/raid1/www/Hosts/bankrupt/TCREUR_Public/100825.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, August 25, 2010, Vol. 11, No. 167
Headlines
F I N L A N D
M-REAL CORP: S&P Raises Corporate Credit Rating to 'B-'
G E R M A N Y
* GERMANY: Drops Plan to Introduce State Creditor Privilege
* GERMANY: Government Set to Overhaul Bank-Rescue Rules
G R E E C E
WIND HELLAS: Senior Creditors Threaten to Quit Trading Bonds
* GREECE: Banks Under Pressure to Merge as Profits Slump
I R E L A N D
ALLIED IRISH: Gets Three Bids for 70% Bank Zachodni Stake
KILDARE SECURITIES: Fitch Cuts Rating on Class D Notes to 'Bsf'
MORRISON HOTEL: Owner Starts Case v. Anglo Over Receivership
* IRELAND: Some Banks May Be Bankrupt if Assets Marked Down
N E T H E R L A N D S
ELEPHANT TALK: Posts US$14.4 Million in Q2 Ended June 30
R U S S I A
CENTERTELECOM OAO: Fitch Affirms LT Foreign Currency IDR at BB
FAR EAST: Fitch Affirms Long-Term Foreign Currency IDR at 'BB'
NORTH-WEST TELECOM: Fitch Affirms LT Foreign Currency IDR at BB
VOLGATELECOM OJSC: Fitch Affirms LT Foreign Currency IDR at 'BB'
SIBIRTELECOM OAO: Fitch Affirms LT Foreign Currency IDR at 'BB'
URALSVYAZINFORM OAO: Fitch Affirms LT Foreign Currency IDR at BB
* Fitch Assigns 'B+' Long-Term Rating on Russian Ryazan Region
U K R A I N E
PRESTIGE-TOUR: Declared Bankrupt; Liquidator Appointed
U N I T E D K I N G D O M
MINERVA PLC: Largest Shareholder Lashes Out at Management
PROFFITTS OF GREAT LEVER: Search for Buyer Continues
SHEGRIM PROPERTIES: In Receivership; Owes GBP19.6 Mil. to Ulster
* UK: Public Sector Supplier Insolvencies Up 47% in 2009
*********
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F I N L A N D
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M-REAL CORP: S&P Raises Corporate Credit Rating to 'B-'
-------------------------------------------------------
Standard & Poor's Rating Services said that it had raised its
long-term corporate credit rating on Finland-based forest product
company M-real Corp. to 'B-' from 'CCC+'. At the same time, the
short-term corporate credit rating was raised to 'B' from 'C'.
The outlook is stable.
"The rating action primarily reflects M-real's improved liquidity
position, which S&P now view as adequate. This is based on an
improved debt maturity profile, a reduced risk of a distressed
exchange offer, and S&P's expectations of improved free operating
cash flow over the near term," said Standard & Poor's credit
analyst Alexander Gusterman.
The rating action also reflects M-real's improved operating
performance together with S&P's expectations that demand for the
company's products will stabilize or continue to improve.
Similarly, S&P believes that implemented and announced selling
price increases in the second half of 2010 will have a positive
effect on M-real's profitability and cash flow generation in the
short term.
On July 30, 2010, M-real redeemed at par the remaining EUR90
million outstanding of a EUR400 million bond maturing in December
2010. In S&P's view, this removes the near-term risk of a
distressed exchange offer. On the basis of M-real's existing
liquidity resources compared with S&P's estimates of its liquidity
needs, S&P take the view that the company's near-term liquidity
risk has materially declined over the past six months.
In S&P's opinion, the prospects for M-real to generate positive
funds from operations over the near term have improved, primarily
because of an improvement in demand for the company's main
products, higher selling prices in the packaging and fine paper
segments, and sharply increasing market pulp prices. In addition,
S&P does not expect further working capital outflow in the second
half of 2010 (negative EUR71 million in the first half of 2010).
Accordingly, in S&P's revised base case, S&P expects free
operating cash flow generation to be positive in the second half
of 2010 (negative EUR80 million in the first half). In S&P's
view, downside risk would primarily relate to remaining
uncertainty about demand and pricing.
The ratings continue to reflect the company's below-average
operating efficiency and above-average industry risk. They also
reflect M-real's highly leveraged financial profile with still
depressed credit metrics and, in S&P's opinion, credit measures
which remain dependent on continued improvement in cash flow from
operations. These factors are partly offset by significant
restructuring initiatives, an improved debt maturity profile, and
sizable shares of the European paperboard and uncoated fine paper
markets as well as the likelihood of favorable market conditions
over the near term.
The stable outlook reflects S&P's expectation that M-real will
maintain an adequate liquidity position. It also reflects
prospects for a continued, moderate recovery in market conditions,
and opportunities for further cost reduction efforts. S&P expects
these factors to support M-real's operating and financial
performance over the short to medium term.
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G E R M A N Y
=============
* GERMANY: Drops Plan to Introduce State Creditor Privilege
-----------------------------------------------------------
Andrea Thomas at Dow Jones Newswires reports that the justice
ministry said Monday that the German government has dropped plans
to introduce a privilege for state creditors in insolvency cases.
According to Dow Jones, the government had planned to reintroduce
a privilege for fiscal authorities as part of its EUR80 billion
austerity drive, but the justice ministry had concerns and called
for an alternative model and convinced the finance ministry in
talks last week.
Dow Jones notes the spokesman said alternative plans are still
being finalized in the justice ministry and a solution will likely
be reached this week.
As part of the austerity measures, the government had planned to
change the insolvency law by giving state creditors priority over
private creditors if a company becomes insolvent, Dow Jones
discloses. As a result of the originally planned changes, tax
authorities, social security institutions and the federal labor
agency would have been served first from the remaining assets of a
insolvent company before other creditors, Dow Jones states.
* GERMANY: Government Set to Overhaul Bank-Rescue Rules
-------------------------------------------------------
Brian Parkin at Bloomberg News reports that German Chancellor
Angela Merkel's government is set to overhaul bank-rescue rules
and create a bailout fund paid for by lenders, replacing money put
up by taxpayers at the height of the financial-market crisis.
Bloomberg relates a government official on Monday said in Berlin
that Chancellor Merkel's bank restructuring bill, which is due to
become law in January, will pass the cost of managing future
crises to banks after taxpayers bore the cost a EUR480 billion
(US$607 billion) rescue fund established in October 2008.
According to Bloomberg, the official said banks will be required
to provide about EUR1.3 billion annually for the fund.
Bloomberg notes the official said the bill, to be considered by
Chancellor Merkel's Cabinet on Aug. 25 before it proceeds through
parliament in the fall, also contains provisions to manage bank
insolvencies. Bloomberg says measures include the creation of so-
called bad bank units and provisions to allow the government to
speed up its disposal of stakes in Commerzbank AG and Hypo Real
Estate Holding AG.
Bloomberg relates the official said all banks headquartered in
Germany will pay into the new fund, transferring fees on Sept. 30
annually. The fund will co-exist with Soffin, the government's
initial rescue fund, which will be wound down in steps, taking no
new applications for financial help from December, Bloomberg says,
citing the official.
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G R E E C E
===========
WIND HELLAS: Senior Creditors Threaten to Quit Trading Bonds
------------------------------------------------------------
Irene Chapple at Dow Jones Newswires reports that a group of Wind
Hellas' senior creditors are ramping up efforts to take control of
the company following its second quarter results Monday by
preparing to quit trading its bonds.
Dow Jones says the shift to go "restricted" reflects a step up in
the Wind Hellas sale process, which was triggered in July after
the Greek government introduced austerity measures in the wake of
the country's sovereign debt crisis.
Dow Jones notes bidders for the company have been whittled down to
around four investment consortia, a group of senior lenders and
Weather Investments. They are now undertaking due diligence on
the company as they work towards a final offer deadline of
Sept. 15, Dow Jones discloses. A preferred offer is expected to
be announced by Oct. 14, Dow Jones states.
Dow Jones relates early indications suggest that the senior
noteholders, which include hedge funds Anchorage Advisors, Mount
Kellett Capital Management, Taconic Capital, Angelo Gordon, and
Eton Park Capital Management, are set to take control through a
debt-for-equity swap, potentially in partnership with an investor
prepared to inject cash.
The deal could be sealed by a prepack procedure, a U.K. insolvency
process where a business on the brink of insolvency is sold on
without liabilities such as debt, Dow Jones says.
Second Quarter Results
The company on Monday reported second quarter results showing
revenue dropped 27.5% year-on-year to EUR202.3 million, Dow Jones
discloses. Adjusted earnings before interest, tax, depreciation
and amortization (EBITDA), showed a 52.4% drop year- on-year, to
EUR39.1 million, according to Dow Jones.
About WIND Hellas
Headquartered in Athens, Greece, WIND Hellas Telecommunications
S.A. -- http://www.wind.com.gr/-- provides mobile voice and data
services to about 6 million consumer and business customers
throughout Greece. The company enables international roaming in
155 countries for travelling subscribers through agreements with
other carriers. It also provides cellular and satellite-based
vehicle management and tracking services. WIND Hellas is owned by
investment firm Weather Investments, a company led by Cairo-based
Orascom Telecom's founder and chairman, Naguib Sawiris.
* * *
As reported by the Troubled Company Reporter-Europe on July 7,
2010, Standard & Poor's Ratings Services said that it lowered its
long-term corporate credit ratings on Greek mobile
telecommunications operator WIND Hellas Telecommunications S.A.
and related entities to 'SD' from 'CC'. S&P said the downgrade to
'SD' (selective default) mainly reflects the group's agreement
with some of its lenders to defer until Nov. 5, 2010, under the
terms of the standstill agreement, a EUR17.5 million amortization
payment under its RCF and payments due on July 15, 2010 relating
to hedging contracts. The downgrade also reflects S&P's view that
the group's capital structure has become unsustainable in the
short to medium term, and consequently that WIND Hellas is highly
likely to undergo a capital restructuring in the very short term,
the second in about eight months.
* GREECE: Banks Under Pressure to Merge as Profits Slump
--------------------------------------------------------
Niklas Magnusson at Bloomberg News reports that Greek banks are
under growing political pressure to merge as second-quarter
earnings probably slumped on rising loan losses and worsening
asset quality in the debt-burdened country.
According to Bloomberg, National Bank of Greece SA, EFG Eurobank
Ergasias SA, Alpha Bank SA and Piraeus Bank SA, which will report
results within the next week, have been called upon to consider
partnerships by Greek Finance Minister George Papaconstantinou and
Bank of Greece Governor George Provopoulos. Profits at the
lenders probably fell more than 60%, Bloomberg says, citing
analysts' estimates.
Pressure on net interest margins, rising loan loss provisions and
domestic deposit outflows probably hurt profit at Greek banks in
the second quarter, said Tania Gold, an analyst at UniCredit SpA
in London, which has "sell" recommendations on the country's four
largest banks, as cited by Bloomberg, said.
Bloomberg says mergers may help banks cut costs, strengthen
balance sheets and provide better access to capital markets and
funding opportunities after they probably posted an increase in
loan losses and non-performing loans as well as deposit outflows.
The country's lenders have largely been cut off from the money
markets, forcing them to rely on funding from the European Central
Bank at a time when deposit outflows from their domestic units
have reduced their traditional funding base, Bloomberg notes.
The banks' dependence on the ECB for funding and the worsening
asset quality are likely to lead to mergers and capital
injections, Alexander Kyrtsis, an analyst at UBS AG in London,
wrote in a report this month, according to Bloomberg.
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I R E L A N D
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ALLIED IRISH: Gets Three Bids for 70% Bank Zachodni Stake
---------------------------------------------------------
BNP Paribas SA, PKO Bank Polski SA and Banco Santander SA made
bids for Allied Irish Bank Plc's 70% stake in Polish unit Bank
Zachodni WBK SA, Joe Brennan at Bloomberg News reports, citing a
person familiar with the process.
According to Bloomberg, the person, who declined to be identified
because the deal is pending, said Allied Irish probably will
identify a preferred bidder for the stake after offers from the
bidders are reviewed.
Allied Irish is selling the stake in Zachodni as it seeks to raise
EUR7.4 billion (US$9.4 billion) to reach new capital standards,
Bloomberg notes.
Bloomberg relates the bank's managing director Colm Doherty said
on Aug. 4 that he expects to have agreements with buyers for the
bank's Polish and U.K. units by the end of September.
Allied Irish Banks, p.l.c., together with its subsidiaries --
http://www.aibgroup.com/-- conducts retail and commercial banking
business in Ireland. It also provides corporate lending and
capital markets activities from its head office at Bankcentre and
from Dublin's International Financial Services Centre. The Group
also has overseas branches in the United States, Germany, France
and Australia, among other locations. The business of AIB Group
is conducted through four operating divisions: AIB Bank Republic
of Ireland division, Capital Markets division, AIB Bank UK
division, and Central & Eastern Europe division. In February
2008, the Group acquired the AmCredit mortgage business in the
Baltic states of Latvia, Lithuania and Estonia. In September
2008, the Group also acquired a 49.99% shareholding in BACB.
* * *
As reported by the Troubled Company Reporter-Europe on July 23,
2010, Moody's Investors Service affirmed AIB's long-term bank
deposit and debt ratings. These are A1 for long-term bank
deposits and senior debt, A2 for dated subordinated debt, Ba3 for
undated subordinated debt, B1 for cumulative tier 1 securities and
Caa1 for non-cumulative tier 1 securities. Moody's said the
outlook on these ratings is stable. AIB's bank financial strength
rating of D, which maps to Ba2 on the long term rating scale, with
a positive outlook was unaffected by the rating action.
KILDARE SECURITIES: Fitch Cuts Rating on Class D Notes to 'Bsf'
---------------------------------------------------------------
Fitch Ratings has downgraded the class C and D notes of Kildare
Securities, an Irish RMBS transaction containing loans originated
by ICS Building Society. The agency has simultaneously affirmed
the class A and class B notes with a Stable Outlook.
The rating actions are:
-- Class A2 (ISIN XS0286335210): affirmed at 'AAAsf'; Outlook
Stable; assigned a Loss Severity rating of 'LS-1'
-- Class A3 (ISIN XS0286335996): affirmed at 'AAAsf'; Outlook
Stable; assigned a Loss Severity rating of 'LS-1'
-- Class B (ISIN XS0286336374): affirmed at 'AA+sf'; Outlook
Stable; assigned a Loss Severity rating of 'LS-3'
-- Class C (ISIN XS0286336531): downgraded to 'BBBsf' from
'Asf'; Outlook Negative; assigned a Loss Severity rating of
'LS-5'
-- Class D (ISIN XS0286336887): downgraded to 'Bsf' from
'BBB+sf'; Outlook Negative; assigned a Loss Severity rating
of 'LS-5'
-- Class A2 Currency Swap Obligations: affirmed at 'AAAsf';
Outlook Stable
The downgrades of the class C and D notes reflect Fitch's
assessment of the deal against the agency's revised criteria
assumptions for Irish RMBS transactions, and Fitch's expectations
of the future performance of the underlying assets in the deal.
The revised criteria include higher market value decline
assumptions, due to expectations on Irish house price declines and
also a forced-sale discount on foreclosed properties. In addition
Fitch has increased its base default probability assumptions for
all loans and particularly those with higher loan-to-value ratios.
The downgrades also reflect the significant house price decline
seen in Ireland since 2006. Fitch expects a peak-to-trough house
price decline in Ireland of 45% and anticipates that this will
ultimately lead to high loss severities. The downgrades of the
class C and D notes reflects this concern, and Fitch's view that
the transaction is likely to experience a back-loaded default
timing, placing more stress on the most junior notes.
As of the last payment date in May 2010, loans three or more
months in arrears comprised 2.8% of the outstanding collateral
balance. This is a marginal increase over the last year with
loans three or more months in arrears of 2.2% in May 2009. Even
though arrears have been increasing, and the Irish housing market
has been going through a substantial correction, only six
properties in the portfolio have been repossessed to date. Fitch
believes that ultimately Irish lenders will either have to
foreclose on some properties or restructure the loans, both of
which will result in a loss to the transaction. For this reason,
the agency has decided to give limited credit in its analysis to
recent foreclosure performance as it believes that this is not
indicative of future performance in a stressed environment. Fitch
also gives no credit to the possibility of the originator buying
loans out of the pool as there is no requirement under the
transaction documentation for this to occur.
MORRISON HOTEL: Owner Starts Case v. Anglo Over Receivership
------------------------------------------------------------
Ian Kehoe and Gavin Daly at The Sunday Business Post report that
businessman Hugh O'Regan has begun legal proceedings against Anglo
Irish Bank, which has appointed a receiver over a number of his
assets, including the Morrison Hotel.
The Post.ie relates the hotelier lodged the High Court action
against the bank after it obtained a EUR37.4 million judgment
against him. Mr. O'Regan is taking the case in his own name, and
not through any company, the report notes. According to the
Post.ie, Mr. O'Regan has not yet filed any documents outlining his
grievance or the cause of the action. However, by issuing
proceedings, he has given himself a 12-month window to pursue the
case, the Post.ie states.
According to the Post.ie, it is understood that the case relates
to the bank's decision to appoint a receiver over the assets,
which included the Morrison. The bank also appointed a receiver
over other assets, including the Hibernian United Services Club on
St. Stephen's Green and a building on Parliament Street in Dublin,
the Post.ie notes.
The Post.ie says Mr. O'Regan believes the bank acted incorrectly
and caused him significant financial loss.
The Post.ie notes a spokesman for Anglo confirmed that proceedings
had been issued, but said the bank had yet to be put on notice.
As reported by the Troubled Company Reporter-Europe on July 5,
2010, The Irish Times said Mr. O'Regan told the High Court he
almost suffered a mental breakdown last year when a receiver was
appointed to Morrison Hotel. The Irish Times disclosed
Mr. O'Regan said he was very concerned about the future of the
Morrison Hotel and it was a very emotional issue for him. He was
giving evidence in a case where the receiver appointed by the
banks, Martin Ferris, was trying to get EUR5.4 million he says is
owed in rent by MHL, the operator of the hotel, The Irish Times
said. Mr. O'Regan and MHL were defending the case against
Mr. Ferris by saying the company had arrangements with its
landlord over rent credits and a rent holiday, the Irish Times
noted. On July 24, 2009, Mr. Ferris was appointed to Clubko Ltd.,
the Thomas Read group (owner of MHL), and the owners of the
Morrison Hotel building, by Anglo which was seeking repayment of
EUR85 million, according to The Irish Times.
Morrison Hotel is a boutique hotel located in Dublin city center.
* IRELAND: Some Banks May Be Bankrupt if Assets Marked Down
-----------------------------------------------------------
Dara Doyle at Bloomberg News reports that Nobel Prize-winning
economist Joseph Stiglitz said some banks may be bankrupt if their
assets were marked down to reflect their true value.
"One of the concerns in the U.S. and Ireland, is that we've been
using bad accounting to try to hide the true state of banks'
balance sheets," Bloomberg quoted Mr. Stiglitz as saying in an
interview broadcast by Dublin-based RTE Radio yesterday. "We know
in the U.S., many of assets are being held on the books of the
banks at a far higher value than their true market value. If we
mark those assets down, the banks would have to go and raise more
capital. Some of the banks may even be bankrupt."
=====================
N E T H E R L A N D S
=====================
ELEPHANT TALK: Posts US$14.4 Million in Q2 Ended June 30
--------------------------------------------------------
Elephant Talk Communications, Inc., filed its quarterly report on
Form 10-Q, reporting a net loss of US$14.4 million on US$9.7
million of revenue for the three months ended June 30, 2010,
compared with a net loss of US$2.7 million on US$11.3 million of
revenue for the same period of 2009.
The Company's balance sheet as of June 30, 2010, showed
US$41.4 million in total assets, US$56.3 million in total
liabilities, and a stockholders' deficit of US$14.9 million.
As reported in the Troubled Company Reporter on April 7, 2010,
BDO Seidman, LLP expressed substantial doubt about the Company's
ability to continue as a going concern after auditing the
Company's financial statements for the year 2009. The independent
auditors noted that the Company incurred a net loss of US$17.4
million, used cash in operations of US$5.4 million and had an
accumulated deficit of US$62.3 million.
In its latest 10-Q, the Company discloses that if it is unable to
secure additional capital, as circumstances require, or does not
succeed in meeting its sales objectives it may not be able to
continue operations.
A full-text copy of the Form 10-Q is available for free at:
http://researcharchives.com/t/s?69a3
Based in Schiphol, The Netherlands, Elephant Talk Communications,
Inc. is an international provider of business software and
services to the telecommunications and financial services
industry. Elephant Talk installs its operating software at the
network operating centers of mobile carrier and receives a fee per
month per cell phone subscriber on the network. Currently the
subscribers are wholesale customers of Vizzavi (a subsidiary of
the Vodafone group) in Spain and T-Mobile in the Netherlands. The
Company also operates landline telephony services in nine European
countries and Bahrain.
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R U S S I A
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CENTERTELECOM OAO: Fitch Affirms LT Foreign Currency IDR at BB
--------------------------------------------------------------
Fitch Ratings has affirmed OAO Centertelecom's, OAO North-West
Telecom's, OJSC VolgaTelecom's, OAO Sibirtelecom's, OAO
Uralsvyazinform's and OJSC Far East Telecom's (also known as OAO
Dalsvyaz) Long-term foreign currency Issuer Default Ratings at
'BB' respectively. Fitch has revised the rating Outlook on each
rating to Positive from Stable. A full rating breakdown is
provided at the end of this comment.
The six companies are regional incumbent telecoms operators in
Russia, and are all operating subsidiaries of OJSC Svyazinvest, a
government-controlled holding company.
"The revision of the Outlooks to Positive reflects Fitch's
expectation that the pending merger of the six regional incumbent
telecom operators and Rostelecom will result in significant
operating and financial synergies," says Nikolai Lukashevich,
Senior Director in Fitch's Telecoms, Media and Technology team.
The timeline for the corporate reorganization is likely to be
brought slightly forward compared with the initial deadline, which
increases the probability that merger synergies may be realized
sooner than previously estimated by Fitch. The legal process is
likely to be finished before the end of Q111. The buy-out of
minority shareholders in conjunction with the merger will require
significantly less than the cap of 10% of net asset value, and
will not lead to leverage deterioration.
The single enlarged operator will benefit from a streamlined
operating strategy across all its geographies and market segments.
This will ultimately remove internal competition between the
regional incumbents and Rostelecom in the corporate segment, and
rule out network overbuild. The new enlarged operator will be
able to promote best practices across Russia and develop a uniform
network modernization strategy and technological solutions which
will likely deliver a significant economy of scale and create the
potential for substantial capex savings.
The merger will help strengthen the operator's product
proposition, particularly in the mass residential segment. The
new Rostelecom will be able to bundle local and long-distance
voice services, but also broadband, and potentially mobile
services into one package. The wider bundling opportunities are a
strategic operating advantage, and may become a more pronounced
differentiating tool in future. Retail subscribers will receive
one bill which will also improve the enlarged company's
relationships with end-customers.
The new operator will be able to maintain a single brand and
likely be more efficient at marketing. This will help the new
Rostelecom to reach more parity with large 'branded' players such
as 'Big Three' mobile operators in Russia, and make it more
competitive with positive implications for churn and its share of
new customer additions, particularly in the broadband segment.
On the mobile side, the new Rostelecom is likely to emerge as a
stronger player than the individual regional operators now.
Consolidation will help to address the long-standing roaming and
brand issues and increase economies of scale in this segment.
The corporate reorganization is also likely to improve
treasury/debt management efficiency. As a single company,
Rostelecom will find it easier to circulate cash between its new
branches, which will help streamline leverage and liquidity across
the group. Historically, differences in leverage metrics and
liquidity/refinancing calls between Svyazinvest subsidiaries have
been quite substantial. As a large player, the new Rostelecom is
likely to establish closer ties with key domestic, and, perhaps,
international banks.
However, Fitch notes that although the potential synergies are
high, uncertainty remains over whether the synergies can be
successfully realized as Rostelecom is facing numerous
organizational and managerial challenges. After the merger, the
new operator is likely to reconsider its network modernization and
mobile strategies which could lead to a more aggressive financial
strategy and make free cash flow generation negative for a
prolonged period of time. Leverage has so far been modest and
shown improvement at all six operators. Fitch estimates that on a
pro-forma basis group-wide leverage is low and estimated to be in
the range of 1x of net debt/EBITDA at end-2010.
The rating actions for the six companies are:
OAO Centertelecom
-- Long-term foreign currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Long-term local currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Foreign currency senior unsecured rating: affirmed at 'BB'
-- Local currency senior unsecured rating: affirmed at 'BB'
-- Short-term foreign currency IDR: affirmed at 'B'
-- National Long-term rating: affirmed at 'AA-(rus)'; Outlook
revised to Positive from Stable
-- National senior unsecured rating: affirmed at 'AA-(rus)'
OAO North-West Telecom
-- Long-term foreign currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Long-term local currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Foreign currency senior unsecured rating: affirmed at 'BB'
-- Local currency senior unsecured rating: affirmed at 'BB'
-- Short-term foreign currency IDR: affirmed at 'B'
-- National Long-term rating: affirmed at 'AA-(rus)'; Outlook
revised to Positive from Stable
-- National senior unsecured rating: affirmed at 'AA-(rus)'
OJSC VolgaTelecom
-- Long-term foreign currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Long-term local currency IDR: assigned at 'BB'; Outlook
Positive
-- Foreign currency senior unsecured rating: assigned at 'BB'
-- Local currency senior unsecured rating: assigned at 'BB'
-- Short-term foreign currency IDR: affirmed at 'B'
-- National Long-term rating: affirmed at 'AA-(rus)'; Outlook
revised to Positive from Stable
-- National senior unsecured rating: affirmed at 'AA-(rus)'
OAO Sibirtelecom
-- Long-term foreign currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Long-term local currency IDR: assigned at 'BB'; Outlook
Positive
-- Foreign currency senior unsecured rating: assigned at 'BB'
-- Local currency senior unsecured rating: assigned at 'BB'
-- Short-term foreign currency IDR: affirmed at 'B'
-- National Long-term rating: assigned at 'AA-(rus)'; Outlook
Positive
-- National senior unsecured rating: assigned at 'AA-(rus)'
OAO Uralsvyazinform
-- Long-term foreign currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Long-term local currency IDR: affirmed at 'BB'; Outlook
Positive
-- Foreign currency senior unsecured rating: affirmed at 'BB'
-- Local currency senior unsecured rating: affirmed at 'BB'
-- Short-term foreign currency IDR: affirmed at 'B'
-- National Long-term rating: affirmed at 'AA-(rus)'; Outlook
revised to Positive from Stable
-- National senior unsecured rating: affirmed at 'AA-(rus)'
OJSC Far East Telecom
-- Long-term foreign currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Long-term local currency IDR: assigned at 'BB'; Outlook
Positive
-- Foreign currency senior unsecured rating: affirmed at 'BB'
-- Local currency senior unsecured rating: assigned at 'BB'
-- Short-term foreign currency IDR: affirmed at 'B'
FAR EAST: Fitch Affirms Long-Term Foreign Currency IDR at 'BB'
--------------------------------------------------------------
Fitch Ratings has affirmed OAO Centertelecom's, OAO North-West
Telecom's, OJSC VolgaTelecom's, OAO Sibirtelecom's, OAO
Uralsvyazinform's and OJSC Far East Telecom's (also known as OAO
Dalsvyaz) Long-term foreign currency Issuer Default Ratings at
'BB' respectively. Fitch has revised the rating Outlook on each
rating to Positive from Stable. A full rating breakdown is
provided at the end of this comment.
The six companies are regional incumbent telecoms operators in
Russia, and are all operating subsidiaries of OJSC Svyazinvest, a
government-controlled holding company.
"The revision of the Outlooks to Positive reflects Fitch's
expectation that the pending merger of the six regional incumbent
telecom operators and Rostelecom will result in significant
operating and financial synergies," says Nikolai Lukashevich,
Senior Director in Fitch's Telecoms, Media and Technology team.
The timeline for the corporate reorganization is likely to be
brought slightly forward compared with the initial deadline, which
increases the probability that merger synergies may be realized
sooner than previously estimated by Fitch. The legal process is
likely to be finished before the end of Q111. The buy-out of
minority shareholders in conjunction with the merger will require
significantly less than the cap of 10% of net asset value, and
will not lead to leverage deterioration.
The single enlarged operator will benefit from a streamlined
operating strategy across all its geographies and market segments.
This will ultimately remove internal competition between the
regional incumbents and Rostelecom in the corporate segment, and
rule out network overbuild. The new enlarged operator will be
able to promote best practices across Russia and develop a uniform
network modernization strategy and technological solutions which
will likely deliver a significant economy of scale and create the
potential for substantial capex savings.
The merger will help strengthen the operator's product
proposition, particularly in the mass residential segment. The
new Rostelecom will be able to bundle local and long-distance
voice services, but also broadband, and potentially mobile
services into one package. The wider bundling opportunities are a
strategic operating advantage, and may become a more pronounced
differentiating tool in future. Retail subscribers will receive
one bill which will also improve the enlarged company's
relationships with end-customers.
The new operator will be able to maintain a single brand and
likely be more efficient at marketing. This will help the new
Rostelecom to reach more parity with large 'branded' players such
as 'Big Three' mobile operators in Russia, and make it more
competitive with positive implications for churn and its share of
new customer additions, particularly in the broadband segment.
On the mobile side, the new Rostelecom is likely to emerge as a
stronger player than the individual regional operators now.
Consolidation will help to address the long-standing roaming and
brand issues and increase economies of scale in this segment.
The corporate reorganization is also likely to improve
treasury/debt management efficiency. As a single company,
Rostelecom will find it easier to circulate cash between its new
branches, which will help streamline leverage and liquidity across
the group. Historically, differences in leverage metrics and
liquidity/refinancing calls between Svyazinvest subsidiaries have
been quite substantial. As a large player, the new Rostelecom is
likely to establish closer ties with key domestic, and, perhaps,
international banks.
However, Fitch notes that although the potential synergies are
high, uncertainty remains over whether the synergies can be
successfully realized as Rostelecom is facing numerous
organizational and managerial challenges. After the merger, the
new operator is likely to reconsider its network modernization and
mobile strategies which could lead to a more aggressive financial
strategy and make free cash flow generation negative for a
prolonged period of time. Leverage has so far been modest and
shown improvement at all six operators. Fitch estimates that on a
pro-forma basis group-wide leverage is low and estimated to be in
the range of 1x of net debt/EBITDA at end-2010.
The rating actions for the six companies are:
OAO Centertelecom
-- Long-term foreign currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Long-term local currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Foreign currency senior unsecured rating: affirmed at 'BB'
-- Local currency senior unsecured rating: affirmed at 'BB'
-- Short-term foreign currency IDR: affirmed at 'B'
-- National Long-term rating: affirmed at 'AA-(rus)'; Outlook
revised to Positive from Stable
-- National senior unsecured rating: affirmed at 'AA-(rus)'
OAO North-West Telecom
-- Long-term foreign currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Long-term local currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Foreign currency senior unsecured rating: affirmed at 'BB'
-- Local currency senior unsecured rating: affirmed at 'BB'
-- Short-term foreign currency IDR: affirmed at 'B'
-- National Long-term rating: affirmed at 'AA-(rus)'; Outlook
revised to Positive from Stable
-- National senior unsecured rating: affirmed at 'AA-(rus)'
OJSC VolgaTelecom
-- Long-term foreign currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Long-term local currency IDR: assigned at 'BB'; Outlook
Positive
-- Foreign currency senior unsecured rating: assigned at 'BB'
-- Local currency senior unsecured rating: assigned at 'BB'
-- Short-term foreign currency IDR: affirmed at 'B'
-- National Long-term rating: affirmed at 'AA-(rus)'; Outlook
revised to Positive from Stable
-- National senior unsecured rating: affirmed at 'AA-(rus)'
OAO Sibirtelecom
-- Long-term foreign currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Long-term local currency IDR: assigned at 'BB'; Outlook
Positive
-- Foreign currency senior unsecured rating: assigned at 'BB'
-- Local currency senior unsecured rating: assigned at 'BB'
-- Short-term foreign currency IDR: affirmed at 'B'
-- National Long-term rating: assigned at 'AA-(rus)'; Outlook
Positive
-- National senior unsecured rating: assigned at 'AA-(rus)'
OAO Uralsvyazinform
-- Long-term foreign currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Long-term local currency IDR: affirmed at 'BB'; Outlook
Positive
-- Foreign currency senior unsecured rating: affirmed at 'BB'
-- Local currency senior unsecured rating: affirmed at 'BB'
-- Short-term foreign currency IDR: affirmed at 'B'
-- National Long-term rating: affirmed at 'AA-(rus)'; Outlook
revised to Positive from Stable
-- National senior unsecured rating: affirmed at 'AA-(rus)'
OJSC Far East Telecom
-- Long-term foreign currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Long-term local currency IDR: assigned at 'BB'; Outlook
Positive
-- Foreign currency senior unsecured rating: affirmed at 'BB'
-- Local currency senior unsecured rating: assigned at 'BB'
-- Short-term foreign currency IDR: affirmed at 'B'
NORTH-WEST TELECOM: Fitch Affirms LT Foreign Currency IDR at BB
---------------------------------------------------------------
Fitch Ratings has affirmed OAO Centertelecom's, OAO North-West
Telecom's, OJSC VolgaTelecom's, OAO Sibirtelecom's, OAO
Uralsvyazinform's and OJSC Far East Telecom's (also known as OAO
Dalsvyaz) Long-term foreign currency Issuer Default Ratings at
'BB' respectively. Fitch has revised the rating Outlook on each
rating to Positive from Stable. A full rating breakdown is
provided at the end of this comment.
The six companies are regional incumbent telecoms operators in
Russia, and are all operating subsidiaries of OJSC Svyazinvest, a
government-controlled holding company.
"The revision of the Outlooks to Positive reflects Fitch's
expectation that the pending merger of the six regional incumbent
telecom operators and Rostelecom will result in significant
operating and financial synergies," says Nikolai Lukashevich,
Senior Director in Fitch's Telecoms, Media and Technology team.
The timeline for the corporate reorganization is likely to be
brought slightly forward compared with the initial deadline, which
increases the probability that merger synergies may be realized
sooner than previously estimated by Fitch. The legal process is
likely to be finished before the end of Q111. The buy-out of
minority shareholders in conjunction with the merger will require
significantly less than the cap of 10% of net asset value, and
will not lead to leverage deterioration.
The single enlarged operator will benefit from a streamlined
operating strategy across all its geographies and market segments.
This will ultimately remove internal competition between the
regional incumbents and Rostelecom in the corporate segment, and
rule out network overbuild. The new enlarged operator will be
able to promote best practices across Russia and develop a uniform
network modernization strategy and technological solutions which
will likely deliver a significant economy of scale and create the
potential for substantial capex savings.
The merger will help strengthen the operator's product
proposition, particularly in the mass residential segment. The
new Rostelecom will be able to bundle local and long-distance
voice services, but also broadband, and potentially mobile
services into one package. The wider bundling opportunities are a
strategic operating advantage, and may become a more pronounced
differentiating tool in future. Retail subscribers will receive
one bill which will also improve the enlarged company's
relationships with end-customers.
The new operator will be able to maintain a single brand and
likely be more efficient at marketing. This will help the new
Rostelecom to reach more parity with large 'branded' players such
as 'Big Three' mobile operators in Russia, and make it more
competitive with positive implications for churn and its share of
new customer additions, particularly in the broadband segment.
On the mobile side, the new Rostelecom is likely to emerge as a
stronger player than the individual regional operators now.
Consolidation will help to address the long-standing roaming and
brand issues and increase economies of scale in this segment.
The corporate reorganization is also likely to improve
treasury/debt management efficiency. As a single company,
Rostelecom will find it easier to circulate cash between its new
branches, which will help streamline leverage and liquidity across
the group. Historically, differences in leverage metrics and
liquidity/refinancing calls between Svyazinvest subsidiaries have
been quite substantial. As a large player, the new Rostelecom is
likely to establish closer ties with key domestic, and, perhaps,
international banks.
However, Fitch notes that although the potential synergies are
high, uncertainty remains over whether the synergies can be
successfully realized as Rostelecom is facing numerous
organizational and managerial challenges. After the merger, the
new operator is likely to reconsider its network modernization and
mobile strategies which could lead to a more aggressive financial
strategy and make free cash flow generation negative for a
prolonged period of time. Leverage has so far been modest and
shown improvement at all six operators. Fitch estimates that on a
pro-forma basis group-wide leverage is low and estimated to be in
the range of 1x of net debt/EBITDA at end-2010.
The rating actions for the six companies are:
OAO Centertelecom
-- Long-term foreign currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Long-term local currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Foreign currency senior unsecured rating: affirmed at 'BB'
-- Local currency senior unsecured rating: affirmed at 'BB'
-- Short-term foreign currency IDR: affirmed at 'B'
-- National Long-term rating: affirmed at 'AA-(rus)'; Outlook
revised to Positive from Stable
-- National senior unsecured rating: affirmed at 'AA-(rus)'
OAO North-West Telecom
-- Long-term foreign currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Long-term local currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Foreign currency senior unsecured rating: affirmed at 'BB'
-- Local currency senior unsecured rating: affirmed at 'BB'
-- Short-term foreign currency IDR: affirmed at 'B'
-- National Long-term rating: affirmed at 'AA-(rus)'; Outlook
revised to Positive from Stable
-- National senior unsecured rating: affirmed at 'AA-(rus)'
OJSC VolgaTelecom
-- Long-term foreign currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Long-term local currency IDR: assigned at 'BB'; Outlook
Positive
-- Foreign currency senior unsecured rating: assigned at 'BB'
-- Local currency senior unsecured rating: assigned at 'BB'
-- Short-term foreign currency IDR: affirmed at 'B'
-- National Long-term rating: affirmed at 'AA-(rus)'; Outlook
revised to Positive from Stable
-- National senior unsecured rating: affirmed at 'AA-(rus)'
OAO Sibirtelecom
-- Long-term foreign currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Long-term local currency IDR: assigned at 'BB'; Outlook
Positive
-- Foreign currency senior unsecured rating: assigned at 'BB'
-- Local currency senior unsecured rating: assigned at 'BB'
-- Short-term foreign currency IDR: affirmed at 'B'
-- National Long-term rating: assigned at 'AA-(rus)'; Outlook
Positive
-- National senior unsecured rating: assigned at 'AA-(rus)'
OAO Uralsvyazinform
-- Long-term foreign currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Long-term local currency IDR: affirmed at 'BB'; Outlook
Positive
-- Foreign currency senior unsecured rating: affirmed at 'BB'
-- Local currency senior unsecured rating: affirmed at 'BB'
-- Short-term foreign currency IDR: affirmed at 'B'
-- National Long-term rating: affirmed at 'AA-(rus)'; Outlook
revised to Positive from Stable
-- National senior unsecured rating: affirmed at 'AA-(rus)'
OJSC Far East Telecom
-- Long-term foreign currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Long-term local currency IDR: assigned at 'BB'; Outlook
Positive
-- Foreign currency senior unsecured rating: affirmed at 'BB'
-- Local currency senior unsecured rating: assigned at 'BB'
-- Short-term foreign currency IDR: affirmed at 'B'
VOLGATELECOM OJSC: Fitch Affirms LT Foreign Currency IDR at 'BB'
----------------------------------------------------------------
Fitch Ratings has affirmed OAO Centertelecom's, OAO North-West
Telecom's, OJSC VolgaTelecom's, OAO Sibirtelecom's, OAO
Uralsvyazinform's and OJSC Far East Telecom's (also known as OAO
Dalsvyaz) Long-term foreign currency Issuer Default Ratings at
'BB' respectively. Fitch has revised the rating Outlook on each
rating to Positive from Stable. A full rating breakdown is
provided at the end of this comment.
The six companies are regional incumbent telecoms operators in
Russia, and are all operating subsidiaries of OJSC Svyazinvest, a
government-controlled holding company.
"The revision of the Outlooks to Positive reflects Fitch's
expectation that the pending merger of the six regional incumbent
telecom operators and Rostelecom will result in significant
operating and financial synergies," says Nikolai Lukashevich,
Senior Director in Fitch's Telecoms, Media and Technology team.
The timeline for the corporate reorganization is likely to be
brought slightly forward compared with the initial deadline, which
increases the probability that merger synergies may be realized
sooner than previously estimated by Fitch. The legal process is
likely to be finished before the end of Q111. The buy-out of
minority shareholders in conjunction with the merger will require
significantly less than the cap of 10% of net asset value, and
will not lead to leverage deterioration.
The single enlarged operator will benefit from a streamlined
operating strategy across all its geographies and market segments.
This will ultimately remove internal competition between the
regional incumbents and Rostelecom in the corporate segment, and
rule out network overbuild. The new enlarged operator will be
able to promote best practices across Russia and develop a uniform
network modernization strategy and technological solutions which
will likely deliver a significant economy of scale and create the
potential for substantial capex savings.
The merger will help strengthen the operator's product
proposition, particularly in the mass residential segment. The
new Rostelecom will be able to bundle local and long-distance
voice services, but also broadband, and potentially mobile
services into one package. The wider bundling opportunities are a
strategic operating advantage, and may become a more pronounced
differentiating tool in future. Retail subscribers will receive
one bill which will also improve the enlarged company's
relationships with end-customers.
The new operator will be able to maintain a single brand and
likely be more efficient at marketing. This will help the new
Rostelecom to reach more parity with large 'branded' players such
as 'Big Three' mobile operators in Russia, and make it more
competitive with positive implications for churn and its share of
new customer additions, particularly in the broadband segment.
On the mobile side, the new Rostelecom is likely to emerge as a
stronger player than the individual regional operators now.
Consolidation will help to address the long-standing roaming and
brand issues and increase economies of scale in this segment.
The corporate reorganization is also likely to improve
treasury/debt management efficiency. As a single company,
Rostelecom will find it easier to circulate cash between its new
branches, which will help streamline leverage and liquidity across
the group. Historically, differences in leverage metrics and
liquidity/refinancing calls between Svyazinvest subsidiaries have
been quite substantial. As a large player, the new Rostelecom is
likely to establish closer ties with key domestic, and, perhaps,
international banks.
However, Fitch notes that although the potential synergies are
high, uncertainty remains over whether the synergies can be
successfully realized as Rostelecom is facing numerous
organizational and managerial challenges. After the merger, the
new operator is likely to reconsider its network modernization and
mobile strategies which could lead to a more aggressive financial
strategy and make free cash flow generation negative for a
prolonged period of time. Leverage has so far been modest and
shown improvement at all six operators. Fitch estimates that on a
pro-forma basis group-wide leverage is low and estimated to be in
the range of 1x of net debt/EBITDA at end-2010.
The rating actions for the six companies are:
OAO Centertelecom
-- Long-term foreign currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Long-term local currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Foreign currency senior unsecured rating: affirmed at 'BB'
-- Local currency senior unsecured rating: affirmed at 'BB'
-- Short-term foreign currency IDR: affirmed at 'B'
-- National Long-term rating: affirmed at 'AA-(rus)'; Outlook
revised to Positive from Stable
-- National senior unsecured rating: affirmed at 'AA-(rus)'
OAO North-West Telecom
-- Long-term foreign currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Long-term local currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Foreign currency senior unsecured rating: affirmed at 'BB'
-- Local currency senior unsecured rating: affirmed at 'BB'
-- Short-term foreign currency IDR: affirmed at 'B'
-- National Long-term rating: affirmed at 'AA-(rus)'; Outlook
revised to Positive from Stable
-- National senior unsecured rating: affirmed at 'AA-(rus)'
OJSC VolgaTelecom
-- Long-term foreign currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Long-term local currency IDR: assigned at 'BB'; Outlook
Positive
-- Foreign currency senior unsecured rating: assigned at 'BB'
-- Local currency senior unsecured rating: assigned at 'BB'
-- Short-term foreign currency IDR: affirmed at 'B'
-- National Long-term rating: affirmed at 'AA-(rus)'; Outlook
revised to Positive from Stable
-- National senior unsecured rating: affirmed at 'AA-(rus)'
OAO Sibirtelecom
-- Long-term foreign currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Long-term local currency IDR: assigned at 'BB'; Outlook
Positive
-- Foreign currency senior unsecured rating: assigned at 'BB'
-- Local currency senior unsecured rating: assigned at 'BB'
-- Short-term foreign currency IDR: affirmed at 'B'
-- National Long-term rating: assigned at 'AA-(rus)'; Outlook
Positive
-- National senior unsecured rating: assigned at 'AA-(rus)'
OAO Uralsvyazinform
-- Long-term foreign currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Long-term local currency IDR: affirmed at 'BB'; Outlook
Positive
-- Foreign currency senior unsecured rating: affirmed at 'BB'
-- Local currency senior unsecured rating: affirmed at 'BB'
-- Short-term foreign currency IDR: affirmed at 'B'
-- National Long-term rating: affirmed at 'AA-(rus)'; Outlook
revised to Positive from Stable
-- National senior unsecured rating: affirmed at 'AA-(rus)'
OJSC Far East Telecom
-- Long-term foreign currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Long-term local currency IDR: assigned at 'BB'; Outlook
Positive
-- Foreign currency senior unsecured rating: affirmed at 'BB'
-- Local currency senior unsecured rating: assigned at 'BB'
-- Short-term foreign currency IDR: affirmed at 'B'
SIBIRTELECOM OAO: Fitch Affirms LT Foreign Currency IDR at 'BB'
---------------------------------------------------------------
Fitch Ratings has affirmed OAO Centertelecom's, OAO North-West
Telecom's, OJSC VolgaTelecom's, OAO Sibirtelecom's, OAO
Uralsvyazinform's and OJSC Far East Telecom's (also known as OAO
Dalsvyaz) Long-term foreign currency Issuer Default Ratings at
'BB' respectively. Fitch has revised the rating Outlook on each
rating to Positive from Stable. A full rating breakdown is
provided at the end of this comment.
The six companies are regional incumbent telecoms operators in
Russia, and are all operating subsidiaries of OJSC Svyazinvest, a
government-controlled holding company.
"The revision of the Outlooks to Positive reflects Fitch's
expectation that the pending merger of the six regional incumbent
telecom operators and Rostelecom will result in significant
operating and financial synergies," says Nikolai Lukashevich,
Senior Director in Fitch's Telecoms, Media and Technology team.
The timeline for the corporate reorganization is likely to be
brought slightly forward compared with the initial deadline, which
increases the probability that merger synergies may be realized
sooner than previously estimated by Fitch. The legal process is
likely to be finished before the end of Q111. The buy-out of
minority shareholders in conjunction with the merger will require
significantly less than the cap of 10% of net asset value, and
will not lead to leverage deterioration.
The single enlarged operator will benefit from a streamlined
operating strategy across all its geographies and market segments.
This will ultimately remove internal competition between the
regional incumbents and Rostelecom in the corporate segment, and
rule out network overbuild. The new enlarged operator will be
able to promote best practices across Russia and develop a uniform
network modernization strategy and technological solutions which
will likely deliver a significant economy of scale and create the
potential for substantial capex savings.
The merger will help strengthen the operator's product
proposition, particularly in the mass residential segment. The
new Rostelecom will be able to bundle local and long-distance
voice services, but also broadband, and potentially mobile
services into one package. The wider bundling opportunities are a
strategic operating advantage, and may become a more pronounced
differentiating tool in future. Retail subscribers will receive
one bill which will also improve the enlarged company's
relationships with end-customers.
The new operator will be able to maintain a single brand and
likely be more efficient at marketing. This will help the new
Rostelecom to reach more parity with large 'branded' players such
as 'Big Three' mobile operators in Russia, and make it more
competitive with positive implications for churn and its share of
new customer additions, particularly in the broadband segment.
On the mobile side, the new Rostelecom is likely to emerge as a
stronger player than the individual regional operators now.
Consolidation will help to address the long-standing roaming and
brand issues and increase economies of scale in this segment.
The corporate reorganization is also likely to improve
treasury/debt management efficiency. As a single company,
Rostelecom will find it easier to circulate cash between its new
branches, which will help streamline leverage and liquidity across
the group. Historically, differences in leverage metrics and
liquidity/refinancing calls between Svyazinvest subsidiaries have
been quite substantial. As a large player, the new Rostelecom is
likely to establish closer ties with key domestic, and, perhaps,
international banks.
However, Fitch notes that although the potential synergies are
high, uncertainty remains over whether the synergies can be
successfully realized as Rostelecom is facing numerous
organizational and managerial challenges. After the merger, the
new operator is likely to reconsider its network modernization and
mobile strategies which could lead to a more aggressive financial
strategy and make free cash flow generation negative for a
prolonged period of time. Leverage has so far been modest and
shown improvement at all six operators. Fitch estimates that on a
pro-forma basis group-wide leverage is low and estimated to be in
the range of 1x of net debt/EBITDA at end-2010.
The rating actions for the six companies are:
OAO Centertelecom
-- Long-term foreign currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Long-term local currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Foreign currency senior unsecured rating: affirmed at 'BB'
-- Local currency senior unsecured rating: affirmed at 'BB'
-- Short-term foreign currency IDR: affirmed at 'B'
-- National Long-term rating: affirmed at 'AA-(rus)'; Outlook
revised to Positive from Stable
-- National senior unsecured rating: affirmed at 'AA-(rus)'
OAO North-West Telecom
-- Long-term foreign currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Long-term local currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Foreign currency senior unsecured rating: affirmed at 'BB'
-- Local currency senior unsecured rating: affirmed at 'BB'
-- Short-term foreign currency IDR: affirmed at 'B'
-- National Long-term rating: affirmed at 'AA-(rus)'; Outlook
revised to Positive from Stable
-- National senior unsecured rating: affirmed at 'AA-(rus)'
OJSC VolgaTelecom
-- Long-term foreign currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Long-term local currency IDR: assigned at 'BB'; Outlook
Positive
-- Foreign currency senior unsecured rating: assigned at 'BB'
-- Local currency senior unsecured rating: assigned at 'BB'
-- Short-term foreign currency IDR: affirmed at 'B'
-- National Long-term rating: affirmed at 'AA-(rus)'; Outlook
revised to Positive from Stable
-- National senior unsecured rating: affirmed at 'AA-(rus)'
OAO Sibirtelecom
-- Long-term foreign currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Long-term local currency IDR: assigned at 'BB'; Outlook
Positive
-- Foreign currency senior unsecured rating: assigned at 'BB'
-- Local currency senior unsecured rating: assigned at 'BB'
-- Short-term foreign currency IDR: affirmed at 'B'
-- National Long-term rating: assigned at 'AA-(rus)'; Outlook
Positive
-- National senior unsecured rating: assigned at 'AA-(rus)'
OAO Uralsvyazinform
-- Long-term foreign currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Long-term local currency IDR: affirmed at 'BB'; Outlook
Positive
-- Foreign currency senior unsecured rating: affirmed at 'BB'
-- Local currency senior unsecured rating: affirmed at 'BB'
-- Short-term foreign currency IDR: affirmed at 'B'
-- National Long-term rating: affirmed at 'AA-(rus)'; Outlook
revised to Positive from Stable
-- National senior unsecured rating: affirmed at 'AA-(rus)'
OJSC Far East Telecom
-- Long-term foreign currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Long-term local currency IDR: assigned at 'BB'; Outlook
Positive
-- Foreign currency senior unsecured rating: affirmed at 'BB'
-- Local currency senior unsecured rating: assigned at 'BB'
-- Short-term foreign currency IDR: affirmed at 'B'
URALSVYAZINFORM OAO: Fitch Affirms LT Foreign Currency IDR at BB
----------------------------------------------------------------
Fitch Ratings has affirmed OAO Centertelecom's, OAO North-West
Telecom's, OJSC VolgaTelecom's, OAO Sibirtelecom's, OAO
Uralsvyazinform's and OJSC Far East Telecom's (also known as OAO
Dalsvyaz) Long-term foreign currency Issuer Default Ratings at
'BB' respectively. Fitch has revised the rating Outlook on each
rating to Positive from Stable. A full rating breakdown is
provided at the end of this comment.
The six companies are regional incumbent telecoms operators in
Russia, and are all operating subsidiaries of OJSC Svyazinvest, a
government-controlled holding company.
"The revision of the Outlooks to Positive reflects Fitch's
expectation that the pending merger of the six regional incumbent
telecom operators and Rostelecom will result in significant
operating and financial synergies," says Nikolai Lukashevich,
Senior Director in Fitch's Telecoms, Media and Technology team.
The timeline for the corporate reorganization is likely to be
brought slightly forward compared with the initial deadline, which
increases the probability that merger synergies may be realized
sooner than previously estimated by Fitch. The legal process is
likely to be finished before the end of Q111. The buy-out of
minority shareholders in conjunction with the merger will require
significantly less than the cap of 10% of net asset value, and
will not lead to leverage deterioration.
The single enlarged operator will benefit from a streamlined
operating strategy across all its geographies and market segments.
This will ultimately remove internal competition between the
regional incumbents and Rostelecom in the corporate segment, and
rule out network overbuild. The new enlarged operator will be
able to promote best practices across Russia and develop a uniform
network modernization strategy and technological solutions which
will likely deliver a significant economy of scale and create the
potential for substantial capex savings.
The merger will help strengthen the operator's product
proposition, particularly in the mass residential segment. The
new Rostelecom will be able to bundle local and long-distance
voice services, but also broadband, and potentially mobile
services into one package. The wider bundling opportunities are a
strategic operating advantage, and may become a more pronounced
differentiating tool in future. Retail subscribers will receive
one bill which will also improve the enlarged company's
relationships with end-customers.
The new operator will be able to maintain a single brand and
likely be more efficient at marketing. This will help the new
Rostelecom to reach more parity with large 'branded' players such
as 'Big Three' mobile operators in Russia, and make it more
competitive with positive implications for churn and its share of
new customer additions, particularly in the broadband segment.
On the mobile side, the new Rostelecom is likely to emerge as a
stronger player than the individual regional operators now.
Consolidation will help to address the long-standing roaming and
brand issues and increase economies of scale in this segment.
The corporate reorganization is also likely to improve
treasury/debt management efficiency. As a single company,
Rostelecom will find it easier to circulate cash between its new
branches, which will help streamline leverage and liquidity across
the group. Historically, differences in leverage metrics and
liquidity/refinancing calls between Svyazinvest subsidiaries have
been quite substantial. As a large player, the new Rostelecom is
likely to establish closer ties with key domestic, and, perhaps,
international banks.
However, Fitch notes that although the potential synergies are
high, uncertainty remains over whether the synergies can be
successfully realized as Rostelecom is facing numerous
organizational and managerial challenges. After the merger, the
new operator is likely to reconsider its network modernization and
mobile strategies which could lead to a more aggressive financial
strategy and make free cash flow generation negative for a
prolonged period of time. Leverage has so far been modest and
shown improvement at all six operators. Fitch estimates that on a
pro-forma basis group-wide leverage is low and estimated to be in
the range of 1x of net debt/EBITDA at end-2010.
The rating actions for the six companies are:
OAO Centertelecom
-- Long-term foreign currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Long-term local currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Foreign currency senior unsecured rating: affirmed at 'BB'
-- Local currency senior unsecured rating: affirmed at 'BB'
-- Short-term foreign currency IDR: affirmed at 'B'
-- National Long-term rating: affirmed at 'AA-(rus)'; Outlook
revised to Positive from Stable
-- National senior unsecured rating: affirmed at 'AA-(rus)'
OAO North-West Telecom
-- Long-term foreign currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Long-term local currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Foreign currency senior unsecured rating: affirmed at 'BB'
-- Local currency senior unsecured rating: affirmed at 'BB'
-- Short-term foreign currency IDR: affirmed at 'B'
-- National Long-term rating: affirmed at 'AA-(rus)'; Outlook
revised to Positive from Stable
-- National senior unsecured rating: affirmed at 'AA-(rus)'
OJSC VolgaTelecom
-- Long-term foreign currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Long-term local currency IDR: assigned at 'BB'; Outlook
Positive
-- Foreign currency senior unsecured rating: assigned at 'BB'
-- Local currency senior unsecured rating: assigned at 'BB'
-- Short-term foreign currency IDR: affirmed at 'B'
-- National Long-term rating: affirmed at 'AA-(rus)'; Outlook
revised to Positive from Stable
-- National senior unsecured rating: affirmed at 'AA-(rus)'
OAO Sibirtelecom
-- Long-term foreign currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Long-term local currency IDR: assigned at 'BB'; Outlook
Positive
-- Foreign currency senior unsecured rating: assigned at 'BB'
-- Local currency senior unsecured rating: assigned at 'BB'
-- Short-term foreign currency IDR: affirmed at 'B'
-- National Long-term rating: assigned at 'AA-(rus)'; Outlook
Positive
-- National senior unsecured rating: assigned at 'AA-(rus)'
OAO Uralsvyazinform
-- Long-term foreign currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Long-term local currency IDR: affirmed at 'BB'; Outlook
Positive
-- Foreign currency senior unsecured rating: affirmed at 'BB'
-- Local currency senior unsecured rating: affirmed at 'BB'
-- Short-term foreign currency IDR: affirmed at 'B'
-- National Long-term rating: affirmed at 'AA-(rus)'; Outlook
revised to Positive from Stable
-- National senior unsecured rating: affirmed at 'AA-(rus)'
OJSC Far East Telecom
-- Long-term foreign currency IDR: affirmed at 'BB'; Outlook
revised to Positive from Stable
-- Long-term local currency IDR: assigned at 'BB'; Outlook
Positive
-- Foreign currency senior unsecured rating: affirmed at 'BB'
-- Local currency senior unsecured rating: assigned at 'BB'
-- Short-term foreign currency IDR: affirmed at 'B'
* Fitch Assigns 'B+' Long-Term Rating on Russian Ryazan Region
--------------------------------------------------------------
Fitch Ratings has assigned the Russian Ryazan Region Long-term
foreign and local currency ratings of 'B+', a Short-term foreign
currency rating of 'B' and a National Long-term rating of
'A(rus)'. The Outlooks for the Long-term ratings are Stable.
The ratings factor in the region's relatively high direct risk
with short-term maturity and its limited flexibility of operating
expenditure. The ratings also consider Ryazan's diversified
economy, satisfactory budgetary performance and low contingent
risk stemming from issued guarantees and broad public sector. The
Stable Outlooks reflect Fitch's expectation that the region will
refinance its short-term loans, maturing in H210, smoothing its
debt profile beyond a one year horizon, whilst its budgetary
performance will remain satisfactory for the rating level.
Ryazan recorded a sound budgetary performance in 2005-2009, as the
operating balance averaged 10.4% of operating revenue. The
downturn of the national economy in 2008 resulted in a degradation
of the operating margin to 6.4% in 2008, which was restored in
2009 up to 8.3%. Fitch expects the operating margin to further
improve to about 10% by end-2010.
The region's budget is rigid on the expenditure side, with core
inflexible items (i.e. municipal and social transfers and
personnel costs) increasing to 80% of operating expenditure in
2009 (2008: 77%). The expected improvement in the macro-economic
environment in 2010 should positively effect the region's
operating expenditure structure and add moderate flexibility to
its spending.
The direct risk of the region increased 1.5x in absolute terms in
2009. The region's deficit before debt variation widened to 10%
of total revenue in 2009 from 6.9% in 2008, and its direct risk
grew to RUB7.8 billion, or 31.7% of current revenue in 2009 from
23.3% in 2008. Bank loans with less than one year to maturity
composed 96% of the region's direct risk in 2009. The region is
planning to issue domestic bonds of up to RUB2.1 billion and an
overall increase in direct risk up to RUB11.6 billion in 2010.
The region's exposure to contingent risk, stemming from few
guarantees and the minor debt of public sector entities, is very
low.
The region's economy is well-diversified and benefits from the
close proximity to the country's capital. The Ryazan Region is
located in the central part of Russia, and borders the Moscow
Region to the north. It contributed 0.4% of national gross
domestic product in 2008 and accounted for 0.8% of Russia's total
population.
=============
U K R A I N E
=============
PRESTIGE-TOUR: Declared Bankrupt; Liquidator Appointed
------------------------------------------------------
The Kyiv Economic Court at a meeting on July 19 declared Prestige-
Tour Ukraine travel agency (Kyiv) bankrupt and started liquidation
procedures, eTurboNews reports, citing a court statement published
in the official press on Aug. 21.
The report relates Lesia Dobrovolska has been appointed
liquidator.
The company's net income in 2009 grew by 2.07% on 2008, to
UAH33.981 million, the report discloses.
Prestige-Tour Ukraine was registered in 2007 and provided travel
services. As of April 22, 2010, the co-owners of the company were
Valeriy Tarasiuk (96%) and Lesia Dobrovolska (4%), according to
eTurboNews.
===========================
U N I T E D K I N G D O M
===========================
MINERVA PLC: Largest Shareholder Lashes Out at Management
---------------------------------------------------------
Daniel Thomas at The Financial Times reports that KiFin, which
owns almost 30% of Minerva plc, has continued its attack on the
management of the company.
There was another round of arguments between Minerva and its
largest shareholder in an increasingly aggressive battle ahead of
a meeting in September to vote on KiFin proposals to oust the
chief executive and chairman, the FT discloses.
According to the FT, KiFin rejected assertions by Minerva that it
wanted control of the company as it was "terrified at the thought
of having to consolidate almost GBP1 billion of Minerva's debt".
The FT relates Minerva, it said, was in a "perilous state", with
its properties fraught with "unresolved issues and problems".
KiFin, the investment vehicle of South African billionaire Nathan
Kirsh, accused the company of inadequate financial reporting and
"hype about profits". KiFin, as cited by the FT, said it "does
not need to be a rocket scientist to see how hugely overleveraged
Minerva is."
The FT relates that in response, the board of Minerva said KiFin's
statements contained a number of inaccuracies and unsubstantiated
claims.
Minerva plc -- http://www.minervaplc.co.uk/-- is a property
investment and development company based in London, United
Kingdom.
PROFFITTS OF GREAT LEVER: Search for Buyer Continues
----------------------------------------------------
Caroline Clayfield at Business Sale Report reports that a buyer is
still being sought for Proffitts of Great Lever Ltd., which fell
into administration in July.
The company has been continuing to trade with half of its original
12 staff and administrators RSM Tenon is still desperately seeking
a buyer, Business Sale Report notes.
According to Business Sale Report, a spokesman said discussions
were being held with a number of interested parties with a view to
selling the company as a going concern.
As reported by the Troubled Company Reporter-Europe, Cabinet Maker
said Proffitts went into administration on July 20. Cabinet Maker
disclosed the administrators said the company had been under
increasing financial pressure because of reduced trade.
Proffitts of Great Lever Ltd. is a furniture retailer based in
Bolton.
SHEGRIM PROPERTIES: In Receivership; Owes GBP19.6 Mil. to Ulster
----------------------------------------------------------------
BBC News reports that Shergrim Properties was placed into
receivership after its bank was unconvinced it would be able to
repay its loans.
The report relates Ulster Bank appointed Gregg Sterritt of
financial consultancy FGS as receiver in May and he filed his
report on the firm to Companies House earlier this month.
According to the report, Shergrim Properties owes the bank more
than GBP19.6 million.
Based in Omagh, Shergrim Properties is controlled by the
Cunningham family who are better known as the owners of Strathroy
Diaries.
* UK: Public Sector Supplier Insolvencies Up 47% in 2009
--------------------------------------------------------
The number of insolvencies involving private sector firms that
rely on public sector contracts has risen significantly in the
past year, Jaimie Kaffash at Public Finance reports, citing an
analysis by the Wilkins Kennedy accountancy firm.
According to the report, analysis by the accountancy firm shows
that insolvencies for public sector suppliers went up by 47% in
the past 12 months. This is compared with a 5% decrease in
insolvencies overall in the same period, the report notes.
The report relates in the first six months of 2010, 168 businesses
in health and social services, education and the defense sectors
went bust, compared with 114 in the same period in 2009. The
health and social care sector has been worst hit, with 106 firms
becoming insolvent this year, the report states.
The report notes Wilkins Kennedy warns that in reality these
figures could be higher, as they do not take into account firms
where public service work is classified as a minority of the
business.
"While the real cost-cutting that this government has threatened
has yet to take place we are already seeing a wide range of
companies fail because of delayed contracts," the report quoted
Wilkins Kennedy director Anthony Cork as saying.
*********
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
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re-mailing and photocopying) is strictly prohibited without prior
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Information contained herein is obtained from sources believed to
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