/raid1/www/Hosts/bankrupt/TCREUR_Public/110715.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
E U R O P E
Friday, July 15, 2011, Vol. 12, No. 139
Headlines
B E L G I U M
DEXIA BANK: Moody's Cuts Bank Financial Strength Rating to 'D'
B U L G A R I A
RUSE INDUSTRY: EU Orders Recovery of Illegal State Aid
G E R M A N Y
FORCE 2005-1: Fitch Affirms Rating on Class D Notes at 'Bsf'
FORCE TWO: Fitch Affirms Rating on Class E Notes at 'CCsf'
PB DOMICILE: S&P Affirms Rating on Class E Notes at 'BB (sf)'
PROVIDE BLUE: S&P Affirms Rating on Class E Notes at 'BB (sf)'
WALTER BAU: Thai Prince Vajiralongkorn's Jet Impounded
* GERMANY: 13 Banks Expected to Pass European Stress Test
G R E E C E
ALPHA BANK: Moody's Confirms Ba3 Ratings of Greek Covered Bonds
AXIA FINANCE: Moody's Withdraws 'B1' Rating on Class A Note
I R E L A N D
ANGLO IRISH: Ex-Irish Nationwide Chief Meets Inquiry Team
BANK OF IRELAND: Moody's Cuts Government Bond Ratings to 'Ba1'
BREFFNI PLANT: Ceases Trading; 90 Jobs at Risk
CELF LOAN: Moody's Lifts Ratings on Two Classes of Notes From Ba2
KINGSLEY MEADOWS: Goes Into Receivership, Owes EUR400,000
LALCO HOLDINGS: Incurs EUR173 Million Losses in 2009
L A T V I A
PRIVATBANK AS: Moody's Confirms E+ Bank Financial Strength Rating
L U X E M B O U R G
CLARENVILLE CDO: Moody's Raises Rating on EUR138.1-Mil. CLO Notes
CODITEL HOLDING: Fitch Assigns 'B' Long-Term Issuer Default Rating
N E T H E R L A N D S
ICTS INTERNATIONAL: Mayer Hoffman Raises Going Concern Doubt
VAN DER MOOLEN: VEB Asks Court to Assert Mismanagement
R U S S I A
ABSOLUT BANK: Fitch Assigns Long-Term Rating on Senior Bond
S P A I N
AYT GOYA: Fitch Affirms Rating on Class D Notes at 'BBsf'
FONCAIXA FTGENCAT: S&P Affirms Rating on Class D Notes at 'D'
* SPAIN: Five Banks Likely to Fail Stress Tests
T U R K E Y
HSBC BANK: Moody's Downgrades Standalone BFSR to 'D+'
* TURKEY: Firms to Sue Turkmenistan Over US$1BB in Unpaid Debt
U K R A I N E
CIB CREDIT: Moody's Withdraws Ratings for Business Reasons
U Z B E K I S T A N
INFINBANK: Moody's Assigns 'E+' Bank Financial Strength Rating
U N I T E D K I N G D O M
DECO 11: S&P Affirms Rating on Class F Notes at 'D (sf)'
HARLOW & MILNER: Falls Due to Industrial Disease & Injury Claims
KINETICS GROUP: Bournemouth Staff Will Transfer to Mouchel
LIFESTYLE HOLDINGS: Falls Into Administration, Directors Quit
LLANGOLLEN HOTELS: Goes Into Administration on GBP900,000 VAT Bill
MILLER GROUP: In Debt Refinancing Talks with Blackstone
RED SKY: Maintenance & Repair Contract With Housing Executive Ends
SANDWELL: Fitch Cuts Ratings on Three Classes of Notes to 'CCsf'
SSB NO.1: Fitch Assigns 'B(exp)' Rating on Limited Recourse Notes
STAG BIDCO: S&P Assigns Prelim. 'B+' Long-term Corp. Credit Rating
* S&P Takes Rating Actions on 410 European Finance Tranches
X X X X X X X X
* EUROPE: European Union Preparing "Backstops" for Banks
* BOOK REVIEW: Competition in the Health Care Sector
*********
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B E L G I U M
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DEXIA BANK: Moody's Cuts Bank Financial Strength Rating to 'D'
--------------------------------------------------------------
Moody's Investors Service has downgraded to A3 from A1 the long-
term senior debt and deposit ratings of Dexia Group's three main
operating entities: Dexia Bank Belgium, Dexia Credit Local and
Dexia Banque Internationale a Luxembourg. This was driven by the
lowering of these entities' Bank Financial Strength Ratings to D,
which corresponds to Ba2 on Moody's long-term scale, from C-/ Baa2
previously. The outlook on the BFSRs is negative.
At the same time, the three entities' subordinated debt ratings
were downgraded to Baa1 from A2. The short-term ratings of all
three entities' were affirmed at Prime-1. The outlook on all
ratings is stable. Moody's also downgraded Dexia's hybrid
securities as detailed further below.
The rating actions conclude the review on the long-term ratings
and BFSRs of Dexia's three main operating entities, initiated on
March 28, 2011.
Aa1 rated bonds of Dexia's issuing entities that benefit from a
guarantee of the governments of France (Aaa/stable), Belgium
(Aa1/stable) and Luxembourg (Aaa/stable) are unaffected by the
rating action.
RATINGS RATIONALE
DEXIA'S FINANCIAL IMBALANCES PUT PRESSURE ON THE GROUP'S INTRINSIC
STRENGTH
Moody's says the downgrade of the ratings of Dexia's main
operating entities' BFSRs and senior debt ratings reflects a
combination of adverse pressures, in particular:
i) the rating agency's continued concerns about the group's
still sizeable reliance on short-term funding (in excess of
EUR100 billion) and the consequent liquidity gaps that render
it relatively vulnerable to adverse market conditions and a
potential deterioration in the market perception of the
credit;
ii) the substantial negative AFS reserves, representing potential
losses that could be realized if Dexia needs to continue
selling illiquid assets ahead of their contractual maturity.
If credit spreads remain unchanged, the negative AFS reserves
are still expected to represent around 50% of the group's
Tier 1 capital at the end of 2011 when the sale acceleration
program (announced on May 27, 2011) is completed;
iii) and, to a much lesser extent, the risk that the group's
reduced production strategy in public finance (which is
constrained by a high reliance on wholesale funding) could
progressively affect Dexia's currently strong public-finance
franchise.
Dexia continues to suffer from the consequences of the financial
imbalances mentioned above, inherited from the pre-crisis period.
The rating agency recognizes the group has made material
improvements since the peak of the crisis, despite unfavorable
market conditions. However, in Moody's view, the path to a fully
restored financial structure remains challenging.
"Although we recognize the acceleration of asset disposals
announced by Dexia on May 27, 2011 is positive for the group's
liquidity, risk profile and capitalization, the magnitude of the
contemplated sale is unlikely by itself to allow Dexia to reduce
the liquidity gaps to such levels that could be considered as
consistent with the previous rating level", says Yasuko Nakamura,
a Moody's Vice President and Senior Analyst.
Moody's believes that the challenges Dexia is facing are more
consistent with a BFSR of D, corresponding to a Ba2 on Moody's
long-term rating scale. The negative outlook on the BFSRs reflects
the risk that any deterioration of the Greek sovereign debt
situation and subsequent possible contagion may, in addition to
triggering direct losses on related securities holdings, have
further negative consequences on Dexia's funding costs and market
access.
Moody's continues to acknowledge the very high inter-company
funding and credit support that currently prevails within the
centrally managed Dexia Group. This is reflected in Moody's
approach of assigning BFSRs at the same level for the three main
group operating companies (DBB, DCL and DBIL).
LONG-TERM RATINGS AND SYSTEMIC SUPPORT ASSUMPTIONS
"Based on our perception that Dexia continues to benefit from very
high systemic support, five notches of uplift from the Ba2
standalone rating are incorporated into the long-term senior debt
and deposit ratings of A3,"adds Ms. Nakamura.
The high systemic support from France, Belgium and Luxembourg is
evidenced by the capital increase in 2008, the funding guarantee
program and the asset-guarantee scheme provided by these
countries. This support, in turn, reflects the deep ties between
Dexia and the public sectors of these countries, both in terms of
its shareholder structure and from a business franchise
perspective. For this reason, Moody's considers this involvement
to be a more structural feature for Dexia compared with other
commercial banks. This contributes to the stable outlook on
Dexia's long-term ratings.
AFFIRMATION OF SHORT-TERM RATINGS
Moody's decision to affirm the Prime-1 short-term ratings reflects
Moody's high expectations of systemic support for the group's
financing needs.
HYBRIDS AND JUNIOR SUBORDINATED DEBT RATINGS
The agreement reached between Dexia and the European Commission
(EC) in 2010 included a ban on common dividend payments, other
than in the form of new shares issued by Dexia SA and its three
main operating entities, until the end of 2011. These common
dividend restrictions have a direct impact on Dexia's hybrid
securities with optional payment features because hybrid coupons
can only be suspended when common dividends have not been paid for
a period of time. Since the related hybrid documents contain a
pusher, common dividend payments "push" hybrid coupon payments.
With the restrictions on common dividend payments, hybrid coupons
were suspended on the non-cumulative Tier 1 instruments issued by
DCL and Dexia Funding Luxembourg (DFL) and the cumulative Upper
Tier 2 instrument issued by DBB. Since some or all of the coupons
payable on these securities have been suspended over the past two
years, Moody's continues to apply an expected loss approach to
position their ratings.
Due to the downgrade of Dexia's BFSR as well as revisions made to
the likely time period for coupon suspension, Moody's has taken
these rating actions:
* DCL: DCL's 4.3% EUR700 million preferred stock rating was
downgraded to Caa1 (hyb) from B3 (hyb). The outlook is negative.
No coupon has been paid on this security over the last two years
and Moody's expects coupon suspension to continue for another
year.
DCL has the weakest solvency within the group and holds a large
part of the legacy assets, which is likely to exert further
pressure on the bank's equity. Moody's view is that DCL may need
some capital at some point in time, which could be provided
through a reallocation of capital within the group. As such, the
risk of continuing non-payment of common dividends in the near
future is high, even after the EC ban on the payment of common
dividends is lifted, which in turn increases the probability of
suspension of the preferred stock coupon.
* DFL: the B3(hyb) rating on the 4.892% EUR500 million non-
cumulative preferred stock issued by Dexia SA's issuing vehicle,
DFL, was confirmed. The outlook is negative. DFL did not pay a
coupon on this security in 2009, but paid one in 2010 due to the
capital increase by incorporation of reserves at Dexia SA in the
same year. Moody's assumption is that no coupon payment will
occur in 2011 because of the EC's continuing ban on payment of
the common dividend. However, coupon payments may resume as soon
as 2012 as a consequence of some pressure from the Belgian and
French shareholders to receive common dividends from Dexia SA.
Once common dividend payments are made, they will "push" the
preferred stock's coupon payments under the terms of the pusher.
* DBB: the rating on the 6.25% junior subordinated debt issued by
DBB was downgraded to B2 (hyb) from Ba2 (hyb). The outlook is
negative. No coupon has been paid on this security over the last
two years. Moody's assumes that no coupon payment will occur in
2011 because of the EC's continuing ban on the payment of common
dividends. However, coupon payments may resume as soon as 2012
because the group may then need to upstream common dividends
from DBB as a way to reallocate capital within the group and to
be able to pay a dividend to Dexia SA's shareholders. Once
common dividend payments are made, they will "push" the junior
subordinated debt's coupon payments under the terms of the
pusher.
Additionally, Moody's downgraded DBIL's preferred stock (6.821%
EUR225 million) rating to B3 (hyb) from B1 (hyb). The outlook is
negative. Since Moody's expects coupon payments on this hybrid to
continue, the rating is now positioned based on normal notching
rather than through an expected loss analysis. Due to its net loss
trigger feature, which results in the suspension of coupons on a
non-cumulative basis upon a trigger breach, the rating is
positioned four notches below the Adjusted Baseline Credit
Assessment (Adjusted BCA). Moody's arrives at the Adjusted BCA by
adding parental and cooperative support, if applicable, to the
BCA, which excludes systemic and regional support.
Simultaneously, Moody's downgraded the ratings of the other
cumulative junior subordinated issues of DBIL and issuing vehicle
Dexia Overseas Limited (guaranteed by DBB) to Ba1 (hyb) from Baa1
(hyb), in line with the downgrades of Dexia's main operating
entities' intrinsic financial strength ratings. Moody's anchored
the ratings from the Adjusted BCA and added one notch because the
trigger for mandatory coupon suspension is effectively insolvency,
which means that these hybrids will not likely absorb losses until
the bank is close to liquidation rather than as a "going" concern.
These securities have paid all their coupons to date.
The negative outlook for all the above rated hybrid securities
directly results from the negative outlook of the group's main
operating entities' intrinsic financial strength ratings.
TRIGGERS FOR POTENTIAL DOWNWARD/UPWARD RATING PRESSURE
Downward pressure may be exerted on the BFSRs from any material
delay or a change in Dexia's strategy or external factors that
could hamper the group's ability to continue to implement its
financial restructuring program and improve its fundamentals.
The long and short-term ratings could experience downward rating
pressure in the event of a multi-notch downgrade of the BFSR.
Downward pressure on the long and short-term ratings could stem
from Moody's considering that a lower probability of systemic
support would be extended to Dexia.
A material acceleration in the improvement of the group's
financial structure, following an easing of tension in the
markets, could exert upward pressure on Dexia's BFSR.
However, Moody's sees limited upward pressure on the group's long-
term debt ratings from its current A3 because improvements in the
bank's fundamentals are likely to be offset to a certain degree by
a decrease in systemic uplift.
IMPACT ON SUBSIDIARIES
The ratings on a number of subsidiaries and issuing vehicles are
affected:
- DCL's BFSR downgraded to D with negative outlook from C-,
deposit and senior unsecured debt ratings downgraded to A3 from
A1, subordinated debt rating downgraded to Baa1 from A2, and
preferred stock rating downgraded to Caa1 (hyb) from B3 (hyb);
all long-term ratings have a stable outlook, except the
preferred stock rating which has a negative outlook. The Prime-1
short-term rating is affirmed;
- DBB's BFSR downgraded to D with negative outlook from C-,
deposit and senior unsecured debt ratings downgraded to A3 from
A1, subordinated debt ratings downgraded to Baa1 from A2, junior
subordinated debt rating downgraded to B2 (hyb) from Ba2 (hyb);
all long-term ratings have a stable outlook, except the junior
subordinated debt rating which has a negative outlook. The
Prime-1 short-term rating is affirmed;
- DBIL's BFSR downgraded to D with negative outlook from C-,
deposit and senior unsecured debt ratings downgraded to A3 from
A1, subordinated debt ratings and junior subordinated debt
ratings downgraded to Baa1 and Ba1 (hyb), respectively, from A2
and Baa1 (hyb), and preferred stock rating downgraded to B3
(hyb) from B1 (hyb); all long-term ratings have a stable
outlook, except the junior subordinated debt and preferred stock
ratings which have a negative outlook. The Prime-1 short-term
rating is affirmed;
- Dexia Funding Luxembourg's backed preferred stock confirmed at
B3 (hyb) with negative outlook;
- Dexia Kommunalkredit Bank's long-term senior unsecured rating
downgraded to Ba2 with negative outlook from Baa2;
- Dexia CLF Finance's backed senior unsecured rating downgraded to
(P)A3 with stable outlook from (P)A1;
- Dexia Public Finance Norden's backed long-term bank deposit
rating downgraded to A3 with stable outlook from A1. The Prime-1
short-term rating is affirmed;
- Dexia Credit Local New York Branch's long-term bank deposit
rating downgraded to A3 with stable outlook from A1. The Prime-1
short-term rating is affirmed;
- Dexia Credit Local Tokyo Branch's long-term bank deposit rating
downgraded to A3 with stable outlook from A1. The Prime-1 short-
term rating is affirmed;
- Dexia Funding Netherlands' backed long-term senior unsecured
rating downgraded to A3 with stable outlook from A1 and backed
subordinated debt rating downgraded to Baa1 with stable outlook
from A2. The (P)Prime-1 short-term rating is affirmed;
- Dexia Overseas Limited's A1 backed long-term backed senior
unsecured rating downgraded to A3 with stable outlook from A1,
backed subordinated debt rating downgraded to Baa1 with stable
outlook from A2, and backed junior subordinated debt rating
downgraded to Ba1 (hyb) with negative outlook from Baa1 (hyb).
These ratings remain unchanged:
- Dexia Financial Products' backed short-term rating of Prime-1;
- Dexia Delaware LLC's backed short-term rating of Prime-1;
- DenizBank A.S.'s C- BFSR, Baa2 long-term domestic currency
deposit ratings, Ba3 long-term foreign currency deposit ratings,
P(Ba1) foreign currency senior unsecured, Prime-2 short-term
domestic currency deposit ratings and Not-Prime short-term
foreign currency deposit ratings are unchanged. The outlook on
the BFSR and domestic currency deposit ratings remains stable
and the outlook on the foreign currency deposit and senior
unsecured ratings remains positive.
- Dexia Credit Local, Stockholm Branch's short-term deposit rating
of Prime-1;
- RBC Dexia Investor Services limited's issuer rating of Aa3.
Moody's says that any potential impact of this rating action on
the group's covered bonds and Dexia Sabadell and Dexia Crediop
will be considered separately.
The principal methodologies used in this rating were Bank
Financial Strength Ratings: Global Methodology published in
February 2007, Incorporation of Joint-Default Analysis into
Moody's Bank Ratings: A Refined Methodology published in March
2007, and Moody's Guidelines for Rating Bank Hybrid Securities and
Subordinated Debt published in November 2009.
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B U L G A R I A
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RUSE INDUSTRY: EU Orders Recovery of Illegal State Aid
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Novinite.com reports that in a July 13 ruling, the first of its
kind for Bulgaria, the European Commission ordered Bulgaria to
recover illegal and incompatible aid from Ruse Industry AD.
According to Novinite.com, after an in-depth investigation, the
European Commission has concluded that Ruse Industry, now in
bankruptcy proceedings, has received subsidies in the form of
unpaid debts to the state of around EUR3.7 million.
The company has been in difficulties for several years,
Novinite.com states. In June 2009, the Bulgarian authorities
notified the Commission of plans to restructure Ruse Industry and
its debt, Novinite.com recounts. In April 2010, the Commission
opened an in-depth investigation, Novinite.com discloses. The
notified restructuring was withdrawn by Bulgaria in November 2010,
but the Commission has continued its investigation into the aid
involved in view of the State's failure to enforce its debt in
previous years, Novinite.com notes. On November 11, 2010, the
Bulgarian authorities filed for bankruptcy proceedings against
Ruse Industry, Novinite.com relates.
Novinite.com says the Commission believes that Ruse Industry
benefited from state aid as any other creditor would have sought
the repayment of the debt sooner and more effectively. This
creates distortions of competition vis a vis other companies, who
had to operate their businesses without such support and were
subject to the discipline of credit markets, according to
Novinite.com. In order to remedy this distortion, the aid to
Ruse Industry should be recovered, Novinite.com states.
Ruse Industry AD is a Bulgarian metal manufacturer.
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G E R M A N Y
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FORCE 2005-1: Fitch Affirms Rating on Class D Notes at 'Bsf'
------------------------------------------------------------
Fitch Ratings has downgraded FORCE 2005-1 Limited Partnership's
class A notes to 'BBBsf' from 'Asf' and affirmed the class B, C
and D notes. The agency has also affirmed FORCE TWO's notes.
Given the bullet loans securitized in these transactions, Fitch
regards refinancing risk as a key risk. All of the loans are
bullet loans maturing on two different days close to each other.
Fitch expects weaker borrowers to have difficulties re-financing
loans at maturity, which could lead to additional defaults. In
addition, the potential lack of liquidity at maturity could lead
to additional defaults. This risk is reflected in the Negative
Outlook for all the classes of notes rated above 'CCCsf'. Fitch is
in contact with the transaction arranger and will review any
available information on the borrowers' repayment and refinancing
plans.
In FORCE 2005-1, three additional principal deficiency ledger
events have occurred since the last review in May 2010. The
outstanding PDL balance has risen to EUR7.5 million from EUR0.8
million at last review. The increased PDL balance has reduced the
credit protection available to the rated notes. The current credit
protection for the class A notes, after considering the current
PDL balance, is sufficient to provide for a default of the ten
largest obligors. In the agency's view, the large obligor
concentrations inherent in the transaction together with the
current class A note credit protection are in line with a 'BBBsf'
rating. Additionally, in Fitch's view, the class A notes are
exposed to significant refinancing risk resulting from the bullet
nature of the securitized loans. In Fitch's view, the credit
enhancement available to the class B, C and D notes is
commensurate with their current ratings.
In FORCE TWO, two additional PDL events have occurred since the
last review. The outstanding PDL balance has risen to EUR7.3
million from EUR4.7 million at the last review. Although credit
protection has declined as a consequence of the additional PDL
events and this transaction is less granular than FORCE 2005-1, in
Fitch's view, the notes' current ratings are reflective of the
transaction's performance.
Fitch assigned Recovery Ratings to three classes of notes in FORCE
TWO. RRs are issued on a scale of 'RR1' (highest) to 'RR6'
(lowest) to denote the range of recovery prospects of notes rated
at or below 'CCC'.
The transactions are cash securitizations of subordinated debt and
loss participation agreements of German SMEs. The portfolio
companies were selected by equiNotes Management GmbH, a joint
venture of IKB Private Equity GmbH (a subsidiary of IKB Deutsche
Industriebank Aktiengesellschaft (IKB)) and Deutsche Bank
Aktiengesellschaft (DBAG), acting as advisor for the issuer.
As all securitized debt instruments are subordinated, Fitch
assumes no recovery in its analysis.
The agency has affirmed the Issuer Report Grade of three stars to
the publicly available reports on the transactions.
The rating actions are:
FORCE 2005-1:
-- EUR167m Class A notes (ISIN: XS0237456156): downgraded to
'BBBsf' from 'Asf', Outlook Negative; Loss Severity Rating
is 'LS-3'
-- EUR17.8m Class B notes (ISIN: XS0237456313): affirmed at
'BBBsf', Outlook Negative, Loss Severity Rating is 'LS-5'
-- EUR20.4m Class C notes (ISIN: XS0237456404): affirmed at
'BB-sf', Outlook Negative, Loss Severity Rating is'LS-5'
-- EUR18.5m Class D notes (ISIN: XS0237456826): affirmed at
'Bsf', Outlook Negative, Loss Severity Rating is 'LS-5'
FORCE TWO:
-- EUR133.5m Class A notes (ISIN: XS0299041037): affirmed at
'Bsf', Outlook Negative, 'Loss Severity Rating is 'LS-3'
-- EUR12.3m Class B notes (ISIN: XS0299041896): affirmed at
'B-sf', Outlook Negative, Loss Severity Rating is'LS-5'
-- EUR13m Class C notes (ISIN: XS0299042357): affirmed at
'CCCsf', assigned Recovery Rating of RR-1
-- EUR11.9m Class D notes (ISIN: XS0299044056): affirmed at
'CCCsf', assigned Recovery Rating of RR-4
-- EUR9.7m Class E notes (ISIN: XS0299045020): affirmed at
'CCsf', assigned Recovery Rating of RR-6
FORCE TWO: Fitch Affirms Rating on Class E Notes at 'CCsf'
----------------------------------------------------------
Fitch Ratings has downgraded FORCE 2005-1 Limited Partnership's
class A notes to 'BBBsf' from 'Asf' and affirmed the class B, C
and D notes. The agency has also affirmed FORCE TWO's notes.
Given the bullet loans securitized in these transactions, Fitch
regards refinancing risk as a key risk. All of the loans are
bullet loans maturing on two different days close to each other.
Fitch expects weaker borrowers to have difficulties re-financing
loans at maturity, which could lead to additional defaults. In
addition, the potential lack of liquidity at maturity could lead
to additional defaults. This risk is reflected in the Negative
Outlook for all the classes of notes rated above 'CCCsf'. Fitch is
in contact with the transaction arranger and will review any
available information on the borrowers' repayment and refinancing
plans.
In FORCE 2005-1, three additional principal deficiency ledger
events have occurred since the last review in May 2010. The
outstanding PDL balance has risen to EUR7.5 million from EUR0.8
million at last review. The increased PDL balance has reduced the
credit protection available to the rated notes. The current credit
protection for the class A notes, after considering the current
PDL balance, is sufficient to provide for a default of the ten
largest obligors. In the agency's view, the large obligor
concentrations inherent in the transaction together with the
current class A note credit protection are in line with a 'BBBsf'
rating. Additionally, in Fitch's view, the class A notes are
exposed to significant refinancing risk resulting from the bullet
nature of the securitized loans. In Fitch's view, the credit
enhancement available to the class B, C and D notes is
commensurate with their current ratings.
In FORCE TWO, two additional PDL events have occurred since the
last review. The outstanding PDL balance has risen to EUR7.3
million from EUR4.7 million at the last review. Although credit
protection has declined as a consequence of the additional PDL
events and this transaction is less granular than FORCE 2005-1, in
Fitch's view, the notes' current ratings are reflective of the
transaction's performance.
Fitch assigned Recovery Ratings to three classes of notes in FORCE
TWO. RRs are issued on a scale of 'RR1' (highest) to 'RR6'
(lowest) to denote the range of recovery prospects of notes rated
at or below 'CCC'.
The transactions are cash securitizations of subordinated debt and
loss participation agreements of German SMEs. The portfolio
companies were selected by equiNotes Management GmbH, a joint
venture of IKB Private Equity GmbH (a subsidiary of IKB Deutsche
Industriebank Aktiengesellschaft (IKB)) and Deutsche Bank
Aktiengesellschaft (DBAG), acting as advisor for the issuer.
As all securitized debt instruments are subordinated, Fitch
assumes no recovery in its analysis.
The agency has affirmed the Issuer Report Grade of three stars to
the publicly available reports on the transactions.
The rating actions are:
FORCE 2005-1:
-- EUR167m Class A notes (ISIN: XS0237456156): downgraded to
'BBBsf' from 'Asf', Outlook Negative; Loss Severity Rating
is 'LS-3'
-- EUR17.8m Class B notes (ISIN: XS0237456313): affirmed at
'BBBsf', Outlook Negative, Loss Severity Rating is 'LS-5'
-- EUR20.4m Class C notes (ISIN: XS0237456404): affirmed at
'BB-sf', Outlook Negative, Loss Severity Rating is'LS-5'
-- EUR18.5m Class D notes (ISIN: XS0237456826): affirmed at
'Bsf', Outlook Negative, Loss Severity Rating is 'LS-5'
FORCE TWO:
-- EUR133.5m Class A notes (ISIN: XS0299041037): affirmed at
'Bsf', Outlook Negative, 'Loss Severity Rating is 'LS-3'
-- EUR12.3m Class B notes (ISIN: XS0299041896): affirmed at
'B-sf', Outlook Negative, Loss Severity Rating is'LS-5'
-- EUR13m Class C notes (ISIN: XS0299042357): affirmed at
'CCCsf', assigned Recovery Rating of RR-1
-- EUR11.9m Class D notes (ISIN: XS0299044056): affirmed at
'CCCsf', assigned Recovery Rating of RR-4
-- EUR9.7m Class E notes (ISIN: XS0299045020): affirmed at
'CCsf', assigned Recovery Rating of RR-6
PB DOMICILE: S&P Affirms Rating on Class E Notes at 'BB (sf)'
-------------------------------------------------------------
Standard & Poor's Ratings Services raised its credit ratings on PB
Domicile 2006-1 PLC's class B and C notes. "At the same time, we
affirmed our ratings on the class A1+, A2+, D, and E notes," S&P
said.
"The rating actions follow our analysis of the transaction's
performance. Credit support is provided by subordination and a
synthetic excess spread mechanism," S&P related.
"As per the latest investor report for the May 26, 2011 payment
date, cumulative losses have increased to what we consider to be a
low amount at EUR2,353,336. Losses peaked for the interest payment
date in May 2010 at EUR411,801 (0.02% of the then-current
outstanding pool balance). Excess spread has covered realized
losses to date. Excess spread in this transaction -- available on
a use-or-lose basis -- equals 57 basis points per year of the
performing balance of the portfolio. The performing balance
makes up about 98% of the total pool balance," S&P said.
"Delinquencies of up to 90 days have been relatively stable since
closing, in our view. Delinquencies of 30-59 days have been below
0.40% of the current pool balance, and delinquencies of 60-89 days
have been below 0.20% -- apart from the latest payment date, when
they reached 0.28% of the current pool balance. We have observed
90+ day delinquencies and credit events of between 0.49%-0.85%
from the beginning of 2008 to mid-2010. They then jumped to about
1.14% of the current pool balance, at which level they have
remained since November 2010. Credit events currently amount to
EUR20,515,655, and the transaction's recovery rate stands at about
68%," S&P said.
"Considering realized losses and delinquencies to date, and taking
into account historical recovery rates in this particular
portfolio, we have assessed the likelihood of future losses for
both the performing and nonperforming parts of the collateral
pool," S&P stated.
"Following our review, we have therefore raised the ratings on the
class B and C notes, due to increased credit support from the
class D and E notes and available excess spread," S&P related.
"We have also affirmed our ratings on the class A1+, A2+, D, and E
notes, as we consider the current credit enhancement to be
commensurate with the ratings on these notes," S&P stated.
"The pool factor in PB Domicile 2006-1 is currently 71%. We will
continue to monitor the development of credit events and actual
losses in the transaction," S&P continued.
PB Domicile 2006-1 is a synthetic, partially funded German
residential mortgage-backed securities transaction.
Ratings List
Class Rating
To From
PB Domicile 2006-1 PLC
EUR182.6 Million Floating-Rate Credit-Linked Notes and Deferrable
Floating-Rate Credit-Linked Notes
Ratings Raised
B AA+ (sf) AA (sf)
C A+ (sf) A (sf)
Ratings Affirmed
A1+ AAA (sf)
A2+ AAA (sf)
D BBB (sf)
E BB (sf)
PROVIDE BLUE: S&P Affirms Rating on Class E Notes at 'BB (sf)'
--------------------------------------------------------------
Standard & Poor's Ratings Services affirmed its credit ratings on
PROVIDE BLUE 2005-1 PLC's class D and E notes.
"The affirmations follow a detailed analysis of the transactions
performance. Credit support is provided by a threshold, above
which losses will be allocated to the notes in an amount of EUR1.4
million, and by the subordinated classes. The unrated class F
notes, in an amount of EUR12.1 million, provide further credit
support to the senior classes of notes," S&P said.
Realized losses have diminished the size of the threshold to zero
and reduced the balance of the class F notes to EUR8,697,331.
"Since losses peaked in 2009 and 2010, we have again seen what we
consider to be lower levels of losses," S&P said.
"Delinquency levels for 90+ day arrears have been stable since
January 2008, in our view, at about 1.20% of the current pool
balance. As of the current pool report, for the July 7, 2011
payment date, the level of 90+ day arrears is 1.21%, and credit
events amount to 2.15% of the current pool balance (equal to
EUR12,420,118). The reported recovery rate is 66%," S&P said.
"Considering realized losses and delinquencies, and taking into
account historical recovery rates in this particular portfolio, we
have assessed the likelihood of future losses for both the
performing and nonperforming parts of the collateral pool," S&P
stated.
"We have affirmed the ratings on the class D and E notes because,
in our opinion, the performance of the transaction, and the
current level of credit enhancement provided to senior classes of
notes by the threshold and subordinated classes, is still
commensurate with the ratings on these notes," S&P related.
Amortization has reduced the pool factor in PROVIDE BLUE 2005-1 to
39%. "We will continue to monitor the development of credit events
and actual losses in the transaction," S&P said.
PROVIDE BLUE 2005-1 is a synthetic German residential mortgage-
backed securities (RMBS) transaction using the partially funded
KfW PROVIDE platform.
Ratings List
Class Rating
PROVIDE BLUE 2005-1
EUR130 Million Floating-Rate Credit-Linked Notes
Ratings Affirmed
D BBB (sf)
E BB (sf)
WALTER BAU: Thai Prince Vajiralongkorn's Jet Impounded
------------------------------------------------------
BBC News reports that German administrators of Walter Bau AG have
impounded a jet used by Thailand's Crown Prince Vajiralongkorn, in
a dispute over an unpaid debt from 20 years ago.
According to the report, the administrators said Thailand's
government has refused to pay a bill of more than EUR30 million
(US$43 million) to a now-defunct German construction firm.
BBC News relates that a spokesman for Munich airport said the
Boeing 737 was seized by court order, and will remain grounded.
BBC News notes that Thailand's Foreign Ministry said the seizure
was "highly inappropriate".
"The Thai authorities have expressed to the German government its
great concern over the incident and have requested it to resolve
the problem as soon as possible," ministry spokesman Thani
Thongphakdi told Reuters news agency, according to BBC News.
But Walter Schneider, the administrator for the now-bankrupt
construction firm, said the "drastic measure" was "virtually the
last resort".
"The Thai government always stalled and did not respond to our
demands," BBC News quotes Mr. Schneider as saying.
The German firm, according to BBC News, was part of a consortium
that helped to build a toll road between Bangkok and Don Muang
airport.
The Thais claim a court decision is still pending on the debt, but
the German administrators say the matter has already been decided,
BBC adds.
About Walter Bau
Headquartered in Augsburg, Germany, Walter Bau AG --
http://www.walter-bau.de/-- is a construction management and
construction technology group in Europe. It principal
activities include turnkey construction, building planning and
construction, civil engineering, utility constructions, traffic
infrastructure construction, and real estate. Walter Bau once
ranked number fourth in the local construction market behind
Hochtief, Bilfinger Berger and Strabag.
Walter Bau declared insolvency in February 2005 after creditor
banks refused to approve its restructuring plan. This denied
the company access to a EUR1.5 billion credit line. In his
report to the creditors, Mr. Schneider blamed the group's demise
to management errors and the downturn in the construction
industry.
* GERMANY: 13 Banks Expected to Pass European Stress Test
---------------------------------------------------------
Ulrike Dauer at Dow Jones Newswires reports that all 13 German
banks taking part in the European stress test appear to have
passed, although it was a close call for two of them it.
According to Dow Jones, state-controlled HSH Nordbank will likely
have a core Tier 1 capital ratio of around 5.5% based on the
stress test's toughest scenario, just above the required 5%.
Dow Jones relates that people familiar with the matter said the
NordLB's ratio is expected to be 5%-6%. Banks such as Deutsche
Bank AG, Commerzbank AG, Hypo Real Estate, WestLB, BayernLB, LBBW,
Deka, DZ Bank, WGZ, Landesbank Berlin and Helaba, should have core
Tier 1 ratios of at least 6%, Dow Jones discloses.
Results of the stress test of 91 European banks are due at 1600
GMT today, Dow Jones discloses. The banks needed to show they
would have core Tier 1 capital above 5% of risk-weighted assets if
they were hit by a severe economic downturn and market stress over
the next two years, Dow Jones states.
For HSH Nordbank, the test doesn't take into account a
restructuring deal it agreed with the European Union on Tuesday
that will be sealed in September, Dow Jones notes. Dow Jones
relates that one person said the deal could lift the bank's core
Tier 1 ratio to around 9%.
NordLB has announced measures to reach a 7% core Tier 1 ratio by
2015, Dow Jones discloses. They include retaining earnings, a
conversion of non-voting shares into equity, the sale of holdings,
and down-sizing its investments to reduce risk-weighted assets,
Dow Jones states.
Hypo Real Estate was the only German bank to fail last year's test
and is in a better position this year, according to Dow Jones.
Separately, Ben Moshinsky and Niklas Magnusson at Bloomberg News
report that Germany's Landesbank Hessen- Thueringen snubbed the
European Union's bank stress tests, refusing to give the European
Banking Authority permission to publish all of its data.
According to Bloomberg, the bank, known as Helaba, disputes the
EBA's measurements of Core Tier 1 capital, the factor by which
banks are said to have passed or failed the tests, because they
don't include some instruments allowed by German regulators. The
lender, as cited by Bloomberg, said it passed the exams with a
capital ratio of 6.8%, counting contractual changes around state
funds of EUR1.92 billion (US$2.71 billion), not included in the
EBA results.
The EBA's evaluation of Helaba's reserves "would lead to a halving
of the core capital without legal grounds," Bloomberg quotes the
Frankfurt-based bank as saying in its statement on Tuesday. "It
is incomprehensible that the EBA will exclude capital that for 10
years has been included in the balance sheet as fully liable and
regulatory-approved capital."
===========
G R E E C E
===========
ALPHA BANK: Moody's Confirms Ba3 Ratings of Greek Covered Bonds
---------------------------------------------------------------
Moody's Investors Service has confirmed the ratings of these
covered bonds issued under Greek law, following Moody's sovereign
rating action on Greece (June 1, downgraded to Caa1) and the
associated rating actions on the relevant issuer ratings:
- Covered bonds issued by Alpha Bank A.E. (Alpha) under its Direct
Issuance Covered Bond Programme (Alpha Direct Issuance CB):
confirmed at Ba3; previously on June 3, 2011, downgraded to Ba3
on review for downgrade;
- Mortgage covered bonds issued by EFG Eurobank Ergasias S.A.
(Eurobank EFG) under its EUR5 billion Covered Bond Programme
(EFG CB I): confirmed at Ba3; previously on June 3, 2011,
downgraded to Ba3 on review for downgrade;
- Mortgage covered bonds issued by Eurobank EFG under its EUR3
billion Global Covered Bond Programme (EFG CB II): confirmed at
Ba3; previously on June 3, 2011, downgraded to Ba3 on review for
downgrade;
- Covered bonds issued by National Bank of Greece S.A. (NBG) under
its Global Covered Bond Programme (NBG CB I): confirmed at Ba3;
previously on June 3, 2011, downgraded to Ba3 on review for
downgrade;
- Covered bonds issued by NBG under its Covered Bond Programme II
(NBG CB II): confirmed at Ba3; previously on June 3, 2011,
downgraded to Ba3 on review for downgrade.
This rating action concludes the review of the above covered
bonds. The timely payment indicators are "Improbable" for Alpha
Direct Issuance CB, EFG CB I, EFG CB II and NBG CB II and "Very
Improbable" for NBG CB I.
RATINGS RATIONALE
The reviews of the covered bonds were initiated by rating actions
on the relevant issuers and the sovereign rating of Greece. On the
basis of the new rating levels of both the issuers and the
sovereign, Moody's has now confirmed the ratings of the covered
bonds.
Generally, a downgrade of the issuer ratings negatively affects
the covered bonds through their impact on both the expected loss
method and the timely payment indicator framework. In addition,
the rating of a sovereign has an impact on the maximum rating
covered bonds can achieve. A weaker sovereign rating is likely to
lead to a deterioration of the future asset performance and
increases the likelihood of a transaction experiencing event risk.
EXPECTED LOSS METHOD
As the issuer's credit strength is incorporated into Moody's
expected loss assessment, any downgrade of the issuer's rating
will increase the expected loss on the covered bonds. However,
Moody's notes that in all cases, the over-collateralization is
sufficient to achieve a Ba3 rating. The minimum over-
collateralization for the programs are (i) 15.0% for Alpha Direct
Issuance CB; (ii) 17.8% for EFG CB I; (iii) 42.0% for EFG CB II;
(iv) 31.0% for NBG CB I; and (v) 19.0% for NBG CB II. Moody's
views these over-collateralization levels as "committed".
TPI FRAMEWORK
Currently, the TPI of "Very Improbable" assigned to NBG CB I
restricts the rating of these covered bonds to Baa3. The TPI of
"Improbable" assigned to Alpha Direct Issuance CB, EFG CB I, EFG
CB II and NBG CB II would cap the covered bond ratings at a higher
level than they are currently rated. However, given the sovereign
rating of Caa1, Moody's does not currently assign ratings higher
than Ba3 to covered bonds issued by Greek banks.
The ratings assigned by Moody's address the expected loss posed to
investors. Moody's ratings address only the credit risks
associated with the transaction. Other non-credit risks have not
been addressed, but may have a significant effect on yield to
investors.
The rating assigned to the existing covered bonds is expected to
be assigned to all subsequent covered bonds issued by the issuers
under these programs and any future rating actions are expected to
affect all such covered bonds. If there are any exceptions to
this, Moody's will, in each case, publish details in a separate
press release.
KEY RATING ASSUMPTIONS/FACTORS
Covered bond ratings are determined after applying a two-step
process: expected loss analysis and TPI framework analysis.
EXPECTED LOSS: Moody's determines a rating based on the expected
loss on the bond. The primary model used is Moody's Covered Bond
Model (COBOL) which determines expected loss as a function of the
issuer's probability of default, measured by the issuer's rating,
and the stressed losses on the cover pool assets following issuer
default.
The cover pool losses are based on Moody's most recent modeling
and are an estimate of the losses Moody's currently models if the
relevant issuer defaults. Cover pool losses can be split between
market risk and collateral risk. Market risk measures losses as a
result of refinancing risk and risks related to interest-rate and
currency mismatches (these losses may also include certain legal
risks). Collateral risk measures losses resulting directly from
the credit quality of the assets in the cover pool. Collateral
risk is derived from the collateral score.
The cover pool losses of Alpha Direct Issuance CB are 28.2%, with
market risk of 20.6% and collateral risk of 7.6%. The collateral
score for this program is currently 11.3%.
The cover pool losses of EFG CB I are 27.9%, with market risk of
20.5% and collateral risk of 7.4%. The collateral score for this
program is currently 11.0%.
The cover pool losses of EFG CB II are 47.0%, with market risk of
32.1% and collateral risk of 15.0%. The collateral score for this
program is currently 22.3%.
The cover pool losses of NBG CB I are 44.4%, with market risk of
35.4% and collateral risk of 9.0%. The collateral score for this
program is currently 13.4%.
The cover pool losses of NBG CB II are 21.5%, with market risk of
13.6% and collateral risk of 7.9%. The collateral score for this
program is currently 11.8%.
For further details on cover pool losses, collateral risk, market
risk, collateral score and TPI Leeway across all covered bond
programs rated by Moody's. These figures are based on the latest
data that has been analyzed by Moody's and are subject to change
over time. Quarterly these numbers are updated in Performance
Overview published by Moody's.
TPI FRAMEWORK: Moody's assigns a "timely payment indicator" which
indicates the likelihood that timely payment will be made to
covered bondholders following issuer default. The effect of the
TPI framework is to limit the covered bond rating to a certain
number of notches above the issuer's rating.
SENSITIVITY ANALYSIS
The robustness of a covered bond rating largely depends on the
credit strength of the issuer.
The number of notches by which the issuer's rating may be
downgraded before the covered bonds are downgraded under the TPI
framework is measured by the TPI Leeway. The ratings of all Greek
covered bonds have been lowered to Ba3, which represents the
lowest point in the TPI table. Covered bonds of issuers rated
below B3 are not subject to restriction due to the TPI.
A multiple-notch downgrade of the covered bonds might occur in
certain limited circumstances. Some examples might be (i) a
sovereign downgrade negatively affecting both the issuer's senior
unsecured rating and the TPI; (ii) a multiple notch downgrade of
the issuer; or (iii) a material reduction of the value of the
cover pool.
RATING METHODOLOGY
The principal methodology used in this rating was "Moody's
Approach to Rating Covered Bonds" published in March 2010.
Other methodologies and factors that may have been considered in
the rating process can also be found on the Moody's website.
AXIA FINANCE: Moody's Withdraws 'B1' Rating on Class A Note
-----------------------------------------------------------
Moody's Investors Service has withdrawn the credit rating of Axia
Finance PLC, a Greek ABS securitization of assets originated and
serviced by Piraeus Bank (B3, Non-Prime). Immediately prior to the
rating withdrawal, the transaction was rated B1 (sf). Details on
the affected notes are provided below:
Issuer: Axia Finance PLC
A Note, Withdrawn (sf); previously on Jun 10, 2011 Downgraded to
B1 (sf)
RATINGS RATIONALE
Moody's Investors Service has withdrawn the credit rating for its
own business reasons.
To identify the applicable primary methodology for the affected
transaction, please refer to the index of methodologies under the
research and ratings tab on Moodys.com.
=============
I R E L A N D
=============
ANGLO IRISH: Ex-Irish Nationwide Chief Meets Inquiry Team
---------------------------------------------------------
Simon Carswell at The Irish Times reports that former Irish
Nationwide chief executive Michael Fingleton met investigators
from the Office of the Director of Corporate Enforcement on Monday
as part of their inquiry into Anglo Irish Bank.
The concealment of loans by former Anglo chairman Sean FitzPatrick
using short-term borrowings from Irish Nationwide is one of four
areas being investigated by the Director of Corporate Enforcement
Paul Appleby, The Irish Times discloses.
It's understood the corporate enforcement office has sought to
interview other former INBS staff in recent months, The Irish
Times notes.
Mr. FitzPatrick concealed borrowings of up to EUR122 million at
Anglo, borrowing short-term loans from Irish Nationwide in the
days before Anglo's financial year on September 30 and repaying
them with fresh borrowings drawn from Anglo several days later,
The Irish Times states.
According to The Irish Times, investigators are also examining a
loan given to one of Anglo's directors in 2008; the lending by the
bank for the purchase of shares in the bank held by businessman
Sean Quinn; and the content of Anglo's financial and other public
statements in 2008.
Mr. Appleby has said he expects the investigation into Anglo to be
completed by the end of the year, The Irish Times relates.
He will seek an extension to his office's investigation beyond the
July 28 deadline set by the High Court last May, The Irish Times
says.
As reported by the Troubled Company Reporter-Europe on July 1,
2011, BreakingNews.ie related that The European Commission cleared
a bailout plan for Anglo Irish Bank and the Irish Nationwide
Building Society. BreakingNews.ie disclosed that the proposal,
which was submitted for approval in January, provides for the
merger of the two troubled institutions and their winding down
over the next 10 years. Anglo Irish and Irish Nationwide jointly
received EUR34.7 billion in capital injections from the State to
cover losses on property loans, BreakingNews.ie noted.
Anglo Irish Bank Corp PLC -- http://www.angloirishbank.com/--
operates in three core areas: business lending, treasury and
private banking. The Bank's non-retail business is made up of
more than 11,000 commercial depositors spanning commercial
entities, charities, public sector bodies, pension funds, credit
unions and other non-bank financial institutions. The Company's
retail deposits comprise demand, notice and fixed term deposit
accounts from personal savers with maturities of up to two years.
Non-retail deposits are sourced from commercial entities,
charities, public sector bodies, pension funds, credit unions and
other non-bank financial institutions. In addition, at Sept. 30,
2008, its non-retail deposits included deposits from Irish
Life Assurance plc. The Private Bank offers tailored products and
solutions for high net worth clients and operates the Bank's
lending business in Ireland and the United Kingdom.
BANK OF IRELAND: Moody's Cuts Government Bond Ratings to 'Ba1'
--------------------------------------------------------------
Moody's Investors Service has downgraded Ireland's foreign- and
local-currency government bond ratings by one notch to Ba1 from
Baa3. The outlook on the ratings remains negative.
The key driver for the rating action is the growing possibility
that following the end of the current EU/IMF support program at
year-end 2013 Ireland is likely to need further rounds of official
financing before it can return to the private market, and the
increasing possibility that private sector creditor participation
will be required as a precondition for such additional support, in
line with recent EU government proposals.
As stated in Moody's recent comment, entitled "Calls for Banks to
Share Greek Burden Are Credit Negative for Sovereigns Unable to
Access Market Funding," the prospect of any form of private sector
participation in debt relief is negative for holders of distressed
sovereign debt. This is a key factor in Moody's ongoing assessment
of debt-burdened euro area sovereigns.
Although Moody's acknowledges that Ireland has shown a strong
commitment to fiscal consolidation and has, to date, delivered on
its program objectives, the rating agency nevertheless notes that
implementation risks remain significant, particularly in light of
the continued weakness in the Irish economy.
The negative outlook on the ratings of the government of Ireland
reflects these significant implementation risks to the country's
deficit reduction plan as well as the shift in tone among EU
governments towards the conditions under which support to
distressed euro area sovereigns will be made available.
Despite the increased likelihood of private sector participation,
Moody's believes that the euro area will continue to utilize its
considerable economic and financial strength in its efforts to
restore financial stability and provide financial support to the
Irish government. The strength and financial capacity of the euro
area is underpinned by the Aaa strength of many of its members
including France and Germany, and indicated by Moody's Aaa credit
ratings on the European Union, the European Central Bank and the
European Financial Stability Facility.
Moody's has also downgraded Ireland's short-term issuer rating by
one notch to Non-Prime (commensurate with a Ba1 debt rating) from
Prime-3.
In a related rating action, Moody's has downgraded by one notch to
Ba1 from Baa3 the long-term rating and to Non-Prime from Prime-3
the short-term rating of Ireland's National Asset Management
Agency (NAMA), whose debt is fully and unconditionally guaranteed
by the government of Ireland. The outlook on NAMA's rating remains
negative, in line with that of the government's bond ratings.
RATIONALE FOR DOWNGRADE
The main driver of today's downgrade is the growing likelihood
that participation of existing investors may be required as a pre-
condition for any future rounds of official financing, should
Ireland be unable to borrow at sustainable rates in the capital
markets after the end of the current EU/IMF support program at
year-end 2013. Private sector creditor participation could be in
the form of a debt re-profiling -- i.e., the rolling-over or
swapping of a portion of debt for longer-maturity bonds with
coupons below current market rates -- in proportion to the size of
the creditors' holdings of debt that are coming due.
Moody's assumption surrounding increased private sector creditor
participation is driven by EU policymakers' increasingly clear
preference -- as expressed during the negotiations over the
refinancing of Greek debt -- for requiring some level of private
sector participation given that private investors continue to hold
the majority of outstanding debt. A call for private sector
participation in the current round of financing for Greece signals
that such pressure is likely to be felt during all future rounds
of official financing for other distressed sovereigns, including
Ba2-rated Portugal (as Moody's recently stated) as well as
Ireland.
Although Ireland's Ba1 rating indicates a much lower risk of
restructuring than Greece's Caa1 rating, the increased possibility
of private sector participation has the effect of further
discouraging future private sector lending and increases the
likelihood that Ireland will be unable to regain market access on
sustainable terms in the near future. This in turn implies that
some Irish government bond investors would need to absorb losses.
The increased risk of a disorderly and outright payment default or
of a disorderly debt restructuring by Greece also increases the
risk that Ireland will be unable to regain access to private
sector credit.
The downward pressure that this creates is mitigated in Ireland's
case by the strong commitment of the Irish government to fiscal
consolidation and structural reforms, and by its success, so far,
in achieving the fiscal adjustment required by the EU/IMF program.
To date, Ireland has met all of its objectives under that program.
In the first half of 2011, the primary balance target was
exceeded, with tax revenues on track and lower-than-anticipated
government expenditures. However, Moody's cautions that
implementation risks related to the overall deficit reduction aims
of the three-year program are still significant, particularly in
light of the continuing weakness of domestic demand.
Apart from Ireland's adherence to fiscal consolidation, Moody's
also acknowledges the Irish economy's continued competitiveness
and business-friendly tax environment. The considerable wage
adjustment that occurred in the course of the crisis reflects the
Irish labor market's flexibility. Taking Ireland's economic
adjustment capacity into account, Moody's expects that, after a
period of prolonged retrenchment, Ireland's long-term potential
growth prospects remain higher than those of many other advanced
nations. While the government's debt-to-GDP burden is expected to
be high compared to similarly rated sovereign credits, Ireland has
managed elevated levels of indebtedness in the past, and has shown
political cohesion while enacting difficult structural
adjustments.
WHAT COULD CHANGE THE RATING UP/DOWN
Moody's would consider a further rating downgrade if the Irish
government is unable to meet the targeted fiscal consolidation
goals. A further deterioration in the country's economic outlook
would also exert downward pressure on the rating, as would further
market disruption resulting from a disorderly Greek default.
Moody's also notes that upward pressure on the rating could
develop if the government's continued success in achieving its
fiscal consolidation targets, supported by a resumption of
sustained economic growth, is able to reverse the current debt
dynamics, thereby sustainably improving the Irish government's
financial strength.
PREVIOUS RATING ACTION AND METHODOLOGIES
Moody's last rating action affecting Ireland was implemented on
April 15, 2011, when the rating agency downgraded Ireland's
government bond ratings by two notches to Baa3 from Baa1, and
maintained the negative outlook.
Moody's last rating action affecting NAMA was implemented on
April 15, 2011, when the rating agency downgraded by two notches
to Baa3 from Baa1 the senior unsecured debt issued by NAMA, which
is backed by a full guarantee from the Irish government. The
negative outlook was maintained.
The principal Moody's rating methodology used in this rating was
"Sovereign Bond Ratings" published in September 2008.
BREFFNI PLANT: Ceases Trading; 90 Jobs at Risk
-----------------------------------------------
The Irish Times reports that Breffni Plant Hire has ceased
trading, putting over 90 full-time jobs at risk.
According to The Irish Times, the company plans to call a
creditors' meeting next week.
The Irish Times relates that the company said it had ceased
trading as a result of financial constraints relating to payments
from main contractors to which it has been providing services. It
has not yet been placed in liquidation, but it has scheduled a
creditors' meeting for July 22 in Portlaoise, The Irish Times
discloses.
Breffni is a sub-contracting business which provides services to
main contractors such as plant hire, earth moving and site
clearance.
CELF LOAN: Moody's Lifts Ratings on Two Classes of Notes From Ba2
-----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by CELF Loan Partners V limited:
Issuer: CELF Loan Partners V Limited
-- EUR20.1M Class B-1 Senior Secured Deferrable Floating Rate
Notes due 2019, Upgraded to A1 (sf); previously on Jun 22,
2011 A2 (sf) Placed Under Review for Possible Upgrade
-- EUR12M Class C Senior Secured Deferrable Floating Rate Notes
due 2019, Upgraded to Baa1 (sf); previously on Jun 22, 2011
Baa3 (sf) Placed Under Review for Possible Upgrade
-- EUR6.17M Class D-1 Senior Secured Deferrable Floating Rate
Notes due 2019, Upgraded to Baa3 (sf); previously on Jun 22,
2011 Ba2 (sf) Placed Under Review for Possible Upgrade
-- EUR3M Class B-2 Senior Secured Deferrable Floating Rate
Notes due 2019, Upgraded to A1 (sf); previously on Jun 22,
2011 A2 (sf) Placed Under Review for Possible Upgrade
-- EUR1.085M Class D-2 Senior Secured Deferrable Floating Rate
Notes due 2019, Upgraded to Baa3 (sf); previously on Jun 22,
2011 Ba2 (sf) Placed Under Review for Possible Upgrade
RATINGS RATIONALE
CELF Loan Partners V Limited, issued in June 2008, is a multi
currency Collateralised Loan Obligation backed by a portfolio of
mostly high yield senior secured loans. The reinvestment period
expired on July 25, 2009 and reinvestment of any sales proceeds
post reinvestment period is not permitted.
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011.
The actions reflect key changes to the modeling assumptions, which
incorporate (1) a removal of the temporary 30% default probability
macro stress implemented in February 2009, (2) increased BET
liability stress factors as well as 3) a change to a fixed
recovery rate modeling framework. Additional changes to the
modeling assumptions include (1) standardizing the modeling of
collateral amortization profile and (2) changing certain credit
estimate stresses aimed at addressing time lags in receiving
information required for credit estimate updates.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as the portfolio par amount, WARF,
diversity score, and weighted average recovery rate, may be
different from the trustee's reported numbers. In its base case,
Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of EUR288.2 million,
defaulted par of EUR15.7 million (with a recovery rate of 21%), a
weighted average default probability of 32.51% (consistent with a
WARF of 3251), a weighted average recovery rate upon default of
44% and a diversity score of 33.
The default probability is derived from the credit quality of the
collateral pool and Moody's expectation of the remaining life of
the collateral pool. The average recovery rate to be realized on
future defaults is based primarily on the seniority of the assets
in the collateral pool. For a Aaa liability target rating, Moody's
assumed that 85% of the portfolio exposed to senior secured
corporate assets would recover 50% upon default, while the
remainder non first-lien loan corporate assets would recover 10%.
In each case, historical and market performance trends and
collateral manager latitude for trading the collateral are also
relevant factors. These default and recovery properties of the
collateral pool are incorporated in cash flow model analysis where
they are subject to stresses as a function of the target rating of
each CLO liability being reviewed.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2012 and
2014 which may create challenges for issuers to refinance.
Sources of additional performance uncertainties are:
1) Delevering: The main source of uncertainty in this transaction
is whether delevering from unscheduled principal proceeds will
continue and at what pace. Delevering may accelerate due to
high prepayment levels in the loan market which may have
significant impact on the notes' ratings.
2) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to
be defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus sell defaulted
assets create additional uncertainties. Moody's analyzed
defaulted recoveries assuming the lower of the market price and
the recovery rate in order to account for potential volatility
in market prices.
3) The deal has significant exposure to non-EUR denominated
assets. Volatilities in foreign exchange rate will have a
direct impact on interest and principal proceeds available to
the transaction, which may affect the expected loss of rated
tranches.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011
The cash flow model used for this transaction, whose description
can be found in the methodology listed above, is Moody's EMEA
Cash-Flow model.
In addition to the quantitative factors that are explicitly
modeled, qualitative factors are part of the rating committee
considerations. These qualitative factors include the structural
protections in each transaction, the recent deal performance in
the current market environment, the legal environment, specific
documentation features and the potential for selection bias in the
portfolio. All information available to rating committees,
including macroeconomic forecasts, input from other Moody's
analytical groups, market factors, and judgments regarding the
nature and severity of credit stress on the transactions, may
influence the final rating decision.
Moody's also notes that around 75% of the collateral pool consists
of debt obligations whose credit quality has been assessed through
Moody's credit estimates. Large single exposures to obligors
bearing a credit estimate have been subject to a stress applicable
to concentrated pools as per the report titled "Updated Approach
to the Usage of Credit Estimates in Rated Transactions" published
in October 2009.
KINGSLEY MEADOWS: Goes Into Receivership, Owes EUR400,000
---------------------------------------------------------
Fiona Magennis at Drogheda Independent reports that Kingsley
Meadows owes Drogheda Borough Council almost EUR400,000 in
development levies for an unfinished estate which has been put
into receivership.
Kingsley Meadows on the Rathmullen Road, a 44 unit development
built by Gareth Peters Building Contractors Ltd, has been in
breach of a number of its planning conditions since 2009,
according to the council, according to Drogheda Independent.
Drogheda Independent notes that development levies of just over
EUR370,000 remain unpaid and angry buyers who paid deposits of up
to EUR22,000 to secure units on the site feel they have been left
in limbo as the estate remains incomplete. The report says that
the site was granted planning permission in March 2007 but a
number of discrepancies arose between what was outlined in the
planning permission and the structure that was eventually built.
Warning letters and an eventual enforcement notice was issued by
Drogheda Borough Council in November 2009.
Drogheda Independent discloses that architects acting on behalf of
the developer wrote to the council after the enforcement order was
issued addressing the concerns raised.
Borough Engineer Pat Finn said that "The Council has taken
enforcement action under the Planning Acts against the developer
of this estate," Drogheda Independent discloses.
Mr. Finn said that the council were engaged in discussions with
agents commissioned by the receiver to 'regularize the
development,' Drogheda Independent says.
The receivers appointed to the site, McStay Luby Chartered
Accountants, said they have appointed a new project manager to
oversee the completion of the development and 'get it back in
compliance with planning regulations,' Drogheda Independent says.
LALCO HOLDINGS: Incurs EUR173 Million Losses in 2009
----------------------------------------------------
Gordon Deegan at The Irish Times reports that companies controlled
by Galway developer John Lally incurred losses totaling EUR173
million in 2009.
According to The Irish Times, accounts just lodged by Mr. Lally's
holding firm, Lalco Holdings Ltd., showed that former subsidiaries
also had net liabilities totaling EUR393 million at the end of
2009.
The directors confirmed that the subsidiaries were transferred
from Lalco Holdings to an unlimited Isle of Man-based company,
Maplegreen Unlimited in 2008, The Irish Times recounts. At the
end of December 2009, Lalco Holdings had accumulated losses of
EUR42.2 million after incurring a loss of EUR3.5 million in 2009,
The Irish Times discloses.
Directors state the company is unlikely to have adequate resources
to continue in operational existence for the foreseeable future
and to meet its obligations as they fall due, The Irish Times
notes.
The accounts confirm that Lalco's loan facilities with Irish
Nationwide were acquired by Nama on July 16, 2010, The Irish Times
relates.
Lalco Holdings Ltd. is a property developer based in Galway.
===========
L A T V I A
===========
PRIVATBANK AS: Moody's Confirms E+ Bank Financial Strength Rating
-----------------------------------------------------------------
Moody's Investors Service has confirmed the E+ bank financial
strength rating and the B2 long-term debt and deposit ratings of
PrivatBank AS (Latvia) with a stable outlook. The bank's Not Prime
short-term rating was affirmed. The rating action concludes the
review for possible downgrade of the bank's ratings, initiated on
April 12, 2011.
RATING RATIONALE
Moody's placed PrivatBank AS ratings on review for possible
downgrade in April 2011 driven by concerns that PrivatBank's
banking license could be revoked by Latvia's Financial and Capital
Market Commission following the suspension of Unimain Holdings'
(PrivatBank's second largest shareholder after Privatbank
(Ukraine)) voting rights. The Commission has the right to revoke
licenses in cases where shareholders with over a 10% stake have
had their voting rights suspended (Unimain's share holding was 24%
at the time) and PrivatBank was given 6 months to solve the issue
from the January 21, 2011.
Initially the bank had communicated an intention to solve the
issue by diluting Unimain's stake through a LVL66 million capital
issuance although Moody's understands that the issue was actually
resolved by reducing Unimain's shareholding to around 6% through a
simple sale which has been approved by the regulator. However, the
capital increase has not been cancelled - shareholders' approval
has already been granted with the bank currently awaiting
regulatory approval.
PrivatBank's BFSR remains positioned in the E+ category,
reflecting: (i) a modest private banking franchise; (ii) very high
borrower concentration in the bank's loan portfolio; (iii) very
high, albeit stabilizing, levels of problem loans at 40% of gross
loans; (iv) improved capitalization with a Tier 1 ratio of 10.2%;
and (v) weak but slowly improving core profitability, recording a
pre-provision income of LVL70,000 at YE 2010.
The stable outlook recognizes the improving conditions in the
Latvian economy as well as the stabilization of problem loans in
conjunction with higher-than-sector-average provisioning levels at
59% of problem loans. It also reflects the improved liquidity
levels due to increased deposits and loans and receivables from
banks as well as indications that profitability may be improving.
Moody's also notes that the capital increase, if approved by the
regulator, would have a positive impact on the bank's credit
quality.
In addition, the bank's B2 long-term deposit rating continues to
reflect Moody's assessment that there is a moderate probability of
parental support from Ukraine's Privatbank Commercial Bank (B3
stable; D-/Ba3 stable) , which currently owns 75% of the bank's
capital, which results in a one-notch uplift from the B3 baseline
credit assessment (BCA). In the past, PrivatBank's parent has
supported the bank through capital increases amounting to LVL20
million in 2010. Moody's notes that PrivatBank provides a corridor
to European markets for the Ukrainian parent: in recent years
Privatbank has opened offices in Portugal and Italy. Furthermore,
Moody's continues to believe that systemic support for PrivatBank
is not probable in the event of a stress situation.
The principal methodologies used in this rating were Bank
Financial Strength Ratings: Global Methodology published in
February 2007, and Incorporation of Joint-Default Analysis into
Moody's Bank Ratings: A Refined Methodology published in
March 2007.
Headquartered in Riga, Latvia, PrivatBank reported total
consolidated assets of around LVL270 million (EUR385 million) at
the end December 2010.
===================
L U X E M B O U R G
===================
CLARENVILLE CDO: Moody's Raises Rating on EUR138.1-Mil. CLO Notes
-----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Clarenville CDO S.A:
Issuer: Clarenville CDO S.A.
-- EUR145M Class A-1a Senior Secured Floating Rate Notes, due
2016, Upgraded to Aaa (sf); previously on Jun 22, 2011 Aa1
(sf) Placed Under Review for Possible Upgrade
-- US$55.5M Class A-1b Senior Secured Floating Rate Notes, due
2016, Upgraded to Aaa (sf); previously on Jun 22, 2011 Aa1
(sf) Placed Under Review for Possible Upgrade
-- GBP25M Class A-1c Senior Secured Floating Rate Notes, due
2016, Upgraded to Aaa (sf); previously on Jun 22, 2011 Aa1
(sf) Placed Under Review for Possible Upgrade
-- EUR13M Class A-2 Senior Secured Floating Rate Notes, due
2016, Upgraded to Aa3 (sf); previously on Jun 22, 2011 Baa1
(sf) Placed Under Review for Possible Upgrade
RATINGS RATIONALE
Clarenville CDO S.A., issued in February 2004, is a multi-currency
cash-flow collateralized loan obligation managed by PIMCO. The
transaction has been in amortization phase since March 2009. The
underlying pool in this transaction amounts to approximately EUR
187.3 million with 80% exposure to European borrowers and 90% to
senior secured debt. The collateral assets and liabilities are
denominated in EUR, GBP and US$.
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The actions also reflect
consideration of the substantial cash balance which is expected to
be used to further deleverage the transaction by payments to the
senior notes.
The actions reflect key changes to the modeling assumptions, which
incorporate (1) a removal of the temporary 30% default probability
macro stress implemented in February 2009, (2) increased BET
liability stress factors, as well as (3) change to fixed recovery
rate assumptions. Additional changes to the modeling assumptions
include (1) standardizing the modeling of collateral amortization
profile and (2) changing certain credit estimate stresses aimed at
addressing time lags in receiving information required for credit
estimate updates.
Compared to the last rating action the OC ratios of all classes
have remained nearly unchanged, for class A from 137.5% in April
2011 to 137.6% in June 2011 (as per investor reports). All OC
tests are still passing and none of the notes have deferred any
interest. Moody's notes that the transaction documentation does
not define OC test haircuts for assets rated Caa and below.
Moody's notes that the class A notes are expected to pay down
substantially on the next payment date in September 2011, based on
the large cash balance of approximately EUR26 million reported in
June 2011 while no cash was reported in April 2011. As a result of
the expected deleveraging, the overcollateralization ratios are
expected to increase further compared to the current levels.
The amortization of the portfolio has affected the characteristics
of the remaining portfolio. A slight deterioration in the credit
quality is observed through a slightly worse average credit rating
of the portfolio (as measured by the weighted average rating
factor "WARF") and a slight increase in the proportion of
securities from issuers rated Caa1 and below. In particular, as of
the latest trustee report for June 2011, the WARF is currently
2,994 compared to 2,722 in the April 2011 report, and securities
rated Caa1 or lower make up approximately 11.91% of the underlying
portfolio in June 2011 versus 10.49% in April 2011. The diversity
score reported by the trustee has decreased from 39.9 to 35.9 over
the same period.
The transaction was structured with the aim of partially matching
the liabilities and assets in each currency. However, US$ and GBP
assets are currently exceeding US$ and GBP liabilities, while EUR
denominated liabilities are under covered by EUR denominated
assets. To mitigate a portion of this imbalance, the transaction
features amortizing cross currency swaps maturing in 2014.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as the portfolio par amount, WARF,
diversity score, and weighted average recovery rate, may be
different from the trustee's reported numbers.
In its base case, Moody's analyzed the underlying collateral pool
to have a performing par and principal proceeds balance of EUR
183.9 million compared to EUR 187.1 million at last rating action,
a defaulted par of EUR 3.4 million compared to zero at last rating
action, an adjusted WARF of 3,372 compared to 3,066 at last rating
action, a weighted average ultimate recovery rate upon default of
51.4% compared to 50.7% at last rating action, a diversity score
of 33.5 compared to 38.9 at last rating action, and a weighted
average spread of 3.25% compared to 3.22% at last rating action.
The default probability is derived from the credit quality of the
collateral pool and Moody's expectation of the remaining life of
the collateral pool and the target rating of the rated class of
liabilities.
The average recovery rate to be realized on future defaults is
based primarily on the seniority of the assets in the collateral
pool. For a Aaa liability target rating, Moody's assumed that the
part of the portfolio exposed to senior secured assets would
recover 50% immediately upon default, while the remainder of the
assets would recover 10% immediately upon default, in each case
accrued by 7% over 1.5 years.
In each case, historical and market performance trends and
collateral manager latitude for trading the collateral are also
relevant factors. These default and recovery properties of the
collateral pool are incorporated in cash flow model analysis where
they are subject to stresses as a function of the target rating of
each CLO liability being reviewed.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2012 and
2014 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
strategy and behavior, 2) divergence in legal interpretation of
CDO documentation by different transactional parties due to
embedded ambiguities.
Sources of additional performance uncertainties are:
1) Deleveraging: The main source of uncertainty in this
transaction is whether deleveraging from unscheduled principal
proceeds will continue and at what pace. Deleveraging may
accelerate due to high prepayment levels in the loan market
and/or collateral sales by the manager, which may have
significant impact on the notes' ratings.
2) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to
be defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus sell defaulted
assets create additional uncertainties. Moody's analyzed
defaulted recoveries assuming the lower of the market price and
the recovery rate in order to account for potential volatility
in market prices.
3) Long-dated assets: Moody's notes that the underlying portfolio
includes a number of investments in securities that mature
after the maturity date of the notes. Based on the June 2011
trustee report, reference securities that mature after the
maturity date of the notes currently make up approximately 9.3%
of the underlying collateral portfolio. These investments
exposes the deal to liquidation risk on those assets. Moody's
assumes an asset's terminal value upon liquidation at maturity
to be equal to an assumed liquidation value (depending on the
extent to which the asset's maturity lags that of the
liabilities).
4) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to participate in amend-
to-extend offerings.
5) The deal has significant exposure to non-EUR denominated
assets. Volatilities in foreign exchange rate will have a
direct impact on interest and principal proceeds available to
the transaction, which may affect the expected loss of rated
tranches. The foreign exchange risk is mitigated by part of the
senior notes being denominated in the respective currencies of
the assets which provide a partial natural hedge.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
The cash flow model used for this transaction, whose description
can be found in the methodology listed above, is Moody's EMEA
Cash-Flow model.
In addition to the quantitative factors that are explicitly
modeled, qualitative factors are part of the rating committee
considerations. These qualitative factors include the structural
protections in each transaction, the recent deal performance in
the current market environment, the legal environment, specific
documentation features, the collateral manager's track record, and
the potential for selection bias in the portfolio. All information
available to rating committees, including macroeconomic forecasts,
input from other Moody's analytical groups, market factors, and
judgments regarding the nature and severity of credit stress on
the transactions, may influence the final rating decision.
Moody's also notes that around 44% of the collateral pool consists
of debt obligations whose credit quality has been assessed through
Moody's credit estimates.
CODITEL HOLDING: Fitch Assigns 'B' Long-Term Issuer Default Rating
------------------------------------------------------------------
Fitch Ratings has assigned Coditel Holding Lux S.a.r.l. a Long-
term Issuer Default Rating of 'B' with a Stable Outlook. At the
same time, the agency has assigned the senior secured bonds being
issued by Coditel Holding S.A., a wholly owned subsidiary of
Coditel, an expected rating of 'B+(exp)'/'RR3'.
Coditel's ratings take into account its relatively small scale,
well built out and technologically advanced network in its
franchise areas, established management and good growth prospects
given a somewhat nascent deployment of 3 play services. The
ratings also factor in a relatively high leverage metric but a
free cash flow (FCF) margin that results in the company
deleveraging under Fitch's forecast assumptions relatively
quickly.
Despite its size, Coditel is a well-established cable operator in
relatively benign markets, both in terms of the Brussels business,
which currently accounts for 75% of the revenue mix, and
Luxembourg. In both markets, the principal competitor is the
incumbent telecom, neither of which appear aggressively motivated
to enter a pricing war. This is particularly the case in Belgium,
where the fragmented nature of cable competition is likely to be
influenced by the pricing strategy of the weakest competitive
offer of the cable operators, reflecting the fact that the
incumbent telecom is bound by regulation to provide the same offer
across its national footprint.
In this environment, cable is considered to offer a competitive
alternative to the incumbent, with its technical advantage evident
in the superior (100MB) speeds that it can deliver via its DOCSIS
3.0 upgraded network. In addition, a strong TV channel line-up,
including a strong ethnic bias aimed at the migrant populations,
and the ability to offer unlimited telephony calls, means that
cable offers a strong alternative proposition to the incumbent.
However, Belgacom is viewed as a well managed and effective
competitor, with one of the most successful IPTV strategies in the
European incumbent peer group. IPTV has gained significant
traction in the Belgium market, standing at 17% penetration on a
national basis at YE10. Cable is likely to experience ongoing
attrition in its basic CATV base, an inevitable trend where cable
is the incumbent in the provision of this service. This will be
compensated for by continued growth in its broadband and telephony
subscriber base. This effect should slow the pace of attrition in
TV customers as triple-play penetration becomes more pervasive
across the subscriber base.
The Stable Outlook reflects the fact that cable is the dominant TV
platform in both Belgium and Luxembourg, with the company
reasonably developed in providing 3 play services in both markets.
As such, the company generates healthy levels of FCF. Leverage is
nonetheless high with the prescribed level of debt following
Coditel's acquisition likely to some extent to pressure free cash
flow metrics. The company is small relative to its cable peer
group, allowing less room for potential off plan performance,
before financial metrics are impacted.
Finances are relatively straight forward, with the buyout by the
Altice/Apax/Deficom consortium funded by EUR110 million of
shareholders capital and a EUR260 million bank facility which is
to be refinanced by a senior secured bond. The bond, which is
expected to have a seven-year maturity, will provide a stable long
term capital structure, with the business expected (by Fitch) to
have delevered to around 2.0x by the time it needs to be
refinanced. With the company strongly FCF positive, additional
liquidity is provided in the form of a EUR25 million super senior
revolving credit facility.
=====================
N E T H E R L A N D S
=====================
ICTS INTERNATIONAL: Mayer Hoffman Raises Going Concern Doubt
------------------------------------------------------------
ICTS International, N.V., filed on July 8, 2011, its annual report
on Form 20-F for the fiscal year ended Dec. 31. 2010.
Mayer Hoffman McCann CPAs, in New York, expressed substantial
doubt about ICTS International' ability to continue as a going
concern. The independent auditors noted that the Company has a
history of recurring losses from continuing operations and
negative cash flows from operations, a working capital deficiency
as of Dec. 31, 2010, and is subject to a significant contingency
in connection with its exposure to certain income tax assessments
made against its subsidiary, ICTS USA, Inc., by the Internal
Revenue Service.
The Company reported a net loss of US$8.1 million on US$98.4
million of revenue for 2010, compared with net income of US$2.9
million on US$95.9 million of revenue for 2009.
At Dec. 31, 2010, the Company's balance sheet showed US$24.0
million in total assets, US$49.5 million in total liabilities, and
a stockholders' deficit of US$25.5 million.
A copy of the Form 20-F is available at http://is.gd/wJ85oI
Based in Amstelveen, The Netherlands, ICTS International, N.V.,
specializes in the provision of aviation security and other
aviation services. Following the taking of its aviation security
business in the United States by the United States Transportation
Security Administration in 2002, ICTS through its subsidiary
Huntleigh engages primarily in non-security related activities in
the USA.
VAN DER MOOLEN: VEB Asks Court to Assert Mismanagement
------------------------------------------------------
Martijn van der Starre at Bloomberg News reports that Dutch
investor group VEB asked the Amsterdam Appeals Court's Enterprise
Chamber to assert mismanagement at Van der Moolen Holding NV after
court-appointed investigators said in May the company lacked
sufficient risk management and its governance had flaws in the
period leading up to the stockbroker's bankruptcy in 2009.
According to Bloomberg, VEB said in an e-mailed statement on
Wednesday that the mismanagement assertion is a next step towards
compensation of duped shareholders.
About Van der Moolen
Headquartered in Amsterdam, Netherlands, Van der Moolen Holding
N.V. -- http://www.vandermoolen.com/-- was an international
securities trading and brokerage firm that specialized in
providing low-cost liquidity in markets worldwide. Its business
was to make money on financial markets, as a broker and
proprietary trader in securities, futures, derivatives indexes and
exchange traded funds.
Van der Moolen, once the fourth-biggest market maker on the New
York Stock Exchange, was declared bankrupt in September 2009 after
posting three consecutive years of losses.
===========
R U S S I A
===========
ABSOLUT BANK: Fitch Assigns Long-Term Rating on Senior Bond
-----------------------------------------------------------
Fitch Ratings has assigned Absolut Bank's RUB1.8 billion senior
unsecured RUB-denominated bond an expected National Long-term
rating of 'AA(rus)(exp)' and placed it on Rating Watch Evolving.
The bond will have a five-year maturity with a put option after
three years. The final rating on the bond is contingent on the
receipt of final documents conforming to information already
received.
AB's ratings are Long-term foreign currency Issuer Default Rating
'BB+'/RWE, Short-term IDR 'B', Individual 'D/E', Support '3'/RWE
and National Rating 'AA(rus)'/RWE.
AB's obligations under the notes rank equally with the claims of
other senior unsecured creditors except claims of retail
depositors, which under Russian law rank above those of other
senior unsecured creditors. Retail deposits accounted for 18.8% of
AB's total liabilities at end-May 2011, according to local GAAP
accounts.
AB is a medium-sized Russian bank (among the top 40 banks by
assets at end-Q111), 99% controlled by Belgium's KBC Bank (KBCB;
IDR:'A'/Stable, Individual Rating: 'C/D'). Under KBCB's strategy,
investment in AB is considered a non-core asset and will be
divested.
=========
S P A I N
=========
AYT GOYA: Fitch Affirms Rating on Class D Notes at 'BBsf'
---------------------------------------------------------
Fitch Ratings has affirmed six tranches of Ayt Goya Hipocario II,
Fondo de Titulizacion de Activos and Ayt Goya Hipotecario III,
Fondo de Titulizacion de Activos's notes:
AyT Goya Hipotecario II, Fondo de Titulizacion de Activos (Goya
II):
-- Class A (ISIN ES0312303003) affirmed at 'AAAsf'; Outlook
Stable; Loss Severity rating of 'LS-1'
-- Class B (ISIN ES0312303011) affirmed at 'Asf'; Outlook
Stable; 'LS-3'
-- Class C (ISIN ES0312303029) affirmed at 'BBBsf'; Outlook
Stable; 'LS-3'
-- Class D (ISIN ES0312303037) affirmed at 'BBsf'; Outlook
Stable; 'LS-5'
AyT Goya Hipotecario III, Fondo de Titulizacion de Activos (Goya
III):
-- Class A (ISIN ES0312274006) affirmed at 'AAAsf'; Outlook
Stable; 'LS-1'
-- Class B (ISIN ES0312274014) affirmed at 'BBB+sf'; Outlook
Stable; 'LS-2'
The two Spanish RMBS transactions include loans originated and
serviced by Barclays Bank S.A., a Barclays Bank Plc's branch ('AA-
'/Stable/'F1+').
The affirmation reflects the adequate credit support available for
the notes, combined with the stable performance of the pools.
Credit enhancement (CE) for Goya II's tranches has continued to
improve due to the sequential principal amortization of the notes.
Subordination is further enhanced through a reserve fund, which,
as of the May 2011 interest payment date stood at 80% of its
target amount of EUR52 million. The draws have been driven by the
defaults being recognized in each period and the subsequent
provisioning. Conversely, Goya III's reserve fund was fully funded
at EUR280 million as of the June 2011 IPD.
Further protection to the Goya II's class A notes is provided by a
second reserve fund of EUR2.6 million, available solely to cover
interest shortfalls due on the class A notes in case the first
reserve fund is fully depleted.
The excess revenues generated by the pool are used to write off
period defaults, which are defined as loans in arrears by more
than 18 months. Over the last six IPDs, the excess spread has been
insufficient to cover new defaults, thus resulting in the reserve
fund draws. In Fitch's analysis, pressure on the reserve fund will
continue as new loans are expected to roll through into default.
However, the volume is expected to be more limited, due to loans
in arrears by more than three months having remained stable below
2% of the current outstanding pool balance. For this reason the
Outlook on the most junior notes remains Stable.
Fitch has been informed that less than 0.5% of the initial
underlying assets have been subjected to a maturity extension,
which allows distressed borrowers to improve their payment
affordability. The agency recognizes these obligors as potentially
weaker and therefore has applied a more conservative approach when
assessing the probability of default in these pools. The average
extension has been calculated at five years in Goya II and 3.5
years in Goya III.
Goya II and Goya III share similar pool characteristics with
weighted average original loan-to-values ranging between 60% (at
close) and 63%, respectively. Regional concentration is
distributed among the Madrid, Cataluna and Andalusia regions and
the majority of the loans are linked to 12-month Euribor.
Both pools also share a higher-than-average risk profile of the
borrowers, whereby a portion of the loans (around 10% at close)
were broker originated and another portion has been granted to
non-Spanish borrowers. Despite these riskier profiles, performance
has remained in line with Fitch's initial expectations, thus
resulting in the Stable Outlook on all tranches.
Goya II also includes loans that are backed by commercial
properties (3.3% at close). Fitch applied its SME CDO criteria to
analyze the expected loss in this portion of the pool.
FONCAIXA FTGENCAT: S&P Affirms Rating on Class D Notes at 'D'
-------------------------------------------------------------
Standard & Poor's Ratings Services took various credit rating
actions in two Spanish SME CLO transactions: Foncaixa FTGENCAT 5,
Fondo de Titulizacion de Activos, and Foncaixa FTGENCAT 6, Fondo
de Titulizacion de Activos.
Specifically, S&P has:
* Lowered and removed from CreditWatch negative its ratings on
the class AS and AG notes in Foncaixa FTGENCAT 5 and Foncaixa
FTGENCAT 6;
* Lowered its ratings on the class B and C notes in Foncaixa
FTGENCAT 5 and Foncaixa FTGENCAT 6; and
* Affirmed its ratings on the class D notes in Foncaixa FTGENCAT
5 and Foncaixa FTGENCAT 6.
"In our analysis, we considered recent developments in the
transactions that we have observed," S&P said. These include
rising delinquency and cumulative default rates, which have
increased above S&P's initial expectations.
FONCAIXA FTGENCAT 5
Foncaixa FTGENCAT 5 closed in November 2007. It has a current pool
factor of 65.07%, with all loans originated in Catalonia.
* As of the last payment date in April 2011, reported
delinquencies of more than 90 days were 1.43% and defaults
over the outstanding balance of the assets were 2.30%. In
addition, the reserve fund was reported as being at 78.43% of
its level required pursuant to the transaction documentation.
* "The level of cumulative defaults over the original balance
was 2.48%, which is above our initial expectations -- derived
from historical originator data -- of around 1.50%. We
subsequently updated the default assumptions used in our
analysis to take into account the higher levels reported," S&P
related.
* "The deal is experiencing reported recoveries on defaulted
loans averaging 40.93%, slightly lower than our initial
expectations. We have therefore adjusted our recovery
assumptions accordingly," S&P stated.
FONCAIXA FTGENCAT 6
Foncaixa FTGENCAT 6 closed in July 2008. It has a current pool
factor of 62.18%, with all loans originated in Catalonia.
* As of the last payment date in June 2011, reported
delinquencies of more than 90 days were 1.17% and defaults
over the outstanding balance of the assets were 2.12%. In
addition, the reserve fund was reported as being 84.20% of its
required level.
* "The level of cumulative defaults over the original balance
was 1.83%, which is already very close to our initial
expectations -- derived from historical originator data -- of
around 2.25%. We subsequently updated the default assumptions
used in our analysis to take into account the higher levels
reported," S&P stated.
* "The deal is experiencing recoveries on defaulted loans
averaging 27.81%, below our initial expectations. We have
therefore adjusted our recovery assumptions accordingly," S&P
continued.
* "The adjusted default and recovery assumptions affect, in our
opinion, the ratings that each class of notes in Foncaixa
FTGENCAT 5 and Foncaixa FTGENCAT 6 can support," S&P related.
The class AS notes have partially amortized and represent 25.17%
and 34.99% of the outstanding balance of the notes in Foncaixa
FTGENCAT 5, and Foncaixa FTGENCAT 6. "Given the amortization trend
of these notes, we consider that the notes can support a maximum
rating of 'AA- (sf)' under our criteria. We have therefore lowered
and removed from CreditWatch negative our ratings on these notes
in both transactions," S&P stated.
"The class AG notes in both transactions benefit from a guarantee
provided by the Autonomous Community of Catalonia (A/Negative/A-
1). However, we have not taken this into account in our analysis
as we do not consider it to be in line with our guarantee
criteria. We consider that these notes can now support a maximum
rating of 'A+ (sf)' under our criteria and we have subsequently
lowered and removed from CreditWatch negative our ratings on these
notes in both transactions," S&P said.
"In our opinion, the level of credit enhancement available to the
class B and C notes in both transactions is now commensurate with
'BBB (sf)' and 'BB (sf)' ratings. We have therefore lowered our
ratings on these classes of notes," S&P related.
"At closing, the class D notes in both transactions funded the
reserve fund and have defaulted on their interest payments since
the April 2010 payment dates. We have therefore affirmed our 'D
(sf)' ratings on these notes," S&P noted.
"We have also applied our 2010 counterparty criteria, which became
effective on Jan. 18, 2011. Following a review of the counterparty
ratings and the transaction documents, we consider the ratings
from our credit and cash flow analysis to be consistent with our
2010 counterparty criteria," S&P continued.
Foncaixa FTGENCAT 5 and Foncaixa FTGENCAT 6 are Spanish small and
midsize enterprise collateralized loan obligation transactions
originated by Caja de Ahorros y Pensiones de Barcelona (La Caixa).
The transactions' portfolios comprise secured and unsecured loans
granted to SMEs in their normal course of business, concentrated
in La Caixa's home market of Catalonia. In July 2011, La Caixa
legally completed the transfer of its banking assets and most of
its liabilities to its subsidiary, CaixaBank S.A. (A+/Stable/A-1).
Ratings List
Class Rating
To From
Foncaixa FTGENCAT 5, Fondo de Titulizacion de Activos
EUR1.027 Billion Floating-Rate Notes
Ratings Lowered and Removed From CreditWatch Negative
AS AA- (sf) AAA (sf)/Watch Neg
AG A+ (sf) AAA (sf)/Watch Neg
Ratings Lowered
B BBB (sf) AA- (sf)
C BB (sf) BBB+ (sf)
Rating Affirmed
D D (sf)
Foncaixa FTGENCAT 6, Fondo de Titulizacion de Activos
EUR768.8 Million Floating-Rate Notes
Ratings Lowered and Removed From CreditWatch Negative
AS AA- (sf) AAA (sf)/Watch Neg
AG A+ (sf) AAA (sf)/Watch Neg
Ratings Lowered
B BBB (sf) A (sf)
C BB (sf) BBB (sf)
Rating Affirmed
D D (sf)
* SPAIN: Five Banks Likely to Fail Stress Tests
-----------------------------------------------
According to Bloomberg News' Ben Sills, El Mundo, citing
unidentified people in the financial markets, reported that four
Spanish savings banks, or cajas, and one bank will fail the stress
tests.
Bloomberg relates that the newspaper said Caja de Ahorros del
Mediterraneo, Unnim, CatalunyaCaixa and Caja Duero likely won't
meet the minimum 5% capital requirement. Bloomberg notes that a
spokesman for Caja Duero, as cited by the newspaper, said the
lender will pass the tests.
The newspaper said that Banco Pastor SA will fail because
officials won't take into account a EUR252 million (US$358
million) convertible bond issue the bank sold to its clients,
according to Bloomberg.
===========
T U R K E Y
===========
HSBC BANK: Moody's Downgrades Standalone BFSR to 'D+'
-----------------------------------------------------
Moody's Investors Service has downgraded the standalone bank
financial strength rating of HSBC Bank A.S. - Turkey from C to D+
(now mapping to Baa3 on the long-term scale from Baa2 previously).
At the same time, Moody's affirmed the bank's A3 long-term global
local-currency deposit rating and downgraded the bank's National
Scale Rating to Aa1.tr from Aaa.tr. The rating agency also
affirmed the Ba3 long-term foreign-currency deposit rating, Prime-
2 and TR-1 short-term GLC deposit ratings and NSR. The outlook for
the foreign-currency deposit rating is positive, while the outlook
on the remaining ratings is stable.
This concludes Moody's review on the bank's ratings, implemented
on December 16, 2010.
RATINGS RATIONALE
Moody's says that the downgrade of the standalone BFSR was
triggered by a combination of (i) poor asset quality, whereby
expansion strategies adopted before the 2008 global financial
crisis resulted in the current weak asset-quality indicators; (ii)
the continuing contraction of the bank's market share in loans
(since 2006) and in deposits and total assets (since 2007); and
(iii) its moderate profitability and efficiency ratios.
Moody's believes that the D+ BFSR and its stable outlook is
supported by the bank's overall moderate consumer and commercial,
and strong credit card and corporate franchise, sound
capitalization and liquidity; and an improving asset quality and
deposit-funding base. Additionally, it reflects the long-term
challenges that the evolution of HSBC -- Turkey's franchise faces
in the form of the strong competition from other domestic banks.
This includes banks with strong retail and commercial franchises
that have also pursued network expansions. The share of revenues
from retail operations has been declining as the recent poor
performance of the bank's retail portfolio constrained the bank's
ability to effectively commercially leverage its pre-2008 branch
expansion. The assigned rating also reflects the bank's moderate
efficiency indicators, at a time of increased importance of
efficiency and economies of scale due to the lower net interest
margin environment the Turkish banking system is faced with.
As the stable outlook assigned to the bank's D+ BFSR reflects,
there is currently no upward pressure on the rating. There could
be downward rating pressure, that could prompt Moody's to either
consider the remapping of the D+ BFSR to Ba1 (from Baa3) on the
long term scale; or a downgrade of the BFSR, if (a) the
profitability and efficiency indicators weaken; (b) asset quality
deteriorates; (c) the bank's retail revenue generation declines or
(d) the growth rate of the credits exceeds that of the high
quality stable deposits increasing the bank's reliance on
wholesale funding - reversing the improving trend in the bank's
funding base.
HSBC -- Turkey's long-term GLC deposit rating incorporates
parental support from HSBC Holding Plc, (Aa2, with negative
outlook, standalone credit strength of Aa3). This provides three
notches of rating uplift to HSBC -- Turkey's GLC deposit rating.
Despite the downgrade of HSBC -- Turkey's BFSR, the high parental
support assumption and the high rating of the parent compared with
that of HSBC -- Turkey, results in the affirmation of the HSBC --
Turkey's A3 GLC deposit rating. Despite the negative outlook on
the parent's rating, the stable outlook on the GLC deposit rating
is under pinned by a combination of (i) the stable outlook on the
HSBC -- Turkey's BFSR; and (ii) the high rating of the parent's
rating compared with HSBC's BFSR. Any pressure on the parent's
rating is unlikely to result in the reduction in the level of
parental support incorporated in the HSBC -- Turkey's GLC deposit
ratings.
HSBC -- Turkey's NSR was downgraded to Aa1.tr from Aaa.tr, the
lower of the two NSR mapping of the A3 GLC deposit rating, due to
the downgrade of the bank's BFSR leading to higher parental
support rating uplift incorporated in the its GLC rating. The
affirmation of the bank's short-term GLC deposit rating resulted
in the affirmation of the bank's short-term NSR of TR-1.
The principal methodologies used in this rating were Bank
Financial Strength Ratings: Global Methodology published in
February 2007, and Incorporation of Joint-Default Analysis into
Moody's Bank Ratings: A Refined Methodology published in March
2007.
Moody's National Scale Ratings are intended as relative measures
of creditworthiness among debt issues and issuers within a
country, enabling market participants to better differentiate
relative risks. NSRs differ from Moody's global scale ratings in
that they are not globally comparable with the full universe of
Moody's rated entities, but only with NSRs for other rated debt
issues and issuers within the same country. NSRs are designated by
a ".nn" country modifier signifying the relevant country, as in
".mx" for Mexico. For further information on Moody's approach to
national scale ratings, please refer to Moody's Rating
Implementation Guidance published in August 2010 entitled "Mapping
Moody's National Scale Ratings to Global Scale Ratings."
* TURKEY: Firms to Sue Turkmenistan Over US$1BB in Unpaid Debt
--------------------------------------------------------------
Suzan Fraser at The Associated Press reports that a group of
Turkish companies are preparing to seek legal action against
Turkmenistan in a bid to recover what they say is more than
US$1 billion in unpaid bills for construction work in the Central
Asian country.
The move comes despite Turkey's efforts to try and settle the
dispute with Turkmenistan through diplomatic channels, the AP
relates.
In May, President Abdullah Gul traveled to the Turkmen Caspian
seaside resort of Avaza, to try and recover the debt and head off
complaints by Turkish companies that have played a leading role in
transforming the capital Ashgaba -- a sleepy post-Soviet backwater
-- into a city of soaring marble-clad government offices and
apartment blocks, the AP recounts. Turkish companies have also
been active in building hotels in Avaza, AP notes.
Irfan Dolek, who represents some 20 Turkish construction companies
operating in Turkmenistan, told the AP Wednesday, that he has held
two rounds of unsuccessful talks with aides of Turkmen President
Gurbanguli Berdymukhamedov, to resolve the issue, following
President Gul's visit, the AP discloses.
Mr. Dolek, as cited by the AP, said that the companies were now
preparing to file complaints with the International Center for
Settlement of Investments Disputes, or ICSID, joining four Turkish
companies who already have already filed.
"Our talks have reached a dead end. They did not show the
interest that we had expected in our ordeal," the AP quotes Mr.
Dolek as saying. "They did not understand the seriousness of the
situation."
According the AP, Mr. Dolek said "We don't want an international
scandal but many of the companies are on the brink of bankruptcy."
Mr. Dolek says his company, Sece Construction and Trade -- which
was involved in the building of a housing complex for state
employees -- is owed some US$58 million in debts and compensation
for losses, the AP relates.
It is unclear what would have prompted a delay of payments by the
Turkmen government, although revenues were reportedly badly hit in
2009, when Russia stopped buying the country's gas following a
pipeline explosion for which both sides denied responsibility, the
AP notes.
=============
U K R A I N E
=============
CIB CREDIT: Moody's Withdraws Ratings for Business Reasons
----------------------------------------------------------
Moody's Investors Service has withdrawn these ratings of CIB
Credit Agricole, PJSC for business reasons.
-- Bank financial strength rating (BFSR) of D
-- The long-term and short-term local currency deposit ratings of
Ba2/Not Prime
-- The long-term and short-term foreign currency deposit ratings
of B3/Not Prime
-- The long-term local currency senior unsecured debt rating of
Ba2
-- The National Scale Rating of Aa1.ua
RATINGS RATIONALE
Moody's has withdrawn the rating for its own business reasons.
The principal methodologies used in this rating were Bank
Financial Strength Ratings: Global Methodology published in
February 2007, and Incorporation of Joint-Default Analysis into
Moody's Bank Ratings: A Refined Methodology published in March
2007.
Moody's National Scale Ratings (NSRs) are intended as relative
measures of creditworthiness among debt issues and issuers within
a country, enabling market participants to better differentiate
relative risks. NSRs differ from Moody's global scale ratings in
that they are not globally comparable with the full universe of
Moody's rated entities, but only with NSRs for other rated debt
issues and issuers within the same country. NSRs are designated by
a ".nn" country modifier signifying the relevant country, as in
".mx" for Mexico. For further information on Moody's approach to
national scale ratings, please refer to Moody's Rating
Implementation Guidance published in August 2010 entitled "Mapping
Moody's National Scale Ratings to Global Scale Ratings."
Headquartered in Kiev, Ukraine, CIB Credit Agricole, PJSC reported
total assets of US$547 million and shareholders' equity of US$64
million as of year-end 2010, according to the bank's regulatory
financial statements.
===================
U Z B E K I S T A N
===================
INFINBANK: Moody's Assigns 'E+' Bank Financial Strength Rating
--------------------------------------------------------------
Moody's Investors Service has assigned a standalone E+ bank
financial strength rating and B3/Not Prime long-term and short-
term global local and foreign currency deposit ratings to
Infinbank (Uzbekistan). The outlook on all of the bank's ratings
is stable.
Moody's rating action is largely based on Infinbank's audited
financial statements for 2009 and 2010 prepared under IFRS.
RATINGS RATIONALE
According to Moody's, the E+ BFSR and B3 deposit ratings are
constrained by Infinbank's narrow franchise (as at year-end 2010,
the bank ranked 20th out of a total of 30 banks in Uzbekistan by
total assets), as well as its short track record of operation.
Infinbank's liabilities predominantly consist of current accounts
and short-term deposits of corporate clients, thus necessitating
consideration of an elevated liquidity cushion to address
potential volatility of the funding base. The bank's concentration
on a limited number of clients also leads to an insufficient
diversification of its income streams, whereby the bank's overall
performance depends on financial standing and sentiments of just a
small number of key clients. Additionally, due to the rapid growth
of Infinbank's loan portfolio (although from a low base), Moody's
expects rising asset quality pressures as the loan book matures
and becomes more seasoned over time.
Among other factors constraining Infinbank's ratings, are the
bank's sizeable investments in equity instruments (made through
its insurance subsidiary) and fixed assets accounting together for
almost three-quarter of its Tier 1 capital as of year-end 2010. On
top of that, 13% of Infinbank's total gross loans and 9% of
customer accounts were attributable to operations with related
parties as of the same reporting date.
On a positive note, factors underpinning Infinbank's ratings
include (i) the predominantly recurring nature of its income
streams, with the portion of fees and commission income accounting
for 54% of total revenues and net interest income contributing
another 17% of the total in 2010; (ii) the relatively good
performance of the bank's loan book, to date, with the share of
impaired loans standing at 3.61% of total gross loans at year-end
2010 and accumulated loan loss reserve accounting for 2.06% of the
portfolio as of the same reporting date; as well as (iii) the
bank's conservative liquidity position, with more than half of its
assets kept in the form of cash and cash equivalents, which,
according to the rating agency, somewhat compensates for the
predominantly short-term duration of Infinbank's funding mix (but
at the same time explains the limited proportion of net interest
income in the bank's total operating revenues).
Moody's said that Infinbank's global local currency deposit
ratings of B3/Not Prime do not incorporate any element of systemic
support given the bank's limited franchise value and its low
importance for the Uzbek banking system as a whole. Nor do
Infinbank's ratings incorporate any probability of shareholders'
support to the bank, in case of distress.
According to the rating agency, Infinbank's E+ BFSR has limited
upside potential at its current level. However, in the longer
term, BFSR might map to a higher long-term scale, as opposed to B3
currently, if the bank were to strengthen its franchise and
increase its core business volumes while also reducing credit
concentrations and lengthening the maturity of its funding base.
In order to achieve higher ratings, all the conditions mentioned
above would need to be accompanied by stable and sound financial
fundamentals.
On the other hand, Infinbank's intrinsic financial strength is
exposed to common risks of the economic and operating environment
in Uzbekistan, particularly as regards asset quality. Negative
pressure could be exerted on the ratings as a result of (i) any
failure by the bank to address these challenges, thereby causing a
significant weakening of its financial fundamentals, and (ii) any
notable increase in concentration on either the asset or liability
side of the balance sheet (or both). Moody's also notes that a
substantial increase in the volume of related-party business or
non-core investments represents another factor that could have an
adverse impact on Infinbank's ratings.
PRINCIPAL METHODOLOGIES
The principal methodologies used in this rating were Bank
Financial Strength Ratings: Global Methodology published in
February 2007, and Incorporation of Joint-Default Analysis into
Moody's Bank Ratings: A Refined Methodology published in March
2007.
Headquartered in Tashkent, Uzbekistan, Infinbank reported -- under
audited IFRS -- total assets of US$67.6 million and total equity
of US$8.8 million as at December 31, 2010; net IFRS income for
2010 stood at US$4.0 million.
===========================
U N I T E D K I N G D O M
===========================
DECO 11: S&P Affirms Rating on Class F Notes at 'D (sf)'
--------------------------------------------------------
Standard & Poor's Ratings Services lowered its credit ratings on
DECO 11 - UK Conduit 3 PLC's class A-2, B, and C notes. "At the
same time, we affirmed our ratings on all the other rated classes
of notes," S&P related.
The transaction, which closed in 2007, currently comprises 13
loans with a total balance of GBP400.1 million, backed by 47
commercial properties. Of these, 11 loans, backed by 26
properties, are scheduled to mature in the next three
years.
"The rating actions reflect our view of the continued difficulties
in the commercial property market and the future economic outlook,
coupled with loans scheduled to mature in the next three years,
which we believe may prove challenging to refinance if the
commercial real estate lending climate continues to be
constrained," S&P related.
"We have lowered our ratings on the class A2, B, and C notes to
reflect our revised outlook of anticipated losses on loans
reaching maturity in the next three years, and on the
deterioration of net operating income with subsequent effect on
property values. We believe there is a risk that losses will
filter through the notes as the reduced property values limit
recoveries," S&P said.
"Approximately 43% of the 11 loans maturing by 2013 have, what we
consider to be, high loan-to-value (LTV) ratios (above 70%); our
analysis suggests that 30% of these have LTV ratios of more than
100%. The majority of the properties backing the loans in this
transaction benefit from a stable cash flow, with the exception of
the Mapeley Gamma loan, which has experienced deterioration
in occupancy," S&P noted.
The Mapeley Gamma loan, the largest loan in this transaction
(approximately 56% of the securitized loan pool), is backed by 24
office buildings throughout the U.K. The loan has suffered a jump
in vacancy rates to 20% from 3% at closing; this is reflected by a
GBP6 million drop in annual net operating income. It still has six
years to maturity, in which time further lease expiries are due
and new lease agreements are likely to be agreed. Despite the
rise in vacancy, the loan still maintains an adequate level of
senior loan interest cover, reported at 1.28x. As part of the
borrower's financial accounting process, the properties were
revalued in 2008, resulting in an LTV ratio increase to 85%, from
75% at closing. Cash is being trapped as a result of this but
there is no event of default.
The remaining 12 loans in the transaction are secured by a mix of
secondary retail, office, industrial, and care home assets across
the U.K.
In July 2010, Hatfield Philips International Ltd., the special
servicer, determined a valuation reduction amount of GBP22.4
million on the Wildmoor Northpoint Ltd. Loan, in accordance with
the intercreditor deed, which triggered a control valuation event.
As a result, the new controlling party is now the senior lender.
Current loans in default in Deco 11 - UK Conduit 3 include:
The Paladru Services loan which defaulted in 2008 due to a
breach of the LTV ratio covenant. A negligence case remains
outstanding against the initial property valuers;
The Wildmoor Northpoint loan, which failed to repay at the
loan maturity date; and
The CPI Retail Active Management loan and the Chesterton
Commercial (Beaconsfield) Ltd. loan, which are in default due
to an ICR covenant breach.
"Our current ratings on the lower notes reflect our analysis of
expected losses on the Paladru Services loan and on the Wildmoor
Northpoint loan. The Paladru Services loan has an outstanding
balance of GBP4.7 million, even after the special servicer-
Hatfield Philips International-sold the property backing the
loan and the loan was partially repaid. The remaining loan balance
will likely result in a loss on the most junior class of notes.
There is an outstanding negligence case, which may result in some
further recoveries, but we cannot give credit in our analysis to
these recoveries as they are currently unquantifiable," S&P
stated.
In addition, Capita Asset Services UK Ltd., the servicer for the
Wildmoor Northpoint loan, commissioned a revaluation of the
property backing this loan, which resulted in a value of GBP26
million against an outstanding loan amount of GBP40 million. The
current special servicer, Solutus Advisors Ltd., is working
out a strategy to increase the value of the property. "We believe
that losses are likely to affect the class D, E, and F notes; we
have affirmed our ratings on these notes because we have already
taken the expected losses into account in previous rating
actions," S&P related.
"We have also affirmed our ratings on the class A-1A and A-1B
notes as we believe that their credit enhancement is sufficient to
maintain the current ratings, which are constrained following the
implementation of our updated counterparty criteria," S&P added.
Ratings List
Class Rating
To From
Deco 11 - UK Conduit 3 PLC
GBP444.387 Million Commercial Mortgage-Backed Floating-Rate Notes
Ratings Lowered
A-2 BBB- (sf) A- (sf)
B BB- (sf) BBB- (sf)
C B+ (sf) BB- (sf)
Ratings Affirmed
A-1A A (sf)
A-1B A (sf)
D B- (sf)
E B- (sf)
F D (sf)
HARLOW & MILNER: Falls Due to Industrial Disease & Injury Claims
----------------------------------------------------------------
Yorkshire Post reports that Harlow & Milner went into
administration last month due to uninsured industrial disease and
injury claims.
Peter Sargent, a partner at Begbies Traynor, who was appointed as
a joint administrator, said the company had faced "unquantifiable"
disease and injury claims related to conditions such as
asbestosis, according to Yorkshire Post.
Yorkshire Post relates that Mr. Sargent said Harlow & Milner had
also suffered from a lack of profitable work and costly fixed
overheads.
In September 2009, Yorkshire Post recalls, Harlow & Milner was one
of 103 firms fined by the Office of Fair Trading (OFT) for
colluding with other companies to rig the tendering price when
bidding for construction contracts. Yorkshire Post relates that
The OFT said companies colluded with competitors on building
contracts and this meant customers had been at risk of being
overcharged.
Harlow & Milner was fined GBP23,000. At the time, Yorkshire Post
notes that the company said it was not aware that it had broken
the rules and the fine had been "substantially" reduced because it
had co-operated with the OFT.
The OFT investigation found that Harlow & Milner was not involved
in more serious rigging of building tenders, Yorkshire Post says.
Mr. Sargent and his colleague Julian Pitts were appointed as joint
administrators on May 13.
An initial meeting of the company's creditors will be held at the
Cedar Court Hotel in Ainley Top, Huddersfield, on July 22 at 10:30
a.m.
Headquartered in Ossett, West Yorkshire, Harlow & Milner is a
Yorkshire building contractor.
KINETICS GROUP: Bournemouth Staff Will Transfer to Mouchel
----------------------------------------------------------
Darren Slade at Daily Echo reports that the Kinetics Group will
transfer its 71 Bournemouth staff to Mouchel, the company which
has already taken over the work of several Bournemouth council
departments.
Daily Echo relates that a statement from Gary Josey, Bournemouth
council's director of housing landlord and parks, said:
"Bournemouth council's maintenance contractor Kinetics ceased
providing a service on July 11. Although works are currently
stopped pending talks with the administrator, we hope to transfer
all staff over to the council's existing corporate facilities
management incremental partner, Mouchel. Bournemouth council only
had an implied contract with Kinetics and effectively took over
the supply chain payments in January due to late payment issues
for local suppliers. The overall value was originally up to
GBP3.7 million per annum, but this reduced as some works were
taken back in-house and material costs deducted."
Administrator Begbies Traynor said the group had "suffered from
confusion regarding the solvency of subsidiary companies, delays
in payments from key customers and from suppliers' refusal to
continue trading with it after its credit insurance cover was
removed." Daily Echo notes.
As reported in the Troubled Company Reporter on July 13, 2011,
Inside Housing reports that the remaining part Kinetics Group is
set to go into administration, according to one of its housing
association clients. The group has reportedly told clients it
will be entering administration in the next two weeks, according
to Inside Housing. Kinetics Group first went into administration
last month and two of its subsidiaries, Cameron Industrial
Services and Lord Group ceased trading, the report recalled.
Inside Housing relates that three other subsidiaries, Sureway Gas,
TA Horn and Wallmotts, were sold to a new company called SCP
Renewable energy, owned by Kinetics investor Sovereign Capital.
LIFESTYLE HOLDINGS: Falls Into Administration, Directors Quit
-------------------------------------------------------------
Housewareslive.net reports that Lifestyle Holdings, the parent of
three tabletop suppliers, went into administration on July 12.
Managing Director Peter Bello left the board and his wife, Debbie,
also a director, left a month earlier, according to
Housewareslive.net.
Mr. Bello established Lifestyle Holdings in 2007 when he bought
Poole Pottery out of administration, Housewareslive.net recalls.
Under the Lifestyle Holdings umbrella, the report relates, Poole
became two companies to sit alongside Mr. Bello's other companies,
Royal Stafford and Lifestyle Products: Poole Pottery 2007 and
Poole Pottery Retail.
Poole Pottery 2007 is the supplier of tableware, while Poole
Pottery Retail operates the visitor centre in Dorset.
Housewareslive.net says that last month Denby Pottery had agreed
terms to buy Poole Pottery. The report notes that Denby could
also be in the process of acquiring all of Lifestyle.
LLANGOLLEN HOTELS: Goes Into Administration on GBP900,000 VAT Bill
------------------------------------------------------------------
Charlotte Fellows at asap.co.uk reports that because of a more
than GBP900,000 VAT bill, Llangollen Hotel Group, was put into
administration last week with administrators KPMG. Owner
Stephanie Booth said the issue began when an extra GBP1 million
loan offer was taken off the table by Barclays Bank, the report
relates.
Ms. Booth said that her business was moving forward with an
aggressive expansion program into leisure interests, according to
asap. The report notes that Barclays sent the company a proposal
for an extra GBP1 million in funding if it started banking with
them, which would secure hotel Bodidris Hall in Llandegla,
Wrexham.
Then last month, the report calls, Ms. Booth said that Barclays
won't be providing the funding after all.
Because they already spent GBP1 million on new developments in
Chester and Oswestry, they didn't have the GBP900,000 to pay Her
Majesty's Revenue and Customs (HMRC) on July 7, the report says.
asap discloses that after seeking extra time for the payment, they
were rejected, asap relays.
Ms. Booth and her husband, David, said in a joint statement that
the biggest debts are with HMRC, energy companies, a few large
national firms and herself, as she borrowed money from her
personal account to keep the company operating, asap notes.
Asap says that Ms. Booth said that they have confidence that the
issues won't cause the closure of traders they have dealt with.
She and other directors at Llangollen Hotels and Global
Investments Group, its parent company, have responsibly called in
the administrators and paid all staff and small suppliers, she
added.
However, asap notes, a spokesperson at Barclays said that the bank
disputes this version of events. The bank worked for nearly a
year with Global Investments Group to find a solution to many
issues at the company -- significant pressure from creditors, cash
flow issues, overextension on capital expenditure and poor
trading, asap adds. No long-term proposals were unfortunately
viable.
Meanwhile, BBC News notes that BBC News relates that
administrators claim there is "huge interest" from potential
buyers interested in four north Wales hotels owned by
businesswoman Stephanie Booth. KPMG said it has had 13 inquiries
after Llangollen Hotels, a chain of seven hotels, went into
administration, BBC News.
All the hotels are continuing to trade. They are Bodidris Hall in
Llandegla, Wrexham, and The Wild Pheasant, The Chainbridge and The
Bryn Howel, all in Llangollen, Denbighshire.
"There has been a huge amount of interest and we have had an
encouraging number of inquiries from potential buyers for the
hotels. The administrators have been in dialogue with 15
interested parties including trade buyers, individuals and other
businesses. We are confident of securing the future of the four
hotels," BBC News quoted David Costley-Wood, joint administrator
and restructuring partner at KPMG, as saying.
MILLER GROUP: In Debt Refinancing Talks with Blackstone
-------------------------------------------------------
Erikka Askeland at The Scotsman reports that Miller Group is in
advanced talks with private equity giant Blackstone to refinance
its debt pile.
According to The Scotsman, Blackstone's credit division, GSO
Capital Partners, will inject GBP160 million of equity in the
company and is expected to push the firm to consolidate the
industry.
Miller has won a number of contracts estimated to be worth
hundreds of millions of pounds to manage the development of
housebuilding projects left unfinished by firms that have gone
into administration, such as McInerney Holdings and Thomas
Mitchell Homes, The Scotsman notes.
Miller, Britain's largest private housebuilder, has an estimated
debt pile of about GBP600 million provided by a consortium of
lenders including Lloyds Banking Group, Royal Bank of Scotland and
National Australia Bank, with facilities extending to 2012, The
Scotsman discloses.
Separately, Andrew Bolger at The Financial Times reports that the
credit arm of Blackstone is negotiating to take a GBP160 million
(US$259 million) stake in Miller Group.
Keith Miller, chief executive, and the rest of his family together
control 60% of the company, The FT discloses. Lloyds Banking
Group has a 20% stake in the company that HBOS, its predecessor,
took in 2008 from some family members, the FT notes.
Miller Group is the UK's largest privately owned housebuilding and
construction business.
RED SKY: Maintenance & Repair Contract With Housing Executive Ends
------------------------------------------------------------------
BBC News reports that Red Sky will complete its final day to carry
out maintenance and repairs for the Housing Executive on July 14.
In April, BBC News recalls, the executive cancelled that contract
after an investigation into the company's activities. Red Sky
went into administration shortly afterwards, according to BBC
News.
BBC News notes that over 100 Red Sky staff will now move to other
Housing Executive contractors.
In recent weeks there had been more controversy over Red Sky
contract after Housing Minister Nelson McCausland tried to
reinstate the company until a new system for awarding contracts
had been introduced, BBC News says.
His intervention was described as "incomprehensible" by the
executive and Mr. McCausland failed in his attempt to stop the
contract ending, BBC News discloses.
BBC News says that it is believed three other firms will take over
the work and staff have been told arrangements are being made to
allow them to transfer to new contractors.
SANDWELL: Fitch Cuts Ratings on Three Classes of Notes to 'CCsf'
----------------------------------------------------------------
Fitch Ratings has downgraded nine tranches and affirmed eight
tranches of the Sandwell series.
The downgrades are driven by deterioration in the credit quality
of each of the loan pools securing Sandwell 1, 2 and 3. The
servicer has continued to revalue properties over the past 12
months and the weighted average (WA) reported loan to value ratio
(LTV) has duly increased for each transaction. Arrears and the
number of loans in enforcement have increased in each portfolio.
Sandwell 1, issued in May 2004, was originally the securitization
of 191 (currently 69) loans with an aggregate pool balance of
GBP250 million (currently GBP94.5 million). The loans in this
portfolio benefit from a high degree of amortization resulting in
a WA Fitch LTV of 86%, reducing to 70% at exit. Some 85% of the
portfolio has been re-valued in 2009/2010/2011, and thus the
reported WA LTV is now 84% compared to 77% a year ago. Two loans
have suffered (GBP1.9m) losses since closing, resulting in the
reserve fund balance falling to GBP1.8m. The downgrade of the
class E notes to 'CCsf'/'RR3' is based on Fitch's expectation that
the increasing number of loans in enforcement will eventually
result in crystallization of losses on this tranche. This also
contributes to Fitch's downgrade of the class D notes from 'BBsf'
to 'Bsf'. Senior bonds are protected by the sequential pay-down
underway.
The structure of Sandwell 2 plc (originated in September 2005) is
similar to that of Sandwell 1. The transaction was originally
secured by 187 loans (currently 128) and while the loan pool was
granular, there were some differences. The average loan size was
slightly larger, LTVs were higher and debt service coverage ratios
(DSCR) were lower. Since Fitch's last rating action, in May 2010,
26 loans have repaid, reducing the securitized pool balance to
GBP187.16 million (from GBP236.1 million). The reported LTV has
increased to 95% from 88%, while the balance of loans in arrears
is now GBP2.7 million (zero in Q110). Like Sandwell 1, the
servicer has continued to test LTVs, with 86% of the portfolio re-
valued since 2009. However, Fitch's immediate concern relates to
the balance of loans in enforcement (GBP11 million compared to
GBP2 million a year ago). Re-financing risk is significant for
performing loans too given the number with Fitch LTVs in excess of
100%. The exposure to loss on the portfolio has led to Fitch's
downgrade of the class D and E notes.
Sandwell 3 (closed in April 2008) was less granular than the other
two Sandwell transactions. While loan count is high for a UK CMBS
transaction (originally 56 loans, currently 48), there are a
number of larger loans in the pool (the top five loans currently
make up 64% of the portfolio). Overall, the loans are more greatly
exposed to re-finance risk than those in Sandwell 1 and 2.
Scheduled amortization is limited, while leverage is high across
the portfolio. Some 91% of loans have been re-valued since 2009,
revealing in many cases negative equity: four of the top five
loans have Fitch LTVs greater than 100%, while the WA reported LTV
is 109% (compared to 86% this time last year). Defaults have been
rising, with eight loans (25.7% of the pool) having had LPA
receivers appointed. As the original valuations were conducted
close to the peak in the UK property market, value declines and
ultimate losses will be worse for this transaction than Sandwell 1
and 2. This is reflected in the higher credit enhancement levels
at the given ratings for the junior classes of notes. The class A
notes, meanwhile, are well protected by the sequential pay-down
underway, which explains their Outlook revision to Stable from
Negative.
The three Sandwell transactions are securitizations of commercial
mortgage loans originated by West Bromwich Building Society. WBBS
also act as servicer and special servicer for each of the deals.
Fitch will continue to monitor the performance of the transaction.
The rating actions are:
Sandwell 1 FRN due 2039:
-- GBP49.1m class A (XS0191369221) affirmed at 'AAAsf'; Outlook
Stable
-- GBP17.5m class B (XS0191371391) affirmed at 'AAsf'; Outlook
Stable
-- GBP12.5m class C (XS0191372522) affirmed at 'Asf'; Outlook
Stable
-- GBP10m class D (XS0191373686) downgraded to 'Bsf' from
'BBsf'; Outlook Negative
-- GBP5m class E (XS0191373926) downgraded to 'CCsf' from
'Bsf'; RR3
Sandwell 2 FRN due 2037:
-- GBP133.0m class A (XS0229030126) affirmed at 'AAAsf';
Outlook Stable
-- GBP13.8m class B (XS0229030472) affirmed at 'AAsf'; Outlook
Stable
-- GBP12.6m class C (XS0229030712) downgraded to 'BBBsf' from
'Asf'; Outlook Negative
-- GBP15.9m class D (XS0229031017) downgraded to 'Bsf' from
'BBsf'; Outlook Negative
-- GBP10.3m class E (XS0229031280) downgraded to 'CCsf' from
'Bsf'; RR6
Sandwell 3 FRN due 2032:
-- GBP92.7m class A1 (XS0357081032) affirmed at 'AAAsf';
Outlook revised to Stable from Negative
-- GBP14.7m class A2 (XS0357081206) affirmed at 'AAsf'; Outlook
revised to Stable from Negative
-- GBP3.6m class A3 (XS0357088631) affirmed at 'AA-sf'; Outlook
revised to Stable from Negative
-- GBP19.2m class B (XS0357088987) downgraded to 'BB' from
'BBBsf'; Outlook Stable
-- GBP10.2m class C (XS0357089100 downgraded to 'B' from
'BBsf'; Outlook Negative
-- GBP12.6m class D (XS0357089365) downgraded to 'CCCsf' from
'Bsf'; 'RR3'
-- GBP10.8m class E (XS0357089951) downgraded to 'CCsf' from
'CCCsf'; 'RR6'
SSB NO.1: Fitch Assigns 'B(exp)' Rating on Limited Recourse Notes
-----------------------------------------------------------------
Fitch Ratings has assigned SSB No.1 PLC's US$200 million 8.25%
upcoming tap issue of limited recourse notes an expected Long-term
rating of 'B(exp)' and a Recovery Rating of 'RR4'. The notes will
be consolidated to form a single series with the outstanding
US$500 million 8.25% notes due in March 2016. The final ratings
are contingent on the receipt of final documentation conforming
materially to information already received.
The notes will be used solely for financing a US dollar-
denominated loan to Ukraine-based JSC State Savings Bank of
Ukraine. Fitch rates Oschadbank Long-term Issuer Default 'B',
Short-term IDR 'B', Individual Rating 'D/E', Support Rating '4',
Support Rating Floor 'B', and National Long-term rating 'AA-
(ukr)'. The Outlooks on both the Long-term IDR and National Long-
term rating are Stable. Oschadbank's IDRs, National Long-term and
Support ratings are underpinned by potential support from the
Ukrainian authorities, in case of need, based on the bank's state
ownership and policy role. The ratings also take into
consideration the ability of the Ukrainian authorities to provide
such support, which remains limited, as indicated by the
sovereign's Long-term IDR of 'B'.
SSB No.1 PLC, a UK-based company, will only pay noteholders
amounts (principal and interest) received from Oschadbank under
the loan agreement. The claims under the loan agreement will rank
at least equally with the claims of other senior unsecured and
unsubordinated creditors of Oschadbank, except those preferred by
relevant Ukrainian legislation. Under Ukrainian law, the claims of
retail depositors rank above those of other senior unsecured
creditors. Oschadbank is the only bank in Ukraine where deposits
are fully covered by state guarantee regardless of the amount. At
end-Q111, retail depositors accounted for around 40% of
Oschadbank's non-equity funding, according to the bank's local
GAAP reporting.
At end-Q111, Oschadbank was the third-largest Ukrainian bank by
assets but the largest in terms of its branch network (around
6,000 outlets) and second-largest by capital. The state,
represented by the Cabinet of Ministers of Ukraine, is the only
shareholder in the bank
STAG BIDCO: S&P Assigns Prelim. 'B+' Long-term Corp. Credit Rating
------------------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'B+' preliminary
long-term corporate credit rating to Stag Bidco Ltd., the proposed
acquisition vehicle for The Carlyle Group's proposed leveraged
buyout of U.K. car breakdown services provider the RAC.
"At the same time, we assigned a preliminary issue rating of 'B+'
to the GBP620 million senior term and revolving secured facilities
to be borrowed by Stag Bidco. The preliminary recovery rating on
this instrument is '3', indicating our expectation of meaningful
(50%-70%) recovery for lenders in the event of a payment default,"
S&P related.
"The preliminary issue and recovery ratings are based on
preliminary information and are subject to the successful signing
of the new facilities, completion of the transaction, and our
satisfactory review of the final documentation," S&P said.
"The ratings reflect our view of the RAC's satisfactory business
profile, supported by its position as the U.K.'s second-largest
provider of car breakdown and roadside assistance services, and
our view of its prospective highly leveraged capital structure as
a result of the proposed buyout by The Carlyle Group. The GBP1
billion proposed LBO of the RAC by The Carlyle Group from U.K.
insurance group Aviva PLC (A/Stable/--) is scheduled to complete
in September 2011," S&P stated.
"In our opinion, even taking a conservative view of future growth
prospects, the RAC should be able to maintain the financial
flexibility necessary to service its newly highly leveraged debt
structure. This reflects the group's solid operating track record,
positive free cash flow generation, and our view of the stability
of its individual membership business model. The outlook also
reflects the absence of near-term refinancing challenges, provided
that the group maintains adequate headroom under its tightening
financial covenants," S&P continued.
"The ratings will cease to be preliminary on satisfactory
completion of the proposed transaction on terms that do not
diverge materially from those presented to us," S&P said.
"We could lower the ratings if poor trading were to weaken the
group's liquidity position such that headroom under financial
covenants fell to less than 10%, EBITDA cash interest coverage
fell to less than 3x, or if funds from operations (adjusted for
leases and the shareholder loan) to net debt fell to less than
5%," S&P related.
"Ratings upside is possible in the medium term, in our view, if
the RAC maintains steady debt deleveraging (to less than 5x
including the shareholder loan). However, we do not anticipate
this material a change unless the shareholder loan is replaced
with common equity," S&P added.
* S&P Takes Rating Actions on 410 European Finance Tranches
-----------------------------------------------------------
Standard & Poor's Ratings Services took various rating actions on
410 European structured finance tranches, including resolving 277
tranches on CreditWatch negative for counterparty reasons.
Specifically S&P has taken these ratings actions:
* "We have lowered our credit ratings on 132 tranches in 46
transactions and, of those, we removed 103 from CreditWatch
negative. Of these tranches, we have subsequently withdrawn
the rating on three tranches in line with our criteria. The
ratings on those tranches that remain on CreditWatch, do so
for other reasons," S&P stated.
* "We have affirmed and removed from CreditWatch negative our
ratings on 171 tranches in 92 transactions," S&P said.
* "We have raised our ratings on eight tranches in five
transactions and, of those, we removed three from CreditWatch
negative," S&P related.
* "We have withdrawn our ratings on three tranches in one
transaction," S&P said.
* S&P has placed one rating on CreditWatch negative.
"The rating actions primarily reflect the application of our
updated counterparty criteria for structured finance transactions.
A full list of the rating actions on July 12, 2011 is accessible
for free at:
http://www.standardandpoors.com/ratings/articles/en/us/?assetID=12
45314698826
S&P lowered its ratings on the downgraded tranches because:
* "The transaction documents do not fully reflect our updated
criteria, but do reflect our prior counterparty criteria.
Therefore, as per our updated criteria, we have lowered the
rating to a ratings floor that is one rating level above the
issuer credit rating (ICR) on the lowest-rated counterparty,"
S&P stated.
* "The transaction documents do not fully reflect our updated
criteria, but do meet certain requirements to achieve a rating
higher than the ratings floor. Based on our analysis, we have
adjusted the maximum potential rating the tranche can achieve,
as described in our updated counterparty criteria, and then
lowered the rating accordingly," S&P noted.
* "The transaction documents do not reflect our updated
criteria, and, in our opinion, have a weak replacement
framework such that the tranche rating doesn't qualify for one
notch above the ICR on the lowest-rated counterparty," S&P
said.
Therefore, S&P has lowered the rating to the ICR level.
"The documentation related to derivatives does not reflect our
updated criteria, so we conducted our cash flow analyses assuming
that the transactions do not benefit from any support under the
swaps. After conducting these cash flow analyses, we concluded
that the current tranche ratings could not be maintained," S&P
stated.
S&P has affirmed tranches that were on CreditWatch for
counterparty reasons because:
* "We have received evidence of legally binding agreements that
reflect our updated criteria," S&P said.
* "We have applied our updated counterparty criteria with the
appropriate notching for variants and, in our opinion, the
counterparties participating in the transaction have a
sufficiently high rating for us to affirm the current rating
on the tranche," S&P noted.
* "The documentation related to derivatives does not reflect our
updated criteria, so we conducted a cash flow analysis
assuming that the swap does not exist. This indicated that the
current ratings could be maintained," S&P noted.
"We have taken some rating actions on tranches that we did not
previously place on CreditWatch negative for counterparty reasons.
However, they are included here because they are classes of notes
in a transaction where we placed at least one other class on
CreditWatch for counterparty reasons. Following a review of the
performance of these classes and the rating on the counterparties,
we have affirmed 96 on tranches in 49 transactions, lowered on 28
tranches in eight transactions, and raised the ratings on five
tranches in four transactions," S&P related.
"For interest-only securities that reference either the entire
asset pool of a transaction or an amortization schedule or
formula, we maintain their current ratings until all principal-
and interest-paying classes rated 'AA-' or higher have been
retired or downgraded below that rating level -- at which time we
will withdraw these interest-only ratings," S&P said.
"In the case of direct support obligations -- such as bank
accounts and custodian accounts -- where the replacement
commitment comes from the issuer and/or the trustee, rather than
the counterparty itself, we consider the use of best or reasonable
efforts or endeavors to be consistent with the replacement
framework in our 2010 counterparty criteria. Since a trustee has a
responsibility to act in the best interests of noteholders, the
criteria differentiates between the replacement commitment of the
issuer and/or trustee and the replacement commitment of the
counterparty itself," S&P said.
"We will continue to review the remaining transactions that we
placed on CreditWatch negative on Jan. 18, and we intend to
resolve all of these CreditWatch placements by the transition date
of July 18, 2011," S&P added.
===============
X X X X X X X X
===============
* EUROPE: European Union Preparing "Backstops" for Banks
--------------------------------------------------------
Nikki Tait at The Financial Times reports that some European Union
countries are still in the process of preparing remedial measures
should their banks fail the latest round of sector-wide "stress
tests" when the results revealed to the public today.
According to The FT, Jacek Rostowski, the Polish finance minister
who chaired Tuesday's meeting of EU finance ministers in Brussels,
said afterwards that the so-called "backstops" -- plans to address
any problems -- were "either ready or in the process of being
prepared".
The FT relates that officials said there was a solid commitment
among countries to strengthen any institutions that are shown to
be weak, but that ministers had agreed that "action plans" should
look first to private sector solutions. Government support would
then be a secondary solution if necessary, and any assistance
provided in line with EU state aid rules.
Even so, Mr. Rostowski, the FT says, pledged that any necessary
capital-bolstering moves would put in place "over the subsequent
few months, very rapidly".
This year's tests, which have been overseen by the new pan-EU
European Banking Authority, are widely expected to be more
demanding than the previous two rounds and will cover 91 of the
EU's largest banks, the FT notes.
* BOOK REVIEW: Competition in the Health Care Sector
----------------------------------------------------
Author: Warren Greenberg, Ph.D.
Publisher: Beard Books
Softcover: 410 pages
List Price: US$34.95
Review by Henry Berry
Competition in the Health Care Sector covers a landmark Federal
Trade Commission (FTC) conference in June 1977. The conference
was attended by over 600 individuals, including healthcare
administrators, government policymakers, sociologists and other
academics, and medical doctors. All were present to try to get a
better appreciation for the role and impact of economics in
healthcare services. At that time (and still true today),
Medicaid and Medicare were growing larger, health maintenance
organizations (HMOs) were assuming a central place in the
healthcare system, payment methods were proliferating and becoming
more complicated, and consumers were becoming more informed about
and involved with their healthcare options. Both government
agencies and the private sector recognized that economic
principles and phenomena were at work in the healthcare sector.
The FTC conference was called to clarify the economic factors and
their effects in healthcare in order to gain better control over
the sector, particularly its escalating costs.
The 24 chapters in Competition in the Health Care Sector are
presented in four sections. The first is "Opening Remarks and
Introduction," followed by sections on "Competition in Selected
Sectors," "Insurance, Competition, and Alternative Delivery
Systems," and "Competition and Regulation." Many of the chapters
are titled "Comment," which contain comments by an individual on
one of the topics presented in the four major sections. There is
also a detailed index that leads readers to specific subjects of
interest.
Despite its general title, the first section gets right to the
substance of the conference as connoted in the title. It is a
staff report prepared by the FTC's Bureau of Economics. At the
time of the conference, Greenberg was a staff economist with the
FTC and presumably he had an appreciable hand in the report.
There is a note that the FTC "has not adopted the report in whole
or part." But this is a pro forma entry because there is little
to adopt or reject in this government paper. The staff report is
a summary of the lengthy and often detailed informative and
analytic papers that follow in the remaining 400 pages of
Competition in the Health Care Sector.
In an address opening the conference, Michael Pertschuk, then FTC
chairman, stresses that, "The Federal Trade Commission is not a
health or medical agency . . . [W]e recognize, along with most
Americans, that the delivery of health care is business, an
industry of vast proportions and vital effect. Health care has
become [the FTC's] business." That the FTC, charged with
monitoring and regulating businesses, has come to regard the
healthcare industry in the same terms as other business sectors
plainly evidences the nature of modern-day healthcare.
Healthcare executives and administrators as well as doctors and
related health professionals concurred with the perspective of the
FTC Chairman. Dr. Theodore Cooper, dean of Cornell University's
Medical College at the time, said in his opening remarks that, "I
have to admit that one can no longer discuss health policy without
an appreciation of the importance of economic factors." Dr.
Cooper also stated that, "the political and technical discussions
about health policy will continue to expand." And he said that,
"if the conference can clarify how competition fits into the
'scheme of things,' this will be a milestone for doctors,
patients, and hospitals."
The critical issue of competition in the healthcare industry was
omnipresent during the conference. Most of the topics covered
during the conference addressed, to some degree or another, the
effects of competition. The impact of competition on physicians,
hospitals, and insurers was analyzed. Another area of discussion
focused on the interrelationship between competition and
alternative means of payment. Appropriately for a conference
sponsored by the FTC, the interrelation of competition and
regulation came under study.
Analyses follow the introduction of each topic. For example,
"Competition Among Physicians," is followed by expert commentary.
The style of the papers is, as is well described by the author, "a
mix of technical jargon and mathematical exposition common to most
economists, and language suitable for non-economists and public
policy-makers."
The conference did not arrive at definite conclusions about the
place and effects of economics on the thriving, sprawling, complex
healthcare industry that encompasses innumerable organizations and
professionals of many different kinds. It did, however, succeed
in its objective of presenting data, offering illuminating
analyses, providing knowledgeable perspectives, and eliciting
expert commentary. All this is offered in a reprint of a 1978
book that still has a place on everyone's bookshelf as a
fundamental text and reference on economics in the healthcare
field.
Warren Greenberg has a Ph.D. in economics from Bryn Mawr
University. Author of many books and articles in the area of
industrial organization economics and healthcare, Greenberg is
also a professor of Health Economics and of Health Care Sciences
at George Washington University.
*********
Monday's edition of the TCR delivers a list of indicative prices
for bond issues that reportedly trade well below par. Prices are
obtained by TCR editors from a variety of outside sources during
the prior week we think are reliable. Those sources may not,
however, be complete or accurate. The Monday Bond Pricing table
is compiled on the Friday prior to publication. Prices reported
are not intended to reflect actual trades. Prices for actual
trades are probably different. Our objective is to share
information, not make markets in publicly traded securities.
Nothing in the TCR constitutes an offer or solicitation to buy or
sell any security of any kind. It is likely that some entity
affiliated with a TCR editor holds some position in the issuers'
public debt and equity securities about which we report.
Each Tuesday edition of the TCR contains a list of companies with
insolvent balance sheets whose shares trade higher than US$3 per
share in public markets. At first glance, this list may look like
the definitive compilation of stocks that are ideal to sell short.
Don't be fooled. Assets, for example, reported at historical cost
net of depreciation may understate the true value of a firm's
assets. A company may establish reserves on its balance sheet for
liabilities that may never materialize. The prices at which
equity securities trade in public market are determined by more
than a balance sheet solvency test.
A list of Meetings, Conferences and Seminars appears in each
Thursday's edition of the TCR. Submissions about insolvency-
related conferences are encouraged. Send announcements to
conferences@bankrupt.com
Each Friday's edition of the TCR includes a review about a book of
interest to troubled company professionals. All titles are
available at your local bookstore or through Amazon.com. Go to
http://www.bankrupt.com/booksto order any title today.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Europe is a daily newsletter co-
published by Bankruptcy Creditors' Service, Inc., Fairless Hills,
Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland USA.
Valerie U. Pascual, Marites O. Claro, Rousel Elaine T. Fernandez,
Joy A. Agravante, Psyche A. Castillon, Julie Anne G. Lopez,
Ivy B. Magdadaro, Frauline S. Abangan and Peter A. Chapman,
Editors.
Copyright 2011. 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 * * *