC Insurance and KBL European Private Bankers. ============= G E R M A N Y ============= SPRINGER SCIENCE+BUSINESS: S&P Raises Corp. Credit Rating to 'B' ---------------------------------------------------------------- Standard & Poor's Ratings Services said that it raised to 'B' from 'CCC+' its long-term corporate credit rating on Springer Science+Business Media S.A., the world's second-largest publisher of science, technology, and medicine journals by title and the largest publisher of STM books. S&P removed the rating from CreditWatch with positive implications, where it was placed on Dec. 18, 2009. The outlook is stable. At the same time, S&P assigned a debt rating of 'B+' to the new EUR1,145 million senior secured facilities and the EUR125 million senior secured revolving credit facility borrowed by Springer and various group entities. This rating is one notch above the corporate credit rating on Springer. The recovery rating on these instruments is '2,' reflecting Standard & Poor's expectation of substantial (70%-90%) recovery in the event of a payment default. In addition, S&P has assigned a debt rating of 'CCC+' to the new EUR454.4 million mezzanine facilities borrowed by Springer Science+Business Media Finance Sarl (not rated) and guaranteed by Springer. This rating is two notches below the corporate credit rating on Springer. The recovery rating on this instrument is '6,' reflecting Standard & Poor's expectation of negligible (0%- 10%) recovery in the event of a payment default. These rating actions follow the closure of the sale of Springer by Cinven and Candover to funds managed by EQT and GIC. Competition authorities in the US and Europe have approved the transfer. Springer has also confirmed that it has received an injection of new equity of about EUR450 million and completion of the new financing package. "The rating actions reflect S&P's assessment of the positive implications on Springer's liquidity profile of the completed refinancing," said Standard & Poor's credit analyst Raam Ratnam. "This alleviates the group's demanding debt maturity profile and has, in S&P's view, resulted in adequate liquidity and headroom under the group's financial maintenance covenants. Furthermore, S&P believes that Springer will be able to improve its free operating cash flow in the near to medium term, which should provide continued support to liquidity." The corporate credit rating is constrained by Springer's financial leverage, which S&P views as high. In addition Springer faces the challenges of growing its revenue base amid budgetary constraints for libraries and other institutional customers. These constraints have led to pressure for lower prices and the sale of more content on an add-on basis. However, the rating should continue to benefit from the group's well-established and sustainable market position in the fragmented STM publishing market, complemented by its strong positions in eBooks, open access, and other online products. The group has a track record of providing customers with high quality, value- added, and integrated content for which there is no authoritative substitute. Furthermore, the group benefits from high revenue and cash flow visibility as a result of its subscription-based business model (subscriptions account for about 94% of journal revenues and 30% of the professional publishing division's revenues) with minimal working capital needs and high cash conversion. "The stable outlook reflects S&P's view that Springer is likely to generate improved free cash flow over 2010 and thereby improve its liquidity position and net senior leverage credit measures," said Mr. Ratnam. S&P could consider a downgrade if the company's EBITDA generation were to decline materially in the coming quarters or if the company were to generate negative free cash flow. A significantly better-than-expected business and financial performance in the currently difficult environment could support a positive rating action. An upgrade would have to be supported, however, by more visibility on the group's long-term shareholder remuneration policy and capital structure. ============= I R E L A N D ============= COMPANY K: Creditors Meeting Set for February 15 ------------------------------------------------ A meeting of creditors of Company K Limited will take place at 9:00 a.m. on February 15, 2010, at: Sunset Ridge Hotel Kileens Blarney Co Cork Ireland The registered address of the company is at: Limerick Road Mallow Co Cork Ireland EIRLES TWO: S&P Withdraws 'CCC-' Rating on US$30 Mil. Notes ----------------------------------------------------------- Standard & Poor's Ratings Services withdrew its 'CCC-' credit rating on Eirles Two Ltd.'s US$30 million variable-rate portfolio credit-linked series 308 notes. The withdrawal follows the arranger's recent notification to us that the notes were fully repurchased. EIRLES TWO: S&P Downgrades Rating on US$150 Mil. Notes to 'D' ------------------------------------------------------------- Standard & Poor's Ratings Services lowered its credit rating to 'D' from 'CCC-' on Eirles Two Ltd.'s US$150 million floating-rate portfolio credit-linked series 300 notes. S&P then withdrew the rating on the notes. The downgrade to 'D' follows confirmation that losses from credit events in the underlying portfolio exceeded the available credit enhancement. This means that on the early termination date the noteholders suffered a principal loss. S&P subsequently withdrew the rating assigned to these notes, having recently received confirmation that the transaction redeemed early. GALVINS WHOLESALE: Diageo Seeks EUR3.2 Mln Summary Judgment Orders ------------------------------------------------------------------ Mary Carolan at The Irish Times reports that Diageo Ireland is seeking EUR3.2 million in summary judgment orders against John Galvin on the back of a personal guarantee. According to the report, judgment in the Commercial Court is sought over guarantees given by Mr. Galvin in May 2009, as a director of Galvins Wholesale Ltd., over debts of that company in an effort to ensure Diageo continued to provide credit to it. The report recalls Galvins Wholesale was under court protection but that examinership failed and a liquidator was subsequently appointed in November 2009. Diageo claims that Mr. Galvin is liable under his guarantee for EUR3.2 million debts of the company and demanded payment of that amount last December, the report recounts. The report relates Gary McCarthy, on behalf of Mr. Galvin, said it would be argued that the Diageo claim did not include various discounts and should be for about half the amount claimed. Mr. Justice Kelly said he was satisfied counsel had outlined a statable defense and adjourned the matter to March 4, the report notes. Galvins Wholesale Ltd. is a drinks importer and distributor in Ireland. The company employs 65 people. HARTOPP INVESTMENTS: Appoints Kieran Wallace as Receiver -------------------------------------------------------- Kieran Wallace of KPMG was appointed receiver and manager of Hartopp Investments Limited by Anglo Irish Bank Corporation Limited on January 29, 2010. The registered address of Hartopp Investments Limited is at: Unit 33 Web Works Eglinton Street Cork Ireland HOUSE OF EUROPE: S&P Junks Rating on Class B Notes From 'BB-' ------------------------------------------------------------- Standard & Poor's Ratings Services lowered its credit ratings on House of Europe Funding V PLC's class A1, A2, A3a, A3b, and B notes. At the same time, S&P affirmed the ratings on the class C, D, E1 and E2 notes. The rating actions follow S&P's assessment of the deterioration in the credit quality of the underlying portfolio. While the transaction has not been exposed to a further increase in the amount of assets rated 'CC' and 'D' since S&P's last review in July, 2009, there has been an increase in the proportion of assets in the pool rated 'CCC+' and lower. According to the latest available trustee report of January 2010, the transaction continues to fail its overcollateralization tests and the issuer has continued to pay down the senior notes in an attempt to bring the tests back into compliance. While both interest and principal proceeds were applied to reducing the notional of the senior notes on the November payment date, reported overcollateralization ratios have nevertheless deteriorated. This is mainly due to discounts applied to the principal balance of assets rated 'BB+' and lower in the calculation of the ratio. S&P's analysis indicates that assets rated 'CCC+' and below now account for about 14% of the portfolio (up from 7.8% in June 2009). In addition, about 12% of the portfolio is currently on CreditWatch negative. On April 6, 2009, S&P published revised assumptions governing structured finance assets with ratings on CreditWatch held within collateralized debt obligation transactions. Under these revised assumptions, ratings on CreditWatch are adjusted downward by at least three notches. The deteriorating credit quality of the underlying portfolio increased the scenario default rate to an extent where, in S&P's view, the credit enhancement on classes A1, A2, A3a, A3b, and B is no longer sufficient to maintain their previous ratings. S&P has lowered the ratings assigned to classes A1, A2, A3a, A3b, and B to levels which, in its view, reflect the current likelihood of repayment to noteholders. S&P has affirmed its 'CC' rating on classes C, D, E1, and E2, as S&P still believe that ultimate repayment of these notes is unlikely. In accordance with the transaction documents, the issuer deferred interest payments on these notes until overcollateralization ratios are brought into compliance with the trigger levels. S&P's analysis indicates that interest payments to these classes are unlikely to resume in the short term. Furthermore, in S&P's view, the principal balance of the assets in the underlying portfolio is insufficient to cover the principal of these notes. House Of Europe Funding V is a cash flow CDO of asset-backed securities transaction that closed in October 2006. Ratings List House of Europe Funding V PLC EUR996 Million Fixed- And Floating-Rate Notes And EUR4 Million Annuity Notes Ratings Lowered Rating ------ Class To From ----- -- ---- A1(1) AA+ AAA A2 A+ AA A3a B+ BBB A3b B+ BBB B CCC+ BB- (1) According to the terms and conditions of the notes, the class A1 delayed draw notes were consolidated with the class A1 notes and the issuer treats them as identical to the class A1 notes in all aspects. Ratings Affirmed Class Rating ----- ------ C CC D CC E1 CC E2 CC M.T.N RYANS: Creditors Meeting Set for February 15 -------------------------------------------------- A meeting of creditors of M.T.N Ryans (Crosspatrick) Limited will take place at 11:15 a.m. on February 15, 2010, at: Harcourt Hotel Harcourt Street Dublin 2 Ireland The registered address of the company is at: Crosspatrick Urlingford Co Kilkenny Ireland O'HERLIHY INVESTMENTS: Creditors Meeting Set for February 15 ------------------------------------------------------------ A meeting of creditors of O'Herlihy Investments Limited will take place at 9:45 a.m. on February 15, 2010, at: Sunset Ridge Hotel Kileens Blarney Co Cork Ireland The registered address of the company is at: Top Floor 32 Parnell Place Cork Ireland WESTILE LIMITED: Creditors Meeting Set for February 16 ------------------------------------------------------ A meeting of creditors of Westile Limited will take place at noon on February 16, 2010, at: Days Hotel Castlebar Co Mayo Ireland The registered address of the company is at: Newport Road Industrial Estate Westport Co Mayo Ireland =================== K A Z A K H S T A N =================== * ALMATY: Fitch Affirms 'BB+' Long-Term Currency Ratings -------------------------------------------------------- Fitch Ratings has affirmed the Kazakh City of Almaty's Long-term foreign and local currency ratings at 'BB+' respectively. The Short-term foreign currency rating is affirmed at 'B' and the National Long-term rating is affirmed at 'AA-(kaz)'. The Outlooks on the Long-term foreign and local currency ratings and National Long-term rating are Stable. Fitch has simultaneously withdrawn the ratings. The agency will no longer provide ratings or analytical coverage of the City of Almaty. =================== L U X E M B O U R G =================== LYONDELL CHEMICAL: U.S. Plan Confirmation Hearing Set for April 15 ------------------------------------------------------------------ Judge Robert Gerber of the United States Bankruptcy Court for the Southern District of New York will consider confirmation of Lyondell Chemical Company and its debtor affiliates' Second Amended Joint Plan of Reorganization on April 15, 2010. Objections to the Amended Plan are due April 6, 2010. A hearing to determine adequacy of the Disclosure Statement accompanying the Amended Plan is currently set on February 8, 2010. Objections to the Disclosure Statement were due January 27, 2010. The Court sets February 22 as the record date to determine creditors that are entitled to vote on the Amended Plan. To support their cause for the approval of their Disclosure Statement, the Debtors, on January 26, amended exhibits to their Motion to Approve Disclosure Statement. The amended exhibits include: * a proposed order approving the Disclosure Statement, * a form of ballot for accepting or reject the Amended Plan, * a notice of confirmation hearing and objection deadline to confirmation of the Amended Plan, * a notice of commencement of rights offering in connection with the Amended Plan, and * a subscription form for the rights offering in the Amended Plan. A full-text copy of the Amended Exhibits dated January 26, 2010 is available for free at: http://bankrupt.com/misc/Lyondell_Jan26AmExhibits.pdf A blacklined version of the Amended Exhibits comparing the previously filed Plan Exhibits is available for free at: http://bankrupt.com/misc/Lyondell_AmExhibits_blacklined.pdf According to Christopher R. Mirick, Esq., at Cadwalader, Wickersham & Taft LLP, in New York, the Amended Plan contains an injunction that prevents, among others, any holder of any claim or equity interest in the Debtors' Chapter 11 cases accepting distributions under the Plan, including all claims arising from the DIP Term Loan Agreement; a December 20, 2007 Senior Secured Credit Agreement; a Bridge Loan Agreement; and an August 10, 2005 indenture for 8.375% senior notes due 2015 in the principal amounts of $615 million and EUR500 million, from directly or indirectly commencing or continuing any action against the Debtors, enforcing judgments related to these claims or interests, asserting rights of setoff, recoupment or subrogation on and after the effective date of the Amended Plan. The Debtors will not have any liability for any administrative expense, claim against or equity interest in the Debtors that arose prior to the effective date under the Plan, he said. Mr. Mirick added that the Amended Plan contains releases and injunctions in favor of: -- the Debtors; -- the Reorganized Debtors; -- the Ad Hoc Group of Senior Secured Lenders; -- current and former agents under the Senior Secured Credit Agreement and the Bridge Loan Agreement; -- the Senior Secured Lenders; -- UBS AG, Stamford Branch and Citibank N.A. as DIP Agents; -- the DIP Lenders; -- LeverageSource (Delaware) LLC, an affiliate of Apollo Management VII, L.P., AI LBI Investment LLC, and affiliate of Access Industries, and Ares Corporate Opportunities Fund III, L.P. as the Rights Offering Sponsors; -- the lenders under the Bridge Loan Agreement; -- the arrangers with respect to the Senior Secured Credit Agreement and the Bridge Loan Agreement; -- the Official Committee of Unsecured Creditors; -- the security agent under a December 20, 2007 Intercreditor Agreement; -- the Disbursing Agent under the Amended Plan; and -- these parties' officers. The releases and injunctions exclude any claim asserted in the action commenced by the Creditors' Committee against the Debtors' prepetition lenders and officers and not settled by the Lender Litigation Settlement entered between the Debtors and Financing Party Defendants, Mr. Mirick related. About Lyondell Chemical LyondellBasell Industries is one of the world's largest polymers, petrochemicals and fuels companies. It is the global leader in polyolefins technology, production and marketing; a pioneer in propylene oxide and derivatives; and a significant producer of fuels and refined products, including biofuels. Through research and development, LyondellBasell develops innovative materials and technologies that deliver exceptional customer value and products that improve quality of life for people around the world. Headquartered in The Netherlands, LyondellBasell -- http://www.lyondellbasell.com/-- is privately owned by Access Industries. Basell AF and Lyondell Chemical Company merged operations in 2007 to form LyondellBasell Industries, the world's third largest independent chemical company. LyondellBasell became saddled with debt as part of the US$12.7 billion merger. On January 6, 2009, LyondellBasell Industries' U.S. operations and one of its European holding companies -- Basell Germany Holdings GmbH -- filed voluntary petitions to reorganize under Chapter 11 of the U.S. Bankruptcy Code to facilitate a restructuring of the company's debts. The case is In re Lyondell Chemical Company, et al., Bankr. S.D.N.Y. Lead Case No. 09-10023). Seventy-nine Lyondell entities, including Equistar Chemicals, LP, Lyondell Chemical Company, Millennium Chemicals Inc., and Wyatt Industries, Inc. filed for Chapter 11. In May 2009, one of the cases was dismissed -- Case No. 09-10068 -- because it is duplicative of Case No. 09- 10040 relating to Debtor Glidden Latin America Holdings. The Hon. Robert E. Gerber presides over the case. Deryck A. Palmer, Esq., at Cadwalader, Wickersham & Taft LLP, in New York, serves as the Debtors' bankruptcy counsel. Evercore Partners serves as financial advisors, and Alix Partners and its subsidiary AP Services LLC, serves as restructuring advisors. AlixPartners' Kevin M. McShea acts as the Debtors' Chief Restructuring Officer. Clifford Chance LLP serves as restructuring advisors to the European entities. Lyondell Chemical estimated that consolidated assets total US$27.12 billion and debts total US$19.34 billion as of the bankruptcy filing date. Lyondell has obtained approximately US$8 billion in DIP financing to fund continuing operations. The DIP financing includes two credit agreements: a US$6.5 billion term loan, which comprises a US$3.25 billion in new loans and a US$3.25 billion roll-up of existing loans; and a US$1.57 billion asset-backed lending facility. Luxembourg-based LyondellBasell Industries AF S.C.A. and another affiliate were voluntarily added to Lyondell Chemical's reorganization filing under Chapter 11 on April 24, 2009, in order to seek protection against claims by certain financial and U.S. trade creditors. On May 8, 2009, LyondellBasell Industries added 13 non-operating entities to Lyondell Chemical Company's reorganization filing under Chapter 11 of the U.S. Bankruptcy Code. All of the entities are U.S. companies and were added to the original Chapter 11 filing for administrative purposes. The filings will have no impact on current business or operations as none of the entities manufactures or sells products. Bankruptcy Creditors' Service, Inc., publishes Lyondell Bankruptcy News. The newsletter tracks the Chapter 11 proceeding undertaken by Lyondell Chemical Company and its various affiliates. (http://bankrupt.com/newsstand/or 215/945-7000) ===================== N E T H E R L A N D S ===================== ING CAPITAL: Moody's Keeps B1 Trust Preferred Securities Rating --------------------------------------------------------------- Moody's Investors Service confirmed ING Bank NV's C+ bank financial strength rating, Aa3 senior long-term debt and deposit ratings and A1 dated subordinated debt rating. The BFSR carries a negative outlook, while the long-term debt and deposit ratings carry a stable outlook. The bank's Prime-1 short-term debt and deposit ratings were affirmed. Moody's also confirmed, with a stable outlook, the A1 senior rating and the A2 dated subordinated debt rating of ING Groep NV. The rating actions conclude Moody's review for possible downgrade of the ratings of ING Bank and ING Group initiated on September 21, 2009 and maintained on 27 October after ING and the European Commission reached agreement on a restructuring plan. Moody's also confirmed the Ba1 ratings of ING Group's preference stocks, ING Verzekeringen NV's subordinated debt securities and Equitable of Iowa Companies Capital Trust II's preferred stocks. The B1 rating of ING Capital Funding Trust III's trust preferred securities was also confirmed. These ratings now carry a positive outlook and the rating actions conclude the review with direction uncertain initiated on October 27, 2009. Confirmation of the Bank's C+ BFSR, Negative Outlook ING Bank's C+ BFSR was confirmed as Moody's believes it adequately represents the entity's creditworthiness, given the relief provided by the asset protection scheme on the Alt-A portfolio, the successful completion of a EUR7.5 billion rights issue in December 2009 and, above all, the proposed restructuring plan, which includes: -- the disposal of the bank's insurance activities by 2013; -- the merger of the bank with the group holding company, thus eliminating double leverage; and -- the fact that the plan implies only limited changes to the bank's overall scope and franchise, the largest change being the disposal of ING Direct in the US. The C+ BFSR incorporates Moody's expectation that the bank's profitability and efficiency will remain lacklustre in coming years, albeit at levels above those of 2008-09. However, it also reflects the rating agency's view that the bank's capital position, although moderate for its rating level, nonetheless represents an adequate buffer for it to absorb potential losses arising from the securities or loan portfolio. Furthermore, Moody's notes that: -- the timing of the implementation of the restructuring plan is uncertain; -- the group is still to decide between various options for the disposal of its insurance operations; and -- given the relatively long horizon of this plan, some changes are possible. The negative outlook on the C+ BFSR captures Moody's view of the potential uncertainties for the bank over the coming one- to two- year period. Confirmation of the Bank's Senior Debt Ratings, Stable Outlook ING Bank's Aa3 long-term debt and deposit ratings were confirmed as the Group, and particularly the Bank, is and will remain a systemically important institution in two European markets, the Netherlands and Belgium, and continues to have a significant retail presence throughout Europe via ING Direct. The ratings carry a stable outlook, as they would not come under adverse pressure in the event of a one-notch downgrade of the BFSR. Confirmation of ING Belgium's BFSR and Senior Debt Ratings ING Belgium SA/NV's BFSR was confirmed at C+ with a stable outlook reflecting the inherent stability of ING Belgium's profile. The Aa3 long-term debt and deposit ratings were also confirmed with a stable outlook as a consequence of both the confirmation of its parent's debt ratings and of the bank's systemic nature in Belgium. Confirmation of ING Group's Senior and Dated Subordinated Ratings, Stable Outlook The confirmation of ING Group's senior and subordinated ratings is a direct consequence of the confirmation of ING Bank's corresponding senior and subordinated ratings. ING Group will become a pure bank holding company of ING Bank, given the group's announcement of its intention to divest its insurance operations by 2013. Therefore, ING Group's senior and subordinated ratings reflect Moody's standard notching for bank holding companies relative to ING Bank's ratings. The stable outlook on ING Group's ratings reflects the stable outlook on ING Bank's senior rating. Moody's notes that double leverage at ING Group remains high and was close to 140% at the end of 2008 (double leverage at the holding company is calculated as the ratio between investments in subsidiaries and adjusted shareholders' equity). However, the rating agency expects this to decrease considerably in the next few years with the repayment of the group's debt from the proceeds it secures from the disposal of its insurance operations. Moody's adds that it views as beneficial (from a quality of capital perspective) the EUR7.5 billion rights issue completed in December 2009 to replace the EUR5 billion core Tier 1 securities received from the Dutch state and to complete the additional payments for the illiquid assets back-up facility. Confirmation of Hybrid Ratings, Positive Outlook Moody's confirmation of the group's Ba1 and B1 hybrid securities reflects the European Commission's decision not to force coupon deferral on these securities as part of its approval of ING's state-aid package. The current ratings of the hybrid securities reflect Moody's view that, given the restructuring of the group, there is still some risk of coupon deferral on these securities. The positive outlook reflects the possibility of these ratings to go up when the execution risk deriving from the group's restructuring process diminishes. All of the hybrid securities contain a dividend pusher provision. However, Moody's notes that the dividend pusher is not applicable as no dividend has been paid since August 2008. The Ba1 rating on the cumulative hybrid securities reflects the fact that the coupon payments on these instruments are cumulative, thereby limiting the loss severity of a coupon deferral if this were to occur. The B1 rating on the only non-cumulative trust preferred securities issued by ING Capital Funding Trust III reflects the fact that, under a going-concern assumption, the expected loss for investors on this non-cumulative instrument is higher than on cumulative securities. List of Rating Actions These ratings were confirmed with a negative outlook: * ING Bank: C+ BFSR; * ING Bank Eurasia: Baa1 LT Bank deposits; * ING Bank Slaski SA: A2 LT Bank deposits. These ratings were confirmed with a stable outlook: * ING Bank: Aa3 senior debt and deposit ratings; * ING Bank NV: A1 dated subordinated rating; * ING Belgium SA/NV: C+ BFSR; * ING Belgium SA/NV: Aa3 senior debt and deposit ratings; * ING Groep NV: A1 senior debt rating; * ING Groep NV: A2 dated subordinated rating; and * Lion Connecticut Holding, Inc. (guaranteed by ING Groep NV): A1 senior debt rating. These ratings were confirmed with a positive outlook: * ING Groep NV: Ba1 cumulative preference stocks; * ING Verzekeringen NV: Ba1 cumulative dated subordinated debt securities with optional coupon deferral provision; * Equitable of Iowa Companies Capital Trust II (guaranteed by Lion Connecticut Holding Inc.): Ba1 cumulative preferred stock with optional coupon deferral provision rating; and * ING Capital Funding Trust III (guaranteed by ING Groep NV): B1 non-cumulative trust preferred securities rating. Previous Rating Actions and Moody's Methodologies The last rating actions took place on October 27, 2009 when Moody's downgraded the insurance financial strength ratings of ING Group's US life insurance operating companies to A2 from A1 and ING Verzekeringen's senior debt to Baa1 from A2. ING Verzekeringen's short-term Prime-1 debt rating was also downgraded, to Prime-2. ING Bank's C+ BFSR and Aa3 senior debt ratings and ING Group's A1 senior debt rating remained on review for possible downgrade, as did the ratings of certain of ING Bank's subsidiaries. Moody's changed the review direction to uncertain from possible downgrade on the Ba1 ratings of ING Group's preference stocks, ING Verzekeringen's subordinated debt securities and Equitable of Iowa Companies Capital Trust II's preferred stocks. The review direction on ING Capital Funding Trust III's B1 trust preferred securities was also changed to uncertain from possible downgrade. The ratings of bank subordinated capital securities are assigned in line with Moody's existing methodology entitled "Moody's Guidelines for Rating Bank Hybrid Securities and Subordinated Debt" (published in November 2009) and the publication of Moody's revised rating methodology for insurance hybrids, issued on 12 January 2010. Based in Amsterdam, ING Groep NV had total assets of EUR1,188 billion at end-September 2009 and reported a net loss of EUR223 million for the nine months ending September 2009. Based in Amsterdam, ING Bank had total assets of EUR900 billion at end-September 2009 and its Tier 1 ratio stood at 9.7%, on an unfloored Basel II basis (applying the 80% floor, the Tier 1 ratio would have stood at 8.9%). In the first nine months of 2009, ING Bank reported a net profit of EUR420 million. The insurance activities of ING Groep had total assets amounting to EUR298 billion at end-September 2009 and the insurance capital coverage ratios for insurance activities was 256%. In the first nine months of 2009, the insurance activities of ING Groep reported a net loss of EUR644 million. INTERXION HOLDING: Moody's Assigns 'B1' Corporate Family Rating --------------------------------------------------------------- Moody's Investors Service has assigned a B1 corporate family rating and probability of default rating to Interxion Holding N.V. Concurrently, Moody's assigned a (P) B2 rating to the senior secured EUR200 million notes due 2017. The outlook is stable. "The B1 CFR assigned to Interxion reflects: (i) its leading position as a provider of European co-location data centre services and moderate barriers to entry for new entrants; (ii) the favorable medium-term demand/supply dynamics expected at least over the next three years; (iii) the stability of its profitability and cash flows given the limited churn characterizing the industry in general and the company in particular," explained Stefano del Zompo, lead analyst for Interxion at Moody's. "Other factors that have impacted the rating assigned include: (i) the limited size and scope of the company's operations; (ii) the moderate risk of oversupply as existing players increase their capacity to take advantage of the favorable demand trends and new entrants could increasingly be attracted by the high margins in the segment; (iii) the risks related to the returns on the company's development plans," adds Mr. del Zompo. Moody's expects Interxion's credit metrics to strengthen over the intermediate term in line with improving general economic conditions, leading to increased pricing and higher occupancy rates. Moody's in particular expects the company's Gross Debt/EBITDA ratio for 2009 to remain below 4.0x on a fully adjusted basis (adjusted in line with Moody's practice for pensions, operating leases and exceptional items) and to remain below that mark in the intermediate term. The forecast increase in revenues should benefit the company's EBITDA progression given Interxion's high operating leverage. Moody's expects EBITDA margins to have increased from slightly above 35% in 2008 to close to 37% in 2009 and this trend should continue to remain positive in the medium term. The (P) B2 rating assigned to the EUR200 million senior secured notes, one notch below the company's CFR, reflects that the notes rank senior to all unsecured liabilities of the company but also their subordination to the EUR60 million super senior revolving credit facility which is expected to remain undrawn at closing. The notes will benefit from security over the share capital and bank accounts of their guarantors, the intercompany loans extended from the issuer to the guarantors and the issuer's bank accounts. Guarantors of the notes shall represent 70% of the company's consolidated assets at all times. At closing, priority debt should be minimal, although there will nonetheless be the possibility to incur secured debt as allowed under the definition of permitted liens. The bank facility documentation also limits the general basket for secured debt to EUR10 million, thus limiting the potential for subordination going forward. Additional indebtedness will be subject to a general incurrence test of a minimum coverage ratio of 2:1 and maximum senior debt (secured debt and debt at the non-guarantor level) leverage of 4:1. The bank facility contains maintenance financial covenants. The rating outlook is stable, reflecting Moody's expectation that -- despite high cash outflows to support the company's expansion plan -- Interxion will maintain sound liquidity and metrics within the target set for the current rating category. Moody's also believes that although current metrics are weak for the rating category, the completion of the IPO as announced will strengthen the company's profile within the rating category. "Moody's believes that positive pressure on the ratings or outlook could develop if demand and supply dynamics continue to support pricing and high occupancy rates in the medium term, leading to Debt/EBITDA ratio towards 3.5x and positive free cash flow generation," said Mr. del Zompo. Interxion is one of the leading providers of carrier-neutral internet data centre services, operating 26 data centers in Europe's main capitals including Paris, Frankfurt, London and Amsterdam. The company's turnover and EBITDA for 2009 are expected to be approximately EUR171 million and EUR63 million, respectively. INTERXION HOLDING: S&P Assigns 'B-' Corporate Credit Rating ----------------------------------------------------------- Standard & Poor's Ratings Services said that it has assigned its 'B-' long-term corporate credit rating to the Netherlands-based data center operator Interxion Holding N.V. At the same time, the rating was placed on CreditWatch with positive implications. In a related action, S&P assigned its preliminary 'BB-' long-term debt rating to Interxion's pending EUR200 million 2017 senior secured notes and a preliminary 'BB' to the EUR60 million revolving credit facility due in 2013. S&P assigned recovery ratings of '2' and '1', respectively, to the notes and revolver, indicating of expectations of "substantial" and "very high" recovery in the case of a payment default. The recovery and debt ratings on the proposed bond and revolving credit facility are subject to their successful placement, S&P's raising of the corporate credit rating to 'B+' from 'B-', and its satisfactory review of the final documentation. In the event of any changes to the amount or terms of the facility or bond, the issue and recovery ratings could be subject to further review. "The corporate credit rating is constrained by S&P's expectation that significant capital investments will keep Interxion's free cash flow generation negative for some time; the industry's largely fixed-cost base; and long planning and sales cycles, which S&P believes could significantly weaken earnings in the medium term; Interxion's significant gross adjusted debt leverage; and S&P's projections for moderate liquidity after early 2013," said Standard & Poor's credit analyst Patrice Cochelin. The ratings are supported, however, by Interxion's status as one of the few carrier-neutral data center providers with a presence in most European communication hubs; adequate barriers to entry in the industry; currently favorable supply-demand dynamics -- driven by constrained space offering, growth in Internet traffic and communications volumes in general, and limited penetration, so far, of outsourced data centers in Europe; significant revenue recurrence; and attractive margins and cash flow generated by facilities operating at optimal capacity. On Sept. 30, 2009, Interxion reported gross consolidated debt of about EUR156 million. "The positive CreditWatch placement reflects S&P's view that the pending refinancing, if successful, would materially improve Interxion's debt maturity profile and liquidity position, leading us to raise the corporate credit rating to 'B+'," said Mr. Cochelin. S&P expects to resolve the CreditWatch placement upon completion of the pending bond issue or, if the issue is delayed or cancelled, over the next three months. ============= R O M A N I A ============= * ROMANIA: Fitch Changes Outlook to Stable; Affirms 'BB+' Rating ---------------------------------------------------------------- Fitch Ratings has revised Romania's Outlook to Stable from Negative. Fitch has simultaneously affirmed Romania's Long-term foreign and local currency Issuer Default Ratings at 'BB+' and 'BBB-' respectively. Romania's Country Ceiling and Short-term foreign currency IDR are affirmed at 'BBB' and 'B' respectively. "The improvement in external financial and economic conditions, sharper than expected narrowing of the 2009 current account deficit, passing of immediate election-related risk, adoption of the 2010 budget and expected normalization of relations with the IMF have eased downward pressures on Romania's sovereign ratings," said David Heslam, Director in Fitch's Sovereign Group. The passing of a contractionary 2010 budget and expected resumption of Romania's IMF/EU funding program has significantly reduced fiscal and external financing risks and the threat of further macroeconomic instability. Following the passing of presidential elections in November 2009 and the formation of a working coalition, the government has passed a 2010 budget targeting a deficit of 5.9%, inline with commitments to the IMF and EU. The passage of the budget and recent statements from the IMF and EU suggest that the next loan tranches from the international support package, as well as those delayed since November 2009, will be forthcoming shortly. The tranches will total EUR3.4 billion, of which EUR1 billion is from the EU. Nonetheless, there are downside risks related to the implementation of politically-challenging policies contained in the 2010 budget, including the public sector wage freeze and the laying-off of some 100,000 public-sector workers, particularly given the government's narrow parliamentary majority and poor fiscal track record in 2007-08. Fitch also notes that fiscal consolidation will need to continue beyond 2010 to sustain the economy's external adjustment and lessen the upward trend in public debt ratios. Fitch forecasts Romania's general government debt (including guarantees) at 33% of GDP at end-2010, compared with 21.8% at end-2008. Romania's economy experienced a sharp adjustment last year. Fitch estimates that real GDP fell by 6.9% in 2009, driven by falling private domestic demand. But encouragingly, this has lessened Romania's demand for imports and supported a sharper-than-expected adjustment of the country's current account deficit. Fitch estimates the 2009 CAD at 4.5% of GDP, down from about 12% in 2008, and forecasts the CAD to remain around 5% of GDP in 2010-11. Rollover rates on Romania's maturing external debt stock have held up well (about 85% on average), with foreign parent banks affirming their commitments to maintain exposure to Romania. The improved external economic and financial environment has aided a stabilization of the RON, helping to contain the deterioration of domestic balance sheets (over 50% of domestic lending is in foreign exchange) and pressure in the banking system. Official foreign exchange reserves (FXR, including gold) ended 2009 some US$4.7 billion higher than a year earlier at US$44.5 billion. This was due to strong external debt rollover ratios, the receipt of about US$12 billion from the US$30 billion IMF-led international financial support package and US$1.4 billion from the IMF's global allocation of Special Drawing Rights. Fitch forecasts Romania's 2010 gross external financing requirement (GXRF = CAD plus maturing external debt) at 58% of end-2009 FXR, down from around 100% of FXR in 2008. =========== R U S S I A =========== AEROFLOT OAO: Russia Approves Merger with Six Small State Airlines ------------------------------------------------------------------ Catherine Belton at The Financial Times reports that Russian Prime Minister Vladimir Putin on Tuesday approved a plan to merge six small state aviation companies into Aeroflot in an attempt to consolidate the country's troubled aviation sector. According to the FT, analysts warned the deal would mean that Aeroflot was saddled with debt-heavy assets. The six airlines -- Rossia, KavMinVody, Vladivostokavia, Orenburg, Saratov and Sakhalin airlines -- with which it is to merge are close to bankruptcy after the financial crisis saw passenger traffic nosedive, the FT notes. "Industry consolidation in Russia is a good idea," the FT quoted Georgy Tarakanov, analyst at VTB Capital, the state investment bank, as saying. "Aeroflot will likely get a huge number of problems to solve as a result, but an increase in passenger traffic might be worth it" The FT says the deal will boost Aeroflot's domestic passenger market from 15% to between 30 and 35%. "This was not a decision taken by Aeroflot but by the government," Ivan Kim, transport analyst at Renaissance Capital, the Moscow investment bank, said, according to the FT. "They need to bail out these companies and think the easiest way to do it is through Aeroflot." Mr. Kim, as cited by the FT, said of the six airlines, only Rossia and Vladivostokavia are an attractive prospect. Aeroflot -- rossiyskiye avialinii OAO (Aeroflot OAO or Aeroflot -- Russian Airlines JSC or Aeroflot JSC) -- http://www.aeroflot.ru/ -- is a Russia-based company involved in the provision of passenger and cargo air transportation services, both domestically and internationally, and in other aviation services from its base at Moscow Sheremetyevo Airport. The Company and its subsidiaries also provide airline catering and insurance services. Its affiliates are mainly comprised of cargo-handling services, fuelling services and duty-free retail businesses. Aeroflot operates a fleet of 97 vehicles to provide scheduled flights to approximately 94 destinations to 47 countries around the world. It has numerous branches located worldwide as well as 11 subsidiaries, of which nine are wholly owned, and seven affiliated companies. Aeroflot is 51.17%-owned by the Government of the Russian Federation (as the Federal Agency for Federal Property Management). ALROSA CO: S&P Reinstates 'B+' Long-Term Corporate Credit Rating ---------------------------------------------------------------- Standard & Poor's Ratings Services said that it had reinstated its long-term corporate credit rating on Russian diamond miner ALROSA Co. Ltd. at 'B+' and the short-term rating at 'B'. S&P suspended the ratings on April 7, 2009. The outlook is positive. The reinstatement follows S&P's receipt of sufficient financial and operating data on Alrosa to surveil the company and assess ratings. S&P also reinstated its 'B+' rating on Alrosa's $500 million Eurobond and 'B' short-term rating on Alrosa's commercial paper program. The '4' recovery ratings on the Eurobond was also reinstated. The Eurobond and commercial paper program are issued by ALROSA Finance S.A. and guaranteed by Alrosa. "The 'B+' long-term rating is based on Alrosa's stand-alone credit profile, which S&P assesses at 'CCC+', as well as on S&P's opinion that there is a "high" likelihood that the government of the Russian Federation (foreign currency BBB/Stable/A-3, local currency BBB+/Stable/A-2; Russia national scale 'ruAAA') would provide timely and sufficient extraordinary support to Alrosa in the event of financial distress," said Standard & Poor's credit analyst Andrey Nikolaev. S&P's view of a "high" likelihood of extraordinary government support is based on S&P's assessment of Alrosa's: * "Important" role for the Russian economy, reflecting its monopoly position in diamond mining in Russia and its status as the largest employer and taxpayer in Yakutia (the Republic of Sakha {BB-/Negative/--; * Russia national scale 'ruAA-'}), which, together with local governments, controls 40% of the company. "Very strong" link with the Russian Federal government, its 50.02% shareholder, which controls its strategy and operations. S&P's assessment of the link with the government is also based on senior government officials' high degree of involvement--including that of Russian Deputy Prime Minister and Finance Minister Alexei Kudrin as the company's chairman in Alrosa's strategic decision- making. S&P's assessment of the likelihood of timely and sufficient extraordinary government support is further underpinned by support provided in 2008-2009 through substantial loans from state-owned JSC VTB Bank (BBB/Negative/A-3; Russia national scale 'ruAAA') and Alrosa being able to sell its diamonds to the State Diamond And Precious Metals Reserve. S&P's view of a 'CCC+' stand-alone credit profile is based on its assessment of Alrosa's business risk profile as "weak" and its financial risk profile as "highly leveraged". Alrosa's business risk profile is constrained by the commodity- type nature and capital-intensiveness of the diamond-mining industry. Business risk is further constrained by the harsh operating conditions in Yakutia. Alrosa's business risk profile is supported by the diamond-mining industry's concentrated structure, where the two largest players control about 70% of the world market. Alrosa's key competitive advantage is a substantial and high-quality reserve base. The company enjoys a 25% global market share and a near monopoly in Russia. Alrosa's financial risk profile is pressured by "very weak" liquidity in S&P's view and a highly leveraged capital structure. Alrosa was able to substantially decrease debt in the second half of 2009, and S&P anticipate that the company should be able to generate neutral or positive free operating cash flow in 2010- 2011. "The positive outlook reflects the possibility of an upgrade in the next six to 12 months, if Alrosa is able to meaningfully improve its liquidity through long-term debt issuance and if diamond-market conditions remain stable," said Mr. Nikolaev. For the rating upside to materialize, S&P would expect the company to generate at least neutral free operating cash flow in 2010 and gradually deleverage. Should the company be unable to access the capital markets as planned, or if its cash flows decline materially in 2010, S&P might lower the ratings. Ratings downside could also appear, if the currently "very strong" link with the government weakens. ========= S P A I N ========= SANTANDER EMPRESAS: Moody's Junks Ratings on Two Classes of Notes ----------------------------------------------------------------- Moody's Investors Service downgraded the ratings of the Series A, B, C, D and E notes issued by Santander Empresas 4, FTA, to A1, Ba1, B3, Ca and C, from Aaa, Aa3, A3, Baa3 and Ba2, respectively. A detailed list of the rating actions can be found at the end of this press release. These rating downgrades conclude the review for possible downgrade that Moody's initiated on March 18, 2009. The downgrades were prompted by the weaker-than-expected collateral performance of the pool of loans backing the notes. The rating review also incorporated Moody's refinement of its ABS SME approach, as described in the Rating Methodology report "Moody's Probability of Default assumptions in the Rating Analysis of Granular Small and Mid-sized Enterprise Portfolios in EMEA", published on March 17, 2009. As part of its review, Moody's has considered the potential for further performance deterioration in the current economic cycle, and the exposure of the transaction to the real estate sector (either through security in the form of a mortgage or debtors operating in these markets). The deterioration of the Spanish economy has been reflected in Moody's negative sector outlook for Spanish SME securitization transactions Collateral Performance Outstanding 90+ delinquencies (i.e. the balance of loans with arrears for more than 90 days) reached 2.64% of the portfolio current balance, as of the January 2010 investor report. While this is down from the peak of 3.35% reported in April 2009, Moody's notes that the cumulative balance of defaulted loans has now increased to 1.35% (January 2010 report). (In this transaction, a loan is in default if it has been in arrears for 12 months or over). In addition, the reserve fund has been reported drawn since January 2009 and, although slightly increased from the previous period, it was at only 23% of its target balance in January 2010. As a result of the transaction performance, the balance of loans in arrears (2.64% in the January 2010 report) has exceeded the 1.50% threshold for several periods, prompting the pro-rata amortization of the Series A1, A2 and A3 notes. Moody's now assumes these will continue to amortize pro-rata until the end of the transaction. Default Probability Adjustments Moody's first revised its assumption for the default probability of the SME debtors to an equivalent rating in the single B-range for debtors operating in the real estate sector (approximately 43% of the outstanding December 2009 pool balance based on loan-level data), and in the low Ba-range for non-real-estate debtors. In addition, Moody's made DP adjustments to reflect the size of the debtors' companies. For the very few instances when loan- level data on large companies was available, Moody's was able to determine a rating proxy in the Baa-range (approximately 4% of the pool). Otherwise, Moody's notched down its rating proxy on a fraction of the debtors to reflect additional default risk associated with micro-size SMEs. In addition, Moody's increased by 10% its DP assumptions for debtors that have not made any principal payment since the transaction closing, based on December 2009 loan level data. While Moody's has been unable to confirm whether the loans with non-amortizing balance had bullet maturities or were still in their grace periods, the rating agency believes there is a payment shock risk associated with the end of non-amortizing periods. Finally, Moody's equivalent rating for loans in arrears for more than 30 days was notched down depending on the length of time the loans had been in arrears, and it was notched up for performing loans not in the building and real estate sector originated prior to 2006, depending on their actual seasoning. Revised WAL and DP assumptions Moody's separately revised its weighted-average remaining life assumption for the pool of loans to four years. With a four-year average life, the single-B range overall DP equivalent rating resulting from the above DP adjustments translate into an increased cumulative mean default assumption of 17.5% of the current outstanding portfolio amount. Expressed as a percentage of the original portfolio balance, Moody's revised cumulative mean default rate is 10.0%, compared to an initial assumption of 2.8% at closing. Given the remaining granularity of the outstanding portfolio of more than 10,000 loans, Moody's used a normal inverse distribution to derive the probabilities of its default scenarios in its cash flow model, ABSROM. In light of the increase in its cumulative mean default assumption, Moody's has reduced its original coefficient of variation assumption to 36% from 60% to maintain its initial implied asset correlation for the portfolio. Recovery and Other Rating Assumptions Moody's has not revised its initial mean recovery expectation of 45%, given the lack of recovery data available, the limited proportion of loans backed by mortgage securities (43%), and the absence of detailed data on the type of properties servicing as collateral for these mortgage securities. However, Moody's tested the sensitivity of results to recovery assumptions in a 40%-50% range. Stochastic recoveries were modeled assuming a 20% standard deviation The constant prepayment rate assumption used in Moody's cash flow model has decreased to 5% from 15% at closing. While this rate is lower than the most recently reported prepayment rate data, Moody's believes it is consistent with its revised default rate expectation for the remainder of the transaction. The Transaction Santander 4 is a securitization fund which purchased a pool of loans granted by Banco Santander, S.A. to Spanish SMEs. At closing, the portfolio consisted of 17,286 credit rights (10,861 as of January 2010). The loans were originated between 1996 and June 2007, with a weighted-average seasoning of 0.9 years and a weighted-average remaining term of eight years. Geographically the pool was well diversified with the highest concentrations in Madrid (21%), Catalonia (15%) and Andalusia (15%) at closing. According to Moody's industry classification, the concentration in the "building and real estate" sector was approximately 47% at closing (43% as of December 2009). The pool factor is 49% based on the January 2010 report data. Meaning of Rating and Methodologies Moody's ratings address the expected loss posed to investors by the legal final maturity of the notes. Moody's ratings address only the credit risks associated with the transaction. Other risks have not been addressed, but may have a significant effect on yield to investors. Detailed Rating Actions -- EUR830.2 million Series A1: Downgraded to A1; previously on 18 March 2009 Aaa Placed Under Review for Possible Downgrade -- EUR1763.6 million Series A2: Downgraded to A1; previously on 18 March 2009 Aaa Placed Under Review for Possible Downgrade -- EUR622.3 million Series A3: Downgraded to A1; previously on 18 March 2009 Aaa Placed Under Review for Possible Downgrade -- EUR90.2 million Series B: Downgraded to Ba1; previously on 18 March 2009 Aa3 Placed Under Review for Possible Downgrade -- EUR97.4 million Series C: Downgraded to B3; previously on 18 March 2009 A3 Placed Under Review for Possible Downgrade -- EUR79.7 million Series D: Downgraded to Ca; previously on 18 March 2009 Baa3 Placed Under Review for Possible Downgrade -- EUR56.6 million Series E: Downgraded to C; previously on 18 March 2009 Ba2 Placed Under Review for Possible Downgrade =========== S W E D E N =========== GENERAL MOTORS: Spyker Confident on Saab Deal; Funding In Place --------------------------------------------------------------- Andrew Ward at The Financial Times reports that Victor Muller, chief executive of Spyker Cars, is confident that its US$400 million deal to acquire General Motors' Saab Automobile would be completed on schedule in the next few weeks. As reported by the Troubled Company Reporter-Europe, GM and Spyker last week agreed to a deal wherein Spyker will acquire Saab for US$74 million in cash and US$326 million of shares. The Swedish brand has been unprofitable and GM had planned to close its operations after trying to search for a buyer. According to the FT, Spyker said it would need US$1 billion to return Saab to profitability by 2012 and insisted the funding was already in place, subject to approval of a EUR400 million (US$559 million) loan from the European Investment Bank. The FT says an initial US$50 million tranche of cash to be paid upon completion of the deal has already been secured, through loans from Tenaci Capital, owned by Mr. Muller, and GEM Global Yield Fund, a New York investment company. The FT notes a further US$24 million payment due to GM in July has yet to be secured but Mr. Muller said numerous potential investors, including institutions and individuals, had approached Spyker about providing the finance. Mr. Muller was hopeful that approval for the crucial EIB loan, which the Swedish government has already agreed to guarantee, would come in the next two or three weeks, with closure of the deal soon after, the FT states. About General Motors General Motors Company -- http://www.gm.com/-- is one of the world's largest automakers, tracing its roots back to 1908. With its global headquarters in Detroit, GM employs 209,000 people in every major region of the world and does business in some 140 countries. GM and its strategic partners produce cars and trucks in 34 countries, and sell and service these vehicles through these brands: Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, Opel, Vauxhall and Wuling. GM's largest national market is the United States, followed by China, Brazil, the United Kingdom, Canada, Russia and Germany. GM's OnStar subsidiary is the industry leader in vehicle safety, security and information services. GM acquired its operations from General Motors Company, n/k/a Motors Liquidation Company, on July 10, 2009, pursuant to a sale under Section 363 of the Bankruptcy Code. Motors Liquidation or Old GM is the subject of a pending Chapter 11 reorganization case before the U.S. Bankruptcy Court for the Southern District of New York. At September 30, 2009, GM had USUS$107.45 billion in total assets against USUS$135.60 billion in total liabilities. About Motors Liquidation General Motors Corporation and three of its affiliates filed for Chapter 11 protection on June 1, 2009 (Bankr. S.D.N.Y. Lead Case No. 09-50026). General Motors changed its name to Motors Liquidation Co. following the sale of its key assets to a company 60.8% owned by the U.S. Government. The Honorable Robert E. Gerber presides over the Chapter 11 cases. Harvey R. Miller, Esq., Stephen Karotkin, Esq., and Joseph H. Smolinsky, Esq., at Weil, Gotshal & Manges LLP, assist the Debtors in their restructuring efforts. Al Koch at AP Services, LLC, an affiliate of AlixPartners, LLP, serves as the Chief Executive Officer for Motors Liquidation Company. GM is also represented by Jenner & Block LLP and Honigman Miller Schwartz and Cohn LLP as counsel. Cravath, Swaine, & Moore LLP is providing legal advice to the GM Board of Directors. GM's financial advisors are Morgan Stanley, Evercore Partners and the Blackstone Group LLP. Bankruptcy Creditors' Service, Inc., publishes General Motors Bankruptcy News. The newsletter tracks the Chapter 11 proceeding undertaken by General Motors Corp. and its various affiliates. (http://bankrupt.com/newsstand/or 215/945-7000) =========================== U N I T E D K I N G D O M =========================== BENGAL BRASSERIE: In Administration; Lismore & Co. On Board ----------------------------------------------------------- Margaret Canning at Belfast Telegraph reports that Bengal Brasserie II, an Indian restaurant business in south Belfast, has gone into administration three months after it began trading. The report relates administrators Lismore & Co. were appointed by the High Court on January 26 to take over the running of Bengal Brasserie II on the Lisburn Road. According to the report, there are at least three contractors who have had problems securing payment for work carried out for Bengal Brasserie II. BRITISH AIRWAYS: Union Renews High Court Action Over Work Changes ----------------------------------------------------------------- BBC News reports that Unite has renewed High Court action against British Airways to try to overturn changes to cabin crew brought in by the airline last year. According to the report, the union claims it was not consulted properly and the changes, including freezing pay and reducing the number of cabin crew on long-haul flights, were imposed. The union said those measures were brought in November and argues it should have been consulted, because the changes are contractual, the report notes. BA, the report says, disputes the claim and has said it was not obliged to consult as "the changes do not alter contractual terms and conditions for individual crew members". The report relates opening the High Court hearing, John Hendy QC said that the 10 test cases being brought were representative of about 5,400 claimants who were among the 13,400 cabin crew employed by BA, mostly at Heathrow. The hearing is scheduled to last all week, the report states. As reported by the Troubled Company Reporter-Europe, Bloomberg News said a strike ballot, organized by Unite, runs until February 25 and a walkout can begin one week after a "yes" vote. Bloomberg disclosed Unite is seeking a strike mandate over BA's introduction of new working practices in November that cut at least one flight attendant on long-haul flights from London Heathrow airport. Bloomberg said the airline needs to cut costs after posting a record GBP217-million loss in the six months to September 30. About British Airways Headquartered in Harmondsworth, England, British Airways Plc, along with its subsidiaries, (LON:BAY) -- http://www.ba.com/-- is engaged in the operation of international and domestic scheduled air services for the carriage of passengers, freight and mail and the provision of ancillary services. The Company's principal place of business is Heathrow. It also operates a worldwide air cargo business, in conjunction with its scheduled passenger services. The Company operates international scheduled airline route networks together with its codeshare and franchise partners, and flies to more than 300 destinations worldwide. During the fiscal year ended March 31, 2009 (fiscal 2009), the Company carried more than 33 million passengers. It carried 777,000 tons of cargo to destinations in Europe, the Americas and throughout the world. In July 2008, the Company's subsidiary, BA European Limited (trading as OpenSkies), acquired the French airline, L'Avion. * * * As reported in the Troubled Company Reporter-Europe on Nov. 12, 2009, Moody's placed the Ba3 Corporate Family and Probability of Default Ratings of British Airways plc and the senior unsecured and subordinate ratings of B1 and B2 under review for possible downgrade. CABLE & WIRELESS: Moody's Raises Corporate Family Rating to 'Ba2' ----------------------------------------------------------------- Moody's Investors Service upgraded the corporate family and probability of default ratings of Cable & Wireless plc to Ba2 from Ba3 with stable outlook, and assigned a provisional senior secured long-term rating of (P)Ba2 to notes being issued by its wholly- owned subsidiary Sable International Finance Ltd. At the same time Moody's affirmed the long-term B1 rating of the existing notes issued by Cable & Wireless plc. The upgrade reflects Moody's expectations that upon completion of the de-merger Cable & Wireless plc will have spun off the Worldwide divison and will continue to own the CWI division (formerly known as "International"). C&W itself will become a subsidiary of a new top holding company, to be called Cable & Wireless Communications plc. In upgrading the CFR, Moody's expects that CWC will be duly incorporated, listed on the London stock exchange and its corporate structure will be as described in the Scheme of Arrangement contained in the shareholders' prospectus. Once CWC has been formally established, Moody's will re-assign the corporate family rating to it from C&W. The Ba2 CFR is supported by the sound operating rationale of the de-merger; the two existing divisions have limited synergies and the transaction will simplify the organizational structure and is likely to improve decision-making processes. Of the two businesses, CWI has a stronger business profile with leading market positions in its various markets and a more diversified business model and lower albeit increasing competitive pressures. Overall, Moody's believes the de-merger will improve the business risk profile of the rated entity. More generally, the CFR factors in CWI's solid operating performance; product and geographic diversification; conservative, albeit increasing leverage; strong liquidity profile and track record of steady cash upstream from the operating entities. The rating will be constrained by an aggressive dividend policy that significantly reduces the free cash flow available to service debt; however while management's strategy is to pay a meaningful dividend, Moody's understand it intends to keep the business free cash flow neutral. Factors which also constrain the rating are the operational challenges in its core Caribbean unit, which are offset to some degree by its recent reorganization and cost cutting exercise; overall intensifying competition within the company's markets; the uncertainty related to the company's future investment strategy as well as the presence of emerging market risk in some countries of operations. A summary of the rating actions is: Ratings upgraded: Cable & Wireless Plc: -- CFR to Ba2 (from Ba3) Ratings affirmed: Cable & Wireless Plc: -- GBP200 million 8.75 % Eurobonds due 2012 at B1; LGD 5 Cable & Wireless International Finance B.V.: -- GBP200 million 8.625% gteed Eurobonds due 2019 at B1; LGD 5 Ratings assigned: Sable International Finance Ltd. -- US$500 million gteed senior secured notes due 2017 at (P) Ba2; LGD 3 The last rating action for Cable & Wireless plc was August 28, 2007 when the outlook for the Ba3 CFR was changed to stable from negative. C&W is headquartered in London. After the de-merger, it will own and operate the CWI business, which is comprised of market-leading regional telecoms businesses and operates through four regional business units: the Caribbean, Panama, Macau and Monaco, and the Islands. CWI offers mobile, broadband, domestic and international fixed line services as well as enterprise and managed service telecom solutions. In the six months ended September 30, 2010, CWI alone generated revenues of GBP 721 million and reported EBITDA before exceptional items of GBP271 million. CABLE & WIRELESS: S&P Retains CreditWatch Positive on 'BB-' Rating ------------------------------------------------------------------ Standard & Poor's Ratings Services said that its 'BB-' long-term corporate credit rating on U.K.-based telecoms service provider Cable & Wireless PLC remains on CreditWatch, where it was placed with positive implications on Nov. 17, 2009. The 'B' short-term corporate credit rating has been affirmed. In addition, S&P assigned a rating of 'BB-' to the proposed US$500 million bond to be issued by C&W's subsidiary Sable International Finance Ltd. This rating was also placed on CreditWatch with positive implications. The rating on the proposed bond is subject to S&P's satisfactory review of the final documentation. In the event of any changes to the amount or terms of the bond, the issue rating could be subject to further review. At the same time, S&P maintained the existing 'BB-' senior unsecured issue ratings on CreditWatch, where they were placed with negative implications on Nov. 17, 2009. The recovery rating on these instruments is unchanged at '3', indicating S&P's expectation of meaningful (50%-70%) recovery in the event of a payment default. C&W intends to demerge its two main business lines, essentially resulting in the spin-off of its "Worldwide" activities from its international fixed-line and mobile operations, known as Cable & Wireless Communications PLC. C&W Communications will be the surviving entity that S&P will rate and will be the obligor of existing senior unsecured bonds. "The CreditWatch placement on the long-term corporate credit rating reflects S&P's view that on completion of the demerger, C&W Communications is likely to benefit from a stronger business risk profile than C&W, probably leading to a corporate credit rating of 'BB'," said Standard & Poor's credit analyst Helen O'Toole. This view is based on the capital structure that S&P expects to be implemented at C&W Communications on the demerger. S&P estimates that C&W Communications' gross pension and lease-adjusted debt will be approximately $2.1 billion, yielding a debt to EBITDA of 3.0x-3.3x, on a proportionate basis, during the 18 months following the demerger. The spin-off of the Worldwide operations should allow us to raise the business risk profile on C&W Communications to "fair" from "weak," under S&P's criteria. C&W Communications' business profile should benefit from established market positions in either fixed line or mobile services (or both) in a variety of relatively small markets across the world. In addition, it should generate steady, high operating margins, approaching 40% on a consolidated basis, despite the current underperformance in the Caribbean. These aspects will be mitigated, however, by country risks, including the risks associated with co-ownership with governments or conglomerates, such as in Panama or Macau, and the materially less than 100% ownership of the group's largest and most cash- generative assets, which include Panama and Macau. The CreditWatch placement with negative implications of the GBP200 million 2012 and 2019 bonds reflects S&P's anticipation of greater subordination in light of the company's refinancing plans, as well as a reduced asset base after the spin-off. The recently issued GBP230 million convertible bonds will be exclusively financial obligations of the newly created Worldwide entity from the demerger and will therefore not be rated by Standard & Poor's. S&P expects that the credit quality of Worldwide will be lower than that of the existing ratings on C&W. "S&P will likely resolve the CreditWatch status as the demerger becomes effective, which the company expects by end-March 2010," said Ms. O'Toole. "In the meantime, S&P will continue to assess the credit implications of the potential demerger and refinancing plans for the business and financial profiles of the surviving rated entity." DIAMONDS & PEARLS: Files Notice to Appoint Administrator -------------------------------------------------------- Nicola Harrison at Retail Week reports that Diamonds & Pearls has filed a notice of intention to appoint an administrator at the high court. According to the report, sources close to the situation said the business is likely to be bought out of pre-pack administration and that a sale is expected to be completed in the next few days. Colin Nicholls and Chris Ratten from accountancy firm RSM Tenon are waiting in the wings to be appointed, the report says. It would be the second time in a year that the retailer has gone into administration, the report notes. The report recalls the company was bought out of administration in March last year by a consortium of undisclosed suppliers to the retail jewelry trade. EMI GROUP: Terra Firma Founder Faces Dilemma if Citi Case Is Moved ------------------------------------------------------------------ Martin Arnold at The Financial Times reports that Terra Firma founder Guy Hands may face a dilemma over his tax planning if Citigroup succeeds in moving its legal dispute with his private equity group from New York to London. The FT recalls Mr. Hands launched a legal fight with Citi late last year over EMI, alleging the US bank tricked him into buying the music group for GBP4 billion in 2007 by wrongly claiming a rival bidder was still in the running. Mr. Hands chose New York as the forum for the lawsuit, but Citi last month challenged this and asked the U.S. judge to send the case to London, the FT recounts. According to the FT, if the case is reassigned to London, it could leave Mr. Hands facing a tough choice: to appear as a key witness in support of Terra Firma's claims, or to protect his non-resident tax status by staying out of the country. The FT says Terra Firma has until today, Feb. 4, to submit its case for why its EMI lawsuit against Citi should stay in a New York court, which has set a provisional trial date of Oct. 18. As reported by the Troubled Company Reporter-Europe on Jan. 26, 2010, the FT said the location of the lawsuit is important as it could determine how much Terra Firma may be awarded from Citigroup in damages, its ability to obtain information from the US bank, and whether the lender can recoup its costs if it wins. The FT disclosed Citigroup told the Federal district court of New York the case should be moved to London because agreements governing the auction of EMI and Citigroup's financing of its acquisition by Terra Firma specified that any dispute should be settled in London and that almost all the major events, companies and people referred to in the lawsuit were based in London, so holding the case in New York would be inappropriate on the grounds of "forum non conveniens". Citing The New York Post, the Troubled Company Reporter-Europe reported on Sept. 30, 2009, that Citigroup, which is seeking to reduce the size of its balance sheet, may force EMI into bankruptcy. As reported by the Troubled Company Reporter-Europe on Aug. 18, 2009, The Wall Street Journal said EMI Music isn't generating enough profit to comply with a GBP950 million loan from Citigroup. According to the WSJ, people familiar with the situation said EMI Music will need cash injections over the next eight months to avoid defaulting on the loan -- and it is unclear how much more cash Mr. Hands is willing to invest. The WSJ said if Mr. Hands, who has injected about GBP80 million into EMI Music through its parent company, Maltby Capital Ltd., doesn't come up with the money, Citigroup could seek to take control of the business and sell it. The WSJ disclosed the Citigroup loan requires increases in EMI Music's earnings before interest, tax, depreciation, and amortization relative to the size of its debt, the Journal disclosed. According to the WSJ, since September, EMI Music has been subjected to three "covenant tests" to see if it meets the ratio -- and failed each one. EMI -- http://www.emigroup.com/-- is the fourth largest record company in terms of market share (behind Universal Music Group, Sony Music Entertainment, and Warner Music Group). It houses recorded music segment EMI Music and EMI Music Publishing. EMI Music distributes CDs, videos, and other formats primarily through imprints and divisions such as Capitol Records and Virgin, and sports a roster of artists such as The Beastie Boys, Norah Jones, and Lenny Kravitz. EMI Music Publishing, the world's largest music publisher, handles the rights to more than a million songs. EMI Music operates through regional divisions (EMI Music North America, International, and UK & Ireland). Private equity firm Terra Firma owns EMI. LEEANNES LIMITED: Country Collection Buys Assets; 15 Jobs Secured ----------------------------------------------------------------- Country Collection has acquired Leeannes Limited's plant and machinery, securing 15 jobs, bdaily reports. The report recalls Tyneside-based Leeannes hit problems as it struggled to maintain adequate profit margins. The company ceased trading on December 17, 2009, and all of the staff was subsequently made redundant, the report recounts. Country Collection, Leeannes' sole customer, has also bought the other remaining assets of the company. The deal was negotiated by business rescue specialist Begbies Traynor. Leeannes Limited manufactured ladies clothing for a catalogue company. MADOFF SECURITIES: SFO Won't Take Action; Evidence Insufficient --------------------------------------------------------------- The U.K. Serious Fraud Office has completed its investigation into Madoff Securities International Ltd., the U.K. arm of Bernard Madoff's investment scheme, and the actions of the company's directors. Following a thorough review of all the available evidence it has decided to take no action against either the company or its directors there being insufficient evidence to provide a realistic prospect of conviction. Lindsay Fortado at Bloomberg News reports Omar Qureshi, who handles fraud cases as a partner at CMS Cameron-McKenna in London, said, "It seems they have taken the view that the time and cost involved in pursuing the case was not justified against the prospects of success". According to Bloomberg, Nicola Finnerty, Esq., the lawyer of Stephen Raven, the former chief executive officer of Madoff Securities International, on Tuesday said Mr. Raven "is pleased with the outcome of the SFO investigation and that he and his directors have been fully exonerated". Bloomberg recounts U.S. prosecutors have said in court Mr. Madoff, 71, pleaded guilty in March 2009 to using money from new investors to pay off old ones in a Ponzi scheme, sparking investigations and dozens of lawsuits in the U.S. and Europe. Investors lost more than US$13 billion in Mr. Madoff's fraud, Bloomberg says. Bloomberg recalls Irving Picard, who was appointed by the Securities Investor Protection Corp. to unwind Mr. Madoff's businesses, said last year in a London court filing Madoff Securities International in London was owned almost exclusively by Mr. Madoff and served as his proprietary trading unit. Mr. Madoff is accused by U.S. prosecutors of sending more than US$250 million between 2002 and 2008 to the U.K. unit in London's Mayfair district from New York-based Bernard L. Madoff Investment Securities LLC, and then back to U.S. accounts, Bloomberg discloses. The SFO continues to provide assistance to international partners in law enforcement on aspects of the continuing worldwide investigation and is continuing its own inquiries into wider aspects of the fraud which may give rise to offending in the UK. About BLMIS and Madoff Securities London-based Madoff Securities International Limited is a money management business of Bernard L. Madoff in the United Kingdom. Bernard L. Madoff Investment Securities LLC and Bernard L. Madoff orchestrated the largest Ponzi scheme in history, with losses topping US$50 billion. On December 15, 2008, the Honorable Louis A. Stanton of the U.S. District Court for the Southern District of New York granted the application of the Securities Investor Protection Corporation for a decree adjudicating that the customers of BLMIS are in need of the protection afforded by the Securities Investor Protection Act of 1970. The District Court's Protective Order (i) appointed Irving H. Picard, Esq., as trustee for the liquidation of BLMIS, (ii) appointed Baker & Hostetler LLP as his counsel, and (iii) removed the SIPA Liquidation proceeding to the Bankruptcy Court (Bankr. S.D.N.Y. Adv. Pro. No. 08-01789) (Lifland, J.). On April 13, 2009, former BLMIS clients filed an involuntary Chapter 7 bankruptcy petition against Bernard Madoff (Bankr. S.D.N.Y. 09-11893). The case is before Hon. Burton Lifland. The petitioning creditors -- Blumenthal & Associates Florida General Partnership, Martin Rappaport Charitable Remainder Unitrust, Martin Rappaport, Marc Cherno, and Steven Morganstern -- assert $64 million in claims against Mr. Madoff based on the balances contained in the last statements they got from BLMIS. On April 14, 2009, Grant Thornton UK LLP as receiver placed Madoff Securities International Limited in London under bankruptcy protection pursuant to Chapter 15 of the U.S. Bankruptcy Code (Bankr. S.D. Fla. 09-16751). Roughly US$100 million to US$500 million in assets and more than US$1 billion in debts were listed for Madoff Securities. The Chapter 15 case was later transferred to Manhattan. In June 2009, Judge Lifland approved the consolidation of the Madoff SIPA proceedings and the bankruptcy case. Judge Denny Chin of the U.S. District Court for the Southern District of New York on June 29, 2009, sentenced Mr. Madoff to 150 years of life imprisonment for defrauding investors in United States v. Madoff, No. 09-CR-213 (S.D.N.Y.). MANCHESTER UNITED: First Bond Issue Performed Poorly ---------------------------------------------------- Anousha Sakoui and Roger Blitz at The Financial Times report that Manchester United's first bond issue, launched barely two weeks ago, has become one of the market's worst performers this year. According to the FT, while the club has secured the GBP500 million (US$798 million) funding that it needs to refinance its bank debt, the paper losses suffered by investors could affect its ability to return to bond markets. The bid price of Manchester United's GBP250 million of sterling denominated bonds has tumbled to just 93% of their face value, while the bid price of its US$425 million of dollar-denominated bonds has fallen to 94.5% of face value, the FT discloses. The FT relates bankers and analysts said on Tuesday that the bonds had performed poorly because they had been priced too highly at launch. They also blamed the lack of a credit rating, the FT states. The FT notes one person with knowledge of the company's financing said that, while it could issue more debt by increasing the size of the outstanding bond, the club was not expected to return to the market soon. Manchester United is likely to wait until it has reduced its debts before raising fresh funds to repay payment-in-kind notes -- an instrument allowing borrowers to roll over cash interest payments -- that were issued as part of its GBP790 million buy-out in 2005, the FT says. Manchester United Limited -- http://www.manutd.com/-- operates Manchester United Football Club, one of the most popular and successful soccer teams in the world. Man U is currently the top soccer team the UK's Premier League, boasting 18 championships and 11 FA Cup titles. Manchester United generates revenue primarily through ticket sales at venerable Old Trafford stadium, as well as through broadcasting rights and sales of Red Devils merchandise. Man U was founded as Newton Heath in 1878 before changing its name in 1902. It is owned by American tycoon Malcolm Glazer, whose holdings include the Tampa Bay Buccaneers NFL team and a majority stake in Zapata. READER'S DIGEST: Delays Emergence on UK Pension Issue ----------------------------------------------------- The Reader Digest Association said it has elected to temporarily delay its emergence from Chapter 11 to address an issue involving the pension program of The Reader's Digest Association, Ltd., the company's UK entity. This issue is specific to the UK entity and does not involve any other RDA company. RDA's restructuring plan was confirmed by the United States Bankruptcy Court for the Southern District of New York on January 15, 2010, enabling the company to choose its date for emergence. RDA expects to emerge within the next few weeks. Last month, the UK entity came to an agreement with the trustees of its pension plan and the UK Pension Protection Fund (PPF) to resolve the company's UK pension fund deficit. This agreement was contingent on approval from the UK Pensions Regulator, which has now indicated that it will not approve the pension application. In light of this unexpected ruling, the UK entity is now reviewing its options in an attempt to find a solution. About The Reader's Digest Association RDA is a global multi-brand media and marketing company that educates, entertains and connects audiences around the world. The company builds multi-platform communities based on branded content. With offices in 44 countries, it markets books, magazines, and music, video and educational products reaching a customer base of 130 million in 78 countries. It publishes 94 magazines, including 50 editions of Reader's Digest, the world's largest-circulation magazine, operates 65 branded Web sites generating 22 million unique visitors per month, and sells 40 million books, music and video products across the world each year. Its global headquarters are in Pleasantville, N.Y. Reader's Digest said that as of June 30, 2009, it had total assets of US$2.2 billion against total debts of US$3.4 billion. Reader's Digest, together with its 47 affiliates, filed for Chapter 11 on August 24 (Bankr. S.D.N.Y. Case No. 09-23529). Kirkland & Ellis LLP has been engaged as general restructuring counsel. Mallet-Prevost, Colt & Mosle LLP has been tapped as conflicts counsel. Ernst & Young LLP is auditor. Miller Buckfire & Co, LLC, is financial advisor. AlixPartners, LLC, is restructuring consultant. Kurtzman Carson Consultants is notice and claims agent. The Official Committee of Unsecured Creditors is tapping BDO Seidman, LLP, as financial advisor, Trenwith Securities, LLP, as investment banker and Otterbourg, Steindler, Houston & Rosen, P.C., as counsel. Bankruptcy Creditors' Service, Inc., publishes Reader's Digest Bankruptcy News. The newsletter tracks the Chapter 11 proceeding undertaken by Reader's Digest and its affiliates (http://bankrupt.com/newsstand/or 215/945-7000) SCARLET TELEVISION: David Hughes Appointed as Administrator ----------------------------------------------------------- Jules Grant at C21media.net reports that UK production group Motive Television has appointed David Hughes, a partner at Janes Insolvency, as administrator for its Manchester-based indie Scarlet Television. In the year ended December 31, 2008, Scarlet reported revenue of GBP929,000 (US$1.48 million) and made a loss before tax of GBP175,000 and a loss after tax of GBP303,000, the report discloses. The report recalls last December Motive, which owns 50.6% of Scarlet, said it was planning to close down or sell its television production businesses in order to move into the digital terrestrial TV technology sector. Scarlet produced factual entertainment fare such as Petrolheads, Entourage Uncovered and Britain's Biggest Babies. VANTIS PLC: Ernst & Young Casts Doubt Over SIB Liquidation ---------------------------------------------------------- Jonathan Sibun at The Daily Telegraph reports that Vantis plc, which is handling the liquidation of Stanford International Bank, has had a going concern warning issued against its interim results by its auditors Ernst & Young. According to the report, Ernst & Young said uncertainties as to when Vantis would receive its fees for handling the SIB liquidation "cast significant doubt on the company's ability to continue as a going concern". The report notes that while Vantis said it had ploughed "significant resources" into handling SIB's liquidation since Nigel Hamilton-Smith and Peter Wastell were appointed as joint receivers to the bank last February and joint liquidators in April, a freezing order issued by a US court, legal appeals by a US-appointed receiver and a delay in the sale and collection of proceeds from "significant property assets" meant it had received no fees in the six months to the end of October last year. The report says the lack of payment pushed Vantis into a first- half pre-tax loss of GBP10.7 million, against a profit of GBP4.5 million a year earlier. Revenues fell 10% to GBP43.1 million, the report discloses. The report recalls Vantis agreed a new debt facility and renegotiated loan covenants with its banks at the end of January, but the recovery firm, however, warned that the fees on the loan were "substantially higher than previously". Vantis plc -- http://www.vantisplc.com/-- is a UK-based accounting, tax, business recovery and advisory group focused on servicing SMEs and owner-managed businesses, as well as private individuals. * UK: Firms Braced for Bumpy Ride Despite Drop in Profit Warnings ----------------------------------------------------------------- After an above average number of profit warnings in the first quarter of 2009, profit warnings tailed off during 2009, with 282 issued during the year, 37% less than 2008 and the lowest annual total since 2003, Ernst & Young said. According to Ernst & Young, there were 50 profit warnings from quoted UK companies during the last quarter of 2009, compared to 126 in 2008, a year on year fall of 60%. Andrew Wollaston, Restructuring partner at Ernst & Young said: "Given the depth of the slump, recovery has certainly come quicker than we might have anticipated. This rapid economic recuperation, along with previously depressed earnings forecasts, is helping companies beat expectations and keep profit warnings low. Good news for UK plc, but this is not the end of the story. Rapid recovery costs and 2010 is when we start paying. Brace yourselves for a bumpy recovery." A Period of Consequences 2010 looks set to be a year of contradiction for the UK economy; a year when the early optimism surrounding the return to economic growth will sit in stark contrast to looming fiscal realities. For while, extensive government and central bank intervention might have staved off the risk of depression and turned the UK economy around, such a rapid turnaround inevitably carries a high price. Facing Consequences The start of the year should see a return to growth for the UK economy. However, that growth will be hard to sustain in the face of some strong headwinds. Budgetary constraints will necessitate not only the end of the fiscal and monetary stimulus, but that the UK government pulls back capital from the economy to help plug the gap in its budget deficit. Meanwhile, the private sector and consumer look to weak to completely fill this gap, while exports are still recovering slowing from the collapse in global demand. The end of quantitative easing (QE) will only add to the uncertainty and strain. Keith McGregor, Restructuring partner at Ernst & Young commented: "Growth in the first part of the year could sit in contrast with economic stagnation or even a second dip later on. Either way, we are still facing the consequences of the credit crunch almost three years on. The events in Dubai at the end of 2009 amply demonstrate how quickly situations can still deteriorate. The coming years could contain more of these shocks not as systemic or seismic as the collapse of Lehman, but still damaging and a reminder of the continuing work needed by companies to restructure and deleverage." Outlook The start of 2010 has seen relatively few profit warnings. The usual flurry of post-Christmas retail profit alerts have not arrived, with just eight warnings for all sectors in the first two weeks of 2010 versus 16 in the same period of 2009. Mr. Wollaston said: "This benign start should not distract us from the obvious difficulties ahead. We can only guess at the effects generated by the end of QE but it seems unlikely that equity and debt markets can continue their stellar run without this support. If markets retreat, financing options will be fewer and more expensive in the year ahead, unless banks significantly pick up lending in 2010. At present this looks unlikely." Profit Forecasting Profit forecasting will be less than straightforward. Economic surveys show the recovery to be fragile and vulnerable to set backs in many sectors, with a good chance that the anticipated public retrenchment could provoke a second output dip later in the year. Meanwhile, the profit warning equation the balance between performance and expectations will even out in the first quarter of 2010 as heavily depressed market expectations rise to meet the plethora of "better than expected" results that are already been reported. Mr. McGregor concluded: "It will be harder for companies to beat expectations in the months ahead. If expectations become buoyed by optimism too quickly and outstrip an economy that is recovering slowly and prone to relapse, we could see a further negative imbalance and an increase in profit warnings later in 2010. How many will depend on the ability of UK plc to manage market expectations and its own internal forecasts during another tricky year." * UK: Financial Uncertainty Curbs Premiership Spending, KPMG Says ----------------------------------------------------------------- While the UK has recently exited recession it appears that football may just be entering it, according to KPMG's Football Transfer Monitor. Gross spending has fallen dramatically in the winter 2010 transfer window, KPMG's Football Transfer Monitor shows. Premiership clubs spent a total of GBP44.8 million during the January period, less than 25% of the GBP190.5 million spent in the previous year's winter transfer window, and over one quarter of this amount is attributed to the sum that Manchester United have agreed for Chris Smalling of Fulham, a fee that could potentially rise to GBP12 million, after he agreed terms on a deal that would see him join Manchester United at the end of the season. Regarding the lack of significant spending in the winter 2010 transfer window, Geoff Mesher, Head of the Forensic Sports Industry Team at KPMG, said: "While the UK has just recently exited recession it appears that football may just be entering it. Financial uncertainty still exists for a number of English football clubs and many football club chairmen will look at the current plight of Portsmouth, facing a winding up order on 10 February in the High Court, with concern." "There had been some expectation that Manchester City's wealthy owners, and the arrival of Carston Yeung at Birmingham City, might have produced some high value signings and that the funds raised from such deals would initiate further spending as they were recycled through the transfer market, but this has not happened." Richard Fleming, UK Head of Restructuring at KPMG, further commented: "Football clubs have not been immune from the effects of the recession and indeed we have already seen credit crunch casualties. Football clubs have three major sources of revenue: season tickets; broadcast revenue and the transfer windows. Accordingly, for clubs in financial distress, these are 'crunch points' when they are likely to go into administration. The end of the transfer window today is the last chance for clubs to generate significant revenue before the season ends; this could prove to be the final solvent testing point for distressed clubs as their ability to meet demands on their cash becomes apparent. With up to 90% of turnover in football clubs accounted for by players' wages, the main creditor is often HMRC. Clubs which have abused HMRC's flexibility by breaking promises to meet their tax liabilities repeatedly may be in for a short, sharp shock." Last month UEFA continued to raise concerns about excessive spending at clubs in Europe with its survey reportedly finding that nearly half of clubs in Europe are running at a loss every year with around 20% of clubs spending as much as 120% of revenue each season. The majority of this spending was found to be on player salaries with one third of clubs spending 70% or more of their revenues on wages. Mr. Mesher commented: "Player salaries appear to be outstripping club income and this may go some way to explain the lack of significant spending by English teams in the most recent transfer window. Reports from UEFA that the salaries of players and coaches are increasing at nearly twice the rate of revenues across Europe are more concerning though and raise questions as to how sustainable this trend is for the individual clubs and the football industry in general." The gross spend of GBP12.3 million by the traditional "Big Four" clubs is almost all down to Manchester United's signing of Chris Smalling. Liverpool have the second highest net fees received in the Premiership following the sales of Andrea Dossenna and Andrei Voronin and no players being brought in for a fee. Arsenal's gross spend amounts to just GBP0.5 million on a single player whilst Chelsea have not spent any funds on transfer fees this January. Mr. Mesher said: "Clubs across the board may also see the current state of affairs as unsustainable and could be waiting for an adjustment in the market value of player transfer fees, or perhaps more importantly wages, before making major investments in new playing staff -- but in the competitive world of football can they afford to wait? "In the short term though it seems that financial uncertainty, brought into sharper focus by the experiences of clubs like Portsmouth and Crystal Palace, is resulting in a degree of financial prudence amongst many English clubs for now." About KPMG KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with nearly 11,000 partners and staff. The UK firm recorded a turnover of GBP1.6 billion in the year ended September 2009. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. The firm operates in 144 countries and has more than 137,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative, a Swiss entity. KPMG International provides no client services. =============== X X X X X X X X =============== * Global Firms Still Nervous About Recovery, E&Y Says ----------------------------------------------------- A comprehensive survey of senior executives at nearly 900 major companies worldwide by Ernst & Young reveals a very different business environment compared to 12 months ago but highlights a corporate world that for the most part is still nervous about recovery. In January 2009, an Ernst & Young study, Opportunities in Adversity, asked companies about their key strategic priorities for 2009. Nearly three-quarters said they were focused on securing the survival of their present business and only 19% said they were looking to take advantage of the recession to pursue new market opportunities. As part of Ernst & Young's ongoing Lessons from change program, new research shows that by the beginning of December 2009, the percentage looking to pursue new opportunities this year has risen to 34%. Over half (53%) of companies, however, still agreed that surviving 2010 would still remain a challenge. However, after the actions that many were forced to take earlier in the year it was not surprising companies were seeing progress with fewer still focused on improving the performance of their current assets, down from 39% to 27%, and the proportion still restructuring their business also declined from 37% to 27%. John Murphy, Global Managing Partner-Markets, Ernst & Young said, "The spirit of optimism has increased, but it is essentially fragile in nature. A pick up in confidence is not surprising, given the massive global government stimulus working its way through the economy and the larger developing and emerging economies beginning to rebound. Companies may be less worried about survival over the next 12 months, but the return to a healthy operating environment is still some way off." A significant minority are generating growth in EBITDA Surprisingly, for a significant minority 2009 was a year when earnings improved. More than one third of companies surveyed reported that earnings before interest, depreciation and amortization (EBITDA) had grown by over 5% in the last 12 months. Remarkably in the context of a global recession, 7% of all businesses had seen a more than 20% increase in earnings. Forty-five per cent of the companies based in Asia-Pacific and with a turnover of between US$100 million and US$500 million reported in excess of 5% EBITDA growth. One-third of the very largest organizations surveyed (turnover exceeding US$10 billion) also reported EBITDA growth exceeding 5%. In Latin America (26%), Western Europe (28%) and Eastern Europe (29%) the proportion reporting 5% EBITDA growth or more was lower. By sector, more than 40% of pharmaceutical, aerospace and defense and banking companies exceeded the 5% growth threshold. Corporates in the oil and gas, manufacturing and automotive sectors were far more likely to report flat or declining earnings. Mr. Murphy added, "As we predicted last January, despite the turmoil and the challenges in 2009 there were some outright winners -- companies that have found opportunity in the adversity. Judging by our research, a picture is emerging across countries and sectors of a group of companies that share a certain performance agenda, particularly around achieving speed-to-market. They are faster in making and executing decisions to take advantage of their changing markets." But a way to go before earnings back at pre-recession levels While they are out of crisis mode, corporates are now turning their attention to when there will be a full recovery in earnings. Approximately one-third saw revenue growth returning within six months, one-third said by the start of 2011 and the final third not for at least two years. Only 1% was pessimistic enough to say it would never return to pre-recession levels. Mr. Murphy added: "Revenue growth -- not just earnings growth -- is now the burning platform for corporate, many of whom see recovery, certainly in the short to medium term, as sluggish." And what will happen in 2010? How were companies planning to improve their performance this year? Three-quarters of respondents said they believed that there were still major costs savings to be made in their organization through improved efficiency. A high proportion of companies (72%) felt they needed to increase the flexibility of their operations through reducing fixed costs, particularly among support functions and improving productivity. The next most popular response was optimizing the markets they serve (64%) via new market entry, new products or new channels, and through revitalizing the business model (64%) with new thinking around organizational structure, core competencies and new business collaborations. Respondents also believed that accelerating their decision making processes and execution (63%) and strengthening their management talent (62%) would be critical to improve their chances of success. 80% look to growth despite problems with accessing capital Exactly half of all businesses agreed that restricted access to capital will continue to constrain their growth prospects over the next year, yet a significant minority of respondents (30%) said they intended to take an aggressive growth-oriented stance as the demand outlook in their markets is improving. A further 49% of corporates said that they intended to pursue growth opportunistically, as the prospects for recovery in their markets remain unclear. The remaining fifth of companies said that their strategic focus will remain squarely on cost control until the market improves. Mr. Murphy concluded, "It is clear that many companies are seeking to learn the lessons of the changed market. Although there is no silver bullet -- no single action that will deliver success -- our research has identified a number of action programs which sets high-performing companies apart. For instance, they have a deeper, broader understanding of their markets and the risks involved. Furthermore, they are more innovative in strategy and structure than their competitors and are more collaborative with partners. These successful companies are essentially equipping themselves for the new economy and navigating a new future for themselves." * Upcoming Meetings, Conferences and Seminars --------------------------------------------- Feb. 21-23, 2010 INSOL International Annual Regional Conference Madinat Jumeirah, Dubai, UAE Contact: 44-0-20-7929-6679 or http://www.insol.org/ April 20-22, 2010 TURNAROUND MANAGEMENT ASSOCIATION Sheraton New York Hotel and Towers, New York, NY Contact: http://www.turnaround.org/ Apr. 29-May 2, 2010 AMERICAN BANKRUPTCY INSTITUTE Annual Spring Meeting Gaylord National Resort & Convention Center, Maryland Contact: 1-703-739-0800; http://www.abiworld.org/ June 17-20, 2010 AMERICAN BANKRUPTCY INSTITUTE Central States Bankruptcy Workshop Grand Traverse Resort and Spa, Traverse City, Michigan Contact: 1-703-739-0800; http://www.abiworld.org/ July 7-10, 2010 AMERICAN BANKRUPTCY INSTITUTE Northeast Bankruptcy Conference Ocean Edge Resort, Brewster, Massachusetts Contact: 1-703-739-0800; http://www.abiworld.org/ July 14-17, 2010 AMERICAN BANKRUPTCY INSTITUTE Southeast Bankruptcy Conference The Ritz-Carlton Amelia Island, Amelia, Fla. Contact: http://www.abiworld.org/ Aug. 5-7, 2010 AMERICAN BANKRUPTCY INSTITUTE Mid-Atlantic Bankruptcy Workshop Hyatt Regency Chesapeake Bay, Cambridge, Maryland Contact: 1-703-739-0800; http://www.abiworld.org/ Oct. 6-8, 2010 TURNAROUND MANAGEMENT ASSOCIATION TMA Annual Convention JW Marriott Grande Lakes, Orlando, Florida Contact: http://www.turnaround.org/ Dec. 2-4, 2010 AMERICAN BANKRUPTCY INSTITUTE 22nd Annual Winter Leadership Conference Camelback Inn, Scottsdale, Arizona Contact: 1-703-739-0800; http://www.abiworld.org/ Mar. 31-Apr. 3, 2011 AMERICAN BANKRUPTCY INSTITUTE Annual Spring Meeting Gaylord National Resort & Convention Center, Maryland Contact: 1-703-739-0800; http://www.abiworld.org/ June 9-12, 2011 AMERICAN BANKRUPTCY INSTITUTE Central States Bankruptcy Workshop Grand Traverse Resort and Spa Traverse City, Michigan Contact: http://www.abiworld.org/ October 25-27, 2011 TURNAROUND MANAGEMENT ASSOCIATION Hilton San Diego Bayfront, San Diego, CA Contact: http://www.turnaround.org/ Dec. 1-3, 2011 AMERICAN BANKRUPTCY INSTITUTE 23rd Annual Winter Leadership Conference La Quinta Resort & Spa, La Quinta, California Contact: 1-703-739-0800; http://www.abiworld.org/ ********* 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. A list of Meetings, Conferences and Seminars appears in each Thursday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com 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., Frederick, Maryland USA. Valerie C. Udtuhan, Marites O. Claro, Rousel Elaine C. Tumanda, Joy A. Agravante and Peter A. Chapman, Editors. Copyright 2010. 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$625 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 Christopher Beard at 240/629-3300. * * * End of Transmission * * *