/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/100526.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Wednesday, May 26, 2010, Vol. 11, No. 102 Headlines A U S T R I A GLOUCESTER ENGINEERING: Parent In Debt Refinancing Talks C Z E C H R E P U B L I C LENOXA: Declared Bankrupt by Liberec Court E S T O N I A THULEMA AS: Files for Bankruptcy Over Liquidity Problems G E R M A N Y ARCANDOR AG: Karstadt May Get Enough Tax Waivers to Allow Sale ARCANDOR AG: Triton Disappointed With Karstadt Sale Talks ARCANDOR AG: Karstadt Workers Prefer HighStreet; Berggruen Bids G R E E C E * GREECE: Most Likely Will Need to Restructure Debt I R E L A N D QUINN INSURANCE: Liberty Mutual Eyes Takeover to Expand EU Ops R U S S I A MECHEL OAO: Moody's Assigns Corporate Family Rating at 'B1' SSMO CJSC: S&P Assigns 'B' Rating on Senior Unsecured Notes S L O V A K R E P U B L I C AIR SLOVAKIA: Administrator Files Bankruptcy Proposal S P A I N CAIXA GIRONA: Fitch Downgrades Individual Rating to 'C/D' CAIXA LAIETANA: Fitch Retains Negative Watch on 'C/D' Rating CAIXA PENEDES: Fitch Retains RWN on 'BB'-Rated Preference Shares CAJA DE AHORROS: Fitch Puts 'BB+' Issuer Rating on Positive Watch U N I T E D K I N G D O M BRITISH AIRWAYS: Posts GBP531MM Loss for Year Ended March 31 LIVESEY: In Administration; P&A Partnership Named Administrator LOYD'S NURSING: 64 Southern Cross Homes Put Up for Sale MAGAZINE MARKETING: In Administration; MCR Appointed Administrator ROYAL BANK: Nears Pakistan Unit Sale Deal VISTEON CORP: Reaches Stipulation on UK Pension Claim Withdrawal X X X X X X X X * S&P Puts Ratings on Senior Unsec. Debts of 22 Governments ********* ============= A U S T R I A ============= GLOUCESTER ENGINEERING: Parent In Debt Refinancing Talks -------------------------------------------------------- Dan Hockensmith at Plastic News reports that Gloucester Engineering, the parent company of Gloucester Engineering Europe, is in talks with private equity firm Blue Wolf Capital Fund of New York on a refinancing package for some of its unpaid debt. According to the report, a source close to the negotiations said May 18 that a deal is in the works, but could not give details. Settlement Separately, the report relates two Gloucester creditors and its insolvent European subsidiary filed in US Bankruptcy Court in Boston to oppose settlements the company has reached with two of its creditors. The report recalls in March, three Gloucester creditors filed an involuntary Chapter 7 bankruptcy petition against the firm. Since then, two creditors -- Hub Technologies and Plastifar -- reached agreement with Gloucester and moved to dismiss the bankruptcy petition, the report recounts. According to the report, attorneys for Hub and Plastifar argued that with Gloucester having more than US$13 million (EUR10.5 million) in secured debt, unsecured creditors were unlikely to recover anything in liquidation. THG, which is owed about US$68,000 (EUR54,666) by Gloucester, and National Metals Finishing, which is owed about US$173,000 (EUR139,100), objected to the Hub and Plastifar deal on the grounds that it is unfair to other unsecured creditors, the report notes. Embezzlement The report relates Raoul Wagner, the bankruptcy trustee appointed for Gloucester Engineering's subsidiary by the Austrian Commercial Court in Vienna, argued in his filing that the U.S. parent company illegally transferred about EUR608,000 from Gloucester Engineering Europe late in 2009 to pay its debts. Mr. Wagner on May 7 lodged a complaint with Austrian prosecutors seeking criminal charges against Gloucester Chairman John Sharood for "embezzlement, grossly negligent impairment of creditor interests and fraudulent bankruptcy offense," the report discloses, citing the bankruptcy court filing. The report notes Mr. Wagner said money transfers left Gloucester Engineering Europe -- which has since been liquidated -- with only about EUR373,000 in its accounts against about EUR847,000 in debt. Gloucester Engineering is a blown and cast film machinery maker in Gloucester, Massachusetts. =========================== C Z E C H R E P U B L I C =========================== LENOXA: Declared Bankrupt by Liberec Court ------------------------------------------ CTK, citing the insolvency register on www.justice.cz, reports that the Liberec court on Monday declared Lenoxa bankrupt. The decision can be appealed to the High Court in Prague, the report notes. According to the report, the company's owners proposed reorganization in which creditors are likely to have a better chance of getting their money back. Lenoxa is a Liberec-based heat supplier. ============= E S T O N I A ============= THULEMA AS: Files for Bankruptcy Over Liquidity Problems -------------------------------------------------------- Ott Ummelas at Bloomberg News reports that AS Thulema, filed for bankruptcy citing liquidity problems and a "difficult" market situation. Thulema filed a request with the Harju County court to announce its bankruptcy after it was unable to stick to its debt restructuring plan approved in court in October, Bloomberg notes, citing a statement from the company on the Baltic News Service Web site. According to Bloomberg, the statement said Thulema's debts total EEK40.2 million (US$3.2 million) and assets amount to EEK38.9 million. Based in Tallinn, AS Thulema is one of the largest furniture makers in Estonia. ============= G E R M A N Y ============= ARCANDOR AG: Karstadt May Get Enough Tax Waivers to Allow Sale -------------------------------------------------------------- Karstadt, the department-store unit of insolvent German retailer Arcandor AG, will probably receive enough tax waivers from German cities to allow a sale of the unit, Cornelius Rahn and Holger Elfes at Bloomberg News report citing, Thomas Schulz, a spokesman for the insolvency administrator. According to Bloomberg, Mr. Schulz said the city of Cologne has signaled it will forfeit its tax claims against the company. On May 14, 2010, the Troubled Company Reporter-Europe, citing Bloomberg News, reported that the cities of Bielefeld and Erding rejected the administrator's request to waive the claims on taxes they are owed by Karstadt, endangering Karstadt's sale. According to Bloomberg, Mr. Schulz said under insolvency rules, 98% of a total of 94 cities in which Karstadt have stores have to accept the request to make the sale possible. About Arcandor AG Germany-based Arcandor AG (FRA:ARO) -- http://www.arcandor.com/-- formerly KarstadtQuelle AG, is a tourism and retail group. Its three core business areas are tourism, mail order services and department store retail. The Company's business areas are covered by its three operating segments: Thomas Cook, Primondo and Karstadt. Thomas Cook Group plc is a tour operator with operations in Europe and North America, set up as a result of a merger between MyTravel and Thomas Cook AG. It also operates the e-commerce platform, Thomas Cook, supporting travel services. Primondo has a portfolio of European universal and specialty mail order companies, including the core brand Quelle. Karstadt operates a range of department stores, such as cosmopolitan stores, including KaDeWe (Kaufhaus des Westens), Karstadt Oberpollinger and Alsterhaus; Karstadt brand department stores; Karstadt sports department stores, offering sports goods in a variety of retail outlets, and a portal, karstadt.de that offers online shopping, among others. As reported by the Troubled Company Reporter-Europe, a local court in Essen formally opened insolvency proceedings for Arcandor on September 1, 2009. The proceedings started for the Arcandor holding company and for 14 units, including the Karstadt department-store chain and Primondo mail-order division. Arcandor filed for bankruptcy protection after the German government turned down its request for loan guarantees. On June 8, 2009, the government rejected two applications for help by the company, which employs 43,000 people. The retailer sought loan guarantees of EUR650 million (US$904 million) from Germany's Economy Fund program. It also sought a further EUR437 million from a state-owned bank. ARCANDOR AG: Triton Disappointed With Karstadt Sale Talks --------------------------------------------------------- Tom Mulier at Bloomberg News reports that Triton, a bidder for Arcandor AG's German department-store chain Karstadt, said progress on talks has been "disappointing" and an agreement might not be reached. According to Bloomberg, John Mengers, a spokesman for Triton at Communications & Network Consulting AG in Munich, said Friday the private equity firm is no longer holding negotiations with administrator Klaus Hubert Goerg, though it will maintain its offer for the unit until a May 28 deadline. "There needs to be some movement on their side," Bloomberg quoted Mr. Mengers as saying. "We are rethinking our position. If there will be no deal, we will do something else. We are not forced into this." Separately, Holger Elfes at Bloomberg News, citing Frankfurter Allgemeine Zeitung, reports that Triton is no longer examining Karstadt's accounts. As reported by the Troubled Company Reporter-Europe on May 19, 2010, Triton was reassessing whether to buy Karstadt, as its plan may become "obsolete" after talks with the Ver.di trade union failed. Bloomberg disclosed Ver.di said talks with the potential buyer ended without agreement because Triton insisted on further wage cuts. Workers at Karstadt accepted pay cuts worth EUR150 million (US$186 million) and rejected further concessions, according to Bloomberg. About Arcandor AG Germany-based Arcandor AG (FRA:ARO) -- http://www.arcandor.com/-- formerly KarstadtQuelle AG, is a tourism and retail group. Its three core business areas are tourism, mail order services and department store retail. The Company's business areas are covered by its three operating segments: Thomas Cook, Primondo and Karstadt. Thomas Cook Group plc is a tour operator with operations in Europe and North America, set up as a result of a merger between MyTravel and Thomas Cook AG. It also operates the e-commerce platform, Thomas Cook, supporting travel services. Primondo has a portfolio of European universal and specialty mail order companies, including the core brand Quelle. Karstadt operates a range of department stores, such as cosmopolitan stores, including KaDeWe (Kaufhaus des Westens), Karstadt Oberpollinger and Alsterhaus; Karstadt brand department stores; Karstadt sports department stores, offering sports goods in a variety of retail outlets, and a portal, karstadt.de that offers online shopping, among others. As reported by the Troubled Company Reporter-Europe, a local court in Essen formally opened insolvency proceedings for Arcandor on September 1, 2009. The proceedings started for the Arcandor holding company and for 14 units, including the Karstadt department-store chain and Primondo mail-order division. Arcandor filed for bankruptcy protection after the German government turned down its request for loan guarantees. On June 8, 2009, the government rejected two applications for help by the company, which employs 43,000 people. The retailer sought loan guarantees of EUR650 million (US$904 million) from Germany's Economy Fund program. It also sought a further EUR437 million from a state-owned bank. ARCANDOR AG: Karstadt Workers Prefer HighStreet; Berggruen Bids --------------------------------------------------------------- Holger Elfes at Bloomberg News, citing Deutschlandradio, reports that Karstadt's workers prefer Goldman Sachs Group Inc.'s Highstreet partnership or Berggruen Holdings Ltd. investment company as buyers of Arcandor AG's insolvent German department- store chain. According to Bloomberg, Margret Moenig-Raane, vice chairman of the Ver.di labor union, as cited by the German radio station, said the union opposes a bid by Triton, which may lead to more firings than a purchase by another investor. Triton As reported by the Troubled Company Reporter-Europe on May 19, 2010, Triton was reassessing whether to buy Karstadt, as its plan may become "obsolete" after talks with the Ver.di trade union failed. Bloomberg disclosed Ver.di said talks with the potential buyer ended without agreement because Triton insisted on further wage cuts. Workers at Karstadt accepted pay cuts worth EUR150 million (US$186 million) and rejected further concessions, according to Bloomberg. Berggruen AS reported by the Troubled Company Reporter-Europe on May 25, 2010, Reuters said Nicolas Berggruen made an offer to buy Karstadt a week before an extended deadline for bids runs out. Dow Jones Newswires, citing Handelsblatt, disclosed that Berggruen Holding Ltd., an investment vehicle owned by private investor Mr. Berggruen, has submitted a detailed bid for all of Karstadt's business activities. According to Dow Jones, the Handelsblatt report, citing a spokesman for Berggruen Holding, said the company hopes to close the deal within the coming weeks although it is expected that Karstadt's landlords will participate in the future restructuring of the company and that the seven remaining municipalities will agree to write-off the department store's commercial tax debts. Highstreet Christiaan Hetzner at Reuters, citing Bild am Sonntag, reported that Highstreet, a finance consortium that owns most of the property of Karstadt, will submit a bid for all 120 department stores after reaching a deal with unions over wage concessions. According to Reuters, the German Sunday weekly disclosed Highstreet, a vehicle led by Goldman Sachs, agreed to give the 25,000 strong workforce a stake of roughly 15% in Karstadt, making it the frontrunner in the bidding war. About Arcandor AG Germany-based Arcandor AG (FRA:ARO) -- http://www.arcandor.com/-- formerly KarstadtQuelle AG, is a tourism and retail group. Its three core business areas are tourism, mail order services and department store retail. The Company's business areas are covered by its three operating segments: Thomas Cook, Primondo and Karstadt. Thomas Cook Group plc is a tour operator with operations in Europe and North America, set up as a result of a merger between MyTravel and Thomas Cook AG. It also operates the e-commerce platform, Thomas Cook, supporting travel services. Primondo has a portfolio of European universal and specialty mail order companies, including the core brand Quelle. Karstadt operates a range of department stores, such as cosmopolitan stores, including KaDeWe (Kaufhaus des Westens), Karstadt Oberpollinger and Alsterhaus; Karstadt brand department stores; Karstadt sports department stores, offering sports goods in a variety of retail outlets, and a portal, karstadt.de that offers online shopping, among others. As reported by the Troubled Company Reporter-Europe, a local court in Essen formally opened insolvency proceedings for Arcandor on September 1, 2009. The proceedings started for the Arcandor holding company and for 14 units, including the Karstadt department-store chain and Primondo mail-order division. Arcandor filed for bankruptcy protection after the German government turned down its request for loan guarantees. On June 8, 2009, the government rejected two applications for help by the company, which employs 43,000 people. The retailer sought loan guarantees of EUR650 million (US$904 million) from Germany's Economy Fund program. It also sought a further EUR437 million from a state-owned bank. =========== G R E E C E =========== * GREECE: Most Likely Will Need to Restructure Debt --------------------------------------------------- Jennifer Ryan and Andrea Catherwood at Bloomberg News report that Arnab Das of Roubini Global Economic said there is a "very strong probability" that Greece will need to restructure its debt. "We think it's a very strong probability that countries such as Greece are going to have to restructure their debt to survive within the euro area," Mr. Das told Bloomberg TV on Friday. "To us, Greece looks like a case of illiquidity and insolvency," Bloomberg quoted Mr. Das as saying. "It's looking pretty dire." ============= I R E L A N D ============= QUINN INSURANCE: Liberty Mutual Eyes Takeover to Expand EU Ops -------------------------------------------------------------- Simon Carswell and Mary Carolan at The Irish Times report that Liberty Mutual, one of the largest US insurance companies, has said it is interested in buying Quinn Insurance as a means of significantly expanding its operations in Europe. According to the Irish Times, Liberty Mutual said that it had contacted the joint administrators of Quinn Insurance, Michael McAteer and Paul McCann of accountants Grant Thornton, to express an interest in taking over the troubled company. The Irish Times says the company has no significant overlapping business with Quinn Insurance in Ireland or Britain. If a takeover proceeded, the sale could leave the Cavan-based insurer intact and minimize further job losses beyond the 902 sought from the 2,450-strong workforce, the Irish Times states. The Irish Times relates the administrators told the High Court Thursday that a sale was not their priority "at this time" but that they had held talks with the insurer's owner, Quinn Group, on a joint approach to any proposed sale. According to the Irish Times, this could lead to the separate sale of the firm's health insurance and general insurance businesses or both combined. The administrators plan to appoint a global merchant bank over the coming weeks to manage a sale process and assess interest among international companies, the Irish Times discloses. Liabilities The Irish Times relates in a report presented to the president of the High Court, Mr. Justice Nicholas Kearns, the administrators said a review by auditors had found that Quinn Insurance had under-provided for liabilities by EUR68 million last year. The court was told that the firm made a loss of EUR47 million in 2009, but that many parts of the business remained at trading levels before the appointment of the administrators in March, the Irish Times notes. Costs The Irish Times says the administrators are seeking costs of EUR565,000 for work carried out between March 30 and April 30, and want to invoice the firm monthly to the end of July for sums not exceeding EUR1.8 million. They want to pay their solicitors McCann Fitzgerald EUR120,000 and their public relations firm Hume Brophy EUR50,000 for work between March 30 and April 30 and a further EUR10,000 a month from this month to July, the Irish Times discloses. Mr. Justice Kearns said he wanted independent material on which he could assess these costs, the Irish Times notes. As reported by the Troubled Company Reporter-Europe on April 19, 2010, The Financial Times said Quinn Insurance was put into administration on April 15 after Sean Quinn abandoned attempts to keep control of the family-owned company. Quinn Insurance is owned by Sean Quinn, Ireland's richest man, and his family. The company has just more than 20% of the motor and health insurance market in Ireland. It has more than one million customers in the country. Employing almost 2,800 people in Britain and Ireland, it was founded in 1996 and entered the UK market in 2004, according to The Times. =========== R U S S I A =========== MECHEL OAO: Moody's Assigns Corporate Family Rating at 'B1' ----------------------------------------------------------- Moody's Investors Service has assigned a B1 corporate family rating to Mechel and a B1 Probability of Default Rating. Concurrently, Moody's Interfax Rating Agency has assigned an A2.ru national scale rating to the company. Moscow-based Moody's Interfax is majority-owned by Moody's, a leading global rating agency. The outlook on the ratings is stable. This is the first time that Moody's rates the company. The CFR of Mechel's reflects: 1) the company's role as a leading domestic steel and coal producer with strong positions in key businesses including production of specialty steel and alloys; 2) the company's largest coal reserve base in Russia; 3) favorable business profile results from high degree of vertical integration which ensures the stable production and to some extent preserves operating margins; the company has internal captive demand for coking coal and iron ore in steel production and for steam coal -- in power generation; 4) strategic location of its key assets close to the major steel consuming markets as well as the ownership and control of essential infrastructure including ports, rolling stock and power plants which provide guaranteed access to export markets; 5) combination of underground and open pit mining operations with no significant concentration on any single mine mitigates the risks of interruption in coal production; 6) good disclosure and adequate corporate governance supported by NYSE listing. The rating also reflects the facts that Mechel's operating performance during 2008-2009 financial crisis was materially affected with modest results in the last financial year though largely in line with other similarly rated Russian peers. The falling prices and volumes were partly mitigated by relatively low cost base and ability to re-direct sales of coal from domestic to the export markets. On the positive side, Moody's also notes that the stretched liquidity position that prevailed during part of 2009 was eventually improved thanks to extension of Yakutugol and Oriel loans as well as a new Gazprombank facilities and RUR bond. The company has large capital expenditures planned for the next few years, which would strengthen the business profile of the company though could weigh on the financial position if not carefully implemented. Moody's believes that strategic acquisitions are largely completed and the projects' related capex is to some extent discretional as it mostly relates to capacity expansion and mine development. In the medium term successful development of coal mining assets would improve the company's positions as the largest metallurgical coal producer in Russia. On the other hand, the CFR of Mechel also reflects: 1) aggressive capital structure with high leverage and modest CF metrics which will take some time before it improves; 2) the company's exposure to the cyclicality of the steel and mining industry which was recently evidenced by the worst downturn in decades; 3) on-going refinancing risk with sizable repayments in 2010 and 2011 and a liquidity profile depending on renewing or extending funding to the extent that the expansion capex plans are carried out; 4) the fact that future green field developments of Elga deposit would require significant resources and provide technical and operating challenges; 5) expectations of substantial capital expenditures related to the current activity of steel assets which would further negatively affect FCF generation; 6) possible negative administrative/regulatory consequences for the Russian mining sector following the recent incidents at the mining sector; 7) the company's ownership concentration adding uncertainty and less predictability to its financial strategy and dividend policy. The stable outlook indicates Moody's expectations that the 2010 performance of the company should support the current rating and would demonstrate positive trends in financial metrics especially reduction in leverage and improved cash flow generation. For an upgrade Moody's would like to see the debt/EBITDA ratio moving toward 2.5x and FCF/Debt becoming positive over the next 2 years. If the company's leverage not converging towards 3x and (CFO -- Dividends)/Debt not moving towards 20 % in the next 18 months that might trigger the downward pressure on the rating. The Company is a vertically integrated mining and metals company. Its business includes four segments: mining, steel, ferroalloy and power. The Company produces coal, iron ore concentrate, nickel, steel, ferrochrome, ferrosilicon, rolled products, hardware, heat and electric power. Mechel products are sold domestically and internationally. The Group's subsidiaries are located in 12 regions of Russia, Kazakhstan, USA, Romania, Bulgaria and Lithuania. Mechel owns three trade ports and a transport operator. In 2009, the company reported revenue of US$5.8 billion (42% decline Y-o-Y) and EBITDA of US$1 billion (51% decrease Y-o-Y). The company is majority owned by CEO Mr. Zyuzin who controls 66.76% of voting shares. After the IPO the company has 33.24% of free float. SSMO CJSC: S&P Assigns 'B' Rating on Senior Unsecured Notes ----------------------------------------------------------- Standard & Poor's Rating Services said that it assigned its 'B' global scale issue rating and 'ruA' Russia national scale rating to the proposed Russian ruble (RUB) 2 billion (US$65 million) senior unsecured notes to be issued by Russia-based construction and development group CJSC SSMO LenSpecSMU (B/Stable/B, Russia national scale 'ruA'). S&P also assigned a recovery rating of '4' to the notes, indicating S&P's expectation of average (30%-50%) recovery in the event of a payment default. The corporate credit ratings on LSS are unchanged. The issue rating on the US$100 million (US$8.1 million currently outstanding) credit-linked notes issued by Golden Ring Finance S.A. (not rated) and guaranteed by LSS, is unchanged at 'B', the same level as the corporate credit rating on LSS. The recovery rating on these notes is also unchanged, at '4', indicating S&P's expectation of average (30%-50%) recovery in the event of a payment default. The issue rating on LSS' existing RUB2 billion unsecured notes due 2012 is unchanged at 'B', the same level as the corporate credit rating on LSS. The recovery rating on these notes is also unchanged, at '4', indicating S&P's expectation of average (30%- 50%) recovery in the event of payment default. The rating on the proposed notes is based on preliminary information and 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 recovery and issue ratings will be subject to further review. Recovery Analysis The proposed RUB2 billion notes are an unsecured obligation of LSS. S&P assumes that these notes rank pari passu with the CLNs and other unsecured debt issued or guaranteed by LSS. S&P has pushed back the year of default to 2012 from 2011 to reflect reduced refinancing risk in 2010-2011 on account of the proposed issue. Downward pressure on the unsecured debt ratings is possible should the share of secured debt in the capital structure increase. Material depreciation of the ruble versus the U.S. dollar could depress estimated recoveries to less than 30%-50%. The recovery prospects are based on a discrete-asset valuation of about RUB13.2 billion (US$380 million). The recovery and issue ratings take into account the unsecured nature of the rated issues and the Russian jurisdiction, which S&P see as relatively creditor unfriendly. In addition, the LSS group has about US$58 million equivalent in unrated bank debt. Ratings List New Rating CJSC SSMO LenSpecSMU RUB2 bil. (proposed) notes Senior Unsecured B Russia National Scale ruA Recovery Rating 4 ============================= S L O V A K R E P U B L I C ============================= AIR SLOVAKIA: Administrator Files Bankruptcy Proposal ----------------------------------------------------- CTK, citing Slovak Television, reports that Air Slovakia's restructuring administrator on Monday filed a proposal for the company's bankruptcy. According to the report, Air Slovakia got permission for restructuring but the state has recently withdrawn its license for running air transport. Air Slovakia is an airline based in Bratislava, Slovakia. It operates charter passenger, ACMI and scheduled flights. ========= S P A I N ========= CAIXA GIRONA: Fitch Downgrades Individual Rating to 'C/D' --------------------------------------------------------- Fitch Ratings has downgraded Caixa d'Estalvis de Girona's Long- term Issuer Default Rating to 'BBB' from 'BBB+' and downgraded its Short-term IDR to 'F3' from 'F2'. Both ratings remain on Rating Watch Negative. Fitch has simultaneously downgraded the caja's Individual Rating to 'C/D' from 'C' and removed the RWN. The agency has affirmed the caja's Support Rating at '3' and Support Rating Floor at 'BB+'. In addition, Fitch has downgraded the caja's senior unsecured debt rating to 'BBB' from 'BBB+' and downgraded its subordinated debt to 'BBB-' from 'BBB'. The debt ratings also remain on RWN. Caixa Girona's government-guaranteed debt, rated 'AAA', is not impacted by the rating action. The downgrades reflect the ongoing negative effects of the weak Spanish economy and property sector downturn on the caja's asset quality and operating profitability. The caja's profitability is continuing to be affected by lower business volumes and margin pressure from deposit competition and low interest rates. Caixa Girona grew its loan book strongly between 2004 and mid-2007, leading to high risk concentration in the real estate and construction sectors, which will be difficult to reduce in the near-term given uncertain prospects regarding the pace of the economic recovery. The RWNs reflect the need to boost core capital, either through asset sales or through a merger with other cajas. Failure to achieve this and/or to manage asset quality deterioration, while protecting operating profitability, will lead to a rating downgrade. The ratings also consider the caja's sound retail franchise, low market risk appetite and sound liquidity. Caixa Girona's 2009 profitability has weakened due to lower business volumes and interest rates and a rise in loan and other asset impairment charges. Pressure will persist during the remainder of 2010, however the effects should be minimized by cost control, generic reserves and one-off capital gains from sale of available-for-sale equity stakes and non-core business assets. Lending exposure to the real estate/construction sectors remains high at 38% of lending, although there has been a reduction since 2007, largely through asset foreclosures (EUR326 million at end- Q110, net of EUR43 million reserve). Real estate exposure is fairly diversified by borrower and chiefly relates to mortgages for small projects tied to primary residences in Girona, most of which are near construction completion. Risk diversification is also provided by 40% of loans being to individuals (mostly residential). The impaired/total loans ratio was high at 6.2% of total loans at end-Q110 (11.3%, if foreclosed assets were included), the same level as in 2009. Caixa Girona's liquidity is sound thanks to its retail deposit base (74% of loans), an adequate level of unencumbered liquid assets and a well-diversified wholesale funding maturity profile. Its end-2009 Tier 1 ratio of 8.3% is adequate, but necessary given its level of impaired assets and high real estate sector risk concentration. Caixa Girona was Spain's 33rd-largest caja by total end-2009 assets. It focuses on retail banking in the Catalonian province of Girona and has 1,132 employees and 229 branches. CAIXA LAIETANA: Fitch Retains Negative Watch on 'C/D' Rating -------------------------------------------------------------- Fitch Ratings has downgraded Caixa d'Estalvis Laietana's Long-term Issuer Default Rating to 'BBB-' from 'BBB' and revised the rating to Rating Watch Negative from Rating Watch Evolving. Fitch has simultaneously reviseded Laietana's Short-term IDR of 'F3' to RWN from RWE. The Individual Rating of 'C/D' remains on RWN. The agency has affirmed the caja's Support Rating at '3' and Support Rating Floor at 'BB+'. Laietana's outstanding preference shares have been downgraded to 'B+' from 'BB-', and reviseded to RWN from RWE The rating actions do not impact Laietana's 'AAA'-rated government-guaranteed debt. The Long- and Short-term IDRs and preference shares had been placed on RWE due to the caja's merger plan with Caixa d'Estalvis del Penedes. The RWE on these ratings have been removed and have now been placed on RWN as the merger has been aborted. The current ratings capture Laietana's stand alone credit profile. The rating actions reflect Fitch's view that Laietana has little scope to improve core capital and that it will be difficult to transform its risk profile, by lowering its exposure to the construction and real estate sectors in the near term, due to uncertain prospects regarding the pace of an economic recovery in Spain and the downturn in the property sector. In addition, Laietana needs to continue improving its funding at a time when competition for deposits is likely to continue. These factors will put pressure on the caja's asset quality and profitability in 2010 and 2011. The RWN reflects the need to improve capital levels through a merger. If this does not take place in the near term, there could be downward ratings pressure. Like most banks in Spain, Laietana's operating profit remains affected by the need to continue to provide for loan impairments and foreclosed assets. Despite operating in one of the more competitive regions in Spain, in 2009, the caja benefited from the decline in interest rates due to a structural mismatch, which widened its net interest margin and fed into net interest income. Its cost efficiency is sound and supported by Laietana's low cost base. Real estate/construction sectors loans accounted for a high 44% of total loans at end-2009 (pure real estate related: 37%). This is mitigated by 17% of total loans being in completed projects, exposures being centered in urban areas, an average LTV on its mortgage book (85% of the loan portfolio) of 58% and a low single- name concentration. Management is actively managing the portfolio to reduce risk through a specialized team, but the downturn of the Spanish housing market is making this challenging. At end-2009, the caja's impaired/total loans stood at 6.3% (cover of 33%). Including foreclosed assets, this ratio would have been 9.6% Laietana's funding has improved somewhat due to rising deposits although these still represented a low 53% of net lending at end- 2009. The caja needs to continue to rebalance its funding towards customer deposits which will be challenging due to competition and private sector deleveraging. Refinancing of EUR900 million in 2011-2012 appears manageable and wholesale maturities are diversified over time. Capital levels are tight for its risk profile, although the caja is deleveraging its balance sheet to support capital and liquidity. Laietana, based in the Catalonian coastal sub-region of Maresme in the province of Barcelona, was Spain's 32nd-largest caja by total assets at end-2009. Its main activities include residential and real estate mortgage lending and deposit taking. In Fitch's rating criteria, a bank's standalone risk is reflected in Fitch's Individual ratings and the prospect of external support is reflected in Fitch's Support ratings. Collectively these ratings drive Fitch's Long- and Short-term IDRs. CAIXA PENEDES: Fitch Retains RWN on 'BB'-Rated Preference Shares ---------------------------------------------------------------- Fitch Ratings has maintained Caixa Penedes's Long-term Issuer Default Rating of 'BBB+', Short-term IDR of 'F2', and Individual Rating of 'C' on Rating Watch Negative respectively. Fitch has simultaneously affirmed the caja's Support Rating at '3', and Support Rating Floor at 'BB+'. Caixa Penedes's preference shares, rated 'BB', remain on RWN. The rating actions have no impact on the caja's 'AAA'-rated government-guaranteed debt. Fitch initially placed the caja's ratings on RWN, on December 9, 2009, due to its merger plans with Caixa d'Estalvis Laietana. However, the merger plan has been aborted. The maintaining of the RWN is now based on the caja's stand-alone credit profile and reflects the need to boost core capital levels in the near-term. Otherwise, the ratings could be downgraded. The caja has experienced a sharp deterioration in asset quality due to risk concentration in Spain's troubled property sector. In addition, the weak Spanish economy and uncertain prospects regarding the pace of an economic recovery are likely to continue pressuring asset quality and operating profitability in 2010 and 2011. The latter is also likely to be affected by strong competition for deposits and low interest rates. Despite these factors, Fitch believes that the caja has a sound provincial franchise, still satisfactory underlying operating profitability, proactive management, low borrower risk concentration and improved liquidity. Caixa Penedes' pre-impairment operating profitability held up well in 2009 due to a sustained net interest margin, despite offering higher returns on time-deposits, higher insurance income and good cost control (cost/income ratio of 54%). However, net income was adversely affected by higher credit impairments, partly ahead of calendar. For 2010, margin pressure will be partly offset by the activation of interest rate 'floors', higher fees, cost control and the potential to realise significant capital gains from asset disposals. Lending exposure to the real estate/construction sectors was a high, albeit declining, 35% of total loans at end-2009. Fitch takes some comfort in the fact that this exposure is mortgage- secured for small projects of primary residences, largely at the final construction stage and diversified by client. A high 47% of loans to individuals (84% in residential mortgages) also provides risk diversification. The caja's impaired/total loans was 6.4% at end-2009 (11.2%, if foreclosed assets were included), above the sector average. The caja's focus on enhancing its retail deposit base, together with loan de-leveraging, helped to improve its deposits/total loans ratio to 65% at end-2009 (54% at end-2007) and reduce reliance on ECB short-term funding. Furthermore, the level of unemcumbered liquid assets (8% of total assets) and long-term funding has increased, largely through the extensive use of the state guarantee funding scheme. Funding is well-diversified in maturities. At end-2009, the caja's Tier 1 ratio of 9.5% was highly-supported by hybrid capital, and its regulatory core capital ratio was 6.6%. As noted above, a higher level of core capital is necessary given the caja's risk profile. Caixa Penedes is Spain's 14th-largest savings bank by total assets at end-2009. It focuses on retail banking in the Catalonia region, where most of its 3,000 staff and 633 branches are located. In Fitch's rating criteria, a bank's standalone risk is reflected in Fitch's Individual ratings and the prospect of external support is reflected in Fitch's Support ratings. Collectively these ratings drive Fitch's Long- and Short-term IDRs. CAJA DE AHORROS: Fitch Puts 'BB+' Issuer Rating on Positive Watch ----------------------------------------------------------------- Fitch Ratings has placed Caja de Ahorros y Monte de Piedad de Cordoba's Long-Term Issuer Default Rating of 'BB+' on Rating Watch Positive to reflect state support. At the same time the agency has downgraded its Individual rating to 'F' from 'D/E', reflecting Fitch's opinion that CajaSur would have defaulted had it not received state support. These ratings have been also been placed on RWP: Short-term IDR of 'B', Support rating of '3', Support Rating Floor of 'BB+' and senior debt of 'BB+'. CajaSur's Subordinated Debt of 'BB' has been placed on Rating Watch Negative. For CajaSur's hybrid capital issues, the agency has downgraded the preference shares to 'CC' from 'B'. There is no rating impact on the 'AAA'-rated government guaranteed debt issued by CajaSur. The rating watches will be resolved once a plan for CajaSur is disclosed. The RWN on the Subordinated Debt reflects the possibility, albeit remote, that this level of securities could be called upon to cover potential shortfalls in equity in the event of a sale of assets and liabilities. In a worst case, there could be a multiple notch downgrade in this instrument. CajaSur was the subject of regulatory intervention by the Bank of Spain on May 22, 2010. The Spanish state's Fund for Orderly Bank Restructuring has taken over control of CajaSur, having replaced the caja's board of directors and management as temporary administrator. The FROB has EUR9 billion in equity and can raise up to ten times this amount in debt (EUR90 billion). It is expected to restore CajaSur's depleted capital adequacy ratios to minimum regulatory requirements and is also empowered by Law to provide the necessary liquidity lines. The Spanish authorities have stated that CajaSur will continue to meet all its financial obligations to depositors and creditors. CajaSur breached its minimum regulatory capital adequacy requirements as a result of the large EUR596 million loss reported for 2009 and there has been a break-up of merger talks between CajaSur and Unicaja (rated Long-term IDR of 'A+'), triggering the regulatory intervention.. The 2009 loss came as a result of large loan impairment (EUR456 million) and other charges (EUR163 million) relating to high risk concentration to construction and real estate companies. At end-2009 the caja had EUR3,656 million in lending to these sectors (27% of total loans), a further EUR338 million in foreclosed assets and EUR899 million in property acquired in exchange for debt. All in all, property exposure accounted for 26% of total assets. The impaired to total loans ratio was 10.2% at end 2009 and this ratio rises to 16% if net repossessed property and net acquired assets are included in this calculation. At end-2009, CajaSur's tier 1 and total regulatory ratios were 1.94% and 3.67% respectively, significantly below the minimum requirements. At end-2009, CajaSur had a capital shortfall of EUR523 million. The FROB is expected to inject capital, either in the form of preference shares or "cuotas participativas" (normally non-voting shares, but voting shares in the case that they are subscribed by the FROB). Three administrators were named by the FROB and have a one-month timeframe (extendible to six months) to come up with a solution for the caja. This could include a merger with another caja or the sale of its assets and liabilities to another institution. The FROB is exempt from any regulatory hybrid capital limits or limits on "cuotas participativas". =========================== U N I T E D K I N G D O M =========================== BRITISH AIRWAYS: Posts GBP531MM Loss for Year Ended March 31 ------------------------------------------------------------ Pilita Clark at The Financial Times reports that British Airways posted a pre-tax loss of GBP531 million (US$763 million) for the 12 months to the end of March, its largest loss since it was privatized in 1987. The figures exclude the costs associated with the recent disruptions linked to the ash cloud from Iceland, which disrupted flight schedules across Europe, or industrial action by BA cabin crew planned this week, the FT notes. According to the FT, for the year ending March 31 revenue dropped 11% to GBP7.99 billion, while the operating loss widened from GBP220 million in 2008-09 to GBP231 million. The group passed on paying a dividend for the second year, the FT states. Strike Separately, the FT's Ms. Clark reports BA said more flight attendants turned up for work than were needed on Monday as the Unite union launched the first of a wave of strikes at the carrier. Thousands of passengers around the world had travel plans disrupted, however, after cabin crew walked out for the second time in two months at BA, the FT relates. According to the FT, the airline said it managed to fly people to "100% of its short-haul destinations" -- which it did not do during the last bout of walkouts in March -- though it had to slash its normal number of daily flights. Overall it expected to operate more than 60% of its long-haul flights from Heathrow and more than 50 per cent of shorter routes to the UK and Europe, the FT says. Its Gatwick and London City flights operated normally, the FT notes. "We got more cabin crew than we required to operate the program we decided on for this five-day period," the FT quoted a BA spokesman saying, though he declined to give precise numbers. Injunction As reported by the Troubled Company Reporter-Europe on May 24, 2010, The Times said Court of Appeal overturned an injunction that was blocking a BA cabin crew strike. The Times disclosed the Unite union said that cabin crew would stop work for five days from May 24, with further five-day walkouts due to start on May 30 and June 5. According to The Times, the Appeal Court judges who overturned the injunction said that the dispute could be settled only through negotiation. On May 19, 2010, the Troubled Company Reporter-Europe, citing Times Online, reported that BA was granted an injunction to stop the Unite union from carrying out cabin crew strikes that had been due to start on May 17. Times Online disclosed the High Court found that the union failed to comply with the legal requirement to "send everyone eligible to vote details of the exact breakdown of the ballot result". 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 March 19, 2010, Moody's Investors Service lowered to B1 from Ba3 the Corporate Family and Probability of Default Ratings of British Airways plc; and the senior unsecured and subordinate ratings to B2 and B3, respectively. Moody's said the outlook is stable. This concludes the review that was initiated on November 10, 2009. The rating action reflects Moody's view that credit metrics will not be commensurate with the previous rating category in the medium term. Moody's expect furthermore that metrics will be burdened in the foreseeable future by the company's significant pension deficit, which was at GBP2.6 billion for the APS and NAPS schemes combined as of September 2009 (under IAS). Moody's nevertheless understand that under the current agreement with the trade unions, the cash contributions to these deficits will be frozen at GBP330 million per year for three years, subject to approval by the Pensions Regulator and the trustees. LIVESEY: In Administration; P&A Partnership Named Administrator --------------------------------------------------------------- The Business Desk reports that Livesey has gone into administration. The report relates insolvency firm The P&A Partnership has been appointed administrator to the company. According to the report, partners at the practice are ensuring that the Shrewsbury firm continues to trade until a buyer can be found. The report notes Jeremy Priestley, P&A managing partner, said the company "was hit by cashflow problems". Livesey is a print and marketing collateral company based in Shropshire. LOYD'S NURSING: 64 Southern Cross Homes Put Up for Sale ------------------------------------------------------- Find a Care Home reports that more than 60 UK care homes owned by Southern Cross are seeking a buyer after Loyd's Nursing Homes Group went into administration. The report recalls Loyd's Nursing Homes Group, one of the biggest landlords of care home provider Southern Cross, went into administration in April after a financial collapse. According to the report, chartered accountants at Grant Thornton who are organizing the administration are aiming to sell 64 homes previously owned by Loyd's -- most of which operated by Southern Cross while others are operated by Four Seasons. "We are currently considering our options for the portfolio of 64 properties . . . and have already been approached by a number of interested parties," the report quoted Daniel Smith, a partner in the recovery and reorganization practice at Grant Thornton, as saying. MAGAZINE MARKETING: In Administration; MCR Appointed Administrator ------------------------------------------------------------------ Sallyanne Pitt and Paul Clark of MCR were appointed Joint Administrators of Magazine Marketing Company Limited, on May 21, 2010. MMC was founded in 1988 and was the UK's largest independent newstrade distributor representing over 135 clients and 400 magazines and collectables. MMC's direct customers were wholesalers, which in the UK comprised of Smith News and Menzies Distribution as well as a number in the independent sector. MMC also exported titles worldwide through export agents. The company also worked on behalf of its clients representing their titles to retail groups to promote sales and to agree which titles the retail groups will sell. MMC's sales drive to retailers was subdivided into supermarkets, the high street (WH Smith Retail and Martin McColl Retail), CTN groups (Star News, GT News, Eastcliffe), convenience groups (One Stop, Co-op, Spar), travel points (WH Smith, Alpha etc) and independent newsagents. The company had also built up a reputation in the export business, with over 77 agents in 58 countries. Sallyanne Pitt, Partner, MCR, stated: "MMC had a long history of distributing well known magazine titles and collectables to the newstrade. It is extremely unfortunate that the Company has had to be placed into Administration. The Company is not continuing to trade. Parties that have an interest in acquiring any of the Company's assets should contact us without delay." ROYAL BANK: Nears Pakistan Unit Sale Deal ----------------------------------------- BBC News reports that the Royal Bank of Scotland is closing in on a deal to sell its operations in Pakistan. According to BBC, the bank is reported to have agreed the sale to Faysal Bank in Pakistan, owned by Bahrain parent company, Ithmaar. An announcement is expected next week, BBC notes. RBS Pakistan employs about 5,000 staff, BBC discloses. About RBS The Royal Bank of Scotland Group plc (NYSE:RBS) -- http://www.rbs.com/-- is a holding company of The Royal Bank of Scotland plc (Royal Bank) and National Westminster Bank Plc (NatWest), which are United Kingdom-based clearing banks. The company's activities are organized in six business divisions: Corporate Markets (comprising Global Banking and Markets and United Kingdom Corporate Banking), Retail Markets (comprising Retail and Wealth Management), Ulster Bank, Citizens, RBS Insurance and Manufacturing. On October 17, 2007, RFS Holdings B.V. (RFS Holdings), a company jointly owned by RBS, Fortis N.V., Fortis SA/NV and Banco Santander S.A. (the Consortium Banks) and controlled by RBS, completed the acquisition of ABN AMRO Holding N.V. (ABN AMRO). In July 2008, the company disposed of its entire interest in Global Voice Group Ltd. * * * As reported by the Troubled Company Reporter-Europe on March 29, 2010, Standard & Poor's Ratings Services said that it lowered its ratings on "may pay" Tier 1 securities issued or guaranteed by The Royal Bank of Scotland Group PLC (A/Stable/A-1) to 'C' from 'CC'. At the same time, the rating on the RBSG-related security issued by Argon Capital PLC was similarly lowered to 'C' from 'CC'. The counterparty credit ratings and stand-alone credit profiles of RBSG and subsidiaries, and the ratings on other debt securities issued by these entities, are unaffected. VISTEON CORP: Reaches Stipulation on UK Pension Claim Withdrawal ---------------------------------------------------------------- Visteon Corp., Visteon UK Pension Trustees Limited, in its capacity as trustee of the Visteon UK Pension Plan, the Board of the Pension Protection Fund, and the Official Committee of Unsecured Creditors sought and obtained permission from the U.S. Bankruptcy Court to enter into a stipulation, which provides that: (a) the claims asserted by the UK Pension Trustee and the PPF against the Debtors will be withdrawn with prejudice; and (b) the Pension Trustee's discovery request, the Debtors' discovery request, the Debtors' objection, and the Creditors Committee's objection will be deemed withdrawn with prejudice. As previously reported, the UK Pension Trustee and the PPF filed Claim Nos. 2032, 2652, 2658, 2664, 2670, 2672, 2674, 2675, 2678, 2772, 2778, 2818, 2819, 2822, 2823, 2825, 2829, 2830, 2837, 2839, 2841, 2843, 2845, 2849, 2850, 2851, 2852, 2853, 2856, and 2859 on October 15, 2009. The Claims asserted against each of the Debtors contingent and unliquidated claims arising under the Pensions Act 2004 and the Pensions Act 2005, all applicable UK Regulations, and other claims against the Debtors relating to the Debtors' potential liability to the Claimants under UK law related to the underfunding of the Visteon UK Pension Plan. The Debtors objected to the allowance of the Claims in early April 2010. The Creditors Committee also filed an objection to the Claims in early May 2010. Each of the UK Pension Trustee and the Debtors sought certain document requests from each other in late April 2010. The parties are entering into the Stipulation to avoid the expense of further litigation among them. The parties acknowledge that execution of the Stipulation will not constitute or be deemed an admission of any kind on the part of the Claimants, the Debtors or the Creditors Committee. About Visteon Corp. Headquartered in Van Buren Township, Michigan, Visteon Corporation (NYSE: VC) -- http://www.visteon.com/-- is a global automotive supplier that designs, engineers and manufactures innovative climate, interior, electronic and lighting products for vehicle manufacturers, and also provides a range of products and services to aftermarket customers. The Company has corporate offices in Van Buren Township, Michigan (U.S.); Shanghai, China; and Kerpen, Germany. It has facilities in 27 countries and employs roughly 35,500 people. The Company has assets of US$4,561,000,000 and debts of US$5,311,000,000 as of March 31, 2009. Visteon Corporation and 30 of its affiliates filed for Chapter 11 protection on May 28, 2009, (Bank. D. Del. Case No. 09-11786 through 09-11818). Judge Christopher S. Sontchi oversees the Chapter 11 cases. James H.M. Sprayregen, Esq., Marc Kieselstein, Esq., and James J. Mazza, Jr., Esq., at Kirkland & Ellis LLP, in Chicago, Illinois, represent the Debtors in their restructuring efforts. Laura Davis Jones, Esq., James E. O'Neill, Esq., Timothy P. Cairns, Esq., and Mark M. Billion, Esq., at Pachulski Stang Ziehl & Jones LLP, in Wilmington, Delaware, serve as the Debtors' local counsel. The Debtors' investment banker and financial advisor is Rothschild Inc. The Debtors' notice, claims, and solicitation agent is Kurtzman Carson Consultants LLC. The Debtors' restructuring advisor is Alvarez & Marsal North America, LLC. Bankruptcy Creditors' Service, Inc., publishes Visteon Bankruptcy News. The newsletter tracks the Chapter 11 proceedings of Visteon Corp. and its debtor-affiliates. (http://bankrupt.com/newsstand/ or 215/945-7000) =============== X X X X X X X X =============== * S&P Puts Ratings on Senior Unsec. Debts of 22 Governments ----------------------------------------------------------- Standard & Poor's Ratings Services said that it had assigned recovery ratings to the senior unsecured debt of 22 speculative- grade local and regional governments in Central and Eastern Europe and Latin America. At the same time, S&P affirmed the issue ratings on the bonds of those 22 LRGs. The rationale for the recovery ratings can be found in table 2 in S&P's commentary on the rating action titled, "S&P Assigns Recovery Ratings To Debt Of 22 LRGs And Affirms Issue Ratings On Those 22 LRGs," published earlier. The assignment of recovery ratings follows the introduction of S&P's LRG recovery rating methodology, while affirmation of issue ratings is based on its general recovery framework. Standard & Poor's Global Sovereign Recovery Rating Scale For Speculative-Grade Issuers Standard & Poor's Recovery Issue Recovery Rating Range Rating* ----------------- -------- ------- 1+ High expectation, full recovery 100% +3 notches 1 Very high recovery 90%-100% +2 notches 2 Substantial recovery 70%-90% +1 notch 3 Meaningful recovery 50%-70% 0 notches 4 Average recovery 30%-50% 0 notches 5 Modest recovery 10%-30% -1 notch 6 Negligible recovery 0%-10% -2 notches * Indicates "notching" relative to Standard & Poor's issuer credit rating. S&P also expects to assign recovery ratings to the debt of other LRGs with Standard & Poor's speculative-grade issuer credit ratings should they issue bonds in the future. The distribution of Standard & Poor's recovery ratings on LRGs currently does not extend to either the "strongest" ('1+' in its recovery rating scale) or the "weakest" ('6' in S&P's recovery rating scale) ends of the recovery rating scale (see chart). This is because there is typically no insolvency regime for LRGs in most jurisdictions, and S&P does not expect asset foreclosures in such jurisdictions. Therefore, S&P estimates that the possibility of a very high recovery is limited unless the default scenario is a very short-term liquidity crisis. On the other hand, because there is no equivalent to corporate liquidation for LRGs, S&P would expect that, given the ongoing existence of LRGs even after default, at least some recovery may be expected. Standard & Poor's starts its recovery analysis by identifying what it views as the most likely default or restructuring scenarios. These scenarios set the relevant parameters for the subsequent recovery analysis, as they envisage the economic, fiscal, and political conditions around default. The default or restructuring scenarios underlying the recovery analysis typically are linked to the key rating constraints that affect the issuer credit rating. However, the simulation of a default scenario could lead to conclusions on an LRG's ability to make debt service payments and recovery incentives in the event of default that are distinct from those in a predefault situation. Therefore, in S&P's opinion, an LRG with a higher issuer credit rating might well have weaker recovery prospects after a default, resulting in a lower recovery rating. It is important to point out that the recovery analysis is performed under a hypothetical assumption, which considers that the default or restructuring scenarios have occurred. Obviously the likelihood that a given scenario would actually occur can vary. This is reflected in S&P's issuer credit ratings on the 22 LRGs covered in this release, which range between 'CCC+' and 'BB+'. Ratings List Recovery Ratings Assigned; Debt Issue Ratings Affirmed Debt Issuing Recovery Issue Entity Rating Rating* ------- -------- ------- Bashkortostan (Republic of) 3 BB+ Irkutsk Oblast 3 B Samara Oblast 3 BB+ Novosibirsk (City of) 3 BB- Sakha (Republic of) 3 BB- Tomsk Oblast 3 B Krasnodar Krai 3 BB Krasnoyarsk Krai 3 BB+ Volgograd Oblast 3 BB- Tver Oblast 3 B+ Leningrad Oblast 3 BB Kyiv (City of) 4 CCC+ Lviv (City of) 4 CCC+ Lugansk (City of) 4 B- Ivano-Frankivsk (City of) 3 B- Bucharest (City of) 3 BB+ Varna (City of) 3 BB Stara Zagora (City of) 3 BB Plovdiv (City of) 3 BB+ Mendoza (Province of) 3 B- Buenos Aires (City of) 2 B- Buenos Aires (Province of) 3 B- ********* 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. Joy A. Agravante, Valerie U. Pascual, Marites O. Claro, Rousel Elaine T. Fernandez, Frauline S. Abangan 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 * * *