TCREUR_Public/120216.mbx         T R O U B L E D   C O M P A N Y   R E P O R T E R

                           E U R O P E

          Thursday, February 16, 2012, Vol. 13, No. 34

                            Headlines



B E L G I U M

TELENET INT'L: Moody's Assigns Ba3 Rating to EUR175MM Term Loan


C Y P R U S

NEW FORWARDING: Moody's Assigns '(P)B1' Rating to Domestic Bonds


F R A N C E

FAURECIA SA: Moody's Affirms 'Ba3' Corporate Family Rating


G E R M A N Y

CHOREN INDUSTRIES: Linde Eng'g Buys Firm's Carbon-V Technology
WISSMACH MODEFILIALEN: Gerry Weber Acquires 200 Wissmach Stores


H U N G A R Y

MALEV ZRT: Court Orders Liquidation, Extends Debt Moratorium


I R E L A N D

AVOCA VII: S&P Raises Rating on Class S Combo Notes to 'CCC+'
EIRCOM GROUP: Likely to File for Creditor Protection Next Month
SMURFIT KAPPA: S&P Raises Corporate Credit Rating to 'BB'


I T A L Y

TAURUS CMBS: Fitch Affirms CCCsf Rating on EUR9.5MM Class F Notes


N E T H E R L A N D S

EUROPE CAPITAL III: S&P Raises Rating on Class E Notes to 'CCC+'
GLOBAL SENIOR LOAN 1: S&P Affirms 'CCC-' Rating on Fund Notes
SILVER BIRCH: S&P Affirms 'CCC-(sf)' Rating on Class E Notes


R O M A N I A

MIC.RO RETAIL: Outstanding Debts Prompt Insolvency Filing


R U S S I A

ALTAYENERGOBANK: Moody's Assigns 'E+' Financial Strength Rating
BANK SBERBANK: Fitch Affirms Viability Rating at 'B'


S P A I N

BANCO BILBAO: Fitch Lowers Rating on Preference Shares to 'BB+'
BANCO FINANCIERO: S&P Cuts Counterparty Credit Ratings to 'BB-/B'
BANCO SANTANDER: Fitch Cuts Rating on Preference Shares to 'BB+'
GRIFOLS BANK: S&P Affirms 'BB' Rating on US$3.4BB Bank Facility


S W E D E N

EILEME 1: S&P Assigns 'B+' Long-Term Corporate Credit Rating


U N I T E D   K I N G D O M

BEACON BOOKSHOP: Goes Into Liquidation Amid Declining Sales
BRITISH ARAB: Fitch Affirms Issuer Default Rating at 'BB'
EUROSAIL 2006-1: S&P Affirms Rating on Class E Notes at 'B-'
EUROSAIL 2006-2BL: S&P Affirms 'B-' Ratings on Two Note Classes
HOWARD RICHARD: Calls in Liquidators After 40 Years in Business

MONEY PARTNERS: Moody's Cuts Rating on EUR15-Mil. B1 Notes to B2
PALMER SQUARE: S&P Lowers Rating on Class A1-AE Notes to 'D'
SOPHOS LTD: S&P Affirms 'B' Long-Term Corporate Credit Rating


X X X X X X X X

* EUROPE: Moody's Adjusts Ratings of Nine European Sovereigns
* Upcoming Meetings, Conferences and Seminars


                            *********


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B E L G I U M
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TELENET INT'L: Moody's Assigns Ba3 Rating to EUR175MM Term Loan
---------------------------------------------------------------
Moody's Investors Service has assigned a Ba3 rating to the EUR175
million of floating rate term loan 'Facility T' (maturing in
December 2018) being raised by Telenet International Finance S.a
r.l. (a subsidiary of Telenet Group Holding NV - 'Telenet' or
'the company').

The Ba3 rating for this tranche is in line with the Ba3 existing
bank credit facilities at the Telenet International Finance S.…
r.l. level. This is because the tranche benefits from the same
terms and conditions as the existing bank credit facilities. The
issuance of this tranche does not affect Telenet's Ba3 corporate
family rating (CFR).

The use of proceeds from this tranche will be for general
corporate purposes, including distributions to shareholders.

Ratings Rationale

The new tranche will increase Telenet's reported net total
leverage ratio (as per the Senior Credit Facility definition), by
approximately 0.2x on a pro forma basis (assuming full use of
proceeds for general corporate purposes). The company's reported
net total leverage ratio stood at 3.3x at the end of September
2011 while Moody's adjusted gross debt/ EBITDA stood at 4.4x on a
last twelve months basis.

This transaction will raise Telenet's leverage only marginally on
a pro-forma basis and is in line with Telenet's publicly stated
intention to re-leverage its reported net total leverage ratio to
a range of 3.5x to 4.5x. The planned re-leveraging is likely to
be executed via shareholder disbursements in absence of
acquisition opportunities. This re-leveraging expectation is
already built in the Ba3 CFR for Telenet. The company currently
remains solidly positioned within the Ba3 rating category, in
Moody's opinion.

The Ba3 CFR reflects : (i) Telenet's solid market share in the
Belgian Digital TV market of approximately 38% as well as in the
country's fixed broadband market of approximately 37% and its
market leading positions for such services in Flanders; (ii) the
company's continued good operating growth trends and solid EBITDA
margins; (ii) its technologically advanced network; (iii) the
recent network price increases and the secured Belgian football
rights which should help support revenue growth in 2012; (iv)
Telenet's ability to increase its triple-play penetration - by
cross-selling Digital TV and Fibernet products - and, thereby,
improving ARPU; and (v) the company's efforts to explore and
expand new growth drivers - B2B products and mobile business.

The rating also factors in (i) the competition that Telenet faces
particularly from incumbent operator, Belgacom (rated A1/
Stable), as well as from mobile operators such as Mobistar; (ii)
the increasing reliance on EBITDA growth to operate within its
own leverage targets as Telenet in future is expected to pay out
(at least) all of the internally generated free cash flow (as
defined by Telenet) in shareholder disbursements (in the absence
of suitable acquisition opportunities); and (iii) the
uncertainties associated with the imposition of regulation in the
Belgian broadcasting market.

Telenet has a solid debt maturity profile and its nearest
maturity is the EUR100 million notes due in November 2016,
followed by the term loan Q of EUR431 million due in 2017.

What Could Change the Rating - Up

Upward rating pressure would develop if, inter alia, the company
demonstrates clear commitment to maintain its gross debt to
EBITDA solidly below 4.5x (as calculated by Moody's) on a
sustained basis. A move to positive free cash flow generation (as
defined by Moody's - post capex and dividends) would also be a
positive factor.

What Could Change the Rating - Down

An increase in leverage at or above 5.5x Gross Debt/ EBITDA (as
adjusted by Moody's) resulting from aggressive shareholder
remuneration and/or significant debt-financed M&A activity
together with sustained negative free cash flow (as calculated by
Moody's) would exert downward pressure on the rating.

The principal methodology used in rating Telenet was the Global
Cable Television Industry Methodology published in July 2009.
Other methodologies used include Loss Given Default for
Speculative-Grade Non-Financial Companies in the U.S., Canada and
EMEA published in June 2009.

Headquartered in Mechelen, Belgium, Telenet is the largest
provider of cable services in Belgium. Currently, US-based
Liberty Global Consortium (rated Ba3/Stable) owns approximately
50.1% of Telenet.


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C Y P R U S
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NEW FORWARDING: Moody's Assigns '(P)B1' Rating to Domestic Bonds
----------------------------------------------------------------
Moody's Investors Service has assigned a provisional (P)B1 rating
(positive outlook) and a Loss Given Default (LGD) assessment of
LGD4/66% to three proposed issues of three-year domestic bonds
(RUB5 billion each) to be issued by New Forwarding Company, which
is a Russian wholly owned subsidiary of Cyprus-domiciled
Globaltrans Investment PLC (Globaltrans; Ba3, with positive
outlook). Globaltrans will guarantee the bonds under suretyship.
The proceeds from the bonds placement will be used predominantly
for financing New Forwarding Company's investment program,
including potential acquisitions.

Ratings Rationale

The bond ratings assigned to New Forwarding Company are one notch
below the Ba3 corporate family rating (CFR) of Globaltrans,
reflecting the structural subordination of the bonds to secured
debt within Globaltrans's debt portfolio structure. The share of
secured debt is estimated to comprise around 26% of the
Globaltrans group's total debt following the proposed bonds
issuance. Moody's assumes that the proposed bonds will rank pari
passu with other unsecured debt of the operating companies of the
group.

The positive outlook on the assigned bond ratings mirrors the
positive outlook on Globaltrans's Ba3 CFR. New Forwarding
Company's bond ratings could be considered for an upgrade over
the next 12-18 months should Globaltrans's CFR be upgraded. Such
an outcome will be subject to Globaltrans (i) demonstrating
sustainably strong financial metrics, with debt/EBITDA below
2.0x, retained cash flow (RCF)/net debt above 35% and solidly
positive free cash flow; (ii) maintaining an EBITA margin above
25%; and (iii) retaining its strong market position.

Negative pressure would be exerted on the bond ratings if
Globaltrans's CFR is downgraded, which could occur in the event
of (i) Globaltrans's debt/EBITDA increasing above 2.5x and
RCF/net debt declining below 30% on a sustainable basis; and (ii)
material deterioration in Globaltrans's liquidity or market
position.

Moody's issues provisional ratings in advance of the final sale
of securities, and these ratings represent only the rating
agency's preliminary opinion. Upon a conclusive review of the
transaction and associated documentation, Moody's will endeavor
to assign definitive ratings to the bonds. A definitive rating
may differ from a provisional rating.

Principal Methodology

Globaltrans's ratings were assigned by evaluating factors that
Moody's considers relevant to the credit profile of the issuer,
such as the company's (i) business risk and competitive position
compared with others within the industry; (ii) capital structure
and financial risk; (iii) projected performance over the near to
intermediate term; and (iv) management's track record and
tolerance for risk. Moody's compared these attributes against
other issuers both within and outside Globaltrans's core industry
and believes Globaltrans' ratings are comparable to those of
other issuers with similar credit risk. Other methodologies used
include Loss Given Default for Speculative-Grade Non-Financial
Companies in the U.S., Canada and EMEA published in June 2009.
Please see the Credit Policy page on www.moodys.com for a copy of
this methodology.

Cyprus-based Globaltrans is one of the largest private railway
transportation groups operating in Russia, with a fleet of 49,529
railcars as of June 2011. In 2010, it transported around 64
million tonnes of various cargos and generated audited IFRS
US$1.4 billion of revenue and US$490 million of EBITDA (adjusted
by Moody's). The group's customers are large Russian blue-chip
companies operating mainly in the metals and mining, oil and oil
products industries. Globaltrans is a public company that has
been listed on the London Stock Exchange since 2008.


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F R A N C E
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FAURECIA SA: Moody's Affirms 'Ba3' Corporate Family Rating
----------------------------------------------------------
Moody's Investors Service has affirmed the Ba3 Corporate Family
Rating of Faurecia S.A. Concurrently, Moody's has assigned a Ba3
(LGD3-45%) rating to the EUR150 million worth of Guaranteed
Senior Notes proposed by Faurecia S.A. The outlook on the ratings
is positive.

Ratings Rationale

The rating affirmation reflects that 2011 credit metrics position
the rating solidly in the Ba3 rating category. Although an
upgrade over the course of 2012 seems rather unlikely given the
bleak near-term prospects for the European automotive industry,
the positive rating outlook reflects the possibility of an
upgrade should Faurecia be able to maintain credit metrics close
to 2011 levels in future.

In 2011, Faurecia generated revenues of EUR16.2 billion (2010:
EUR13.8 billion) and EUR651 million of reported Operating Income
(2010: EUR456 million), which was ahead of Moody's expectations
at the time when the rating was assigned in October 2011. On a
Moody's adjusted basis debt/EBITDA was 3.1x and the EBIT-margin
was 3.5%. Despite the positive earnings development Free Cash
Flow was slightly negative due to a substantial increase in
capex, higher working capital and dividend payments of in total
EUR53 million.

Although management acknowledges a challenging market environment
in Europe, Faurecia targets revenues of EUR16.3-16.7 billon and
Operating Income of EUR610-670 million in 2012 on the back of
anticipated market growth in other regions. Against the backdrop
of a weak macroeconomic environment Moody's considers these
targets to be challenging. Moreover, profitability and financial
ratios on a Moody's adjusted basis will be burdened by higher
capitalized developments costs which management expects to peak
at approximately EUR250 million in 2012 (2011: EUR179 million).
The rating reflects Moody's expectation of a 6% decline in
European light vehicle production in 2012 and growth in other
regions which Moody's expects to result in weaker metrics than in
2011 but still well in line with the current Ba3 rating category.

The rating outlook remains positive given that 2011 results were
overall already in line with credit metrics commensurate with a
Ba2 rating. A rating upgrade over the next 12-18 months is
possible should Faurecia manage to achieve (i) EBIT-margins of 3%
or higher, (ii) positive Free Cash Flow generation, and (iii) a
debt/EBITDA ratio below 3.5x over the cycle on a sustainable
basis. A strengthening of Faurecia's liquidity profile is also a
critical factor for a possible rating upgrade.

The Ba3 rating is based on Moody's view that Faurecia will be
able to maintain recent improvements in its financial ratios and
sustainably achieve EBIT-margins of at least 2% and debt/EBITDA
close to 4x on a Moody's adjusted basis. Pressure on the rating
would arise in case of a deterioration in earnings and cash flow
generation reflected in recurring negative Free Cash Flow or
EBIT-margins below 2%. In addition, pressure on the rating could
evolve should debt/EBITDA rise again materially above 4x.

The Ba3 CFR is supported by Faurecia's solid business profile. In
particular, Moody's views (i) the large size of Faurecia's
operations, (ii) its global presence, (iii) solid market
positions (among top three players in relevant markets according
to management data) and (iv) established customer relationships
with most of the global original equipment manufacturers (OEMs)
as credit strengths.

However, Faurecia is strongly reliant on cyclical new light
vehicle production volumes as it lacks any non-automotive
activities and a material aftermarket business. Moreover, the
group is strongly exposed to its European home market where it
generated 62% of 2011 revenues. The rating also reflects the
general risks to which virtually all automotive suppliers are
exposed, i.e. high level of competition and strong bargaining
power of OEM customers.

The proposed guaranteed senior notes worth EUR150 million
constitute a reopening of the EUR350 million notes due December
2016 and have the same terms as, and will be consolidated with,
the existing notes. Faurecia S.A., the issuer, is the parent
company of Faurecia group and a holding company. It does not own
or operate tangible assets and therefore relies on funds provided
by its operating subsidiaries to service its financial
obligations. The Ba3 rating reflects that the proposed notes will
be supported by upstream guarantees of operating subsidiaries
representing approximately 75% of group EBITDA. This mitigates
their structural subordination to the financial obligations of
Faurecia S.A.'s subsidiaries. Therefore Moody's ranked the notes
at the same level as the liabilities of operating subsidiaries,
including trade payables and pensions, for the purpose of its
Loss-Given-Default-Model.

As of December 2011, Faurecia had a sizeable cash position of EUR
630 million and available commitments with a maturity of more
than one year of EUR660 million under its existing core credit
facility. However, the company also had sizeable short-term debt
maturities (EUR 616 million) and off-balance sheet factoring
activities (EUR 462 million). Moody's views positively that
Faurecia was able to rely on its relationship banks during the
2009 recession and also that according to management data its
factoring arrangements worked well also in the middle of the
industry downturn. Nonetheless, Moody's considers the group's
liquidity profile to be rather weak despite the expected increase
in its long-term funds from the proposed notes issue. Moody's
further cautions that Faurecia's core credit facilities also
contain conditionality language in the form of financial
covenants.

The principal methodology used in rating Faurecia S.A. was the
Global Automotive Supplier Industry Methodology published in
January 2009. Other methodologies used include Loss Given Default
for Speculative-Grade Non-Financial Companies in the U.S., Canada
and EMEA published in June 2009.

Headquartered in Paris, France, Faurecia group is one of the
world's largest automotive suppliers for seats, exhaust systems,
exteriors and interiors. In 2011, group revenues amounted to EUR
16.2 billion. The group operates along four divisions: Automotive
Seating, Interior Systems, Emission Control Technologies and
Automotive Exteriors. The parent company, Faurecia S.A., is a
holding company which directly and indirectly provides financial,
accounting, general management and administrative services to the
group. Faurecia S.A. is listed on the Paris stock exchange. The
largest shareholder is PSA Peugeot Citro‰n with a 57%
shareholding. The remaining shares are in free float.


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G E R M A N Y
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CHOREN INDUSTRIES: Linde Eng'g Buys Firm's Carbon-V Technology
--------------------------------------------------------------
Hydrocarbon Processing reports that Linde Engineering Dresden has
acquired the Carbo-V technology of insolvent Choren Industries,
Freiberg from German insolvency administrator Dr. Bruno M.
Kubler.

The Carbo-V technology constitutes a multi-stage biomass
gasification technology, the report discloses.

"In the future we plan to offer the Carbo-V technology as
licensor and also as an engineering and contracting company for
commercial projects on a strongly growing market", the report
quotes Jorg Linsenmaier, managing director of the Linde
Engineering Dresden, as saying.

The acquisition of the Carbo-V technology comprises all related
patents and trademarks, according to the report.

The companies said they agreed that the purchase price will
remain undisclosed, Hydrocarbon Processing notes.

As reported in the Troubled Company Reporter-Europe on July 13,
2011, Bloomberg News said Choren Industries GmbH began insolvency
proceedings after running into "financing difficulties" following
the commissioning of a synthetic-gas demonstration plant.
According to Bloomberg, Choren said in a statement on its Web
site that the administrators will restructure the company through
an insolvency plan or sale.

Freiberg-based Choren Industries GmbH is a German second
generation biofuels company.


WISSMACH MODEFILIALEN: Gerry Weber Acquires 200 Wissmach Stores
---------------------------------------------------------------
Leonie Barrie at just-style.com reports that German fashion firm
Gerry Weber International AG is taking over the assets of
insolvent women's wear retailer Wissmach Modefilialen GmbH.

According to the report, the purchase price has not been
disclosed, although Gerry Weber said the deal will be financed
from its own funds.  The Wissmach stores will be converted into
Taifun and Samoon banners, the report notes.

"The takeover of the 200 Wissmach stores will allow us to
accelerate the expansion of our own retail segment even further",
just-style.com quotes CEO Gerhard Weber as saying. "Our Taifun
and Samoon brands [in particular] should benefit from the
takeover, as it will enable us to open our own mono-label
stores."

Based in Goppingen, Wissmach Modefilialen GmbH employs around
1,000 people and operates roughly 200 stores throughout Germany.
It has been in administration since October 2011, just-style.com
reports.


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H U N G A R Y
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MALEV ZRT: Court Orders Liquidation, Extends Debt Moratorium
------------------------------------------------------------
MTI-Econews reports that gazdasag.hu said on Tuesday the
Municipal Court of Budapest has ordered to put Malev under
liquidation.

The liquidation order was published in the official company
gazette Cegkozlony on Tuesday, MTI-Econews relates.

According to MTI-Econews, the liquidation procedure was initiated
on Feb. 1.

The court also extended by 90 days a moratorium on claims against
Malev by creditors and suppliers, MTI-Econews notes.  The
moratorium, MTI-Econews says, is allowed under an earlier
government decree declaring Malev a "business of elevated
strategic importance".

The court appointed state-owned Hitelintezeti Felszamolo
Nonprofit Malev's liquidator and Jeno Varga the bailiff for the
company, MTI-Econews discloses.

Malev Zrt. is the flag carrier and principal airline of Hungary.


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I R E L A N D
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AVOCA VII: S&P Raises Rating on Class S Combo Notes to 'CCC+'
-------------------------------------------------------------
Standard & Poor's Ratings Services raised its credit ratings on
Avoca CLO VII PLC's class B Def notes, and class K, R, S, and T
combination notes. "At the same time, we have affirmed our
ratings on the class A1, A2, A3, C1 Def, C2 Def, D1 Def, D2 Def,
E1 Def, E2 Def, and F Def notes, and the class V combination
notes," S&P said.

"The rating actions follow our performance review of the
transaction and the application of our 2010 counterparty
criteria," S&P said.

"Since our last review in March 2010, we have observed a
relatively positive rating migration of the underlying portfolio.
Defaulted assets have increased to 2.5% from 0.6%, and 'CCC'
rated assets have increased to 4.9% from 3.1%," S&P said.

"At the same time, the credit enhancement available to each class
of notes has slightly improved following an increase in the
aggregate collateral balance to EUR684 million from EUR678
million. None of the classes has amortized, as the transaction is
still in its reinvestment period. The class E and F Def par
value tests have been in breach since November 2011, due to the
increase in 'CCC' rated assets in the underlying portfolio. The
other tests are in compliance," S&P said.

"Positive factors in our analysis include the reduction of the
weighted-average life and the increase of the weighted-average
spread to 3.15% from 2.65%, following the continuous reinvestment
of redemption proceeds into assets that pay greater margins," S&P
said.

"We have subjected the transaction's capital structure to a cash
flow analysis to determine the break-even default rate for each
rated class. We used the portfolio balance that we consider to be
performing, the reported weighted-average spread, and the
weighted-average recovery rates that we consider to be
appropriate. We incorporated various cash flow stress scenarios
using our standard default patterns, levels, and timings for each
rating category assumed for each class of notes, in conjunction
with different interest rate stress scenarios," S&P said.

"Non-euro assets denominated in U.S. dollars, British pounds
sterling, Danish kroner, and Swedish kronor account for about 12%
of the underlying portfolio, and the resulting foreign currency
risk is hedged via perfect asset swaps with Citibank N.A.
(A/Negative/A-1), Credit Suisse International (A+/Negative/A-1),
Deutsche Bank AG (A+/Negative/A-1), and JP Morgan Chase Bank N.A.
(A+/Stable/A-1) as swap counterparties. We have also stressed the
transaction's sensitivity to and reliance on the swap
counterparties, especially for senior classes of notes rated
higher than the swap counterparties, by applying foreign exchange
stresses to the notional amount of non-euro assets. Our analysis
showed that the class A1 notes, which would otherwise pass at a
'AAA' rating level, could only withstand a 'AA+' stress under
these conditions, whereas the class A2 and A3 notes, and the
class V combination notes, could withstand a 'AA' stress," S&P
said.

"Therefore, and in accordance with our analysis, we have raised
our ratings on the class B Def notes, and the class K, R, S, and
T combination notes to levels that appropriately reflect the
current levels of credit enhancement, the portfolio credit
quality, and the transaction's performance," S&P said.

"We have also observed that the credit support available to the
class A1, A2, A3, C1 Def, C2 Def, D1 Def, D2 Def, E1 Def, E2 Def,
and F Def notes, and the class V combination notes is
commensurate with their current ratings, and we have therefore
affirmed our ratings on these notes. However, note that the
ratings on the class E1 Def and E2 Def notes are still capped at
'CCC+' by our largest obligor test and would otherwise pass at a
'B' level. Similarly, the rating on the class F Def notes is
still capped at 'CCC-' by our largest obligor test and would
otherwise pass at a 'CCC+' level," S&P said.

Avoca CLO VII is a cash flow collateralized loan obligation (CLO)
transaction backed primarily by leveraged loans to speculative-
grade corporate firms. Geographically, the portfolio is
concentrated in Germany, France, the Netherlands, and the U.K.,
which together account for about 70% of the portfolio. Avoca CLO
VII closed in April 2007 and is managed by Avoca Capital
Holdings.

             Standard & Poor's 17g-7 Disclosure Report

SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and
a description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities. The Rule applies to in-scope securities initially
rated (including preliminary ratings) on or after Sept. 26, 2011.

If applicable, the Standard & Poor's 17g-7 Disclosure Report
included in this credit rating report is available at

      http://standardandpoorsdisclosure-17g7.com

Ratings List

Class               Rating
            To                  From

Avoca CLO VII PLC
EUR788 Million Floating-Rate Notes

Ratings Raised

B Def       A (sf)              A- (sf)
K Combo     BBB- (sf)           BB+ (sf)
R Combo     B (sf)              CCC- (sf)
S Combo     CCC+ (sf)           CCC- (sf)
T Combo     B (sf)              CCC (sf)

Ratings Affirmed

A1          AA+ (sf)
A2          AA (sf)
A3          AA (sf)
C1 Def      BBB- (sf)
C2 Def      BBB- (sf)
D1 Def      BB+ (sf)
D2 Def      BB+ (sf)
E1 Def      CCC+ (sf)
E2 Def      CCC+ (sf)
F Def       CCC- (sf)
V Combo     AA (sf)


EIRCOM GROUP: Likely to File for Creditor Protection Next Month
---------------------------------------------------------------
Joe Brennan at Bloomberg News reports that Eircom Group Ltd. may
be heading for what would be Ireland's biggest creditor
protection filing.

Eircom has hired Morgan Stanley to find its seventh owner in 13
years, Bloomberg discloses.  According to Bloomberg, three people
with knowledge of the restructuring discussions said that the
most likely outcome is that the debt-laden company will seek
protection from creditors as early as next month.

"Eircom's financial position has been eroded through a number of
ownership changes over the past decade or so," Bloomberg quotes
Ivan Palacios, an analyst at Moody's Investors Service, as
saying.  "Almost every change in ownership came with a bit more
leverage, which ultimately made the company's capital structure
unsustainable."

Creditor protection will give the company space to trade while it
reorganizes the EUR3.75 billion (US$4.9 billion) of debt it has
accumulated since the government sold shares to the public in
1999, Bloomberg states.

According to Bloomberg, the people familiar said that should the
company draw a bidder, Eircom may still file for examinership, an
Irish variant of a U.S. Chapter 11 creditor protection petition,
due to the scale of the debt.

Bloomberg notes that one of the people said alternatively, Eircom
may file for protection from creditors through a pre-packaged
administration in a U.K. court, a pre-arranged plan between a
company and certain creditors to reorganize debt.

Barry Lyons, partner in Dublin-based Lyons Kenny Solicitors, said
that either such filing allows day-to-day trading to continue
while the debt is reorganized, Bloomberg relates.

Now, Eircom's board is discussing proposals from the first-lien
lenders, Bloomberg notes.  According to Bloomberg, two people
familiar with the proposal said on Nov. 30 that under the
lenders' plan, they would write off about 8% of their EUR2.36
billion of loans and take full control of the company.  Under the
proposals, junior lenders will lose almost all of what they are
owed, Bloomberg states.

At the behest of the senior lenders, Eircom suspended coupon
payments on EUR350 million of floating rate notes, including a
payment scheduled for Feb. 15, Bloomberg relates.

The ultimate outcome may be that the first lien lenders may take
control, Bloomerg says.   Moody's said that in the event of a
default, losses on the first-lien loans may be around 23%,
Bloomberg notes.  The ratings company said that junior lenders
may lose more than 70% of their investment, according to
Bloomberg.

Headquartered in Dublin, Ireland, Eircom Group --
http://www.eircom.ie/-- is an Irish telecommunications company,
and former state-owned incumbent.  It is currently the largest
telecommunications operator in the Republic of Ireland and
operates primarily on the island of Ireland, with a point of
presence in Great Britain.


SMURFIT KAPPA: S&P Raises Corporate Credit Rating to 'BB'
---------------------------------------------------------
Standard & Poor's Ratings Services raised its long-term corporate
credit rating on Ireland-based paper and packaging producer
Smurfit Kappa Group PLC (Smurfit Kappa) to 'BB' from 'BB-'. The
outlook is stable.

"The rating action primarily reflects a revision of the group's
business risk profile to 'satisfactory' from 'fair', as well as
our expectations of continued positive free operating cash flow
generation over the near to medium term. Furthermore, we view the
group's renewed, narrowed, leverage target of unadjusted debt to
EBITDA of below 3x over the cycle, as well as a proposed
extension of the senior debt facilities as supportive of the
group's financial risk profile and liquidity position," S&P said.

"The ratings on Smurfit Kappa continue to reflect the group's
aggressive financial risk profile, exposure to volatile raw
material prices, and cyclical industry conditions. Balancing
these risk factors are the group's satisfactory business risk
profile, supported by Smurfit Kappa's leading position in the
European containerboard and corrugated board markets, good
geographic diversity, and high level of forward integrated
operations. As of Dec. 31, 2011, the group had estimated adjusted
debt of about EUR3.6 billion," S&P said.

"The stable outlook reflects our base-case assumption that
Smurfit Kappa's operating performance will not weaken materially
despite an uncertain macroeconomic and operating environment,"
S&P said.


=========
I T A L Y
=========


TAURUS CMBS: Fitch Affirms CCCsf Rating on EUR9.5MM Class F Notes
-----------------------------------------------------------------
Fitch Ratings has affirmed Taurus CMBS No.2 S.r.l. (Taurus 2) as
follows:

  -- EUR10.1m class A (IT0003957005) affirmed at 'AAAsf'; Outlook
     Negative

  -- EUR26.0m class B (IT0003957013) affirmed at 'AAAsf'; Outlook
     Negative

  -- EUR14.2m class C (IT0003957021) affirmed at 'AAsf'; Outlook
     Stable

  -- EUR16.6m class D (IT0003957039) affirmed at 'Asf'; Outlook
     Stable

  -- EUR14.2m class E (IT0003957047) affirmed at 'BBsf'; Outlook
     Negative

  -- EUR9.5m class F (IT0003957054) affirmed at 'CCCsf'; Recovery
     Estimate RE100%

  -- EUR14.1m class G (IT0003957062) affirmed at 'BBsf'; Outlook
     Stable

The affirmations reflect the stable performance of the one
remaining loan (Berenice) since Fitch's last rating action in
April 2011.  The reported loan-to-value (LTV) has improved
slightly to 52% compared to 55% 12 months ago (September 2011
valuation) and good tenants on long leases occupy many of the
remaining 31 properties.  The borrower continues to dispose of
assets with ensuing proceeds covering the allocated loan amounts
and repaying the notes sequentially.  Seven properties have been
sold since April 2011 with the resultant securitized loan balance
reducing to EUR105 million from EUR108 million.

As previously reported, the higher rating of the class G notes
(compared to the class F notes) is due to the available funds
cap, which means that Fitch's analysis does not incorporate the
likelihood of class G interest being paid.  In July 2010 there
was an interest shortfall on the class F which was repaid on the
following interest payment date.  Although the loan margin is due
to increase by 15 basis points (to 1.1%) and Fitch does not
anticipate imminent shortfalls on the class F notes, prepayments
(as a result of asset sales) and issuer costs may lead to future
shortfalls and thus the class F notes have been affirmed at
'CCCsf'.

At closing in December 2005, Taurus 2 was a securitization of
four commercial mortgage loans originated in Italy.  The Berenice
loan was a one-third pari passu participation in a EUR490 million
syndicated loan, granted to a closed-ended listed real estate
investment fund.  The loans, originated by Merrill Lynch Capital
Markets Bank Ltd, were secured by 83 predominantly office
properties.  Following the prepayment of the Bentra, Little Domus
and Leather loans, only the Berenice loan remains outstanding.


=====================
N E T H E R L A N D S
=====================


EUROPE CAPITAL III: S&P Raises Rating on Class E Notes to 'CCC+'
----------------------------------------------------------------
Standard & Poor's Ratings Services raised its credit ratings on
all classes of notes in Leveraged Finance Europe Capital III B.V.
"At the same time, we removed from CreditWatch positive our
ratings on the class A, B, and C notes," S&P said.

"The rating actions follow our assessment of the transaction's
performance and our application of our relevant criteria for
transactions of this type," S&P said.

"For our review of the transaction's performance, we used data
from the trustee report dated Jan. 20, 2012, in addition to our
cash flow analysis. We have taken into account recent
developments in the transaction and have applied our 2010
counterparty criteria, as well as our cash flow criteria," S&P
said.

"From our analysis, we have observed an increase in the
proportion of assets that we consider to be rated in the 'CCC'
category ('CCC+', 'CCC', and 'CCC-'). The proportion of defaulted
assets (rated 'CC', 'SD' [selective default], and 'D') in the
portfolio have reduced since we last reviewed the transaction,"
S&P said.

"Since our last review, we have also noted an increase in the
weighted-average spread earned on Leveraged Finance Europe
Capital III's collateral pool, and an increase in the par
coverage test results for senior classes of notes. However, the
class D and E par coverage tests continue to perform below the
minimum levels and are lower than at our last review. The
transaction is in its amortizing period, and 51.71% of the
original balance of the class A notes remains outstanding," S&P
said.

"We subjected the capital structure to a cash flow analysis to
determine the break-even default rate. In our analysis, we used
the reported portfolio balance that we consider to be performing,
the principal cash balance, the current weighted-average spread,
and the weighted-average recovery rates that we considered to be
appropriate. We incorporated various cash flow stress scenarios
using various default patterns, levels, and timings for each
liability rating category, in conjunction with different interest
rate stress scenarios," S&P said.

"Taking into account our credit and cash flow analyses and our
2010 counterparty criteria, we consider the credit enhancement
available to all rated classes of notes in this transaction to be
commensurate with higher rating levels. We have therefore raised
our ratings on these classes of notes," S&P said.

"None of the classes were constrained by the application of the
largest obligor default test, a supplemental stress test we
introduced in our 2009 criteria update for corporate
collateralized debt obligations (CDOs). Our ratings on the class
D and E notes were constrained by this test during our February
2010 analysis," S&P said.

"We have analyzed the counterparties' exposure to the
transaction, and we consider that this is sufficiently limited to
not affect our current ratings on the class A and B notes if the
counterparties failed to perform," S&P said.

Leveraged Finance Europe Capital III is a cash flow
collateralized loan obligation (CLO) transaction that securitizes
loans to primarily speculative-grade corporate firms.

             Standard & Poor's 17g-7 Disclosure Report

SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and
a description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities. The Rule applies to in-scope securities initially
rated (including preliminary ratings) on or after Sept. 26, 2011.

If applicable, the Standard & Poor's 17g-7 Disclosure Report
included in this credit rating report is available at

      http://standardandpoorsdisclosure-17g7.com

Ratings List

Class               Rating
            To                 From

Leveraged Finance Europe Capital III B.V.
EUR306.5 Million Floating-Rate Notes

Ratings Raised and Removed From CreditWatch Positive

A           AAA (sf)           A+ (sf)/Watch Pos
B           A+ (sf)            BBB- (sf)/Watch Pos
C           BBB (sf)           BB (sf)/Watch Pos

Ratings Raised

D           B- (sf)            CCC- (sf)
E           CCC+ (sf)          CCC- (sf)


GLOBAL SENIOR LOAN 1: S&P Affirms 'CCC-' Rating on Fund Notes
-------------------------------------------------------------
Standard & Poor's Ratings Services lowered its credit rating on
Global Senior Loan Index Fund 1 B.V.'s class A2 notes, and
affirmed its ratings on the class A1 and Fund notes.

"The rating actions follow our credit and cash flow analysis of
the transaction using data from the latest available trustee
report, dated Nov. 30, 2011. We have taken into account recent
developments in the transaction and reviewed the transaction
under our 2010 counterparty criteria," S&P said.

"The trustee report shows that the overcollateralization test is
currently passing and that the reported weighted-average spread
earned on the collateral pool has increased to 2.9% from 2.6%
since our previous review. However, it also shows that the
percentage of portfolio assets that we consider in our analysis
as defaulted (i.e., debt obligations of obligors rated 'CC', 'SD'
[selective default], or 'D') has increased since our previous
review, to 3.5% from 0.0%, which has caused the credit
enhancement available to all classes of notes to decrease," S&P
said.

"From our analysis, we have observed a decrease in the
portfolio's weighted-average maturity, which resulted in lower
scenario default rates across all rating levels," S&P said.

"We have subjected the transaction's capital structure to a cash
flow analysis to determine the break-even default rate for each
rated class. In our analysis, we used the portfolio balance that
we consider to be performing (i.e., of assets rated 'CCC-' or
above), the reported weighted-average spread of 2.9%, and the
weighted-average recovery rates that we considered to be
appropriate. We incorporated various cash flow stress scenarios
using our standard default patterns, levels, and timings for each
rating category assumed for each class of notes, in conjunction
with different interest rate and exchange rate stress scenarios,"
S&P said.

"We have observed from our analysis that the credit support
available to the class A1 notes remains commensurate with the
current rating, and we have therefore affirmed our rating on this
class," S&P said.

"The application of the largest obligor default test constrained
our rating on the Fund notes, which was also the case at our last
full review of the transaction, and we have therefore affirmed
our rating on this class. We introduced the supplemental stress
tests in our 2009 criteria update for corporate collateralized
debt obligations (CDOs)," S&P said.

"Approximately 25% of the assets in the transaction's portfolio
are non-euro-denominated. Because all liabilities are denominated
in euros, the issuer has entered into cross-currency swap
agreements throughout the life of the transaction, to mitigate
the risk of foreign-exchange-related losses. Our analysis of the
swap counterparties and the swap documentation indicates that
they are not consistent with our 2010 counterparty criteria. To
assess the potential impact on our ratings, we have assumed that
the transaction does not benefit from the currency swaps. We
concluded that, in this scenario, the class A1 notes would keep
the current 'AA (sf)' rating, and that the rating on the class A2
notes would drop to 'A (sf)'. Thus, we have lowered our rating on
the class A2 notes. Under our 2010 counterparty criteria, our
rating on the Fund notes is supported by our ratings on the swap
counterparties. Hence, we have applied no additional foreign-
exchange-related stresses to the Fund notes," S&P said.

Global Senior Loan Index Fund 1 is a cash flow collateralized
loan obligation (CLO) transaction that securitizes loans to
primarily speculative-grade corporate firms. The transaction
closed in December 2007 and is managed by Harbourmaster Capital
Ltd.

             Standard & Poor's 17g-7 Disclosure Report

SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and
a description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities. The Rule applies to in-scope securities initially
rated (including preliminary ratings) on or after Sept. 26, 2011.

If applicable, the Standard & Poor's 17g-7 Disclosure Report
included in this credit rating report is available at

      http://standardandpoorsdisclosure-17g7.com

Rating List

Class                    Rating
                  To                 From

Global Senior Loan Index Fund 1 B.V.
EUR652 Million Floating-Rate Term Notes

Rating Lowered

A2                A (sf)             A+ (sf)

Ratings Affirmed

A1                AA (sf)
Fund notes        CCC- (sf)

E                 CCC- (sf)


SILVER BIRCH: S&P Affirms 'CCC-(sf)' Rating on Class E Notes
------------------------------------------------------------
Standard & Poor's Ratings Services raised its credit ratings on
Silver Birch CLO I B.V.'s class A, B, C, and D notes. "At the
same time, we affirmed our rating on the class E notes," S&P
said.

Specifically, S&P has:

-- raised its rating on the class A notes to 'AAA (sf)' from
    'A+ (sf)';

-- raised its rating on the class B notes to 'A+ (sf)' from
    'BBB+ (sf)';

-- raised its rating on the class C notes to 'BBB+ (sf)' from
    'B+ (sf)';

-- raised its rating on the class D notes to 'B+ (sf)' from
    'CCC- (sf)'; and

-- affirmed its 'CCC- (sf)' rating on the class E notes.

"The rating actions follow our assessment of the transaction's
performance and our application of relevant criteria for
transactions of this type," S&P said.

Silver Birch CLO I is a cash collateralized loan obligation (CLO)
transaction that closed in August 2005 and securitizes loans to
primarily speculative-grade corporate firms.

"For our review of the transaction's performance, we used data
from the trustee report dated Oct. 31, 2011, in addition to our
cash flow analysis. We have taken into account recent
developments in the transaction and have applied our 2010
counterparty criteria, as well as our cash flow criteria," S&P
said.

"From our analysis, we have observed that the credit quality of
the portfolio has improved since we last reviewed the
transaction. We have also observed a decrease in the proportion
of defaulted assets (rated 'CC', 'SD' [selective default], and
'D') and in the proportion of assets that we consider to be rated
in the 'CCC' category ('CCC+', 'CCC', and 'CCC-')," S&P said.

"The transaction is in its post-reinvestment period, and thus
benefits from the deleveraging of the structure, with 47% of the
class A note balance already paid down," S&P said.

"Credit enhancement for all classes of notes and the weighted-
average spread earned on the collateral pool have increased --
which, in our view, supports higher ratings on the class A, B, C,
and D notes. We have also observed from the trustee report that
the overcollateralization test results for all classes have
improved," S&P said.

"In addition, our analysis indicates that the weighted-average
maturity of the portfolio since our last transaction update has
decreased, which has led to a reduction in our scenario default
rates (SDRs) for all rating categories," S&P said.

"We subjected the capital structure to a cash flow analysis to
determine the break-even default rate. In our analysis, we used
the reported portfolio balance that we consider to be performing,
the principal cash balance, the current weighted-average spread,
and the weighted-average recovery rates that we considered to be
appropriate. We incorporated various cash flow stress scenarios
using various default patterns, levels, and timings for each
liability rating category, in conjunction with different interest
rate stress scenarios," S&P said.

"Taking into account our credit and cash flow analyses and our
2010 counterparty criteria, we consider the credit enhancement
available to the class A, B, C, and D notes to be commensurate
with higher rating levels. We have therefore raised our ratings
on these classes of notes," S&P said.

"The credit enhancement available to the class E notes is
commensurate with the current rating. We have therefore affirmed
our rating on this class of notes," S&P said.

"None of the notes is constrained by the application of the
largest obligor default test, a supplemental stress test we
introduced in our 2009 criteria update for corporate
collateralized debt obligations (CDOs)," S&P related.

"The rating on the class C notes was constrained by the
application of the largest obligor test in our previous review.
As such, we lowered our rating on the class C notes to a level
that passed the largest obligor test, i.e., 'B+', although the
class C notes passed the other stresses at a higher level, i.e.,
'BB-'. Our analysis of the current portfolio indicates that the
class C notes are no longer constrained by the largest obligor
test and so can achieve a higher rating. We have therefore raised
our rating on these notes," S&P said.

             Standard & Poor's 17g-7 Disclosure Report

SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and
a description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities. The Rule applies to in-scope securities initially
rated (including preliminary ratings) on or after Sept. 26, 2011.

If applicable, the Standard & Poor's 17g-7 Disclosure Report
included in this credit rating report is available at

      http://standardandpoorsdisclosure-17g7.com

Ratings List

Class             Rating
            To             From

Silver Birch CLO I B.V.
EUR300 Million Floating-Rate Notes

Ratings Raised

A           AAA (sf)       A+ (sf)
B           A+ (sf)        BBB+ (sf)
C           BBB+ (sf)      B+ (sf)
D           B+ (sf)        CCC- (sf)

Rating Affirmed

E           CCC- (sf)


=============
R O M A N I A
=============


MIC.RO RETAIL: Outstanding Debts Prompt Insolvency Filing
---------------------------------------------------------
Business Review reports that Mic.ro Retail filed for insolvency
on Tuesday.

According to Business Review, Mic.ro stores have been facing
difficulties for several months now due to outstanding debts to
suppliers and banks.

At present, many of the Mic.ro stores are displaying empty
shelves while others were simply closed after the rent was not
paid, Business Review says.

Among the company's suppliers that have asked for Mic.ro Retail's
insolvency are Romaqua Borsec, Dorna Lactate, Dr. Oetker, Vel
Pitar, Ocean Fish and more recently Tiriac Auto, the company
owned by local businessman Ion Tiriac, Business Review discloses.

According to Ziarul Financiar's Ecaterina Craciun, the court date
was set for Feb. 16.

Mic.ro Retail is the company that operates the Mic.ro proximity
stores.  It is owned by Romanian businessman Dinu Patriciu.


===========
R U S S I A
===========


ALTAYENERGOBANK: Moody's Assigns 'E+' Financial Strength Rating
---------------------------------------------------------------
Moody's Investors Service has assigned these ratings to
Altayenergobank: a standalone bank financial strength rating
(BFSR) of E+, which maps to B3 on the long-term scale, long-term
local and foreign currency deposit ratings of B3, and short-term
local and foreign currency deposit ratings of 'Not Prime'. All
the bank's ratings carry a stable outlook

Moody's assessment is primarily based on Altayenergobank's
financial statements for 2010 (audited) -- prepared under IFRS,
and (unaudited) Russian GAAP as at January 1, 2012.

Ratings Rationale

According to Moody's, Altayenergobank's ratings are constrained
by (i) the bank's modest capital base, (ii) a weak liquidity
buffer, (iii) the operational and credit risks stemming from its
recent aggressive loan growth strategy and (v) the short track
record under its present business model. However, the ratings are
supported by Altayenergobank's cost-efficient distribution
strategy, granular customer base and low market risk, as well as
the absence of large concentration and related-party risks which
are typical for most other Russian banks of similar size.

According to Moody's, Altayenergobank is a small bank in Russia
ranked 204 by total assets (RUB12 billion -- US$373 million) as
at January 1, 2012. Moody's notes that the key factors which
constrain the bank's ratings over the medium term include its
weak capitalisation and liquidity buffer, limited access to long-
term funding and its aggressive loan growth strategy.

Altayenergobank's capital adequacy ratio was 11.3% at 1 January
2012 which is just above the 10% regulatory minimum. The rating
agency regards Altayenergobank's loss absorption capacity as low
given the credit risks linked to its unseasoned loan book.

At YE2011, Altayenergobank's liquid assets (cash, interbank and
government securities) accounted for 12.2% of total assets which
is low compared to the average of 26% for all Russian banks.
Moody's also observes that liquid assets cover only about 14% of
customer deposits, rendering the bank's liquidity profile
vulnerable to potential deposit outflows.

Moody's also notes that Altayenergobank recorded net losses in
FY2010 (in accordance with audited IFRS). Moody's expects the
bank to book an IFRS loss in FY2011 and return to IFRS
profitability in 2012, thanks to improving recurring earnings in
the framework of its ongoing strategy to rapidly increase the
volume of high-margin retail loans. However, the rating agency
also believes that Altayenergobank's core profitability will
remain negatively affected by margin pressure linked to its
expensive deposit funding base.

According to Moody's, Altayenergobank's B3 deposit ratings could
be upgraded if the bank demonstrates a sustainable track record
under its new business model, expands its asset size while also
improving its capital base and liquidity cushion. Conversely,
negative pressure could be exerted on these ratings as a result
of any material adverse changes in the bank's risk profile,
particularly any impairment of its liquidity position, and any
failure to maintain control over asset quality.

Principal Methodologies

The 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 Moscow, Russia, Altayenergobank had total assets
of RUB12.0 billion and total equity of RUB1.1 billion , and
reported a net profit of RUB215.6 million as at YE 2011 according
to Russian Accounting Standards.


BANK SBERBANK: Fitch Affirms Viability Rating at 'B'
----------------------------------------------------
Fitch Ratings has affirmed the Long-term foreign-currency Issuer
Default Ratings (IDRs) of Kazakstan-based Subsidiary Bank
Sberbank of Russia OJSC (SBK) and VTB Bank (Kazakhstan) (VTBK) at
'BBB-'.  The Outlooks on both IDRs are Stable.

SBK's and VTBK's IDRs reflect Fitch's view of the high
probability of support from the banks' respective owners,
Sberbank of Russia (Sberbank, 'BBB'/Stable) and VTB Bank (VTB,
'BBB'/Stable) if needed.  The parent institutions' propensity to
support their Kazakh subsidiaries would likely be high, in
Fitch's view, given the strategic importance for Sberbank and VTB
of their expansions in the CIS region, the subsidiaries' small
relative size (and hence the moderate cost of any potential
support), common branding of parents/subsidiaries and significant
potential reputational risks arising from a subsidiary default,
Sberbank's and VTB's strong track record to date of supporting
their subsidiaries, including SBK and VTBK and the solid
government relations between Russia and Kazakhstan.

At the same time, the one-notch difference between the ratings of
the parent and subsidiary banks reflects the cross-border nature
of the parent-subsidiary relationships.  It also takes into
account the fact that Sberbank's and VTB's non-Russian operations
have yet to demonstrate their strong commercial viability, and
some uncertainty as to whether these operations will remain of
high strategic importance to the parent banks in the longer term.

SBK's Viability Rating of 'b' reflects the bank's diminishing
capital cushion, rapid growth and high business concentrations.
Based on SBK's management IFRS accounts at end-Q311, the bank's
Basel I Tier I ratio stood at 8.3%, which is a low level in
Fitch's view given the risk profile. Pressure on capital has been
caused by rapid loan growth (five-fold over the past three
years), and capital ratios are dependent on the performance of
the bank's largest loans (at end-9M11, exposures to the top 20
borrowers totalled 3x equity).  Non-performing loans in the
unseasoned portfolio were a moderate 2.5% at end-Q311.  SBK funds
itself domestically, for the most part, but deposit
concentrations are also high.

VTBK effectively began operating in Q209, and the scope of its
operations is still limited (loan book of USD0.3bn at end-2011).
Given its short track record and unseasoned business model, Fitch
has not assigned it a Viability Rating.  While underwriting
standards have been reasonable to date, Fitch cannot rule out the
possibility of them being loosened in the future given VTBK's
ambitious expansion plans.  VTBK has so far funded its lending
operations in the local market; however, parent funding may
become more significant as VTBK expands.  VTBK has been loss
making to date, and management only expects the bank to become
profitable in 2013.  Capital ratios are currently high (31% total
capital ratio at end-11) reflecting significant growth appetite.

SBK and VTB's IDRs are likely to move in tandem with the IDRs of
Sberbank and VTB, respectively.  The Stable Outlooks on the
subsidiaries currently reflect those on the parent banks.

SBK is the seventh largest bank in Kazakhstan, focusing on
corporate business.  Sberbank currently owns virtually 100% of
SBK.  VTBK is the 21st largest bank in Kazakhstan, reflecting its
later launch, and targets both corporate banking business and
affluent customers on the retail side.

The rating actions are as follows:

SBK

  -- Long-term foreign currency IDR: affirmed at 'BBB-'; Outlook
     Stable
  -- Long-term local currency IDR: affirmed at 'BBB-'; Outlook
     Stable
  -- Short-term foreign currency IDR: affirmed at 'F3'
  -- Viability Rating: affirmed at 'b'
  -- Support Rating: affirmed at '2'
  -- National Long Term Rating: affirmed at 'AA(kaz)'; Outlook
     Stable
  -- Subordinated Debt Rating: affirmed at 'BB+'
  -- Subordinated Debt National Rating: affirmed at 'AA-(kaz)'

VTBK

  -- Long-term foreign currency IDR: affirmed at 'BBB-'; Stable
     Outlook
  -- Long-term local currency IDR: affirmed at 'BBB-'; Stable
     Outlook
  -- Short-term foreign currency IDR: affirmed at 'F3'
  -- Support Rating: affirmed at '2'
  -- National Rating: affirmed at 'AA(kaz)'; Stable Outlook
  -- Senior Unsecured Debt Long-Term Rating affirmed at 'BBB-'
  -- Senior Unsecured Debt National Rating: affirmed at 'AA(kaz)'


=========
S P A I N
=========


BANCO BILBAO: Fitch Lowers Rating on Preference Shares to 'BB+'
---------------------------------------------------------------
Fitch Ratings has downgraded the Long-term Issuer Default Ratings
(IDR) of Banco Bilbao Vizcaya Argentaria (BBVA) to 'A' from 'A+',
Bankia, S.A. (Bankia) to 'BBB+' from 'A-', CaixaBank, S.A.
(CaixaBank) to 'A-' from 'A' and Caja de Ahorros y Pensiones de
Barcelona (La Caixa) to 'A-' from 'A'.  With the exception of La
Caixa, the Long-term IDRs have been removed from Rating Watch
Negative (RWN).  The Outlook on BBVA's and CaixaBanks's Long-term
IDR is Negative.  The Outlook on Bankia's Long-term IDR is Stable
as it is at the Support Rating Floor (SRF).

The rating actions largely reflect Fitch's downgrade of the
Spanish sovereign to 'A'/Negative from 'AA-'.  The Negative
Outlooks on BBVA and Caixabank mirror that on the sovereign
rating.

As a result of the downgrade of the sovereign rating, Fitch has
also downgraded BBVA, CaixaBank and Bankia's Support Ratings to
'2' from '1' and revised their SRFs to 'BBB+' from 'A-'.  The
downgrade of Spain indicates a weakening of its ability to
support its largest banks.  However, Fitch expects the Spanish
authorities to continue to show a high propensity to support
these institutions.

Fitch believes there is a close link between bank and sovereign
credit risk (and therefore ratings) and, it is unusual for banks
to be rated above their domestic sovereigns.  Banks tend to own
large portfolios of domestic sovereign debt and are highly
exposed to domestic counterparties, meaning profitability and
asset quality are vulnerable to adverse macroeconomic and market
trends.  Funding access, stability and cost for domestic banks
are also often closely linked to broad perceptions of sovereign
risk.  Fitch expects no GDP growth for Spain in 2012 and 1%
growth 2013, for unemployment to remain high at around 23% and
for the real estate market to remain a long-term cause for
concern.

The diversification achieved through BBVA's ownership of
subsidiaries in Latin America and the U.S. has helped BBVA to
mitigate some of the earnings and asset quality pressures it is
currently facing in Spain and positively differentiates BBVA from
the more domestically-focused Spanish banks with lower VRs.
Nonetheless, in Fitch's opinion, it does not entirely mitigate
the rating constraints arising from its domicile.  Local
regulatory scrutiny and requirements mean capital and liquidity
are not fully transferable within banking groups, particularly
cross border.  The VRs of BBVA's largest international
subsidiaries are 'a-' (BBVA Bancomer) and 'bbb+' (Compass
Bancshares, Inc), still lower than BBVA.

BBVA's profitability and asset quality in Spain will continue to
be affected by the weak economic environment.  However, concerns
relating to the bank's exposure to the stressed real estate
sector in Spain are substantially mitigated as the bank will have
reserved around 50% of the total exposure to the sector by end-
2012 as estimated by Fitch.  In the medium term, earnings from
the group's diverse international retail franchise, particularly
Mexico and South America, should continue to offset weak
profitability in Spain and support the parent bank's overall
profitability to a greater degree than domestic banks can
achieve.

BBVA is making substantial efforts to boost capital and will
comply with the 9% core capital requirement set by the European
Banking Authority by end-June 2012.  It is one of the Spanish
banks that is better placed to comply with the stricter
provisioning rules imposed by the Spanish Ministry of Finance.
With a Fitch core capital to weighted risks ratio of 9.3% at end-
2011, Fitch considers capitalization good.

CaixaBank's extensive nationwide retail banking franchise
contributes to recurring revenue generation. However, its
activities are centered in Spain and the deteriorating
macroeconomic outlook and challenging wholesale funding markets
are likely to continue to negatively affect its profitability and
asset quality.  It has less scope to mitigate these pressures
than internationally diversified banks. On the other hand, its VR
also considers strong capital base with an estimated Fitch core
capital to weighted risks ratio of around 10.5% at end-2011.
Existing reserves include EUR1.8 billion of generic reserves,
which will help CaixaBank to cope with the stricter provisioning
requirements.

As a holding company, La Caixa's IDR and VR are mainly driven by
the capacity for dividend flows from, and the risk profile of,
its investments/subsidiaries.  Its main investment is an 81.5%
stake in CaixaBank but its debt service capacity also relies on
dividend flows from, and the potential monetization of
investments held by, another subholding that owns real estate
subsidiaries and stakes in utility companies.  Fitch believes
that the potential for lower dividend flows and higher
impairments required on foreclosed assets are likely to weaken La
Caixa's risk profile.  A EUR1.5 billion subordinated debt issue
in Q411 has helped reduce the refinancing risks associated with
EUR2.5 billion of maturities in 2012 and Fitch understands that
further refinancing initiatives are in the pipeline.  La Caixa's
Long-term IDR and VR remain on RWN while Fitch reassesses these
risks. Any further negative rating action on La Caixa's IDR and
VR is likely to be limited to one notch.

Bankia is Spain's largest domestic banking group. Its 'bb-' VR is
unaffected by today's rating actions.  Its VR takes into account
its high risk concentration to Spain's troubled property sector,
weak asset quality and the correlation of Bankia's activities
with Spain's weak economy, which will continue to affect
profitability and asset quality.  It also considers that Bankia
is highly reliant on the wholesale funding markets, faces
sizeable refinancing needs in the medium term and its access to
the capital markets remains difficult.

As Bankia's VR is lower than its SRF, its Long-term IDR has been
downgraded to the level of its SRF ('BBB+') and reflects Fitch's
opinion that there is a high likelihood that it would receive
extraordinary state support, if needed.  The Outlook is Stable.
Bankia's SRF would likely only be downgraded if there was a
multiple notch further downgrade of the Spanish sovereign rating.

The multiple-notch downgrade of the preference shares issued by
BBVA and CaixaBank and any of their special purpose issuance
vehicles reflect the application of Fitch's new bank regulatory
capital securities rating criteria.  In Spain, Fitch rates
preference shares five notches below an institution's VR because
it believes non-performance triggers can be relatively easily
activated.

Any rating actions on BBVA's U.S. and Latin American subsidiaries
will be covered in a separate comment.

The rating actions are as follows:

BBVA:

  -- Long-term IDR: downgraded to 'A' from 'A+'; Outlook
     Negative; removed from RWN
  -- Short-term IDR: affirmed at 'F1'; removed from RWN
  -- VR: downgraded to 'a' from 'a+'; removed from RWN
  -- Support Rating: downgraded to '2' from '1'; removed from RWN
  -- SRF: revised to 'BBB+' from 'A-'; removed from RWN
  -- Senior unsecured debt long-term rating: downgraded to 'A'
     from 'A+'; removed from RWN
  -- Senior unsecured debt short-term rating and commercial
     paper: affirmed at 'F1'; removed from RWN
  -- Market-lined senior unsecured securities: downgraded to
    'Aemr' from 'A+emr'; removed from RWN
  -- Subordinated debt: downgraded to 'A-' from 'A'; removed from
     RWN
  -- Preference shares: downgraded to 'BB+' from 'BBB+'; removed
     from RWN

BBVA Capital Finance, S.A. Unipersonal

  -- Preference shares: downgraded to 'BB+' from 'BBB+'; removed
     from RWN

BBVA International Preferred, S.A. Unipersonal

  -- Preference shares: downgraded to 'BB+' from 'BBB+'; removed
     from RWN

BBVA Senior Finance, S.A. Unipersonal

  -- Senior unsecured debt long-term rating: downgraded to 'A'
     from 'A+'; removed from RWN
  -- Senior unsecured debt short-term rating: affirmed at 'F1';
     removed from placed on RWN

BBVA U.S. Senior, S.A. Unipersonal

  -- Senior unsecured debt long-term rating: downgraded to 'A'
     from 'A+'; removed from RWN
  -- Senior unsecured debt short-term rating: affirmed at'F1';
     removed from RWN

CaixaBank, S.A.:

  -- Long-term IDR: downgraded to 'A-' from 'A'; Outlook
     Negative; removed from RWN
  -- Short-term IDR: downgraded to 'F2' from 'F1'; removed from
     RWN
  -- VR: downgraded to 'a-' from 'a'; removed from RWN
  -- Support Rating: downgraded to '2' from'1'; removed from RWN
  -- SRF: revised to 'BBB+' from 'A-'; removed from RWN
  -- Senior unsecured debt long-term rating: downgraded to 'A-'
     from 'A'; removed from RWN
  -- Senior unsecured debt short-term rating and commercial
     paper: downgraded to 'F2' from 'F1'; removed from RWN
  -- Subordinated debt: downgraded to 'BBB+' from 'A-',removed
     from RWN
  -- Preference shares and preferred stock: downgraded to 'BB'
     from 'BBB'; removed from RWN

La Caixa:

  -- Long-term IDR: downgraded to 'A-' from 'A'; maintained on
     RWN
  -- Short-term IDR: downgraded to 'F2' from 'F1'; removed from
     RWN
  -- VR: downgraded to 'a-' from 'a'; maintained on RWN
  -- Support Rating affirmed at '5'
  -- SRF affirmed at 'No floor'
  -- Senior unsecured debt long-term rating: downgraded to 'A-'
     from 'A'; maintained RWN
  -- Subordinated debt: downgraded to 'BBB+' from 'A-',
     maintained on RWN
  -- State-guaranteed debt: unaffected at 'A'

Bankia:

  -- Long-term IDR: downgraded to 'BBB+' from 'A-'; Outlook
     Stable; removed from RWN
  -- Short-term IDR affirmed at 'F2'
  -- Viability Rating: unaffected at 'bb-'
  -- Support Rating: downgraded to '2' from '1'; removed from RWN
  -- Support Rating Floor: revised to 'BBB+' from 'A-'; removed
     from RWN
  -- Senior unsecured debt long-term rating: downgraded to 'BBB+'
     from 'A-'; removed from RWN
  -- Senior unsecured debt short-term rating and commercial
     paper: affirmed at 'F2'
  -- Market-linked senior unsecured securities: downgraded to
     'BBB+emr' from 'A-emr', removed from RWN
  -- State-guaranteed debt: unaffected at 'A'


BANCO FINANCIERO: S&P Cuts Counterparty Credit Ratings to 'BB-/B'
-----------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on 15
Spain-based financial institutions and revised the outlook to
negative from stable on one financial institution. "We also
removed the ratings on 13 financial institutions from CreditWatch
with negative implications, where we placed them on Dec. 8, 2011,
and assigned negative outlooks to the ratings on 11 and a stable
outlook to the ratings on two," S&P said.

"We kept the ratings on two financial institutions on CreditWatch
negative. Both CreditWatch placements reflect our view that
pending acquisitions and their integration could have a negative
impact on each entity's creditworthiness," S&P said.

"The rating actions follow the lowering of the long- and short-
term sovereign credit ratings on the Kingdom of Spain
(A/Negative/A-1) and our subsequent revision of our Banking
Industry Country Risk Assessment (BICRA) on Spain to group '5'
from group '4' and of our industry risk score -- a component of
the BICRA -- to '5' from '3'," S&P said.

"We also assigned ratings to newly created Kutxabank S.A., and
withdrew the ratings on Bilbao Bizkaia Kutxa (BBK) and Caja de
Ahorros y Monte de Piedad de Gipuzkoa y San Sebastian (Kutxa) on
their request," S&P said.

"We lowered our long-term counterparty credit ratings on 10
financial institutions by one notch based on our lowering of our
assessments of their stand-alone credit profiles (SACPs) by one
notch following our BICRA revision and change of the 'anchor' we
apply to banks operating primarily in Spain to 'bbb-' from 'bbb'
(we determine a bank's 'anchor' based on the our calculation
of the weighted average of the economic risk scores of the
countries where the bank operates and the industry risk score of
the bank's country of domicile). We lowered our long-term ratings
on five financial institutions by two notches following the
revised SACPs and 'anchor,' as well as changes in the number of
notches of uplift we incorporate in the ratings from the SACP to
reflect our view of the possibility of the banks receiving
extraordinary government support. We reduced the number of
notches we factor into the ratings on some banks, and for others,
we ceased to include any notches from the SACPs," S&P said.

"We will publish individual research updates on the banks
identified below, including a list of ratings on affiliated
entities, as well as the ratings by debt type--senior,
subordinated, junior subordinated, and preferred stock," S&P
said.

The ratings are counterparty credit ratings.

Downgraded
                       To                   From
Banco Santander S.A.  A+/Negative/A-1      AA-/Watch Neg/A-1+

Banco Espanol de Credito S.A.
                       A+/Negative/A-1      AA-/Watch Neg/A-1+

Santander UK PLC      A+/Negative/A-1      AA-/Watch Neg/A-1+

Santander Consumer Finance, S.A.
                       A/Negative/A-1       A+/Watch Neg/A-1

Santander Holdings U.S.A Inc.
                       A/Negative/A-1       A+/Watch Neg/A-1

Sovereign Bank        A/Negative/A-1       A+/Watch Neg/A-1

Banco Bilbao Vizcaya
Argentaria S.A.
                       A/Negative/A-1       A+/Watch Neg/A-1

CaixaBank S.A.        BBB+/Stable/A-2      A/Watch Neg/A-1

Caja de Ahorros y
Pensiones de Barcelona
                       BBB-/Stable/A-3      BBB+/Watch Neg/A-2

Bankinter S.A.        BBB/Negative/A-2     BBB+/Watch Neg/A-2

Ibercaja Banco S.A.   BBB/Negative/A-2     BBB+/Watch Neg/A-2

Banco de Sabadell S.A.
                       BBB-/Watch Neg/A-3   BBB/Watch Neg/A-2

Banco Popular Espanol S.A.
                       BBB-/Watch Neg/A-3   BBB+/Watch Neg/A-2

Banca Civica S.A.     BBB-/Negative/A-3    BBB/Watch Neg/A-2

Bankia S.A.           BBB-/Negative/A-3    BBB+/Watch Neg/A-2

Banco Financiero y
de Ahorros S.A.
                       BB-/Negative/B       BB+/Watch Neg/B

Downgraded; Ratings Withdrawn
                       To                   From
Bilbao Bizkaia Kutxa (BBK)
                       BBB/Negative/A-2     BBB+/Watch Neg/A-2

Caja de Ahorros y Monte
de Piedad de Gipuzkoa y
San Sebastian (Kutxa)
                       BBB/Negative/A-2     BBB+/Watch Neg/A-2

Outlook Action
                        To                  From
Barclays Bank S.A.      A/Negative/A-1         A/Stable/A-1

New Rating

Kutxabank S.A.          BBB/Negative/A-2

NB. This list does not include all ratings affected.


BANCO SANTANDER: Fitch Cuts Rating on Preference Shares to 'BB+'
----------------------------------------------------------------
Fitch Ratings has downgraded Banco Santander's Long-term Issuer
Default Ratings (IDR) to 'A' from 'AA-' and Viability Rating (VR)
to 'a' from 'aa-'. Fitch has removed the ratings from Rating
Watch Negative (RWN).  The Outlook on the Long-term IDR is
Negative. At the same time, Fitch has affirmed Santander UK plc's
(San UK) Long-term IDR at 'A+' and its VR at 'a+'.  The Outlook
on the IDR is Stable.  Fitch has also taken actions on various
other European subsidiaries of Santander.

The rating actions on Santander largely reflect Fitch's downgrade
of the Spanish sovereign to 'A'/Negative from 'AA-'.  The
Negative Outlook on Santander mirrors that on the sovereign
rating.

Fitch believes there is a close link between bank and sovereign
credit risk (and therefore ratings) and it is unusual for banks
to be rated above their domestic sovereigns.  Banks tend to own
large portfolios of domestic sovereign debt and are highly
exposed to domestic counterparties, meaning profitability and
asset quality are vulnerable to adverse macroeconomic and market
trends.  Funding access, stability and cost for banks are also
often closely linked to broad perceptions of sovereign risk.
Fitch expects no GDP growth for Spain in 2012 and 1% growth in
2013, for unemployment to remain high at around 23% and for the
real estate market to remain a long-term cause for concern.

Santander's ownership of subsidiaries in the UK, Continental
Europe, Latin America and the U.S. positively differentiates it
from the more domestically-focused Spanish banks with lower VRs
but, in Fitch's opinion, does not entirely mitigate the rating
constraints arising from its domicile.

Banking is a highly regulated industry and local regulatory
scrutiny and requirements mean capital and liquidity are not
fully transferable within banking groups, particularly cross
border.  The benefit to the parent bank of owning subsidiaries
(two of which, Santander UK and Santander Chile, have higher VRs
than Santander) mostly arises from potential dividend flows and
the ability, subject to market conditions and appetite, to sell
stakes if needed.  In this regard, Santander has a fairly long
track record of generating capital from asset sales.  Over the
long term, the market value of subsidiaries will invariably
fluctuate as banks and banking systems experience inevitable
peaks and troughs.

As a result of the downgrade of the sovereign rating, Fitch has
also downgraded Santander's Support Rating to '2' from '1' and
revised the Support Rating Floor (SRF) to 'BBB+' from 'A-'.  The
downgrade of Spain indicates a weakening of its ability to
support its largest banks.  However, Fitch expects the Spanish
authorities to continue to show a high propensity to support
these institutions.

Santander's profitability and asset quality in Spain will
continue to be affected by the weak economic environment.
However, concerns relating to the bank's exposure to the stressed
real estate sector in Spain are substantially mitigated as the
bank will have reserved around 50% of the total exposure to the
sector by end-2012 as estimated by Fitch.  Strong contributions
from the group's international retail franchise, particularly
Brazil, Mexico and Chile, should continue to help offset weak
profitability in Spain and support the parent bank's overall
profitability to a greater degree than domestic banks can
achieve.

Santander now complies with the 9% core capital requirement set
by the European Banking Authority and is one of the Spanish banks
that is better placed to comply with the stricter provisioning
rules imposed by the Spanish Ministry of Finance.  With a Fitch
core capital to weighted risks ratio of 8.3% (adjusting for
mandatory convertibles of EUR7 billion due to convert in October
2012 and EUR1.7 billion swapped into equity) Fitch considers
capitalization to be adequate considering the group's business
mix and risk profile and in comparison to similarly rated peers.

San UK's IDRs continue to be driven by its standalone strength
and do not factor in any support from its parent.  San UK's IDRs
reflect its strong franchise in the UK, its solid asset quality,
comfortable liquidity and relatively strong capital ratios but
also factor in negative pressures on profitability from the
macroeconomic, operating and regulatory environment.  San UK's
'A' SRF reflects its systemic importance in the UK as the second-
largest player in the UK residential mortgages and retail savings
markets.

San UK's net exposure to the Santander group is insignificant and
is collateralized.  San UK's liquidity position benefited from
the issuance of GBP25 billion of medium-term debt in 2011, which
reduced the need for short-term funding and more price-sensitive
deposits.  Core Tier 1 regulatory capital ratio was a healthy 11%
at end-2011 and is supported by internal capital generation.
Santander UK is intentionally run as a separately funded and
capitalized bank within the Santander group.  Fitch believes that
San UK's funding and capital positions are to a large degree
ring-fenced from the rest of the group due to strong regulatory
oversight by the UK FSA.

Where Fitch has downgraded the Long-term IDRs and Support Ratings
of subsidiary banks, the actions reflect a potential weakening in
available support due to the downgrade of the parent banks.

The Long-term IDRs of Banco Espanol de Credito (Banesto),
Santander Consumer Finance (SCF) and the relatively recently
acquired Polish Bank Zachodni WBK S.A. (BZ WBK), reflect an
extremely high probability of support from the parent and their
strong integration.  Banesto conducts retail banking activities
in Spain under a separate brand name from Santander. SCF is
Santander's consumer finance unit with lending centered in
Germany (51%), Spain (13%), Italy (13%) and Scandinavia (11%).
Poland is a strategic market for Santander and BZ WBK's
activities are centered in retail and corporate banking, leasing,
asset management and brokerage, among others.

Allfunds Bank is a small niche bank in Spain specialising in the
distribution of around 20,000 investment funds managed by over
400 asset management houses.  It is a 50:50 joint venture between
Santander and Intesa Sanpaolo ('A-'/Negative). Despite the
downgrade of its Support Rating to '2' from '1', Fitch expects
there to be a high probability of support from its shareholders.

The multiple-notch downgrade on preference shares and upper Tier
2 securities issued by Banco Santander, its special purpose
issuance vehicles and Banesto reflect application of Fitch's new
bank regulatory capital securities rating criteria.  In Spain,
Fitch rates preference shares five notches below an institution's
VR because it believes non-performance triggers can be relatively
easily activated.

Rating actions on Santander's U.S. and Latin American
subsidiaries, Banco Santander Totta and Santander Totta SGPS, if
any, will be covered in separate commentaries.  Similarly, any
rating actions on covered bonds issued by Santander and Banesto
will be communicated in a separate comment.  There is no impact
on the covered bonds issued by Abbey National Treasury Services
plc.

The rating actions are as follows:

Santander:

  -- Long-term IDR: downgraded to 'A' from 'AA-'; Outlook
     Negative; removed from RWN
  -- Short-term IDR: downgraded to 'F1' from 'F1+'; removed from
     RWN
  -- VR: downgraded to 'a' from 'aa-'; removed from RWN
  -- Support Rating: downgraded to '2' from '1'; removed from RWN
  -- Support Rating Floor (SRF): revised to 'BBB+' from 'A-';
     removed from RWN
  -- Senior unsecured debt long-term rating and certificates of
     deposit: downgraded to 'A' from 'AA-', removed from RWN
  -- Senior unsecured debt short-term rating, commercial paper
     and certificate of deposits: downgraded to 'F1' from 'F1+';
     removed from RWN
  -- Market-linked senior unsecured securities: downgraded to
     'Aemr' from 'AA-emr', removed from RWN
  -- Subordinated debt: downgraded to 'A-' from 'A+', removed
     from RWN
  -- Preference shares: downgraded to 'BB+' from 'A-', removed
     from RWN

Santander Commercial Paper, S.A. Unipersonal

  -- Commercial paper: downgraded to 'F1' from 'F1+', removed
     from RWN

Santander Financial Issuance Ltd.

  -- Subordinated debt: downgraded to 'A-' from 'A+'; removed
     from RWN

Santander International Debt, S.A. Unipersonal

  -- Senior unsecured debt long-term rating: downgraded to 'A'
     from 'AA-'; removed from RWN
  -- Senior unsecured debt short-term rating: downgraded to 'F1'
     from 'F1+'; removed from RWN
  -- Senior unsecured debt long-term rating: downgraded to
     'A(EXP)' from 'AA-(EXP)'

Santander Finance Capital, S.A. Unipersonal

  -- Preference shares: downgraded to 'BB+' from 'A-'; removed
     from RWN

Santander Finance Preferred, S.A. Unipersonal

  -- Preference shares: downgraded to 'BB+' from 'A-'; removed
     from RWN

Santander International Preferred, S.A. Unipersonal

  -- Preference shares: downgraded to 'BB+' from 'A-'; removed
     from RWN

Santander US Debt, S.A.U.

  -- Senior unsecured debt long-term rating: downgraded to 'A'
     from 'AA-'; removed from RWN

Santander Perpetual, S.A. Unipersonal

  -- Upper Tier 2: Downgraded to 'BBB' from 'A'; removed from RWN

Banesto

  -- Long-term IDR: downgraded to 'A' from 'AA-'; Outlook
     Negative; removed from RWN
  -- Short-term IDR: downgraded to 'F1' from 'F1+'; removed from
     RWN
  -- VR: unaffected at 'a-'
  -- Support Rating: affirmed at '1'
  -- Senior unsecured debt long-term rating: downgraded to 'A'
     from 'AA-', removed from RWN
  -- Senior unsecured debt short-term rating and commercial
     paper: downgraded to 'F1' from 'F1+'; removed from RWN
  -- Market-lined senior unsecured securities: downgraded to
     'Aemr' from 'AA-emr', removed from RWN
  -- Subordinated debt: downgraded to 'A-' from 'A+', removed
     from RWN
  -- Preference shares: downgraded to 'BB' from 'BBB-', removed
     from RWN

Banesto Financial Products plc

  -- Senior unsecured debt long-term rating: downgraded to 'A'
     from 'AA-', removed from RWN
  -- Senior unsecured debt short-term rating: downgraded to 'F1'
     from 'F1+'; removed from RWN

Allfunds

  -- Long-term IDR: downgraded to 'BBB+' from 'A'; Outlook
     Negative; removed from RWN
  -- Short-term IDR: downgraded to 'F2' from 'F1'; removed from
     RWN
  -- VR: unaffected at 'bbb-'
  -- Support Rating: downgraded to '2' from '1'; removed from RWN

Santander Consumer Finance, S.A.

  -- Long-term IDR: downgraded to 'A' from 'AA-'; Outlook
     Negative; removed from RWN
  -- Short-term IDR: downgraded to 'F1' from 'F1+'; removed from
     RWN
  -- Support Rating: affirmed at '1'
  -- Senior unsecured debt long-term rating: downgraded to 'A'
     from 'AA-', removed from RWN
  -- Senior unsecured debt short-term rating and commercial
     paper: downgraded to 'F1' from 'F1+'; removed from RWN
  -- Subordinated debt: 'A-' from 'A+', removed from RWN

Bank Zachodni WBK, S.A.

  -- Long-term IDR: downgraded to 'A-' from 'A+'; Outlook
     Negative; removed from RWN
  -- Short-term IDR: downgraded to 'F2' from 'F1'; removed from
     RWN
  -- VR: unaffected at 'bbb'
  -- Support Rating: affirmed at '1'

Santander UK plc:

  -- Long-term IDR: affirmed at 'A+'; Outlook Stable
  -- Short-term IDR: affirmed at F1
  -- VR: affirmed at 'a+'
  -- Support Rating: affirmed at '1'
  -- SRF: affirmed at 'A'
  -- Guaranteed debt: affirmed at 'A+'
  -- Senior unsecured debt long-term rating: affirmed at 'A+'
  -- Senior unsecured debt short-term rating and commercial
     paper: affirmed at 'F1'
  -- Market-lined senior unsecured securities: affirmed at
     'A+emr'
   -- Subordinated debt: affirmed at 'A'
  -- Upper Tier 2 subordinated debt: 'A-' remains on RWN
  -- Preference shares: 'A-' remains on RWN

Abbey National Treasury Services plc

  -- Long-term IDR: affirmed at 'A+'; Stable Outlook
  -- Short-term IDR: affirmed at 'F1'
  -- Senior unsecured debt long-term rating: affirmed at 'A+'
  -- Market-lined senior unsecured securities: affirmed at
     'A+emr'
  -- Covered bonds: 'AAA' unaffected by today's ratings actions


GRIFOLS BANK: S&P Affirms 'BB' Rating on US$3.4BB Bank Facility
---------------------------------------------------------------
Standard & Poor's Ratings Services affirmed its 'BB' issue rating
on the US$3.4 billion senior secured bank facility due 2016 and
2017 borrowed by Spain-based specialty biopharmaceutical company
Grifols S.A. (Grifols; BB-/Positive/--) and its fully owned U.S.
subsidiary Grifols Inc. (not rated). "The recovery rating on the
debt is unchanged at '2', reflecting our expectation of
substantial (70%-90%) recovery for the lenders in an event of a
payment default. Despite numerical coverage in excess 90%, we
continue to cap the recovery rating on the senior secured debt at
'2' to factor in our unfavorable view of the Spanish insolvency
regime. Taking into account the proposed amendments to Grifols'
bank debt documentation, we foresee recoveries at the low end of
the 70%-90% range," S&P said.

"At the same time, we affirmed our 'B' issue rating on the $1.1
billion unsecured bond due 2018 issued by Grifols Inc. and
guaranteed by Grifols. The recovery rating on the bond is
unchanged at '6', reflecting our expectation of negligible (0%-
10%) recovery for bondholders in an event of a payment default,"
S&P said.

"In our view, the proposed amendments to Grifols' senior secured
bank debt documentation could weaken lenders' recovery
prospects," S&P said.

"The proposed amendments to the bank debt documentation include,
among other things, a debt basket allowing the company to incur
up to US$600 million of additional senior secured debt (referred
to as the incremental facility), subject to a 3.5x senior secured
leverage covenant. Importantly, given Grifols' current debt
levels, we believe that the company will not be able to raise
this incremental facility in the near term. In addition, we view
this newly created basket as unfavorable for existing lenders, as
it would add up to US$600 million of additional secured debt into
the waterfall. The proposed amendments also include the removal
of debt service cover ratio and annual maximum capital
expenditure (capex) covenants; a six-month shift of the leverage
and interest cover covenants; and fewer restrictions on
acquisitions and dividend payments. We believe that these
amendments would diminish lenders' control over the way in which
Grifols spends its cash in the future. As a result, we think that
the amendments would, if they are implemented, weaken ultimate
recovery prospects for lenders. However, we understand that
management intends to continue deleveraging the company as
originally planned, which somewhat mitigates the effect of the
proposed amendments, in our opinion," S&P said.

"However, given the company's significant enterprise value, we
continue to calculate numerical coverage in excess of 90% for
senior secured lenders at the point of default. The recovery
rating is capped at '2' (equivalent to our expectation of 70%-90%
recovery), reflecting our unfavorable view of the Spanish
insolvency regime. Given the more generous debt baskets in the
proposed amended documentation, we now forecast recovery on the
senior secured bank debt at the lower end of this range," S&P
said.

"We will assess the full impact of these amendments on the
ratings following our review of the final bank debt
documentation," S&P said.

                         Recovery Analysis

Grifols' debt instruments consist of a US$3.4 billion senior
secured bank facility--taken by both the parent company Grifols
and its fully owned U.S. subsidiary Grifols Inc.--and a US$1.1
billion unsecured bond issued by Grifols Inc. and guaranteed by
Grifols.

"We regard the security package for the senior secured lenders as
comprehensive. The lenders benefit from pledges over most of the
group's assets and a secured guarantee from the group's
subsidiaries (which must represent at least 85% of the group's
assets, net sales, and EBITDA)," S&P said.

The bondholders do not benefit from any security, but from the
operating companies' guarantees. The bonds' guarantors are the
same as those of the senior secured debt, but guarantee the bonds
on a senior unsecured basis.

"To determine recoveries, we simulate a hypothetical default
scenario. Our default scenario comprises a significant decline in
revenues and margins stemming from a tougher competitive
environment and a hypothetical product contamination that would
damage the group's reputation," S&P said.

S&P also assumes:

    An unchanged level of nonrecourse factoring of about EUR185
    million; and

    Total debt outstanding of about US$3.8 billion at the
    simulated point of default, consisting of the fully drawn
    US$300 million revolving credit facility (RCF), US$69 million
    of term loan A (average amount outstanding at year-end 2015
    and year-end 2016), US$2.1 billion of term loan B, US$1.1
    billion of the high-yield bond, and the nonrecourse factoring
    line.

Under this hypothetical scenario, Grifols defaults in 2016, with
EBITDA having declined to about US$470 million.

"We value Grifols as a going concern, supported by our view of
the group's strong market position in an industry where the
number of players is limited and the barriers to entry are
relatively high. We calculate a gross stressed enterprise value
of about US$3,065 billion at our simulated point of default," S&P
said.

"From our gross enterprise value of US$3,065 billion we deduct
about US$215 million of priority enforcement costs, leading to a
net stressed enterprise value of about US$2,850 million. We then
subtract about EUR185 million (about US$260 million) of priority
liabilities, consisting of nonrecourse factoring," S&P said.

"This leaves about US$2,590 million of residual value available
to the senior secured lenders. We calculate that there will be
about US$2,570 million of senior secured debt outstanding at the
time of default. This comprises the amortized term loans A and B,
the fully drawn RCF, and prepetition interest. This results in
coverage in excess of 90% for the senior secured lenders.
However, in line with our criteria on jurisdiction-specific
adjustments, we cap our recovery rating on the senior secured
debt at '2', indicating our expectation of substantial (70%-90%)
recovery for the senior secured lenders. This reflects the
group's exposure to the Spanish insolvency regime, which we view
as relatively unfavorable for creditors," S&P said.

"We then calculate that there will be negligible (0%-10%) value
left for the subordinated unsecured bondholders' claims (totaling
US$1,145 million, including prepetition interest), hence our
recovery rating of '6' on the bonds," S&P said.


===========
S W E D E N
===========


EILEME 1: S&P Assigns 'B+' Long-Term Corporate Credit Rating
------------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'B+' long-term
corporate credit rating to EILEME 1 AB. The outlook is stable.

"At the same time, we assigned our 'B-' issue rating to EILEME
1's planned US$201 million payment-in-kind (PIK) notes due 2020,"
S&P said.

The long-term corporate credit rating on EILEME 1 reflects that
on its parent company, Metelem Holding Company Ltd. (Metelem;
B+/Stable/--). Metelem is the ultimate holding company of Polish
wireless telecommunications operator, Polkomtel S.A. (not rated).

"The rating on Metelem primarily reflects our view of the group's
high leverage and aggressive financial policy following its
recent acquisition of Polkomtel. We see a long-term risk of
mergers among related parties within the new ownership structure.
In addition, we forecast relatively limited headroom under the
group's debt covenants and Standard & Poor's-adjusted leverage of
slightly more than 5x in our base-case credit scenario for 2012.
We also consider that the highly competitive Polish wireless
telecoms market places material pricing pressure on the group's
retail revenues," S&P said.

"These weaknesses are partly offset by our view of Polkomtel's
solid position as one of the three leading operators in the
Polish wireless market, with a relatively low churn rate; its
high profitability compared with its local and global peers; and
its potential ability to continue cutting costs. We also see
material room for growth in Polkomtel's mobile broadband
business, given Poland's relatively low smartphone penetration
and poor fixed broadband coverage. These strengths translate into
our assessment of Metelem's business risk profile as
'satisfactory,'" S&P said.

"The stable outlook reflects that on EILEME 1's parent company,
Metelem. The rating and outlook on EILEME 1 will move in line
with the rating and outlook on Metelem," S&P said.

"The stable outlook on Metelem reflects our view that Polkomtel's
operating performance should remain relatively stable, with
potential growth prospects from 2013 driven by increasing data
revenues and the implementation of cost-cutting initiatives.
Rating downside could arise if operating pressures over 2012 are
higher than we anticipate, leading to a significant decline in
covenant headroom or an increase in adjusted leverage to more
than 6x. Rating upside is limited over the next 12 months, in our
opinion, given our forecast for relatively slow deleveraging,"
S&P said.


===========================
U N I T E D   K I N G D O M
===========================


BEACON BOOKSHOP: Goes Into Liquidation Amid Declining Sales
-----------------------------------------------------------
Jo-Anne Rowney at Buckinghamshire Advertiser reports that The
Beacon Bookshop in Beaconsfield has gone into liquidation after
closing recently due to financial problems.

Four members of staff have lost their jobs as a result of the
closure, the report says.

"We have instructed Wilkins Kennedy to act as liquidators as we
have been hit badly by the change in the market for paper books,"
the report quotes Bookshop manager, Andrew Morrish, as saying.
"We have tried hard to reduce overheads to a level which would
allow the business to continue, but it has not been enough and it
has been necessary to take the difficult decision to close the
shop."

Buckinghamshire Advertiser notes that the shop was set up in
Gregories Road over 30 years ago, but sales had been declining
steadily in recent years.

According to the report, a spokesperson for the accountancy firm,
Wilkins Kennedy said the company that operates the bookshop is
now being placed into liquidation.


BRITISH ARAB: Fitch Affirms Issuer Default Rating at 'BB'
---------------------------------------------------------
Fitch Ratings has affirmed British Arab Commercial Bank's (BACB)
Long-term Issuer Default Rating (IDR) at 'BB' and Viability
Rating at 'bb' and removed both ratings from Rating Watch
Negative (RWN).  The Outlook is Stable.

BACB's funding is dominated by deposits from Libyan institutions.
Since Fitch's last review in November 2011, most of the sanctions
blocking these deposits have been lifted.  There have been no
signs of significant withdrawals of funds (the risk of possible
withdrawal was the main reason for maintaining the RWN).  Deposit
balances had increased by end-2011, as the bank's Libyan
counterparties replenished their balances with the bank.
Although funding is highly concentrated and largely short term
(contractually at least), BACB adopts a conservative approach to
the deployment of these deposits to minimize liquidity risk.
About 85% of assets consist of bank placements and liquid debt
securities, predominantly with western European or US
counterparties.  Business in Libya is tentatively picking up, and
despite considerable political uncertainty in Libya and in a
number of BACB's other markets, most notably Syria, Fitch
considers it appropriate at this point to remove the RWN and
affirm the ratings.

BACB's IDRs are driven by its intrinsic strength, as indicated by
its Viability Rating.  High liquidity alongside satisfactory
capitalization have helped protect the balance sheet from the
uncertainties in the markets where it operates.  The Support
Rating is based on potential support from the bank's major
shareholder, the Libyan Foreign Bank (LFB).  Although support
from the LFB is possible, and Libyan board members have been
restored to BACB's board, it is difficult for Fitch to assess the
likelihood of support given the current circumstances in Libya,
and therefore the lowest Support Rating of '5' has been affirmed.

London-based BACB was established in 1972. The bank is a niche
provider of short-term trade finance to wholesale customers in
the Middle East and North African markets.  BACB is 83.5% owned
by the Libyan Foreign Bank (LFB).  Aside from LFB, the Banque
Centrale Populaire and Banque Exterieure d'Algerie, Moroccan and
Algerian state-owned commercial banks respectively, each own
8.26% of the bank's shares.

The rating actions are as follows:

Long-term IDR affirmed at 'BB'; RWN removed, Stable Outlook
Short-term IDR affirmed at 'B'; RWN removed
Viability Rating affirmed at 'bb'; RWN removed
Support Rating affirmed at '5'


EUROSAIL 2006-1: S&P Affirms Rating on Class E Notes at 'B-'
------------------------------------------------------------
Standard & Poor's Ratings Services took various credit rating
actions on all classes of Eurosail 2006-1 PLC's notes.

Specifically, S&P has:

-- lowered and kept on CreditWatch negative its rating on the
    class A2c notes;

-- raised and removed from CreditWatch negative its ratings on
    the class B1a and B1c notes; and

-- affirmed and removed from CreditWatch negative its ratings on
    the class C1a, C1c, D1a, and D1c notes; and

-- affirmed its rating on the class E note.

"The rating actions follow our credit and cash flow analysis of
the most recent transaction information that we have received
(December 2011). Our analysis reflects our recently published
U.K. residential mortgage-backed securities (RMBS) criteria, and
our application of our relevant criteria for transactions of this
type," S&P said.

"The performance of the transaction has improved since we last
reviewed it in June 2010. Credit enhancement has increased across
all classes of notes due to the deleveraging of the transaction.
The reserve fund has been topped up to its target level via
excess spread, and arrears, while high, are stable," S&P said.

"As the currency swap agreement does not comply with our 2010
counterparty criteria, we have carried out our cash flow analysis
without the benefit of a currency swap, to determine if the class
A2c notes can maintain a rating above the issuer credit rating
(ICR) on the counterparty, plus one notch. The currency swap
provider in this transaction is Barclays Bank PLC (A+/Stable/A-
1)," S&P said.

"We determined that the class A2c notes cannot maintain a rating
above the (ICR) on the counterparty plus one notch, when we do
not give credit to the currency swap. We have therefore lowered
our rating on these notes to 'AA- (sf)' and placed it on
CreditWatch negative for counterparty reasons. The rating on the
class A2c notes was previously on CreditWatch negative for credit
and cash flow reasons; however, the rating on these notes is no
longer on CreditWatch for credit and cash flow reasons and we
have  placed it on CreditWatch negative solely for counterparty
reasons. We have placed the A2c note on CreditWatch negative as
we have not yet received confirmation that the counterparty is
posting collateral," S&P said.

"We have raised and removed from CreditWatch negative our ratings
on the class B1a and B1c notes. Credit enhancement levels for
both classes of notes have increased since our last review and
the revised ratings are commensurate with the levels achieved in
our cash flow analysis under our recently updated U.K. RMBS
criteria," S&P said.

"Based on our credit and cash flow analyses, we have also
affirmed and removed from CreditWatch negative our ratings on the
class C1a and C1c notes as the ratings remain commensurate with
the levels achieved in our cash flow analysis," S&P said.

"We have affirmed and removed from CreditWatch negative our
ratings on the class D1a and D1c notes, and affirmed our rating
on the class E note, due to the recent improved performance of
the transaction, the results of our credit and cash flow
analyses, and our view that there is 'little' risk of default in
the near term," S&P said.

"We also consider credit stability in our analysis, to determine
whether or not an issuer or security has a high likelihood of
experiencing adverse changes in the credit quality of its pool
when moderate stresses are applied. However, the scenarios that
we have considered under moderate stress conditions did not
result in the ratings deteriorating below the maximum projected
deterioration that we would associate with each relevant rating
level, as outlined in the credit stability criteria," S&P said.

"We expect severe arrears to remain at their current levels, as
there are a number of downside risks for nonconforming borrowers.
These include inflation, weak economic growth, high unemployment,
and fiscal tightening. On the positive side, we expect interest
rates to remain low for the foreseeable future," S&P said.

Eurosail 2006-1 is backed by nonconforming U.K. residential
mortgages originated by Southern Pacific Mortgages Ltd. and
Southern Pacific Personal Loans Ltd.

             Standard & Poor's 17g-7 Disclosure Report

SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and
a description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities. The Rule applies to in-scope securities initially
rated (including preliminary ratings) on or after Sept. 26, 2011.

If applicable, the Standard & Poor's 17g-7 Disclosure Report
included in this credit rating report is available at

      http://standardandpoorsdisclosure-17g7.com

Ratings List

Class                  Rating
            To                       From

Eurosail 2006-1 PLC
GBP462.978, Million EUR60.7 Million and US$437.5 million (Plus an
Overissuance of GBP11.025 Million) Mortgage-Backed Floating-Rate
Notes

Rating Lowered and Kept on CreditWatch Negative[1]

A2c         AA- (sf)/Watch Neg       AA (sf)/Watch Neg

Ratings Raised and Removed From CreditWatch Negative

B1a         A (sf)                   BBB (sf)/Watch Neg
B1c         A (sf)                   BBB (sf)/Watch Neg

Ratings Affirmed and Removed From CreditWatch Negative

C1a         BB (sf)                  BB (sf)/Watch Neg
C1c         BB (sf)                  BB (sf)/Watch Neg
D1a         B (sf)                   B (sf)/Watch Neg
D1c         B (sf)                   B (sf)/Watch Neg

Rating Affirmed

E           B- (sf)

[1]S&P's rating on this class of notes is on CreditWatch negative
   for counterparty reasons, but is no longer on CreditWatch for
   credit and cash flow reasons.


EUROSAIL 2006-2BL: S&P Affirms 'B-' Ratings on Two Note Classes
---------------------------------------------------------------
Standard & Poor's Ratings Services took various credit rating
actions on all classes of Eurosail 2006-2BL PLC's notes.

Specifically, S&P has:

-- lowered and kept on CreditWatch negative its ratings on the
    class A2c, B1a, and B1c notes;

-- raised and removed from CreditWatch negative its ratings on
    the class C1a and C1c notes;

-- lowered and removed from CreditWatch negative its ratings on
    the class D1a and D1c notes; and

-- affirmed its ratings on the class E1c and F1c notes.

"The rating actions follow our credit and cash flow analysis of
the most recent transaction information that we have received
(December 2011). Our analysis reflects our recently published
U.K. residential mortgage-backed securities (RMBS) criteria," S&P
said.

"The performance of the transaction has improved since we
conducted a credit and cash flow review in June 2010. Credit
enhancement has increased across all classes of notes due to the
deleveraging of the transaction. The reserve fund remains fully
funded, there are no liquidity draws, there is excess spread in
the transaction, and arrears are stable," S&P said.

"As the currency swap agreement does not comply with our 2010
counterparty criteria, we have carried out our cash flow analysis
without the benefit of a currency swap, to determine if the class
A2c, B1a, and B1c notes can maintain a rating above the issuer
credit rating (ICR) on the counterparty, plus one notch. The
currency swap provider in this transaction is Barclays Bank PLC
(A+/Stable/A-1)," S&P said.

"We determined that the class A2c, B1a, and B1c notes cannot
maintain ratings above the ICR on the counterparty plus one
notch, when we do not give credit to the currency swap. We have
therefore lowered our ratings on these notes to 'AA- (sf)' and
placed them on CreditWatch negative for counterparty reasons. The
ratings on the class A2c, B1a, and B1c notes were previously on
CreditWatch negative for credit and cash flow reasons; however,
the ratings on these notes are no longer on CreditWatch for
credit and cash flow reasons and we have placed them on
CreditWatch negative solely for counterparty reasons. We have
placed these notes on CreditWatch negative as we have not yet
received confirmation that the counterparty is posting
collateral," S&P said.

"We have raised and removed from CreditWatch negative our ratings
on the class C1a and C1c notes. Credit enhancement levels for
both classes of notes have increased since our last review and
the revised rating is commensurate with the level achieved in our
cash flow analysis under our recently updated U.K. RMBS
criteria," S&P said.

"Credit enhancement levels for the class D notes have increased
since our last review and the increase in credit coverage levels
at the current rating level is greater than the required level
under our criteria. However, based on the credit and cash flow
analysis that we have carried out under our recently updated U.K.
RMBS criteria, we have lowered and removed from CreditWatch
negative our ratings on the class D1a and D1c notes," S&P said.

"We have affirmed our ratings on the class E1c and F1c notes, due
to the current performance of the transaction, the results of our
credit and cash flow analyses, and our view that there is little
risk of default in the near term," S&P said.

"We also consider credit stability in our analysis, to determine
whether or not an issuer or security has a high likelihood of
experiencing adverse changes in the credit quality of its pool
when moderate stresses are applied. However, the scenarios that
we have considered under moderate stress conditions did not
result in the ratings deteriorating below the maximum projected
deterioration that we would associate with each relevant rating
level, as outlined in the credit stability criteria," S&P said.

"In cases where future performance could change the arrears
position of an asset pool, under our credit stability criteria we
make additional adjustments to the default probability metric by
projecting buckets of probable arrears. As total arrears in this
transaction have been decreasing since March 2009, we have not
projected any additional arrears in our analysis," S&P said.

Eurosail 2006-2BL is backed by a pool of nonconforming U.K.
residential mortgages originated by Preferred Mortgages Ltd.

             Standard & Poor's 17g-7 Disclosure Report

SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and
a description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities. The Rule applies to in-scope securities initially
rated (including preliminary ratings) on or after Sept. 26, 2011.

If applicable, the Standard & Poor's 17g-7 Disclosure Report
included in this credit rating report is available at

      http://standardandpoorsdisclosure-17g7.com

Ratings List

Class                  Rating
            To                       From

Eurosail 2006-2BL PLC
EUR60.8 Million, GBP406.28 Million, and US$318 Million Mortgage-
Backed Floating-Rate Notes

Ratings Lowered and Kept On CreditWatch Negative[1]

A2c         AA- (sf)/Watch Neg       AAA (sf)/Watch Neg
B1a         AA- (sf)/Watch Neg       AA (sf)/Watch Neg
B1b         AA- (sf)/Watch Neg       AA (sf)/Watch Neg

Ratings Lowered and Removed From CreditWatch Negative

D1a         B (sf)                   BB- (sf)/Watch Neg
D1c         B (sf)                   BB- (sf)/Watch Neg

Ratings Raised and Removed From CreditWatch Negative

C1a         A+ (sf)                  A (sf)/Watch Neg
C1c         A+ (sf)                  A (sf)/Watch Neg

Ratings Affirmed

E1c         B- (sf)
F1c         B- (sf)

[1]S&P's ratings on these classes of notes are on CreditWatch
   negative for counterparty reasons, but are no longer on
   CreditWatch for credit and cash flow reasons.

A1-A            CC (sf)              CCC- (sf)
A1-AE           D (sf)               CCC- (sf)
A1-B            CC (sf)              CCC- (sf)


HOWARD RICHARD: Calls in Liquidators After 40 Years in Business
---------------------------------------------------------------
DIY Week reports that family-run Howard Richard Sales appoints
liquidators after more than 40 years of trading.

Director Howard Jones told DIY Week he was "absolutely
devastated" that the business, which was founded in 1967, had
gone into liquidation.

According to the report, Mr. Jones blamed the firm's demise on "a
very hostile trading environment, which some people seem to be
coping with more successfully than we could".

All employees have now been let go and Mr. Jones is working with
liquidators Elwell Watchhorn & Saxton LLP to clear the business'
remaining stock, DIY Week relates.


MONEY PARTNERS: Moody's Cuts Rating on EUR15-Mil. B1 Notes to B2
----------------------------------------------------------------
Moody's downgraded the ratings of notes in 3 UK non-conforming
RMBS transactions. All affected ratings are listed at the end of
this press release.

The ratings of senior notes issued by Money Partners Securities 2
plc and Money Partners Securities 3 plc were placed on review for
possible downgrade on October 14, 2011, following the downgrade
of Skipton Building Society from Baa1/P-2 to Ba1/NP. The rating
of all classes of notes issued by Money Partners Securities 4 plc
were placed on review for possible downgrade on July 14, 2011,
following performance review of 75 UK non-conforming RMBS
transactions.

Ratings Rationale

The downgrade is driven by (i) the exposure to payment disruption
risk, (ii) the revision of collateral performance assumptions,
(iii) Moody's outlook for UK non-conforming RMBS, and (iv) the
level of credit enhancement supporting the notes.

-- Payment Disruption Risk:

Homeloan Management Limited ("HML"), which is part of Skipton
Building Society ("Skipton"), acts as servicer and as a back-up
cash manager in the affected transactions. Following the
downgrade of Skipton (parent company of HML) Moody's analyzed
continuity of payments in the affected transactions following a
potential disruption in functions performed by HML.

Moody's considers current back-up servicing arrangements
insufficient to support payments in the event of servicer
disruption despite presence of a back-up servicer with investment
grade sponsor because the arrangements are not "warm". The back-
up servicer in the affected transaction is Western Mortgage
Services Ltd (NR). Parent of Western Mortgage Services Ltd is Co-
Operative Bank Plc (A3/P-2). The back-up servicer targets full
servicing function transfer in 120 days from the relevant
appointment. In absence of servicer reports the cash managers may
not be able to perform calculation necessary to process payments
in a timely fashion.

In addition, current back-up cash management arrangements are not
compliant with Moody's operational risk criteria. HML acts as a
back-up cash manager in the affected transactions. The cash
manager is Kensington Mortgage Company (KMC) (NR). Investec PLC
(Ba1/NP) is the parent of KMC. KMC delegated cash management
functions to Investec Bank PLC (Baa3/P-3). In particular, Moody's
notes that there are no automatic termination of cash manager, no
automatic appointment of back-up cash manager and the current
timeline on the transfer of cash management function does not
contain provision to address the timely payment of required
amounts.

Moody's also believes that this risk is further exacerbated for
the affected transactions because the senior notes are
denominated in another currency. A failure to make timely
payments to the swap counterparty could lead to a termination
event under the swap documentation. Moody's concludes that
maximum achievable rating for the notes in the affected
transactions is Aa2 (sf) in consideration of this additional
risk. Moody's notes that there is sufficient liquidity available
in all the transactions.

-- Collateral performance assumptions

Moody's has reassessed its lifetime loss expectations taking into
account the collateral performance to date. Although overall
arrear levels in the affected deals have been stable recently,
the collateral performance has been worse than assumed since the
latest reviews in June 2011 (MPS2), July 2011 (MPS3) and June
2010 (MPS4).

As of November 2011, loans more than 360 days delinquent
(excluding outstanding repossessions) comprised 12.6% of the
outstanding principal balance in MPS2 portfolio, 12.9% in MPS3
and 15.0% in MPS4 portfolio. Only 10% of loans that were more
than 360 days delinquent as of February 2011 have improved their
performance and moved into a lower arrears bucket as of November
2011. For this reason, Moody's considers loans with delinquencies
exceeding 360 days as a proxy for additional future increases in
repossessions and resulting losses above current losses
realization trends. After considering the current amounts of
realized losses and completing a roll rate and severity analysis
for the portfolio Moody's has increased its lifetime expected
loss assumption to 8.7% from 7.2% of the original portfolio
balance in MPS2, to 10.2% from 9.0% respectively in MPS3 and to
13.0% from 8.0% respectively in MPS4.

Moody's has also re-assessed updated loan-by-loan information and
increased its MILAN Aaa CE assumption to 45.0% from 39.0% in
MPS2, to 45% from 32.5% in MPS3 and to 50% from 34% in MPS4,
mainly due to increased uncertainty over future collateral
performance.

-- Negative Outlook for UK non-conforming RMBS

Our outlook for the collateral performance of UK non-conforming
RMBS transactions in 2012 is negative. The UK economy will grow
by only 0.7% in 2012, non-conforming borrowers will be more
sensitive to the deteriorating economic environment than prime
borrowers. Most non-conforming borrowers already use interest-
only products, making it difficult for lenders to lower monthly
payments if the borrower faces a disruption to income.
Unemployment rates will rise to 8.5% in 2012 from a average of
8.0% in 2011. Rising unemployment will hurt non-conforming
borrower performance.

Factors and Sensitivity Analysis

Expected loss assumptions remain subject to uncertainty with
regards to the general economic activity, interest rates and
house prices. Lower than assumed realised recovery rates or
higher than assumed default rates would negatively affect some of
the ratings in these transactions.

Uncertainty also stems from the timing of a servicing transfer
and the credit strengths of the back-up servicer. Should a
servicing transfer take longer than expected following an
operational disruption or the credit strength of the back-up
servicers sponsors deteriorate, the rating would be negatively
affected.

In reviewing the affected transactions, Moody's used ABSROM to
model the cash flows and determine the loss for each tranche. The
cash flow model evaluates all default scenarios that are then
weighted considering the probabilities of the lognormal
distribution assumed for the portfolio default rate. In each
default scenario, the corresponding loss for each class of notes
is calculated given the incoming cash flows from the assets and
the outgoing payments to third parties and noteholders.
Therefore, the expected loss or EL for each tranche is the sum
product of (i) the probability of occurrence of each default
scenario; and (ii) the loss derived from the cash flow model in
each default scenario for each tranche.

As such, Moody's analysis encompasses the assessment of stressed
scenarios.

The principal methodology used in these ratings was Moody's
Approach to Rating RMBS in Europe, Middle East, and Africa,
published in October 2009.

Other Factors used in these rating are described in Global
Structured Finance Operational Risk Guidelines: Moody's Approach
to Analyzing Performance Disruption Risk published in June 2011.

LIST OF AFFECTED SECURITIES

Issuer: Money Partners Securities 2 Plc

   -- GBP188.5M A2a Notes, Downgraded to Aa2 (sf); previously on
      Oct 14, 2011 Aaa (sf) Placed Under Review for Possible
      Downgrade

   -- US$78M A2c Notes, Downgraded to Aa2 (sf); previously on
      Oct 14, 2011 Aaa (sf) Placed Under Review for Possible
      Downgrade

   -- EUR15M B1 Notes, Downgraded to B2 (sf); previously on
      Jun 2, 2011 Downgraded to Ba3 (sf)

   -- GBP10M M1a Notes, Downgraded to Aa3 (sf); previously on
      Nov 30, 2005 Definitive Rating Assigned Aa2 (sf)

   -- EUR26.2M M1b Notes, Downgraded to Aa3 (sf); previously on
      Nov 30, 2005 Definitive Rating Assigned Aa2 (sf)

   -- GBP16M M2a Notes, Downgraded to Baa3 (sf); previously on
      Jun 2, 2011 Downgraded to Baa1 (sf)

   -- EUR4M M2b Notes, Downgraded to Baa3 (sf); previously on
      Jun 2, 2011 Downgraded to Baa1 (sf)

   -- MERCS Notes, Downgraded to Aa2 (sf); previously on
      Oct 14, 2011 Aaa (sf) Placed Under Review for Possible
      Downgrade

Issuer: Money Partners Securities 3 Plc

   -- GBP150.85M A2a Notes, Downgraded to Aa2 (sf); previously on
      Oct 14, 2011 Aaa (sf) Placed Under Review for Possible
      Downgrade

   -- EUR247.5M A2b Notes, Downgraded to Aa2 (sf); previously on
      Oct 14, 2011 Aaa (sf) Placed Under Review for Possible
      Downgrade

   -- US$50M A2c Notes, Downgraded to Aa2 (sf); previously on
      Oct 14, 2011 Aaa (sf) Placed Under Review for Possible
      Downgrade

   -- GBP26.65M M1a Notes, Downgraded to Aa3 (sf); previously on
      Jun 23, 2010 Confirmed at Aa2 (sf)

   -- EUR18M M1b Notes, Downgraded to Aa3 (sf); previously on
      Jun 23, 2010 Confirmed at Aa2 (sf)

   -- MERCS Notes, Downgraded to Aa2 (sf); previously on Oct 14,
      2011 Aaa (sf) Placed Under Review for Possible Downgrade

Issuer: Money Partners Securities 4 Plc

   -- GBP292.5M A1a Notes, Downgraded to Aa2 (sf); previously on
      Jul 14, 2011 Aaa (sf) Placed Under Review for Possible
      Downgrade

   -- EUR303.5M A1b Notes, Downgraded to Aa2 (sf); previously on
      Jul 14, 2011 Aaa (sf) Placed Under Review for Possible
      Downgrade

   -- GBP6M B1a Notes, Downgraded to Caa1 (sf); previously on
      Jul 14, 2011 Ba2 (sf) Placed Under Review for Possible
      Downgrade

   -- EUR14.3M B1b Notes, Downgraded to Caa1 (sf); previously on
      Jul 14, 2011 Ba2 (sf) Placed Under Review for Possible
      Downgrade

   -- GBP14.75M B2 Notes, Downgraded to Ca (sf); previously on
      Jul 14, 2011 Caa1 (sf) Placed Under Review for Possible
      Downgrade

   -- GBP19.2M M1a Notes, Downgraded to Baa1 (sf); previously on
      Jul 14, 2011 Aa3 (sf) Placed Under Review for Possible
      Downgrade

   -- EUR40.15M M1b Notes, Downgraded to Baa1 (sf); previously on
      Jul 14, 2011 Aa3 (sf) Placed Under Review for Possible
      Downgrade

   -- GBP6.2M M2a Notes, Downgraded to Ba2 (sf); previously on
      Jul 14, 2011 Baa2 (sf) Placed Under Review for Possible
      Downgrade

   -- EUR31M M2b Notes, Downgraded to Ba2 (sf); previously on
      Jul 14, 2011 Baa2 (sf) Placed Under Review for Possible
      Downgrade

   -- MERCs Notes, Downgraded to Aa2 (sf); previously on
      Nov 21, 2006 Definitive Rating Assigned Aaa (sf)


PALMER SQUARE: S&P Lowers Rating on Class A1-AE Notes to 'D'
------------------------------------------------------------
Standard & Poor's Ratings Services lowered to 'D (sf)' from 'CCC-
(sf)' its credit rating on Palmer Square PLC's class A1-AE notes.
"At the same time, we have lowered to 'CC (sf)' from 'CCC- (sf)'
our ratings on the class A1-A and A1-B notes, and affirmed our
'CC (sf)' ratings on the class A2, B, C, and D notes," S&P said.

The rating actions follow:

    The trustee's notices, dated Jan. 27 and Jan. 31, 2012, of
    acceleration and of enforcement over Palmer Square's
    collateral;

    The Jan. 31, 2012 appointment of Alastair Beveridge and Simon
    Appell of Zolfo Cooper Europe as receivers to the
    transaction; and

    The receivers' Feb. 1, 2012 decision to suspend regular
    distributions on interest payment dates.

"Interest is due and payable on the nondeferrable class A1-AE
notes on the seventh day of each month. As the receivers have
suspended regular payment date distributions, and the grace
period for nonpayment on the class A1-AE notes has now passed,
the notes are now in interest payment default. We have therefore
lowered to 'D (sf)' from 'CCC- (sf)' our rating on the class A1-
AE notes," S&P said.

"Classes of notes other than A1-AE pay on a quarterly basis. From
information presented in Palmer Square's transaction reports, we
do not consider that these classes of notes are currently in
payment default. Our rating actions on these classes of notes are
based on our assessment of the risks of the noteholders
ultimately experiencing principal losses," S&P said.

"From the transaction reports, we note that the issuer had assets
with a par value of US$931.17 million following the quarterly
payment date in January 2012. At the same time, the amounts
outstanding on the notes totalled US$1,008.78 million, of which
US$860.78 million represented the remaining balance of class
A1 notes -- the A1-A, A1-B, and A1-AE notes -- which rank pari
passu for principal repayments. According to the transaction
documents, in enforcement the issuer must fully repay all of the
class A1 notes before redeeming the other classes of notes," S&P
said.

"While the par value of assets is greater than the outstanding
amount of all of the class A1 notes, our analysis indicates that
more than 24% of the portfolio holdings are currently rated
either 'CC' or 'D', and more than 20% are rated in the 'CCC' band
(i.e., 'CCC+', 'CCC', or 'CCC-'). As a result, we consider it
likely that all noteholders will ultimately experience principal
losses. Our opinion of the creditworthiness of the remaining
classes of notes is therefore 'CC (sf)', signifying that all
classes are currently vulnerable to nonpayment," S&P said.

"Accordingly, we have lowered to 'CC (sf)' from 'CCC- (sf)' our
ratings on the class A1-A and A1-B notes, and affirmed our 'CC
(sf)' ratings on the class A2, B, C, and D notes," S&P said.

Palmer Square is a collateralized debt obligation (CDO)
transaction with a portfolio of primarily U.S. structured finance
securities. It closed in March 2005.

             Standard & Poor's 17g-7 Disclosure Report

SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and
a description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities. The Rule applies to in-scope securities initially
rated (including preliminary ratings) on or after Sept. 26, 2011.

If applicable, the Standard & Poor's 17g-7 Disclosure Report
included in this credit rating report is available at

      http://standardandpoorsdisclosure-17g7.com

Ratings List

Class                   Rating
                To                   From

Palmer Square PLC
US$1.255 Billion Asset-Backed Floating-Rate Notes

Ratings Lowered

A1-A            CC (sf)              CCC- (sf)
A1-AE           D (sf)               CCC- (sf)
A1-B            CC (sf)              CCC- (sf)

Ratings Affirmed

A2-A            CC (sf)
A2-B            CC (sf)
B-1             CC (sf)
B-2             CC (sf)
C-1             CC (sf)
C-2             CC (sf)
D-1             CC (sf)
D-2             CC (sf)


SOPHOS LTD: S&P Affirms 'B' Long-Term Corporate Credit Rating
-------------------------------------------------------------
Standard & Poor's Ratings Services revised its outlook on U.K.-
domiciled Sophos Ltd., a leading provider of integrated
information technology (IT) security and data protection software
and applications, to "positive" from "stable". "At the same time,
we affirmed our 'B' long-term corporate credit rating on the
company," S&P said.

"The outlook revision reflects our expectation that Sophos'
credit metrics are likely to improve meaningfully over the next
12 months. We anticipate that this will be primarily due to the
application of discretionary cash flow generation toward debt
reduction and modest EBITDA growth. In addition, in the first
nine months of financial year-ending March 31, 2012, Sophos
reported stronger results than we had expected; year-on-year
organic growth in billings was about 8%, boosted by meaningful
growth in the unified threat management (UTM) and endpoint
security segment," S&P said.

"In our base-case credit scenario, we anticipate about 20% growth
in billings in financial 2012, primarily due to the recently
acquired Astaro (which was not consolidated in financial 2011).
Furthermore, we anticipate low-single-digit organic growth in
financial 2013, mainly because of continued strong demand for UTM
solutions. Despite the weaker economic environment, we do not
assume a decline in billings because we consider the global IT
security market to be relatively resilient to economic downturns,
and we see ongoing growth in targeted web-based threats and
broadband internet connectivity," S&P said.

"Our base-case assumptions also include modest cash EBITDA margin
compression in financial 2012, to about 26% from 27% in financial
2011. This is due to adverse product mix effects, pricing
pressures, and continued growth in research and development
spending in response to rising IT security threats. However, we
anticipate that margins will improve somewhat in financial 2013,
mainly due to cost-cutting efforts and operating leverage," S&P
said.

"We forecast that the group's Standard & Poor's-adjusted gross
debt as of March 30, 2012, will reach about $750 million,
including about $315 million subordinated preference certificates
(SPCs) sitting at Sophos' parent company, Shield BidCo Ltd.(not
rated). According to our criteria, we view the characteristics of
the SPCs as debt-like instruments rather than permanent equity,"
S&P said.

"Assuming mandatory debt repayments and a moderate cash flow
sweep, we forecast a decline in Sophos' gross adjusted debt-to-
EBITDA ratio to about 6x at financial year-end 2013, down from
about 6.8x pro forma at financial year-end 2012. However,
excluding the rapidly interest accruing SPCs, we estimate that
leverage will decline well below 4x on a gross-debt basis from
about 4x pro forma at financial year-end 2012. We also anticipate
material discretionary cash flow of about $50 million in fiscal
year 2013, equivalent to about 7% of adjusted gross debt. Our
base-case scenario does not incorporate any meaningful
acquisitions or dividend distributions," S&P said.

"The rating on Sophos reflects our assessment of the group's
business risk profile as 'fair' and its financial risk profile as
'highly leveraged,'" S&P said.

The group's "fair" business risk profile is primarily constrained
by the highly competitive IT security market, limited diversity,
and high operating leverage. This is partly offset by Sophos'
well established business position and strong worldwide demand
for IT security.

"Sophos' 'highly leveraged' financial risk profile primarily
reflects our view of its highly leveraged capital structure and
aggressive financial policy, as shown by the recent significant
acquisition of Astaro. This is partly offset by Sophos' solid
free cash flow generation and long-term capital structure," S&P
said.


===============
X X X X X X X X
===============


* EUROPE: Moody's Adjusts Ratings of Nine European Sovereigns
-------------------------------------------------------------
As anticipated in November 2011, Moody's Investors Service has
adjusted the sovereign debt ratings of selected EU countries in
order to reflect their susceptibility to the growing financial
and macroeconomic risks emanating from the euro area crisis and
how these risks exacerbate the affected countries' own specific
challenges.

Moody's actions can be summarized as:

- Austria: outlook on Aaa rating changed to negative

- France: outlook on Aaa rating changed to negative

- Italy: downgraded to A3 from A2, negative outlook

- Malta: downgraded to A3 from A2, negative outlook

- Portugal: downgraded to Ba3 from Ba2, negative outlook

- Slovakia: downgraded to A2 from A1, negative outlook

- Slovenia: downgraded to A2 from A1, negative outlook

- Spain: downgraded to A3 from A1, negative outlook

- United Kingdom: outlook on Aaa rating changed to negative

The implications of these actions for directly and indirectly
related ratings will be reported through separate press releases.

The main drivers of the actions are:

- The uncertainty over (i) the euro area's prospects for
   institutional reform of its fiscal and economic framework and
   (ii) the resources that will be made available to deal with
   the crisis.

- Europe's increasingly weak macroeconomic prospects, which
   threaten the implementation of domestic austerity programs and
   the structural reforms that are needed to promote
   competitiveness.

- The impact that Moody's believes these factors will continue
   to have on market confidence, which is likely to remain
   fragile, with a high potential for further shocks to funding
   conditions for stressed sovereigns and banks.

To a varying degree, these factors are constraining the
creditworthiness of all European sovereigns and exacerbating the
susceptibility of a number of sovereigns to particular financial
and macroeconomic exposures.

Moody's has reflected these constraints and exposures in its
decision to downgrade the government bond ratings of Italy,
Malta, Portugal, Slovakia, Slovenia and Spain as listed above.
The outlook on the ratings of these countries remains negative
given the continuing uncertainty over financing conditions over
the next few quarters and its corresponding impact on
creditworthiness.

In addition, these constraints have also prompted Moody's to
change to negative the outlooks on the Aaa ratings of Austria,
France and the United Kingdom. The negative outlooks reflect the
presence of a number of specific credit pressures that would
exacerbate the susceptibility of these sovereigns' balance
sheets, and of their ongoing austerity programs, to any further
deterioration in European economic conditions and financial
landscape.

An important factor limiting the magnitude of Moody's rating
adjustments is the European authorities' commitment to preserving
the monetary union and implementing whatever reforms are needed
to restore market confidence. These rating actions therefore take
into account the steps taken by euro area policymakers in
agreeing to a framework to improve fiscal planning and control
and measures adopted to stem the risk of contagion.

The rating agency considers the ratings of the following European
sovereigns to be appropriately positioned, namely Denmark (Aaa),
Finland (Aaa), Germany (Aaa), Luxembourg (Aaa), Netherlands
(Aaa), Sweden (Aaa), Belgium (Aa3), Estonia (A1) and Ireland
(Ba1). Moody's review of Cyprus' Baa3 rating, as announced in
November 2011, is ongoing, while the developing outlook on
Greece's Ca rating remains appropriate as the rating agency
awaits clarification on the country's debt restructuring.

As for Central and Eastern European sovereigns outside the euro
area, Moody's will be assessing the credit implications of the
fragile financial market conditions and weak macroeconomic
outlook during the first half of this year.

In related rating actions, Moody's has also downgraded the rating
of Malta Freeport Co. to A3 from A2, and that of Spain's Fondo de
Reestructuracion Ordenada Bancaria (FROB) to A3 from A1. Both of
these issuers are government-guaranteed entities and therefore
have a negative outlook in line with the outlook on their
respective sovereign. Moody's has also changed the outlook on the
Aaa debt rating of the Bank of England to negative, in parallel
with its decision to change the outlook on the UK's sovereign
rating. Similarly, Moody's has changed to negative the outlook on
the Aaa debt ratings of the Societe de Financement de l'Economie
Fran‡aise (SFEF) and the Societe de Prise de Participation de
l'Etat (SPPE) in line with the change of outlook on France's
sovereign rating.

The principal methodology used in these ratings was Sovereign
Bond Ratings Methodology published in September 2008.

Moody's changes the outlook on Austria's Aaa rating to negative

Moody's Investors Service has changed the outlook on the Aaa
rating of the Republic of Austria to negative from stable.
Concurrently, Moody's has affirmed Austria's short-term debt
rating of Prime-1.

The key drivers of the action on Austria are:

1) The uncertainty over the prospects for institutional reform in
the euro area and the weak macroeconomic outlook across the
region, which will continue to weigh on already fragile market
confidence.

2) The balance sheet of the Austrian government is exposed to
larger contingent liabilities than is the case for other Aaa-
rated sovereigns in the EU, mainly on account of the relatively
large size of Austria's banking sector, its substantial exposure
to the more volatile economies in Central and Eastern Europe and
the reliance of the banks on wholesale funding markets. The
stand-alone credit strength of the Austrian banking sector is low
for a Aaa-rated sovereign.

3) While the concerns over the banking sector are not new,
Austria's debt metrics are weaker today than they were in 2008-
2009, the last time that the Austrian government provided support
to its banks. The Austrian government's debt metrics are also
weaker than some of those of other Aaa-rated peers.

Rationale for Negative Outlook

As indicated in the introduction of this press release, a
contributing factor underlying Moody's decision to change the
outlook on Austria's Aaa bond rating to negative is the
uncertainty over the euro area's prospects for institutional
reform of its fiscal and economic framework and over the
resources that will be made available to deal with the crisis.
Moreover, Europe's weak macroeconomic prospects complicate the
implementation of domestic austerity programs and the structural
reforms that are needed to promote competitiveness. Moody's
believes that these factors will continue to weigh on market
confidence, which is likely to remain fragile, with a high
potential for further shocks to funding conditions for stressed
sovereigns and banks.

While constraining the creditworthiness of all European
sovereigns, the fragile financial environment increases Austria's
susceptibility to financial shocks. Moody's decision to change
the outlook to negative reflects the large contingent liabilities
to which the Austrian sovereign is exposed, given the relatively
large size of its banking sector and in particular its exposure
to the Central, Eastern and South-Eastern European (CESEE)
region. According to the Austrian banking regulator FMA, total
consolidated assets of Austria's banks amounted to 390% of
Austria's GDP in Q3 2011 and their exposure to the CESEE region
remains elevated at EUR225 billion, or 75% of GDP, as of
September 2011 (see OeNB Financial Stability Report, December
2011). Moody's notes that the stand-alone credit strength of the
Austrian banking sector is low compared with the banking sectors
of other Aaa-rated sovereigns.

The decision to assign a negative outlook mainly reflects Moody's
lower "tolerance" for high levels of contingent liabilities at
the very high end of the rating spectrum, rather than concerns
over a further increase in the government's potential exposure.
Austrian banks' capitalization levels are lower than they are in
other Aaa-rated countries, and their business models continue to
exhibit higher risks than those of banks in most of Austria's
peers. This was acknowledged by Austria's central bank in its
latest Financial Stability Report (published in December 2011).

Moody's acknowledges the active attempts by the Austrian banking
regulator to reduce the country's exposure by requiring the
Austrian banks that operate in the region to reduce the funding
mismatch that is prevalent in some of the countries. However,
Moody's believes that this reduction will most likely happen only
gradually over the next few years. In the meantime, a potential
further downturn in the CESEE region (for example, from contagion
from a further deterioration of economic and financial conditions
in the euro area) could generate considerably higher capital and
funding support needs, which Moody's would deem to be
incompatible with the Austrian government maintaining its Aaa
rating.

The third factor underpinning the outlook change is Austria's
weakened public debt metrics compared with some of the other Aaa-
rated peers. Austria's debt metrics are not as strong as they
were in 2008/09, the last time that the Austrian government
provided support to its banks. Austria's public debt ratio stood
at around 75% of GDP in 2011, which is significantly above the
median debt ratio for all Aaa-rated sovereigns of around 52% of
GDP. This estimate includes the full debt of the government-
related issuer OeBB Infrastruktur (EUR17 billion as of end-2011).
Even under base case assumptions, Moody's expects Austria's debt
ratio to rise to around 80% of GDP in 2013, an increase of 20
percentage points compared to 2007, and to decline only gradually
thereafter.

The upward trajectory of Austria's outstanding debt places it
amongst the most heavily indebted of its Aaa-rated peers,
alongside the United States, France and the United Kingdom whose
Aaa ratings also carry a negative outlook.

Rationale for Unchanged Aaa Rating

Austria's Aaa rating is supported by the country's strong,
diversified economy with no major private sector or external
imbalances to correct. Growth performance has been strong by
comparison with other European economies, unemployment is low,
the current account has been in surplus since 2002 and the
leverage of the private sector is moderate. Austria has a good
track record of achieving and maintaining low budget deficits,
recording a budgetary shortfall of above 2.5% of GDP only once in
the period of 1997 to 2009. The deficit outturn in 2011 was
better than budgeted, with a deficit of 3.3% of GDP (versus an
expected 3.9% budget shortfall) due to much stronger revenue
growth and very strict monitoring of spending. This compares
favorably with the budgetary performance of some of the other
Aaa-rated peers. However, given the expected slowdown in growth
across the euro area in 2012, Moody's is not expecting the
Austrian government to make any material progress in reducing the
fiscal deficit, which will in turn keep the debt ratio on an
upward trajectory. Moody's acknowledges the government's recently
presented fiscal consolidation package which aims to bring the
budget deficit to zero by 2016. While the accelerated fiscal
consolidation is welcome, Moody's notes that Austria's debt ratio
will remain above 70% of GDP in 2016, even assuming full
implementation of all the proposed measures.

What Could Move The Rating Down

The Austrian government's bond rating could potentially be
downgraded to Aa1 if further material government support were
needed to support the country's banking sector. A sharp
intensification of the euro area crisis and further deterioration
of macroeconomic conditions in Europe, leading to material fiscal
and debt slippage in Austria, could also pressure the rating.

Conversely, the outlook on the sovereign Aaa rating could be
returned to stable if government contingent liabilities were
materially reduced, for example, by a further significant
strengthening of the banking sector's capital base through
private sector capital or organic capital growth, so as to remove
any doubt about the need for future public sector support.

Moody's changes the outlook on France's Aaa rating to negative

Moody's Investors Service has changed the outlook on the Aaa
rating of France's local- and foreign-currency government debt to
negative from stable.

The key drivers of today's outlook change on France are:

1) The uncertainty over the prospects for institutional reform in
the euro area and the weak macroeconomic outlook across the
region, which will continue to weigh on already fragile market
confidence.

2) The ongoing deterioration in France's government debt metrics,
which are now among the weakest of France's Aaa-rated peers.

3) The significant risks to the French government's ability to
achieve its fiscal consolidation targets, which could be further
complicated by a need to support other European sovereigns or its
own banking system.

Concurrently, Moody's has also changed to negative the outlook on
the Aaa debt ratings of the Societe de Financement de l'Economie
Fran‡aise (SFEF) and the Societe de Prise de Participation de
l'Etat (SPPE) in line with the change of outlook on France's
sovereign rating.

Rationale For Negative Outlook

As indicated in the introduction of this press release, a
contributing factor underlying Moody's decision to change the
outlook on France's Aaa government bond rating to negative is the
uncertainty over the euro area's prospects for institutional
reform of its fiscal and economic framework and over the
resources that will be made available to deal with the crisis.
Moreover, Europe's weak macroeconomic prospects complicate the
implementation of domestic austerity programs and the structural
reforms that are needed to promote competitiveness. Moody's
believes that these factors will continue to weigh on market
confidence, which is likely to remain fragile, with a high
potential for further shocks to funding conditions. In addition
to constraining the creditworthiness of all European sovereigns,
the fragile financial environment increases France's
susceptibility to financial and macroeconomic shocks given the
concerns identified below.

The second driver underpinning the negative outlook is the
ongoing deterioration in France's government debt metrics, which
are now among the weakest of France's Aaa peers. France's primary
balance is in deficit and compares unfavorably with other Aaa-
rated countries with a stable outlook. The upward trajectory of
France's outstanding debt over the decade preceding the crisis,
at a time when most other governments were reducing their debt
ratios, places it amongst the most heavily indebted of its Aaa-
rated peers, alongside the United States and the United Kingdom
whose Aaa ratings also carry a negative outlook. France's
capacity to support higher government debt levels is also
complicated by the limitations of operating without the advantage
of being the single "risk-free" issuer of debt denominated in its
currency.

The third driver of the announced action is the significant risk
attached to the government's medium-term ability to implement
consolidation targets and achieve a stabilization and reversal in
its public debt trajectory. While the rating agency acknowledges
the French government's efforts to implement important economic
and fiscal reforms since 2008, and meet fiscal targets over the
past two years, the agency notes that France's prior reluctance
to decisively reform and consolidate have left its finances in a
challenging position amid an ongoing global financial and euro
area debt crisis. Stabilizing, and ultimately reducing, France's
stock of outstanding debt will be contingent on the French
government maintaining its fiscal consolidation effort.
Meanwhile, the fragile financial market environment, which will
endure for many months to come, constrains the French
government's room to maneuver in terms of stretching its balance
sheet in the face of further direct challenges to its finances --
for example, from the possible need to provide support to other
European sovereigns or to its own banking system, both of which
would further complicate its own fiscal consolidation process.

Rationale For Unchanged Aaa Rating

France's Aaa rating is supported by the economy's large size,
high productivity and broad diversification, together with high
private sector savings and relatively moderate household and
corporate liabilities. This provides considerable capacity to
absorb shocks, as demonstrated by the resilience of domestic
demand during the 2008-2009 global crisis. The ability of the
French government to finance its very high debt level at
affordable interest rates in an uncertain financial and economic
environment will be crucial to it retaining its Aaa rating.

What Could Move The Rating Down

Moody's would downgrade France's government debt rating in the
event of an unsuccessful implementation of economic and fiscal
policy measures, leading to failure of the government's attempt
to stabilize and reverse the high public debt ratio, generating a
further weakening of the debt metrics against peers and further
reducing France's resiliency to potential economic and financial
shocks. A material increase in exposure to contingent liabilities
from the national banking system or a requirement for further
support to neighboring euro area member states if the euro area
crisis were to intensify could also prompt a rating downgrade.

A return to a stable outlook on France's sovereign rating would
require significant progress towards improving the debt metrics
and an easing of the euro area sovereign crisis given Moody's
concerns regarding the country's exposure to contingent
liabilities.

Moody's downgrades Italy's government bond rating to A3 from A2,
negative outlook

Moody's Investors Service has downgraded the Italian government's
local- and foreign-currency debt rating to A3 from A2. The
outlook remains negative. Concurrently, Moody's has downgraded
the country's short-term rating to Prime-2 from Prime-1.

The key drivers of the rating action on Italy are:

1) The uncertainty over the prospects for institutional reform in
the euro area and the weak macroeconomic outlook across the
region, which will continue to weigh on already fragile market
confidence.

2) The challenges facing Italy's public finances, especially its
large stock of debt and high cost of funding, as well as the
country's deteriorating macroeconomic outlook.

3) The significant risk that Italy's government may not achieve
its consolidation targets and address its public debt given the
country's pronounced structural economic weakness.

Moody's is maintaining a negative outlook on Italy's sovereign
rating to reflect the potential for a further decline in economic
and financing conditions as a result of a deterioration in the
euro area debt crisis.

Rationale For Downgrade

As indicated in the introduction of this press release, a
contributing factor underlying Moody's one-notch downgrade of
Italy's government bond rating is the uncertainty over the euro
area's prospects for institutional reform of its fiscal and
economic framework and over the resources that will be made
available to deal with the crisis. Moreover, Europe's weak
macroeconomic prospects complicate the implementation of domestic
austerity programs and the structural reforms that are needed to
promote competitiveness. Moody's believes that these factors will
continue to weigh on market confidence, which is likely to remain
fragile, with a high potential for further shocks to funding
conditions. In addition to constraining the creditworthiness of
all European sovereigns, the fragile financial environment
increases Italy's susceptibility to financial and macroeconomic
shocks given the concerns identified below.

The deteriorating macroeconomic environment is in turn
exacerbating a number of Italy's own challenges that are weighing
on its creditworthiness and constitute the second driver of
Moody's one-notch downgrade of Italy's bond rating. The multiple
structural measures introduced by the government to promote
economic growth will take time to yield results, which are
difficult to predict at this stage. Moreover, the recent
volatility in funding conditions for the Italian sovereign
remains a risk factor that needs to be reflected in the
government bond rating. Overall, the combination of a large debt
stock (equivalent to 120% of GDP) and low medium-term economic
growth prospects makes Italy susceptible to volatility in market
sentiment that results in increased debt-servicing costs.

The third driver of today's rating action is the significant risk
that the Italian government may not achieve its consolidation
targets and prove unable to reduce the large stock of outstanding
public debt. Moody's acknowledges that the new Italian
government's fiscal consolidation and economic reform efforts
have helped to maintain a primary surplus. The government has
targeted primary surpluses in excess of 5% in the coming years.
However, in an environment of pronounced regional economic
weakness, the Italian government faces considerable challenges in
generating the high primary surpluses required to compensate for
higher interest payments and ultimately reduce its outstanding
public debt.

These credit pressures have intensified and become more apparent
in the period since Moody's last rating action on Italy in
September 2011, and are contributing to the need to reposition
Italy's rating at the lower end of the 'A' range.

The decision to downgrade Italy's debt rating also reflects
Moody's view that Italy's credit fundamentals and vulnerabilities
due to its high debt burden are difficult to reconcile with a
rating above the lower end of the "single-A" rating category.
Indeed, peers at the top of the single-A category (like the Czech
Republic and South Korea) as well as those in the middle of the
category (like Poland), do not face Italy's high debt and
structural growth challenges.

What Could Move The Rating Up/Down

Italy's government debt rating could be downgraded further in the
event of evidence of persistent economic weakness, reform
implementation difficulties, or increased political uncertainty,
which translate into a significant postponement of Italy's fiscal
consolidation and reversal of the public debt trajectory. A
substantial and ongoing deterioration of medium-term funding
conditions for Italy due to further substantial domestic economic
and financial shocks from the euro area crisis would also be
credit-negative. Moreover, Italy's sovereign rating could
transition to substantially lower rating levels if the country's
access to the public debt markets were to be constrained and the
long-term availability of external sources of liquidity support
were to remain uncertain.

Conversely, a successful implementation of economic reform and
fiscal measures that effectively strengthen the Italian economy's
growth pattern and the government's balance sheet would be
credit-positive and could stabilize the outlook. Upward pressure
on Italy's rating could develop if the government's public
finances were to become less vulnerable to volatile funding
conditions, further to a reversal of the upward trajectory in
public debt and, ultimately, the achievement of substantially
lower debt levels.

Moody's downgrades Malta's government bond rating to A3 from A2,
negative outlook

Moody's Investors Service has downgraded Malta's government bond
rating to A3 from A2. The outlook remains negative.

The key drivers of today's rating action on Malta are:

1) The uncertainty over the prospects for institutional reform in
the euro area and the weak macroeconomic outlook across the
region, which will continue to weigh on already fragile market
confidence.

2) Malta's relatively weak debt metrics compared with 'A'
category peers and the country's reliance on the strength of the
European economy, which will dampen its own growth prospects in
the medium term and worsen its debt dynamics.

Moody's is maintaining a negative outlook on Malta's sovereign
rating to reflect the potential for a further decline in economic
and financing conditions as a result of a deterioration in the
euro area debt crisis.

In a related rating action, Moody's has also downgraded the
foreign- and local-currency debt ratings of Malta Freeport Co. to
A3 from A2 given its status as a government-guaranteed entity.
The outlook remains negative in line with the sovereign rating.

Rationale For Downgrade

As indicated in the introduction of this press release, a
contributing factor underlying Moody's one-notch downgrade of
Malta's government bond rating is the uncertainty over the euro
area's prospects for institutional reform of its fiscal and
economic framework and over the resources that will be made
available to deal with the crisis. Moreover, Europe's weak
macroeconomic prospects complicate the implementation of domestic
austerity programs and the structural reforms that are needed to
promote competitiveness. Moody's believes that these factors will
continue to weigh on market confidence, which is likely to remain
fragile, with a high potential for further shocks to funding
conditions. In addition to constraining the creditworthiness of
all European sovereigns, the fragile financial environment
increases Malta's susceptibility to financial and macroeconomic
shocks given the concerns identified below.

The fragile external environment is exacerbating a number of
Malta's own challenges which continue to weigh negatively on the
country's debt rating and constitute the second driver of Moody's
downgrade. Malta's debt metrics are among the weaker of the 'A'-
rated sovereigns. Growth prospects over the medium term also
appear poorer for Malta than for its peers, given the country's
dependence on tourism from the euro area as its main source of
economic growth. This will hinder the narrowing of the fiscal
imbalance. Lower business confidence and tighter credit
conditions are likely to result in weak private-sector
investment, and real output growth is likely to be significantly
lower than the government's forecast of over 2%. The
deteriorating growth prospects and the concomitant impact on
already weak debt dynamics will further reduce government
financial strength and expose it to more constrained, higher-cost
funding conditions.

What Could Move The Rating Up/Down

Downward pressure on the rating could develop if Malta's economic
growth prospects deteriorate significantly, thereby obstructing
fiscal consolidation and leading to a significant further
deterioration in the sovereign's key credit metrics. The rating
could also be downgraded if an intensification of the euro area
crisis were to result in materially higher cost or constrained
funding conditions for the government. A further deterioration of
macroeconomic conditions in Europe, leading to material fiscal
and debt slippage in Malta, could also pressure the rating.

Conversely, the negative outlook on Malta's sovereign rating
would be changed to stable in the event of a sustained
improvement in investor sentiment across the euro area. Although
unlikely in the foreseeable future, the government's ratings
could move upward in the event of a significant improvement in
the government's balance sheet, leading to greater convergence
with 'A' category medians. Substantial structural reforms focused
on enhancing competitiveness and boosting potential output growth
rates would also be credit-positive.

Moody's downgrades Portugal's government bond rating to Ba3 from
Ba2, negative outlook

Moody's Investors Service has downgraded the government of
Portugal's long-term debt ratings to Ba3 from Ba2. The outlook
remains negative.

The key drivers of the rating action on Portugal are:

1) The uncertainty over the prospects for institutional reform in
the euro area and the weak macroeconomic outlook across the
region, which will continue to weigh on already fragile market
confidence.

2) The resulting potential for a deeper and longer economic
contraction in Portugal than previously anticipated, and the
ongoing deleveraging process in the country's economy and banking
system.

3) The higher-than-expected general government debt ratios, which
are due to reach roughly 115% of GDP within the next two years,
thereby significantly limiting the room for fiscal maneuver and
commensurately reducing the likelihood of achieving a declining
debt trajectory.

4) Potential contagion emanating from the impending Greek
default, which is likely to extend the period during which
Portugal is unable to access long-term private markets once the
current support program expires.

Moody's is maintaining a negative outlook on Portugal's sovereign
rating to reflect the potential for a further decline in economic
and financing conditions as a result of a deterioration in the
euro area debt crisis.

Rationale For Downgrade

As indicated in the introduction of this press release, a
contributing factor underlying Moody's one-notch downgrade of
Portugal's government bond rating is the uncertainty over the
euro area's prospects for institutional reform of its fiscal and
economic framework and over the resources that will be made
available to deal with the crisis. Moreover, Europe's weak
macroeconomic prospects complicate the implementation of domestic
austerity programs and the structural reforms that are needed to
promote competitiveness. Moody's believes that these factors will
continue to weigh on market confidence, which is likely to remain
fragile. This will in turn mean a high potential for further
shocks to funding conditions, which will affect weaker sovereigns
like Portugal first, increasing its susceptibility to other
financial and macroeconomic shocks given the concerns identified
below.

This backdrop is exacerbating Portugal's domestic challenges and
informs the second driver of Moody's rating action, which is the
weakening outlook for the country's economic growth prospects and
the implications for the government's efforts to place its debt
on a sustainable footing. Moody's expects the Portuguese economy
to contract by more than 3% in 2012 given the multitude of
downside risks from the region, including the impact of the
ongoing deleveraging in the financial and private sector as well
as the immediate impact of the government's austerity measures.
The unemployment rate is likely to remain high and nominal wages
will remain under pressure due to cutbacks in public-sector
bonuses and staff levels, thus depressing domestic demand.
Moreover, Moody's expectation of a slowdown among Portugal's main
trading partners in 2012 will undermine the contribution from net
exports, the only driver of GDP growth since the 2009 recession.
Lastly, the macroeconomic impact of the targeted fiscal
tightening in 2012 is programmed to be as intense as that of
2011, further subduing domestic growth prospects.

The third driver for the downgrade of Portugal's sovereign rating
is the unfavorable revision of the forecast for government debt
metrics, which are now projected to rise to around 115% of GDP or
higher before stabilizing. This greater-than-anticipated level is
a consequence of the government's assumption of debt from state-
owned enterprises and regional governments in 2008, 2009 and
2010, as well as the expectation that the government will need to
draw the EUR12 billion bank recapitalization package that is part
of the IMF/EU program. At these levels, the government has very
little room to maneuver in the event of further economic,
financial or political shocks originating from either domestic or
external sources. Moreover, in a low-growth environment, higher
initial debt levels will further complicate the government's
deleveraging efforts, especially since debt affordability (i.e.
the cost of servicing the debt as a share of government revenues)
is likely to remain more onerous than previously estimated.

The fourth driver of the rating action is Moody's view that the
increasing likelihood of a disorderly default by Greece (if it
fails to gain the required level of support of investors for the
proposed restructuring terms, or further financial assistance
from official-sector supporters) will very likely make Portugal
unable to access long-term market funding in September 2013 as
planned, and increase pressure on the government to seek a debt
restructuring. Moody's believes that there is a high risk of
contagion from Greece among weaker euro area sovereigns in
particular. While unfavorable market perceptions will not affect
Portugal's access to long-term official-sector funding under its
International Monetary Fund/European Union support program until
at least 2014, and probably beyond, Moody's notes that access to
official-sector funding is not a guarantee of support from
private-sector creditors. Moreover, the longer official-sector
support is needed, the greater the pressure for a restructuring
of Portugal's private-sector debt becomes.

While risks remain weighted to the downside, there are several
reasons why Moody's downgrade of Portugal's government debt
rating is limited to one notch. The first is the government's
success in exceeding fiscal targets, as set out in its IMF/EU-
supported economic adjustment program. This was possible despite
the initial significant divergence in the government deficit from
these targets in the first half of 2011, additional setbacks such
as assuming the debt and debt-servicing obligations of some
state-owned enterprises under recent EU accounting rules, as well
as EUR1.1 billion in previously unreported debt stemming from the
autonomous region of Madeira. These setbacks were partly overcome
with the help of the one-off transfer of pension assets worth
3.5% of GDP from the big four commercial banks to the central
government, which facilitated a total reduction in Portugal's
nominal general government deficit by nearly 6% of GDP in 2011.

The second reason for the limited rating adjustment is Moody's
expectation that the Portuguese government will have achieved a
structural budget correction in 2011 equivalent to around 4% of
GDP, which the IMF estimates to be the largest such adjustment in
Europe in 2011. A third reason is that, in 2011, the Portuguese
government also began to design and implement a set of further
structural reforms intended to bolster the economy's potential
growth rate. The Portuguese government, unlike that of Greece,
has managed to secure the cooperation of a large segment of the
labor force for these reforms.

What Could Move The Rating Up/Down

The rating could be further downgraded if the government's
deficits are not kept sufficiently low to place the debt ratios
on a clear downward path within the next three years, or if the
government fails to meet its fiscal targets or fails to implement
its planned structural reforms. An intensification of the euro
area crisis and further deterioration of macroeconomic and
financial market conditions in Europe, leading to material fiscal
and debt slippage in Portugal, could also pressure the country's
rating.

Although positive rating pressure is not likely over the near to
medium term, Moody's considers that the outlook on Portugal's
debt rating could stabilize if the government were to pursue
macroeconomic policies that place its debt on a sustainable
downward trajectory and buoys the economy's growth potential. The
credit would also benefit from continued compliance with the
IMF/EU program and ongoing enactment of the promised structural
reforms, which would improve market confidence and increase the
likelihood that the Portuguese government will regain access to
the private long-term debt market.

Moody's downgrades Slovakia's government bond rating to A2 from
A1, negative outlook

Moody's Investors Service has downgraded Slovakia's government
bond ratings to A2 from A1. The outlook has been changed to
negative.

The key drivers of today's rating action on Slovakia are:

1) The uncertainty over the prospects for institutional reform in
the euro area and the weak macroeconomic outlook across the
region, which will continue to weigh on already fragile market
confidence.

2) Slovakia's increased susceptibility to financial and political
event risk, presenting considerable challenges to achieving the
government's fiscal consolidation targets and reversing the
adverse trend in debt dynamics.

3) The increased downside risks to economic growth due to
weakening external demand.

Moody's has changed the outlook on Slovakia's sovereign rating to
negative to reflect the potential for a further decline in
economic and financing conditions as a result of a deterioration
in the euro area debt crisis.

Rationale For Downgrade

As indicated in the introduction of this press release, a
contributing factor underlying Moody's one-notch downgrade of
Slovakia's government bond rating is the uncertainty over the
euro area's prospects for institutional reform of its fiscal and
economic framework and over the resources that will be made
available to deal with the crisis. Moreover, Europe's weak
macroeconomic prospects complicate the implementation of domestic
austerity programs and the structural reforms that are needed to
promote competitiveness. Moody's believes that these factors will
continue to weigh on market confidence, which is likely to remain
fragile, with a high potential for further shocks to funding
conditions. In addition to constraining the creditworthiness of
all European sovereigns, the fragile financial environment
increases Slovakia's susceptibility to financial and
macroeconomic shocks given the concerns identified below.

The fragile external environment is directly increasing
Slovakia's susceptibility to financial event risk, which is the
second driver informing the one-notch downgrade of the country's
government bond rating. Specifically, the volatile market
conditions are increasing Slovakia's financing costs and its
growing funding risks. At the same time, political event risk has
also been heightened by the recent collapse of the government led
by Prime Minister Iveta Radicova following a confidence vote in
October 2011. Increased susceptibility to financial and political
event risk present considerable challenges to achieving the
government's fiscal consolidation targets and reversing the
recent adverse trend in debt dynamics. Slovakia's general
government debt-to-GDP ratio has climbed from 28% in 2008 to over
44% in 2011, and will not stabilize in 2012-13 as had been
initially expected.

The third factor underlying the downgrade is Slovakia's exposure
to the deteriorating regional macroeconomic environment given the
dependence of the economy on external demand, a key channel for
contagion from the euro area crisis. Subdued activity in the euro
area will continue to negatively affect the export-driven Slovak
economy, constraining its ability to implement its fiscal
consolidation targets, especially in light of the downfall of the
ruling coalition, which had been committed to achieving these
targets. While Moody's forecasts a 1.1% growth in real GDP for
2012, risks remain firmly on the downside as continued
uncertainty hinders business and consumer confidence in Slovakia
and the broader euro area. Weaker revenue collection will hamper
the government's efforts to reduce its deficit going forward,
resulting in a further deterioration of the government's balance
sheet. The potential for further fiscal slippage remains high,
while the willingness of the new Slovak government to take the
steps needed to achieve the revised fiscal targets presents
considerable implementation risks.

What Could Move The Rating Up/Down

Downward pressure on the rating could develop if Slovakia's
economic growth prospects deteriorate significantly, thereby
obstructing fiscal consolidation and leading to a significant
further deterioration in the government's balance sheet. A sharp
intensification of the euro area crisis and further deterioration
of macroeconomic conditions in Europe, leading to material fiscal
and debt slippage in Slovakia, could also pressure the country's
rating. Moody's would view such fiscal slippage negatively as it
would lead to a deterioration of policy credibility and debt
dynamics. This would in turn adversely affect Slovakia's funding
prospects, increase rollover risk and result in a higher cost of
funding for the government.

Moody's would consider changing the negative outlook to stable in
the event of a sustained improvement in investor sentiment across
the euro area, thereby materially reducing the risk of contagion
from the euro area periphery. Similarly, a stabilization in
Slovakia's debt metrics would reduce negative pressure on the
rating. Although unlikely in the foreseeable future, Moody's
would upgrade the rating in the event of a resumption of
structural improvements, a significant strengthening of the
government's balance sheet and debt ratios relative to the 'A'
category, and resumed convergence of Slovakia's credit metrics
with EU levels.

Moody's downgrades Slovenia's government bond rating to A2 from
A1, negative outlook

Moody's Investors Service has downgraded Slovenia's local- and
foreign-currency government bond ratings to A2 from A1. The
outlook remains negative.

The key drivers of today's rating action on Slovenia are:

1) The uncertainty over the prospects for institutional reform in
the euro area and the weak macroeconomic outlook across the
region, which will continue to weigh on already fragile market
confidence.

2) The risk to Slovenia's public finances from potential further
shocks, especially the possible need to provide further support
to the nation's banking system.

3) The difficulties that Slovenia's small and open economy faces
in view of weak growth among key European trading partners, and
the resulting significant challenge to the government's ability
to achieve its medium-term fiscal consolidation plans.

Moody's is maintaining a negative outlook on Slovenia's sovereign
rating to reflect the potential for a further decline in economic
and financing conditions as a result of a deterioration in the
euro area debt crisis.

Rationale For Downgrade

As indicated in the introduction of this press release, a
contributing factor underlying Moody's one-notch downgrade of
Slovenia's government bond rating is the uncertainty over the
euro area's prospects for institutional reform of its fiscal and
economic framework and over the resources that will be made
available to deal with the crisis. Moreover, Europe's weak
macroeconomic prospects complicate the implementation of domestic
austerity programs and the structural reforms that are needed to
promote competitiveness. Moody's believes that these factors will
continue to weigh on market confidence, which is likely to remain
fragile, with a high potential for further shocks to funding
conditions. In addition to constraining the creditworthiness of
all European sovereigns, the fragile financial environment
increases Slovenia's susceptibility to financial and
macroeconomic shocks given the concerns identified below.

The deteriorating macroeconomic environment is exacerbating a
number of existing and potential pressures on the Slovenian
government's balance sheet, which are weighing on its
creditworthiness and constitute the second driver of Moody's one-
notch downgrade of Slovenia's bond rating. While somewhat
shielded by manageable (but rising) debt and debt servicing
levels, Slovenia's public finances are at risk from potential
further shocks, stemming from a possible further deterioration in
the economic growth outlook in the euro area and globally and the
likely need to provide further support to the country's banks.

In particular, the country's largest banks face asset quality,
capitalization and funding challenges. In comparison with other
systems in Central and Eastern Europe, Slovenia has a large
banking sector, with total assets equivalent to 136% of GDP.
Asset quality pressure and the euro area debt crisis are weighing
on the sector's solvency and threaten its ability to continue to
access private funding markets. Non-performing loan ratios are
continuing to rise, reflecting concentrations of exposure towards
the highly leveraged corporate sector. Slovenian banks' asset
quality, profitability and funding position remain under
considerable stress, increasing the risk of additional
governmental support being needed, which would further pressure
the sovereign's debt metrics.

The third driver informing Moody's rating decision on Slovenia is
the threat to growth in the country's small and open economy
given the poor growth prospects among Slovenia's principal export
markets in Europe. Moreover, the ongoing significant adjustment
in Slovenia's highly leveraged corporate sector, particularly the
construction sector, and the deleveraging across all sectors of
the economy, are expected to continue to represent a drag on
economic activity for the next year or so. The weak economic
outlook poses a significant challenge to the Slovenian
government's ability to achieve its medium-term fiscal
consolidation plans and may necessitate additional fiscal
measures that could further pressure the sovereign's debt
metrics.

These credit pressures have intensified and become more apparent
in the period since Moody's last rating action in December 2011,
and are contributing to the need to reposition Slovenia's rating
in the middle of the 'A' range.

What Could Move The Rating Up/Down

A further downward adjustment in Slovenia's sovereign rating
could result from (i) a substantial intensification of the risks
and uncertainties for the Slovenian government's balance sheet,
stemming from the potential need for further support to banks; or
(ii) a further marked deterioration in economic growth prospects
due to external shocks stemming from the euro area crisis, which
would in turn lead to the potential failure of the government to
stabilize and reverse the general government debt trajectory.

Moody's would stabilize the outlook on Slovenia's rating in the
event of government progress in implementing economic and fiscal
policies that pave the way for a substantial and sustainable
trend of increasing primary surpluses, and lead to a significant
reversal in the public debt trajectory.

Moody's downgrades Spain's government bond rating to A3 from A1,
negative outlook

Moody's Investors Service has downgraded the government bond
rating of the Kingdom of Spain to A3 from A1. The outlook on the
rating is negative.

Concurrently, Moody's has also downgraded the rating of Spain's
Fondo de Reestructuraci¢n Ordenada Bancaria (FROB) to A3 with a
negative outlook from A1, in line with the sovereign rating
action, given that FROB's debt is fully and unconditionally
guaranteed by the Kingdom of Spain. Both Spain's and the FROB's
short-term ratings have been downgraded to (P)Prime-2 from
(P)Prime 1.

The key drivers of the rating action on Spain are:

1) The uncertainty over the prospects for institutional reform in
the euro area and the weak macroeconomic outlook across the
region, which will continue to weigh on already fragile market
confidence.

2) The country's challenging fiscal outlook is being exacerbated
by the larger-than-expected fiscal slippage in 2011, mainly on
account of budget overshoots by Spain's regional governments.
Moody's is sceptical that the new government will be able to
achieve the targeted reduction in the general government budget
deficit, leading to a further increase in the rapidly rising
public debt ratio.

3) The pressures on the Spanish economy, which is close to
entering a renewed recession, will be further increased by the
need for even stronger action to achieve a deficit reduction. A
renewed recession will also negatively affect the profitability
of Spanish banks at a time when they are required to clean up
their balance sheets.

Moody's is maintaining a negative outlook on Spain's sovereign
ratings to reflect the potential for a further decline in
economic and financing conditions as a result of a deterioration
in the euro area debt crisis.

Rationale For Downgrade

As indicated in the introduction of this press release, a
contributing factor underlying Moody's two-notch downgrade of
Spain's government bond rating is the uncertainty over the euro
area's prospects for institutional reform of its fiscal and
economic framework and over the resources that will be made
available to deal with the crisis. Moreover, Europe's weak
macroeconomic prospects complicate the implementation of domestic
austerity programs and the structural reforms that are needed to
promote competitiveness. Moody's believes that these factors will
continue to weigh on market confidence, which is likely to remain
fragile. This will in turn mean a high potential for further
shocks to funding conditions, which will affect weaker sovereigns
like Spain first, increasing its susceptibility to other
financial and macroeconomic shocks given the concerns identified
below.

The second driver underpinning the downgrade of Spain's sovereign
rating is Moody's expectation that the country's key credit
metrics will continue to deteriorate. The larger-than-expected
fiscal deviation reported for 2011 (with a general government
deficit of around 8% of GDP vs. a target of 6%) make the
country's fiscal outlook for 2012 even more challenging than
Moody's anticipated at the time of its last rating action on
Spain. Moody's acknowledges that the new government has taken
timely action to compensate for a large part of last year's
fiscal slippage, and has also taken steps to place the regional
governments' finances under closer supervision. However, the
effectiveness of these steps remains to be seen. Overall, the
adjustment required to bring the public finances back onto the
targeted path (a budget deficit target of 4.4% of GDP in 2012) is
unprecedented. According to Moody's estimates, a total fiscal
adjustment of approximately EUR40 billion (3.7% of GDP) will be
needed, compared to a reduction in the deficit of around EUR28
billion in aggregate in 2010 and 2011.

Moody's is therefore skeptical that the target can be achieved
and expects the general government budget deficit to remain
between 5.5% and 6% of GDP. This in turn implies that the public
debt ratio will continue to rise. Under Moody's base-case
assumption, the debt ratio will be around 75% of GDP at the end
of the year, more than double the trough reached in 2007, and
will likely approach the 80% of GDP mark in the coming two years.
One of Spain's key relative credit strengths -- its lower debt-
to-GDP ratio compared to some of its closest peers in Europe --
is therefore eroding.

The third driver of today's rating action is the weakening
Spanish economy, which is likely to come under even greater
pressure because of the need for stronger action to achieve a
deficit reduction. Spain recorded a contraction in real GDP of
0.3% quarter-on-quarter in Q4 of 2011 and Moody's expects Spain's
GDP to contract by a further 1%-1.5% in 2012, compared to a
forecast of low but positive growth of around 1% just a few
months ago.

A renewed recession will further affect the profitability of
Spanish banks at a time when they are expected to remove impaired
real-estate-related assets from their balance sheets. Moody's
views positively the new government's attempt to force the
banking sector to increase provisioning against problematic
assets related to banks' exposure to the real estate sector,
thereby improving the transparency of banks' balance sheets and
contributing to restoring market confidence. However, Moody's is
doubtful that the government's plan to encourage stronger banks
to merge with weaker ones will be achievable without further
support from the public sector. The rating agency therefore
continues to believe that the contingent risks arising from the
banking sector are higher and more likely to crystallize in the
case of Spain than among many of its peers. Moody's recognizes
that the labor market reforms, announced by the government on 10
February, are important steps to increase the flexibility in the
labor market and should help foster faster employment growth once
the economic recovery begins.

The decision to downgrade by two notches is explained by Moody's
view that Spain's credit fundamentals and outlook are difficult
to reconcile with a rating above the lower end of the "single-A"
rating category. Indeed, peers at the top of the single-A
category (like the Czech Republic and South Korea) as well as
those in the middle of the category (like Poland), do not face
Spain's fiscal and growth challenges, nor do they have banking
systems with similar issues.

What Could Move The Ratings Up/Down

Moody's expects Spain's A3 rating to exhibit some degree of
tolerance to potential downside scenarios that may emerge in
coming quarters, including (i) a further modest deterioration in
the macroeconomic outlook relative to the rating agency's base
case expectation; (ii) a moderate deviation from the government's
current fiscal targets and limited additional cost to the
government from supporting the restructuring of the banking
sector; as well as (iii) occasional political set-backs in the
progress towards agreeing and implementing the necessary reforms
to restore confidence.

However, Moody's rating would not be immune to a further
substantial deterioration in macroeconomic or financial market
conditions, leading to sharp fiscal and debt slippage in Spain,
or to a substantial erosion in Spanish policymakers' commitment
to reform implementation.

The rating outlook could be stabilized at the current level if
the wider euro area situation were to be resolved conclusively.
The rating could be upgraded if and when the economy is placed on
a clear and improving trend and the public debt ratio has
stabilized at sustainable levels.

Moody's changes the outlook on the United Kingdom's Aaa rating to
negative

Moody's Investors Service has changed the outlook on the United
Kingdom's Aaa government bond rating to negative from stable.

The key drivers of today's action on the United Kingdom are:

1) The increased uncertainty regarding the pace of fiscal
consolidation in the UK due to materially weaker growth prospects
over the next few years, with risks skewed to the downside. Any
further abrupt economic or fiscal deterioration would put into
question the government's ability to place the debt burden on a
downward trajectory by fiscal year 2015-16.

2) Although the UK is outside the euro area, the high risk of
further shocks (economic, financial, or political) within the
currency union are exerting negative pressure on the UK's Aaa
rating given the country's trade and financial links with the
euro area. Overall, Moody's believes that the considerable
uncertainty over the prospects for institutional reform in the
euro area and the region's weak macroeconomic outlook will
continue to weigh on already fragile market confidence across
Europe.

Concurrently, Moody's has also changed to negative the outlook on
the Aaa debt rating of the Bank of England in line with the
change of outlook on the UK's sovereign rating.

Rationale For Negative Outlook

The primary driver underlying Moody's decision to change the
outlook on the UK's Aaa rating to negative is the weaker
macroeconomic environment, which will challenge the government's
efforts to place its debt burden on a downward trajectory over
the coming years. These challenges, reflecting the combined
effect of a commodity price driven hit to real incomes, the
confidence shock from the euro area and a reassessment of the
lasting effects of the financial crisis on potential output, were
already evident in the government's Autumn Statement. The
statement announced that a further two years of austerity
measures would be needed in order for the government to meet its
fiscal mandate of achieving a cyclically adjusted current budget
balance by the end of a rolling five-year time horizon, and to
reach its target of placing net public sector debt on a declining
path by fiscal year 2015-16.

Moody's central expectation is that these objectives will be met,
with a general government gross debt-to-GDP ratio peaking at just
under 95% in 2014 or 2015, before gradually declining thereafter.
However, Moody's expects the UK's debt to peak later, and at a
higher level, than in most other Aaa-rated countries. Moreover,
risks to the rating agency's forecasts are skewed to the
downside. In part, these risks are the by-product of a necessary
fiscal consolidation program and the ongoing parallel
deleveraging process in both the household and financial sectors.
Moody's also believes that the further cutbacks announced last
autumn indicate that the government has a reduced capacity to
absorb further abrupt economic or fiscal deterioration without
incurring a further slippage in its consolidation timetable.

A combination of a rising medium-term debt trajectory and lower-
than-expected trend economic growth would put into question the
government's ability to retain its Aaa rating. The UK's
outstanding debt places it amongst the most heavily indebted of
its Aaa-rated peers, alongside the United States and France whose
Aaa ratings also carry a negative outlook.

The second and interrelated driver of Moody's decision to change
the UK's rating outlook to negative is the fact that the weaker
environment is also, in part, a by-product of the ongoing crisis
in the euro area. Although the UK is outside the euro area, the
crisis is affecting the UK through three channels: trade, the
financial sector and consumer and investor confidence.

Moody's believes that there is considerable uncertainty over the
euro area's prospects for institutional reform of its fiscal and
economic framework and over the resources that will be made
available to deal with the crisis. Moreover, Europe's weak
macroeconomic outlook complicates the implementation of domestic
austerity programs and the structural reforms that are needed to
promote competitiveness. Moody's believes that these factors will
continue to weigh on market confidence, which is likely to remain
fragile, with a high potential for further shocks to funding
conditions.

In addition to constraining the creditworthiness of all European
sovereigns, the fragile financial environment increases the UK's
susceptibility to financial and macroeconomic shocks. Any such
shock would pose further risks to the performance of the UK
economy and to the strength of its financial sector, with
inevitable consequences for the government's ability to achieve
fiscal consolidation on schedule. Moreover, while the UK
currently enjoys 'safe haven' status, there is also a growing
risk that the weaker macroeconomic outlook could damage market
confidence in the government's fiscal consolidation program and
cause funding costs to rise.

Rationale For Continued Aaa Rating

Although Moody's has some concerns about the UK's macroeconomic
outlook for the next few years, the UK's Aaa sovereign rating
continues to be well supported by a large, diversified and highly
competitive economy, a particularly flexible labor market, and a
banking sector that compares favorably to peers in the euro area.
The economy generally benefits from the significant structural
reforms undertaken in the past. As a result of these strong
structural features, Moody's expects the UK to eventually return
to its trend growth rate of around 2.5%, although the return to
trend growth is expected to be slower than originally expected,
reflecting the nature and depth of the financial crisis.

The current fiscal consolidation program remains intact and the
government has demonstrated its willingness and ability to take
action to address shortfalls. The UK has been proactive in
pushing banks to hold more capital and in taking steps to reduce
the probability and impact of the sovereign having to use its own
balance sheet to support British banks. Further, the outstanding
debt stock has important structural features that give the UK
government a very high shock-absorption capacity.

The government is implementing an ambitious fiscal consolidation
program and so far has been meeting, and even exceeding, its
deficit reduction forecasts. In the Autumn Statement, the Office
for Budget Responsibility (OBR) announced weaker economic growth
forecasts, to which the government responded by announcing
further spending cuts, both over the medium and long term.
Although Moody's sees rising challenges in achieving debt
reduction within the timeframe that has been laid out by the
government -- not least the possible impact of any future
cutbacks on short-term growth -- the rating agency believes that
the UK government's response to negative developments late last
year indicates its commitment to restoring a sustainable debt
position. This suggests that the UK's track record of reversing
increases in debt is likely to continue going forward.

The UK's Aaa rating is also supported by the robust structure of
government debt. The UK has the lowest refinancing risk of all
the large Aaa economies, based on the average maturity of the
UK's debt stock (nearly 14 years), its large domestic investor
base, and the willingness and ability of its central bank to
undertake accommodative monetary policy.

What Could Move The Rating Down

The UK's Aaa rating could potentially be downgraded if Moody's
were to conclude that debt metrics are unlikely to stabilize
within the next 3-4 years, with the deficit, the overall debt
burden and/or debt-financing costs continuing on a rising trend.
This could happen in one of three scenarios, all of which would
imply lower economic and/or government financial strength: (1) a
combination of significantly slower economic growth over a multi-
year time horizon -- perhaps due to persistent private-sector
deleveraging and very weak growth in Europe -- and reduced
political commitment to fiscal consolidation, including
discretionary fiscal loosening or a failure to respond to a
deteriorating fiscal outlook; (2) a sharp rise in debt-
refinancing costs, possibly associated with an inflation shock or
a deterioration in market confidence over a sustained period; or
(3) renewed problems in the banking sector that force a
resumption of official support programs and spill over into the
real economy, indirectly causing lower growth and larger budget
deficits.

Conversely, the rating outlook could return to stable if the
combination of less adverse macroeconomic conditions, progress
towards containing the euro area crisis and deficit reduction
measures were to ease medium-term uncertainties with regards to
the country's debt trajectory.


* Upcoming Meetings, Conferences and Seminars
---------------------------------------------

April 3-5, 2012
  TURNAROUND MANAGEMENT ASSOCIATION
     TMA Spring Conference
        Grand Hyatt Atlanta, Atlanta, Ga.
           Contact: http://www.turnaround.org/

Apr. 19-22, 2012
  AMERICAN BANKRUPTCY INSTITUTE
     Annual Spring Meeting
        Gaylord National Resort & Convention Center,
        National Harbor, Md.
           Contact: 1-703-739-0800; http://www.abiworld.org/

July 14-17, 2012
  AMERICAN BANKRUPTCY INSTITUTE
     Southeast Bankruptcy Workshop
        The Ritz-Carlton Amelia Island, Amelia Island, Fla.
           Contact: 1-703-739-0800; http://www.abiworld.org/

Aug. 2-4, 2012
  AMERICAN BANKRUPTCY INSTITUTE
     Mid-Atlantic Bankruptcy Workshop
        Hyatt Regency Chesapeake Bay, Cambridge, Md.
           Contact: 1-703-739-0800; http://www.abiworld.org/

November 1-3, 2012
  TURNAROUND MANAGEMENT ASSOCIATION
     TMA Annual Convention
        Westin Copley Place, Boston, Mass.
           Contact: http://www.turnaround.org/

Nov. 29 - Dec. 2, 2012
  AMERICAN BANKRUPTCY INSTITUTE
     Winter Leadership Conference
        JW Marriott Starr Pass Resort & Spa, Tucson, Ariz.
           Contact: 1-703-739-0800; http://www.abiworld.org/

April 10-12, 2013
  TURNAROUND MANAGEMENT ASSOCIATION
     TMA Spring Conference
        JW Marriott Chicago, Chicago, Ill.
           Contact: http://www.turnaround.org/

October 3-5, 2013
  TURNAROUND MANAGEMENT ASSOCIATION
     TMA Annual Convention
        Marriott Wardman Park, Washington, D.C.
           Contact: http://www.turnaround.org/


                            *********

Monday's edition of the TCR delivers a list of indicative prices
for bond issues that reportedly trade well below par.  Prices are
obtained by TCR editors from a variety of outside sources during
the prior week we think are reliable.  Those sources may not,
however, be complete or accurate.  The Monday Bond Pricing table
is compiled on the Friday prior to publication.  Prices reported
are not intended to reflect actual trades.  Prices for actual
trades are probably different.  Our objective is to share
information, not make markets in publicly traded securities.
Nothing in the TCR constitutes an offer or solicitation to buy or
sell any security of any kind.  It is likely that some entity
affiliated with a TCR editor holds some position in the issuers'
public debt and equity securities about which we report.

Each Tuesday edition of the TCR contains a list of companies with
insolvent balance sheets whose shares trade higher than US$3 per
share in public markets.  At first glance, this list may look
like the definitive compilation of stocks that are ideal to sell
short.  Don't be fooled.  Assets, for example, reported at
historical cost net of depreciation may understate the true value
of a firm's assets.  A company may establish reserves on its
balance sheet for liabilities that may never materialize.  The
prices at which equity securities trade in public market are
determined by more than a balance sheet solvency test.

A list of Meetings, Conferences and Seminars appears in each
Thursday's edition of the TCR. Submissions about insolvency-
related conferences are encouraged.  Send announcements to
conferences@bankrupt.com

Each Friday's edition of the TCR includes a review about a book
of interest to troubled company professionals.  All titles are
available at your local bookstore or through Amazon.com.  Go to
http://www.bankrupt.com/booksto order any title today.


                            *********


S U B S C R I P T I O N   I N F O R M A T I O N

Troubled Company Reporter-Europe is a daily newsletter co-
published by Bankruptcy Creditors' Service, Inc., Fairless Hills,
Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland
USA.  Valerie U. Pascual, Marites O. Claro, Rousel Elaine T.
Fernandez, Joy A. Agravante, Ivy B. Magdadaro, Frauline S.
Abangan and Peter A. Chapman, Editors.

Copyright 2012.  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 Peter Chapman at 240/629-3300.


                 * * * End of Transmission * * *