/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/120503.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, May 3, 2012, Vol. 13, No. 88 Headlines B U L G A R I A BTC: Creditors May Put Business for Sale Again G E R M A N Y PRAKTIKER AG: Mulls Closure of Nine Stores This Year Q-CELLS SE: Sale or Controlled Insolvency Among Options I R E L A N D TREASURY HOLDINGS: Legal Proceedings Against NAMA Begins I T A L Y FONDAZIONE MONTE: Standstill Agreement Deadline Postponed L A T V I A UAB BITE: Fitch Affirms 'B-' Issuer Default Rating N E T H E R L A N D S CARLSON WAGONLIT: S&P Assigns 'B+' Rating to US$850MM Sr. Notes N O R W A Y SONGA OFFSHORE: Moody's Affirms 'B2' CFR; Outlook Stable R U S S I A GAZPROMBANK: S&P Rates Subordinated Series 4 Notes 'BB-' S P A I N MAPFRE SA: S&P Lowers Subordinated Debt Rating to 'BB+' * SPAIN: S&P Takes Negative Rating Actions on 16 Banks T U R K E Y * TURKEY: S&P Affirms 'BB/B' Long-Term Sovereign Credit Ratings U N I T E D K I N G D O M ARGOS: Hires Consultants to Conduct Radical Overhaul DEWEY & LEBOEUF: Prepares to Liquidate U.K. Office * UK: Moody's Says RMBS Master Trusts Exposed to Extension Risk * UK: Moody's Says Olympics Give Short-Term Boost to Corporates X X X X X X X X * Upcoming Meetings, Conferences and Seminars ********* =============== B U L G A R I A =============== BTC: Creditors May Put Business for Sale Again ---------------------------------------------- Novinite.com reports that the creditors of Bulgaria's incumbent telco BTC, which operates under the brand name Vivacom, may be expected to put the company up for sale again in one or two years' time. According to Novinite.com, Capital Daily, citing insiders, reported that "The collapse of talks for BTC sale means lenders will have to seek restructuring options for the debt-laden company and manage it themselves." Capital Daily noted that the planned sale of Bulgaria's incumbent telco BTC failed after its creditors rejected the offers of all three bidders, including Turkcell, the biggest Turkish mobile- phone company, Novinite.com relates. The restructuring talks will aim at securing better terms and reducing the debt, which is burdening BTC, its parent company NEF Telecom Bulgaria and the holding company that owns NEF Telecom, Novinite.com discloses. Capital Daily disclosed that some of the subordinated non- performing loans may be transformed into equity capital, others restructured or even written down, according to Novinite.com. The insiders said that if the debt is reduced, in one or two years the company will be more likely to attract a quality investor and higher bids, Novinite.com notes. The mezzanine subordinated non-performing loans total EUR400 million, Novinite.com discloses. The mezzanine lenders include French financial group AXA, Austrian investor Mezzanine Management, US Tennenbaum Capital Partners, Darby Overseas Investments, Deutsche Bank and Royal Bank of Scotland, Novinite.com states. The creditors hired Morgan Stanley in London last year to help sell the company, after it breached the terms on the loan, Novinite.com recounts. ============= G E R M A N Y ============= PRAKTIKER AG: Mulls Closure of Nine Stores This Year ---------------------------------------------------- Julie Cruz at Bloomberg News reports that Praktiker AG will close at least nine stores in Germany this year. According to Bloomberg, Harald Guenter, a spokesman for the company, said by phone on Wednesday that Praktiker already closed its first store in Krefeld and will close six more stores in Germany in the second half of the year. The spokesman, as cited by Bloomberg, said that Praktiker will also shut down two stores of its Extra Bau + Hobby brand this year, one in May, and one in October. The retailer announced a EUR300 million (US$394 million) financing program in November as part of a reorganization that includes eliminating unprofitable outlets and cutting 1,400 jobs, Bloomberg relates. Based in Kirkel, Praktiker AG is Germany's third largest home- improvement retailer. Q-CELLS SE: Sale or Controlled Insolvency Among Options ------------------------------------------------------- Stefan Nicola at Bloomberg News reports that Q-Cells SE said Henning Schorisch, an insolvency administrator, may be sold or restructured in a controlled insolvency as talks with investors over the company begin. According to Bloomberg, Mr. Schorisch said on Wednesday at Q- Cells headquarters in Bitterfeld-Wolfen that talks with creditors about a possible debt-to-equity conversion as well as finding an investor for the Solibro thin-film unit, which isn't affected by the insolvency, are continuing. "All options remain on the table, and that's positive," Bloomberg quotes Mr. Schorisch as saying. Mr. Schorisch, as cited by Bloomberg, said he's "cautiously optimistic" that the company, which employs about 1,300 in Saxony-Anhalt and Berlin, can be restructured without significant job losses because it's a "technology leader." Mr. Schorisch, a lawyer at HWW Wienberg Wilhelm, was named by a local court as preliminary insolvency administrator until formal insolvency proceedings are opened and a permanent administrator is named, Bloomberg recounts. Q-Cells, which has about EUR150 million (US$197 million) in liquid assets, is back to producing cells 24 hours a day, seven days a week, Bloomberg discloses. Mr. Schorisch, as cited by Bloomberg, said that it's planning for an internal interim progress report on mergers and acquisitions by the middle of the month after several interested parties contacted the insolvency administrator. He said that there have been no layoffs yet, Bloomberg notes. As reported by the Troubled Company Reporter-Europe on April 9, 2012, the Executive Board of Q-Cells filed a request to open insolvency proceedings at the competent District Court in Dessau. Q-Cells SE is a German solar cell and module maker. ============= I R E L A N D ============= TREASURY HOLDINGS: Legal Proceedings Against NAMA Begins -------------------------------------------------------- Ciaran Hancock at The Irish Times reports that Treasury Holdings has begun legal proceedings against the National Asset Management Agency. Treasury Holdings, the Irish Times says, is seeking substantial compensation and is contesting the constitutionality of the legislation governing its activities. It is understood that Treasury, which is jointly controlled by businessmen Richard Barrett and Johnny Ronan, has made an application to the High Court on both matters, the Irish Times notes. This relates to NAMA's decision in January to appoint joint receivers to certain assets secured against loans of more than EUR1 billion owed to the agency, the Irish Times states. Treasury Holdings was in breach of the covenants on the borrowings and deemed insolvent when NAMA called in the loans, the Irish Times recounts. In March, Treasury Holdings won leave to pursue a judicial review of NAMA's actions, the Irish Times recounts. The developer is now preparing to pursue two additional cases relating to NAMA's decision, the Irish Times discloses. One will focus on the detrimental financial consequences for Treasury of NAMA's decision to call in its loans in January, the Irish Times states. The damages sought have not been quantified, the Irish Times says. The other is being taken against the State and the Attorney General and will test the constitutionality of the NAMA Act 2009 and of the way in which NAMA used its powers when moving against Treasury, the Irish Times notes. According to the Irish Times, the damages claim will focus on a number of issues relating to NAMA's decision to appoint joint receivers -- PwC and Ernst Young -- to some of Treasury's assets earlier this year. Treasury Holdings is an Irish property developer. The company owns the Westin Hotel in Dublin and the Irish headquarters of accounting firm PricewaterhouseCoopers. ========= I T A L Y ========= FONDAZIONE MONTE: Standstill Agreement Deadline Postponed --------------------------------------------------------- Dow Jones Newswires reports that Fondazione Monte dei Paschi di Siena, the Italian banking foundation that controls Banca Monte dei Paschi di Siena SpA, said Wednesday it has agreed with its lenders to postpone the deadline to reach an agreement to bring down its debt through May. According to Dow Jones, in a statement, Fondazione Monte dei Paschi di Siena said the negotiations are at "very advanced" levels and the only the "last details" are needed for its debt restructuring. The previous standstill agreement with the creditors expired Monday, Dow Jones relates. The foundation has also started selling part of its controlling stake in the bank to raise capital, Dow Jones discloses. =========== L A T V I A =========== UAB BITE: Fitch Affirms 'B-' Issuer Default Rating -------------------------------------------------- Fitch Ratings has affirmed UAB Bite Lietuva's Long-term Issuer Default Rating (IDR) at 'B-'. The Outlook on the Long-term IDR is Stable. The agency has also affirmed SIA EECF Bella Finco's senior secured revolving credit facility (RCF) at 'B'. The Recovery Rating of the facility is 'RR3'. The senior secured notes due 2014 issued by Bite Finance International BV have been affirmed at 'B-'. The Recovery Rating for the notes is 'RR4'. Bite's ratings are supported by the continued cash flow generation improvements in its Latvian operations and the relatively stable underlying performance, excluding regulatory cuts, in its Lithuanian operations. LTM EBITDA in Latvia grew to EUR3.8 million in Q112, from -EUR1.9 million in Q111 and -EUR10.2 million in Q110. The company continues to add high numbers of postpaid subscribers in Latvia, which gives Fitch comfort that the company will not return to generating negative EBITDA in the country. Although mobile service revenue continues to decline in Lithuania, this is largely attributed to regulatory cuts, which should begin to ease after 2012. While these revenue declines are causing overall EBITDA to decline in Lithuania, the growth in Latvia is more than compensating for the Lithuanian decline. Overall group EBITDA has grown to EUR44.7 million in Q112 from EUR39.2 million in Q111 and EUR36 million in Q110. The growth in EBITDA has helped the company to continually improve its leverage, with net debt: EBITDA standing at 4.2x in Q112, from 5.1x in Q111 and 5.9x in Q110. Fitch believes this trend will continue to improve, although a potential LTE network rollout at some point over the next few years could impact free cash flow generation and slow further leverage improvements. Bite competes with two much larger, international operators. If either of these competitors were to engage in disruptive market practices, Bite might not have the financial flexibility to match such moves. This size differential constrains the rating to a certain extent. Fitch would consider a negative rating action if the company returns to a negative FCF generating position, although temporary spikes related to capex would be tolerated. A negative rating action could also occur if FFO adjusted net leverage approaches 5.5x or if the company does not make headway into refinancing its 2014 bond maturity. Conversely, the refinancing of the 2014 maturity could allow for positive rating action to be taken at some point in the future. As well as the refinancing, further improvements in the Latvian operations together with stable Lithuanian operating trends would be required before a positive rating action is envisaged. If Latvian margins begin to approach 20% and Fitch believes that the operations in the country are firmly established, then a positive rating action could be taken. ===================== N E T H E R L A N D S ===================== CARLSON WAGONLIT: S&P Assigns 'B+' Rating to US$850MM Sr. Notes --------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B+' issue rating to the proposed US$850 million dual-currency senior secured notes due 2019 to be issued by Netherlands-based business travel management company Carlson Wagonlit B.V. (CWT; B+/Stable/--). A proportion of the proposed notes will be issued in dollars, and a proportion in euros. The issue rating is in line with the corporate credit rating on CWT. "We also assigned a recovery rating of '4' to the proposed notes, indicating our expectation of average (30%-50%) recovery prospects for creditors in the event of a payment default," S&P said. "The company will use the proceeds of the proposed notes and a new, unrated super senior US$100 million secured revolving credit facility (RCF) due 2018 to repay its existing EUR285 million senior floating-rate notes and US$493 million senior secured facilities. The company expects to establish the new RCF and cancel an existing US$161 million RCF at the same time that it closes the proposed notes' offering. We will withdraw the issue ratings on the debt instruments to be repaid on their repayment," S&P said. RECOVERY ANALYSIS "The recovery rating on the proposed notes is supported by our valuation of CWT as a going concern, underpinned by its leading market positions and sizable customer base," S&P said. The proposed notes will benefit from: * Guarantees and 65% share pledges of certain holding companies; Security over all the shares and assets of CWT's material U.S. subsidiaries; and * A 100% share pledge of the immediate parent company of CWT. "This collateral will also secure the new RCF on a super senior basis. The proposed notes will receive guarantees from CWT's U.S. entities, representing 36.1% of its revenues and 38.9% of its EBITDA in 2011. The proposed notes will not benefit from guarantees or security from the non-U.S. entities, however," S&P said. "The recovery rating on the proposed notes is constrained by the new dual-tranche US$100 million RCF, which will rank ahead of the proposed notes on the payment of proceeds in the case of enforcement, according to the intercreditor agreement. The refinancing of previous subordinated debt with the new senior secured notes also contributes to the dilution of the overall recovery prospects. The recovery rating on the proposed notes is also constrained by CWT's exposure to various insolvency regimes, which could delay insolvency proceedings in the event of a default and therefore prove expensive," S&P said. "We also note that the documentation for the proposed notes allows for credit facilities of up to US$125 million (including the new RCF); an incremental US$125 million of debt under a general basket; and further debt providing that the company complies with the proposed notes' incurrence covenants. However, there are limits to the amount of debt that the company can incur through nonguarantor subsidiaries to avoid excessive structural subordination of the proposed notes. The documentation also allows, among other things, for an unlimited amount of securitization, although the company currently has no plans to establish such a program. If CWT were to incur significant additional debt under these conditions, the recovery prospects for the proposed notes could be materially diluted," S&P said. "To estimate recoveries for the proposed notes, we simulate a default scenario. We assume that a default is caused by lower revenues as a consequence of weak economic conditions compounded by travel disruptions. We simulate a hypothetical payment default in 2015, at which point we estimate CWT's stressed enterprise value at approximately US$620 million," S&P said. "We also assume that the prospective super senior RCF would be drawn at the point of default. We calculate a residual value of US$399 million, assuming full drawings on the RCF and prepetition interest--together totaling about US$104 million--and deducting US$117 million of priority liabilities, which include enforcement costs and 50% of the company's 2011 pension deficit. This residual value would be sufficient, in our view, for average (30%-50%) recovery for holders of the proposed US$850 million senior secured notes," S&P said. RATINGS LIST New Ratings Carlson Wagonlit B.V. Senior Secured Debt US$850 mil. equivalent notes B+ Recovery Rating 4 =========== N O R W A Y =========== SONGA OFFSHORE: Moody's Affirms 'B2' CFR; Outlook Stable -------------------------------------------------------- Moody's Investors Service has affirmed the B2 Corporate Family Rating (CFR) and Probability of Default Rating (PDR) of Songa Offshore SE. The outlook on the ratings is revised to stable from negative. Ratings Rationale The rating action follows the company's recent NOK633 million equity issuance and credit facility amendments, including a deferral of US$106 million of loan installments for four quarters. In Moody's view, these actions have eased Songa's near- term liquidity risk at a time when it has a large capital expenditure program for its existing fleet and a US$48 million bond maturing in June 2012. Moody's had previously indicated that the outlook would likely be stabilized if sufficient financing was in place to meet all immediate liquidity needs, with adequate headroom under the bank covenants. Songa needed new financing because of operational issues with its rigs in Malaysia and vessel upgrades this year in relation to its three existing rigs in Norway's North Sea, the Dee, Trym and Delta, which all have contracts with Statoil ASA (Aa2 stable) extending to at least 2015. However, to enhance their capabilities and to meet the required specifications (and in doing so increasing their useful life) Songa needs to spend around US$225 million on the rigs, with approximately half of that funded by Statoil. The proceeds from the equity issuance will be used to partly finance the difference. In addition, Songa needs funding to build four new, so called Cat-D drilling rigs, which are high-specification, semisubmersible rigs for use in a midwater (up to 3,000 feet) harsh environment in the Norwegian North Sea. The B2 CFR reflects the company's high adjusted leverage, as well as the company's exposure to oil industry cyclicality and small asset base with only six rigs and low diversification. The stable outlook nevertheless reflects Moody's view that the recent financing has removed near-term liquidity risks, supported by the company's contract backlog and a positive operating environment outlook. Songa currently operates only six drilling rigs, including the Eclipse in Angola, but over the past year won significant eight- year drilling contracts from Statoil that require the Cat-D rigs. Last year, Songa arranged the two initial construction payments of US$113 million each on the first two rigs through a combination of bank loans and NOK1.4 billion (around US$244 million) five-year bond issuance and in February, Statoil agreed to provide financing for the two initial payments of US$113 million each on the other two rigs as part of its two eight-year contract awards. Overall, Songa benefits from a strong and supportive relationship with Statoil, evident in the number of three-year and eight-year contracts it has won. The drilling market environment has improved over the last 18 months, with dayrates rising in most geographies. However, Songa's liquidity has been stressed by operational issues in its fleet of rigs during the fourth quarter last year. In Malaysia, the Venus experienced 50 days downtime owing to required repairs on subsea equipment and the Mercur had more extensive testing than expected as it is also contracted by Petroliam Nasional Berhad (PETRONAS, A1 stable). Additionally, delays in finalizing acceptance testing of Songa's new rig, the Eclipse, by Total S.A. (Aa1 stable) before it started operations also resulted in cash flow since the third quarter of 2011 that was below Moody's expectations. Moody's expects Songa's debt/EBITDA to remain high for its rating at around 5.0x at the end of this year because of the recent operational setbacks and upfront payments for the two additional rigs. However, this is mitigated by the combination of a larger contract backlog of over US$7.1 billion and increasing benefits from the relationship with Statoil. Additionally, Moody's expects leverage to fall to about 4.0x in 2013 as it benefits from higher utilization of the Eclipse and the rigs in the North Sea. Although Moody's notes Songa has a history of unpredictability with regards to announcing construction of new rigs. At this time, Moody's believes that the company's liquidity remains satisfactory over at least a 12 month horizon, factoring in the existing cash balance, the Revolving Credit Facilities (RCF) and negligible near-term debt maturities. Nevertheless, Moody's expects the company to be free cash flow negative until 2013 because of high capital expenditure and initial payments for new rigs, financing of which has already been agreed with Statoil. Given the high leverage, a positive rating action is not expected in the short term. However, it is possible if Songa reduces debt/EBITDA to below 3.0x on a sustained basis. Negative pressure on the rating would likely result if debt/EBITDA remains above 4.5x through 2013, or if there is a lack of improvement in fleet utilization or a failure to contract vessels at suitably high dayrates. The principal methodology used in rating Songa Offshore SE was the Global Oilfield Services Rating Methodology published in December 2009. Songa, established in Norway in 2005 and listed on the Norwegian stock exchange with a market capitalization of approximately NOK3 billion, has grown rapidly through both acquisitions and some re-commissioning of second-hand floaters and currently has a fleet of six semisubmersibles, with four under construction. For the 12 months ending December 2011, it reported revenue of about US$500 million. =========== R U S S I A =========== GAZPROMBANK: S&P Rates Subordinated Series 4 Notes 'BB-' -------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BB-' issue rating to the subordinated Series 4 notes to be issued by Gazprombank (BB+/Stable/B; Russia national scale 'ruAA+') via GPB Eurobond Finance PLC. "The bond placement totals US$500 million and will form part of Gazprombank's loan participation note program, equivalent to US$10 billion. The subordinated Series 4 notes have a seven-year maturity and a fixed 7.25% interest rate to be paid semi- annually. The proceeds of the bond issue will be used to provide a subordinated loan to Gazprombank, and repayment of bonds is linked to the repayment of the corresponding subordinated loan. The described transaction structure is subject to approval from the Central Bank of the Russian Federation (CBR) with regards to the structure of the subordinated loan agreement in line with the CBR's Regulation 215-P," S&P said. "The bond is rated two notches below the long-term counterparty credit rating on Gazprombank. This accounts for the structural subordinated nature of the loan that GPB Eurobond Finance PLC will provide to Gazprombank from the proceeds of the Series 4 bond issue, and that repayment of the Series 4 bond issue is linked to repayment of the corresponding subordinated loan, in accordance with the Standard & Poor's methodology on rating bank hybrid capital instruments," S&P said. "Standard & Poor's bases its ratings on Gazprombank on its 'bb' anchor for a commercial bank operating only in Russia and the bank's adequate business position, moderate capital and earnings, moderate risk position, and average funding and adequate liquidity, as our criteria define these terms. The long-term rating incorporates two notches of support above its stand-alone credit profile (SACP), reflecting Gazprombank's status as a government-related entity. The SACP is 'bb-'," S&P said. "The stable outlook reflects our expectation that Gazprombank's main rating factors will remain unchanged over the next 12 months. We expect Gazprombank's asset quality to remain better than the system average, capital to increase in proportion to risk assets, and earnings to improve, thanks to increasing commercial banking revenues and decreasing dependence on volatile gains from investments," S&P said. "We could take a positive rating action if Gazprombank improved its risk-adjusted capital ratio before diversification to above 10%. Sales of noncore assets and a substantial shift in revenues toward recurring commercial banking business would also be positive rating factors. We could also raise the ratings on Gazprombank if, in our opinion, the bank's link with the Russian government strengthened," S&P said. "We would consider lowering the ratings on Gazprombank if its current capital adequacy and asset quality weakened. Other potentially negative developments would be a weakening in the bank's risk profile and an increase in its appetite for market risk. We could also lower the rating if we considered that the bank's role or link with the government had become less important, leading to lower expected support from the Russian government," S&P said. ========= S P A I N ========= MAPFRE SA: S&P Lowers Subordinated Debt Rating to 'BB+' ------------------------------------------------------- Standard & Poor's Ratings Services lowered to 'A-' from 'A' the long-term counterparty credit and insurer financial strength ratings on the two operating entities that S&P regards as core to Spain-based Mapfre insurance group: Mapfre Global Risks, Compania Internacional de Seguros y Reaseguros S.A., and Mapfre Re Compa��a de Reaseguros S.A. "At the same time, we lowered the long-term counterparty credit rating on the group's holding company, Mapfre S.A., to 'BBB' from 'BBB+'. We also lowered our long-term issue ratings on the subordinated debt of Mapfre S.A. to 'BB+' from 'BBB-'. The outlook on the ratings on Mapfre S.A. and the core operating entities is negative," S&P said. "We regard Mapfre's U.S. operations--Commerce Insurance Co. and Citation Insurance Co. and their intermediate holding company, Mapfre USA Corp.--as strategically important. Commerce and Citation have stand-alone credit profiles of 'a-', and we have affirmed the 'A-' long-term counterparty credit and insurer financial strength ratings on these entities. We have also affirmed our 'BBB' long-term counterparty credit rating on Mapfre USA. We have revised to negative our outlook on all three U.S. entities," S&P said. "The rating actions on the various Mapfre Group entities follow our lowering of the long- and short-term ratings on the Kingdom of Spain (BBB+/Negative/A-2)," S&P said. "Under our criteria, our view of country risk generally constrains our ratings on an insurer. Following the sovereign rating action, Mapfre Group's country risk has, in our view, increased. Over 40% of the EUR19.6 billion business written by the group is in its domestic market and over 50% of its EUR38.0 billion reported invested assets are invested there," S&P said. "However, we estimate that Mapfre's exposure, in terms of revenues and assets, to the U.S., Brazil, and other countries with sovereign local currency ratings of 'A-' or higher is close to 40%. We estimate a further 35% of the Mapfre group's policyholder liabilities are held by entities domiciled outside Spain," S&P said. "Accordingly, although we continue to assess Mapfre group's exposure to Spanish country risk as high, under our criteria, we allow a one-notch rating differential between the ratings on Mapfre and the Spanish sovereign ratings. This is based on the current rating level of Spain, current Mapfre's geographic diversification in countries rated higher than Spain, and the sensitivity of the insurance sector to country risk, which we regard as high," S&P said. "The ratings on the Mapfre Group's core operating entities reflect the group's leading competitive position in Spain and Latin America, its strong operating performance, and its strong capitalization, the last of which has not been much affected by the sovereign downgrade. The ratings also reflect our view that the Mapfre Group's management track record is a positive factor for the ratings," S&P said. These factors are partially offset by the difficult economic and financial climate in Spain. "The negative outlook reflects that on our long-term rating on Spain and our view that Mapfre's country risk could weaken further if we were to lower the sovereign rating further," S&P said. "We could lower the ratings on Mapfre's core operating subsidiaries if we were to lower the ratings on Spain or if there were a significant weakening in Mapfre's business risk and financial risk profile. Conversely, we would most likely revise the outlook to stable if the outlook on the Kingdom of Spain were to be revised to stable. We currently regard positive rating action as unlikely," S&P said. * SPAIN: S&P Takes Negative Rating Actions on 16 Banks ------------------------------------------------------ Standard & Poor's Ratings Services has taken these rating actions on 16 Spanish banks: * "We lowered our long- and short-term counterparty credit ratings on Banco Santander S.A. (Santander) and its core subsidiary Banco Espa�ol de Credito S.A. (Banesto) to 'A-/A- 2' from 'A+/A-1'. We lowered our ratings on Santander's senior debt to 'A-' from 'A+'. We lowered our ratings on its non-deferrable subordinated debt and Tier 1 hybrid notes by one notch and placed them on CreditWatch with negative implications. We also lowered the long- and short-term ratings on its highly strategic subsidiary Santander Consumer Finance, S.A. (SCF) to 'BBB+/A-2' from 'A/A-1'. We affirmed the long- and short-term ratings on highly strategic subsidiary Banco Santander Totta S.A. at 'BB/B'. The outlooks on the long-term ratings on Santander and the abovementioned core and highly strategic subsidiaries are negative," S&P said. * "We lowered our long- and short-term counterparty credit ratings on Banco Bilbao Vizcaya Argentaria S.A. (BBVA) to 'BBB+/A-2' from 'A/A-1'. The outlook is negative. We lowered our ratings on BBVA's senior debt to 'BBB+' from 'A'. We lowered our ratings on its non-deferrable subordinated debt and Tier 1 hybrid notes by one notch (see Ratings List) and placed them on CreditWatch with negative implications. The outlook on the long-term rating on BBVA is negative," S&P said. * "We lowered our long- and short-term counterparty credit ratings on Banco de Sabadell S.A. (Sabadell) to 'BB+/B' from 'BBB-/A-3'. The long-term rating remains on CreditWatch with negative implications, where we placed it on Dec. 8, 2011," S&P said. * "We lowered our long- and short-term counterparty credit ratings on Ibercaja Banco S.A. (Ibercaja) to 'BBB-/A-3' from 'BBB/A-2'. Both the long- and short-term ratings remain on CreditWatch with negative implications, where we placed them on March 5, 2012," S&P said. * "We lowered our long- and short-term counterparty credit ratings on Kutxabank S.A. (Kutxabank) to 'BBB-/A-3' from 'BBB/A-2' and placed them on CreditWatch with negative implications," S&P said. * "We lowered our long- and short-term counterparty credit ratings on Banca Civica S.A. (Civica) to 'BB+/B' from 'BBB-/A- 3'. The ratings remain on CreditWatch with positive implications, where we placed them on March 30, 2012," S&P said. * "We lowered our long- and short-term counterparty credit ratings on Bankinter S.A. (Bankinter) to 'BBB-/A-3' from 'BBB/A-2' and placed them on CreditWatch with negative implications," S&P said. * "We lowered our long- and short-term counterparty credit ratings on Confederacion Espanola de Cajas de Ahorros (CECA) to 'BBB-/A-3' from 'BBB/A-2' and placed them on CreditWatch with negative implications," S&P said. * "We lowered our long- and short-term counterparty credit rating on Barclays Bank S.A. (BBSA) to 'BBB+/A-2' from 'A/A- 1'. The outlook is negative," S&P said. * "We placed on CreditWatch with negative implications our 'BBB+/A-2' long- and short-term counterparty credit ratings on CaixaBank S.A. (Caixabank) and our 'BBB-/A-3' on its parent, Caja de Ahorros y Pensiones de Barcelona (la Caixa). We also placed on CreditWatch with negative implications all debt ratings not placed on CreditWatch with negative implications on March 30, 2012," S&P said. * "We placed on CreditWatch with negative implications our 'BBB-/A-3' long- and short-term counterparty credit ratings on Bankia S.A. (Bankia) and our 'BB-' long-term rating on its parent company Banco Financiero y de Ahorros S.A. (BFA). We affirmed the 'B' short-term rating on BFA," S&P said. * "We are keeping our 'BBB-/A-3' long- and short-term counterparty credit ratings on Banco Popular Espa�ol S.A. (Popular) on CreditWatch with negative implications, where we placed them on Oct. 11, 2011," S&P said. "The rating actions follow our downgrade on April 26, 2012, of the Kingdom of Spain," S&P said. "The sovereign downgrade has direct negative rating implications for the banks that we rate at or above the sovereign rating on Spain, and on most banks whose ratings incorporate uplift over their stand-alone credit profiles (SACP) to reflect Spanish government support," S&P said. Therefore, the lowering of the long- and short-term sovereign credit ratings on the Kingdom of Spain has led to follow-on rating actions on: * "Santander and some of its core and highly strategic subsidiaries, which we rate one notch above the sovereign, and BBVA, and BBSA, which we rate at the same level as the long-term sovereign rating on Spain. We seldom rate financial institutions above the foreign currency rating on the country where the institution is domiciled and, in these occasions, the maximum notching differential according to our criteria is limited to one notch unless the sovereign rating is 'B-' or lower, reflecting our view of the interconnection between a banking system and the related sovereign," S&P said. * "Sabadell, CECA, Ibercaja, C�vica, Bankinter, and kutxabank, which are six of the eight banks whose ratings include uplift over their SACPs. Following the sovereign rating action on Spain, we have removed entirely or reduced the number of notches of uplift incorporated into the ratings on these banks because of the combination of the lowering of the long- term rating on Spain to 'BBB+' and our current assessments of these banks' SACPs, in accordance with our criteria. Following the actions on the banks and in accordance with our criteria, we factor uplift into the ratings to reflect Spanish government support on only four banks -- Bankia, and indirectly its parent company BFA, Banco Popular, and Banco Sabadell," S&P said. * "CaixaBank, and its parent company, la Caixa, where we anticipated the ratings would likely benefit from one notch of government support if we were to lower our assessment of CaixaBank's SACP on completion of its acquisition of Civica," S&P said. "In addition, the factors behind the lowering of the long- and short-term sovereign ratings on Spain could have an impact on our view of the economic risk and industry risk affecting the Spanish banking system, and on our opinion of the specific rating factors (business position, capital & earnings, risk position, and funding & liquidity) driving our assessments of these banks' SACPs. Consequently, we have placed on CreditWatch negative most of our issuer and issue ratings on Spanish banks that were not already on CreditWatch. At the same time, we have expanded our rationale for the already existing CreditWatch placements on C�vica, Ibercaja, Popular, and Sabadell, which are currently involved in mergers. The CreditWatch status for these banks now also includes the potential impact of our possible revision of economic risk and industry risk factors affecting the banking system," S&P said. "We did not place the counterparty credit and senior debt ratings on Santander and its subsidiaries mentioned above and on BBVA on CreditWatch with negative implications because we do not expect to lower those ratings even if we were to lower our assessments of their SACPs. However, there is a potential for these banks' SACPs to be lowered, which would likely have a negative impact on the ratings on their non-deferrable subordinated debt and hybrid securities. Consequently, we placed the ratings on the non- deferrable subordinated debt and hybrid securities on CreditWatch negative," S&P said. "We have not placed the ratings on BBSA on CreditWatch negative because we do not expect our ratings on BBSA to be affected by our review of the impact of the sovereign downgrade on the economic and industry risks of the Spanish banking system. As a highly strategic subsidiary of U.K.-based Barclays Bank PLC (A+/Stable/A-1), the long-term rating on BBSA is derived from notching down one notch from the ratings on its parent. Under our criteria, we also cap the ratings at a level equal to that of the long-term rating on Spain. Consequently, the ratings on BBSA remain at the same level as those on Spain," S&P said. =========== T U R K E Y =========== * TURKEY: S&P Affirms 'BB/B' Long-Term Sovereign Credit Ratings --------------------------------------------------------------- Standard & Poor's Ratings Services revised the outlook on Turkey's long-term foreign and local currency sovereign credit ratings to stable, from positive. "At the same time, we affirmed our 'BB/B' foreign currency and 'BBB-/A-3' local currency long- and short-term sovereign credit ratings on Turkey. We also affirmed the Turkey long- and short-term national scale ratings at 'trAA+/trA-1'. The '3' recovery rating and 'BBB-' transfer and convertibility (T&C) assessment remain unchanged," S&P said. "Less-buoyant external demand and worsening terms of trade (the price of exports compared to imports) have, in our view, made economic rebalancing more difficult, and have increased the risks to Turkey's creditworthiness given its high external debt and the state budget's reliance on indirect tax revenues. We have revised the outlook on Turkey's long-term sovereign credit ratings to stable from positive, reflecting our view that the ratings are likely to remain at the current level during the next 12 months," S&P said. Under S&P's sovereign ratings criteria, the key constraints on Turkey's ratings are: * Its external vulnerability as measured by high net external debt and gross external financing needs relative to its capacity to generate foreign currency (measured by current account receipts [CARs]). * "Modest income levels. We estimate Turkey's GDP per capita at US$9,840 at end-2011, which is below the majority of its trading partners but compares well with similarly rated sovereigns. This reflects modest levels of absolute productivity, as well as low labor participation rates, especially among women," S&P said. * "Risks related to the 2010-2011 credit boom. Turkey's real GDP growth of more than 8% annually over the past two years was mostly driven by rapid domestic credit expansion, financed mainly by short-term external funding to banks. Domestic demand, particularly via import-intensive private consumption and investment in nontradable sectors, mainly contributed to this rapid GDP growth," S&P said. "As a result of the above factors, Turkey's current account deficit (CAD) exceeded 40% of CARs in 2011 (about 10% of GDP) and the financial sector's net external debt rose to 40% of CARs at end-2011, versus 7% at end-2009. We estimate that Turkey's gross external financing needs (current account balance plus short-term external debt by residual maturity) will reach 142% of CARs plus usable reserves in 2012, one of the highest ratios for a rated sovereign. This heavy reliance on external savings exposes Turkey to shocks, either domestic -- for example if recent high domestic credit growth were to result in future bad loans -- or external, say if rising risk aversion were to deter foreign investors and banks and result in a net outflow of foreign capital. Such external shocks could lead to a rapid depreciation of the Turkish lira, with a significant pass-through to inflation. In turn this could increase domestic interest rates and have a potential negative secondary effect on government borrowing costs. In addition, we note that Turkish banks obtained about US$14.8 billion (8% of CARs) of foreign currency funding through repurchase agreements of local currency securities with foreign banks at end-2011; this exposes banks to margin calls should bond prices fall or the Turkish lira depreciate," S&P said. "Our ratings on Turkey are supported by our view of its generally effective policymaking and institutions, its moderate and declining public debt burden, and its monetary policy flexibility. In our view, a floating exchange rate regime can work as a channel of nominal adjustment for economies like Turkey that are exposed to potentially volatile capital inflows. As the Turkish lira has weakened since the second half of 2011, we expect domestic demand for imports to moderate and Turkish exports to become more competitive. However, we believe the competitiveness gain from weaker exchange rates will probably be partly offset by wage inflation through indexation. During fourth-quarter 2011, credit growth decelerated as the cost of external funding increased. The Banking Regulation and Supervisory Agency of Turkey has also implemented macroprudential measures that have helped manage credit growth. In our view, however, Turkey's central bank's monetary policy--with stable policy repo rates but frequently adjusted and diverging overnight rates--has been less effective in influencing monetary conditions or narrowing Turkey's sizable external deficit. This has been partly due to the highly accommodative monetary policies of global central banks in advanced economies," S&P said. "We believe that the government will aim to stabilize net general government debt to GDP at around 35% by 2015, despite our expectation that GDP will slow to 2% in 2012 as credit growth decelerates. We estimate that the general government primary surplus will likely have reached 1% of GDP in 2011 before deteriorating mildly over the ratings horizon (2012-2015) due to our forecast of economic slowdown. In our opinion, much of 2011's expected fiscal outperformance is due to temporary factors, including what we view to have been an unsustainable, credit- driven, year-on-year expansion of nominal GDP by some 15%, as well as the government's success in raising funds by tax amnesties. While Turkey's large and resilient economy benefits from a young and rapidly growing population, the social security deficit continues to be the major driver of headline general government deficit, highlighting the need for social security reform," S&P said. "The stable outlook reflects our view that the key risks to the Turkish economy will likely remain in balance in the next 12 months," S&P said. "If external demand is stronger than we have assumed in our base case scenario, and the Turkish economy continues to shift toward net-export-driven growth, its external imbalances could unwind without the fiscal accounts significantly weakening or banks destabilizing. As of April 2012, the banking sector continued to report a loan-to-deposit ratio of just under 100%, compared with less than 80% at end-2009. As Turkey moves toward more-balanced and sustainable growth, its sovereign credit standing could improve," S&P said. "We could consider a positive rating action if we see that structural reforms to the social security and energy sectors, and to education and labor policy, have boosted foreign direct investment and GDP growth. Creditworthiness could also improve, in our view, were the Turkish government to rationalize public spending and reduce budgetary vulnerabilities in the medium-to- long term," S&P said. "On the other hand, if external demand is weaker than our baseline assumption, or Turkey's oil import price rises further and external financing costs increase, economic adjustment would be seen in a sharper contraction in domestic demand. In our view, this could adversely affect Turkey's fiscal account as well as Turkish banks' credit quality, thus potentially weakening Turkey's creditworthiness and placing pressure on the ratings," S&P said. "Moreover, a continued abundant supply of liquidity, globally, could exacerbate imbalances in Turkey. In our view, a delayed correction would increase the risk of reduced access to external funding and could also weaken the government's fiscal accounts beyond our current expectations, which could place downward pressure on the ratings," S&P said. =========================== U N I T E D K I N G D O M =========================== ARGOS: Hires Consultants to Conduct Radical Overhaul ---------------------------------------------------- Louisa Peacock at The Telegraph reports that the new chief executive of Argos, John Walden, has drafted in consultants to conduct a radical overhaul of the struggling retailer. Mr. Walden, who joined Argos nine weeks ago, has hired OC&C Strategy Consultants to help him turn the business around, the Telegraph relates. The root and branch review could close some of the company's 700 shops as well as revamp the remaining stores to make them more appealing to customers, the Telegraph discloses. Analysts expect the number of Argos shops to be cut dramatically as the company struggles to compete with online retailers, the Telegraph notes. The overhaul, which is already under way, is understood to be assessing which stores are profitable and whether sales can be substituted in other nearby stores or online, the Telegraph says. Details of which stores face closure are not expected until at least October, however, the Telegraph states. Argos is a catalogue merchant based in the United Kingdom and Ireland. Together with sister company Homebase, it today forms part of the Home Retail Group. DEWEY & LEBOEUF: Prepares to Liquidate U.K. Office -------------------------------------------------- Jeremy Hodges, Linda Sandler and Sophia Pearson at Bloomberg News report that Dewey & LeBoeuf LLP is preparing to liquidate its U.K. office while its U.S. practice tries to collect its bills and preserve its business. According to Bloomberg, two people familiar with the situation said that the New York-based law firm's London office appointed a committee including restructuring lawyer Mark Fennessy and banking lawyer Bruce Johnston to review its options to wind down or close the business. Bloomberg notes that one of the people said more than 25 partners work at Dewey's London operation, out of about 300 partners worldwide before a round of departures. Martin Bienenstock, one of four members of Dewey's chairman's office, said that in New York, the firm is near an agreement with banks about extending a credit line and plans to stave off bankruptcy by collecting bills to pay lenders and transferring employees and property to other firms, Bloomberg relates. He said that Dewey is talking with potential merger partners and its lenders are being cooperative. "Bankruptcy is always a last resort and is not in current plans," Bloomberg quotes Mr. Bienenstock, who heads Dewey's restructuring group, as saying in an e-mail on Tuesday. "If real property and equipment leases are assumed by other firms or renegotiated, and the lenders realize on their accounts receivable and inventory, there may be no need." Dewey's U.K. partnership, which also covers its Paris office, is a separate legal entity to the firm's U.S. limited liability partnership, so a decision on whether to file for so-called administration can be made separately, Bloomberg notes. Dewey & LeBoeuf was formed by the 2007 merger of Dewey Ballantine LLP and LeBoeuf, Lamb, Greene & MacRae LLP. The New York Times reports that before the recent departures, Dewey employed about 2,000 people -- roughly 1,000 lawyers in 25 offices across the globe and the other half support staff including legal secretaries, mailroom clerks and paralegals. * UK: Moody's Says RMBS Master Trusts Exposed to Extension Risk --------------------------------------------------------------- Absent sponsor support, extension risk for scheduled and bullet notes remains significant for UK RMBS master trusts, according to a new report published on May 1 by Moody's Investors Service. Extension beyond a scheduled or bullet maturity can lead to the re-pricing of risk, low redemption rates and actual and potential trigger breaches in some trusts. These breaches affect principal payment allocation and can significantly affect yields. "Looking at only the assets in the deals, all notes in the Aire Valley, Lanark, Langton and Lannraig master trusts extend under their current total redemption rates (TRR)," says Jonathan Livingstone, a Moody's Vice President-Senior Analyst and author of the report "UK RMBS Master Trusts: Extension Risk Remains Significant due to Low Principal Payment Rates". "We assess the overall extension-risk score for 80.9% notes in all trusts to be at least Medium/High, which is a slight increase compared with the 73.8% recorded for 2011. This assessment reflects the (i) reliance on a high proportion of scheduled notes without high accumulation periods; and (ii) continuing historically low principal payment rates observed in the trusts," says Mr. Livingstone. In this report, Moody's notes that many trusts are structured such that they rely on the originator to refinance the notes on their due dates or else the risk of notes extending remains high. Lack of originator support and low repayment rates has meant that many of the scheduled amortization notes in the Aire Valley and Granite master trusts have already extended past their expected maturity dates. This report goes on to note that with the property market remaining stagnant amidst tight credit conditions, TRRs will remain at around 15% over the next 12 months, which is significantly below their 34.5% average between 2005-08. TRRs will also remain under downward pressure from (i) tight lending conditions for buy-to-let (BTL), non-conforming and interest-only mortgages; (ii) the increasing portion of borrowers who are unable to refinance onto more attractive rates with other lenders having standard variable rate (SVR) loans; (iii) trusts with greater exposure to loans with limited-income verification, interest-only features and higher-indexed LTVs, which tend to have greater proportions of SVR loans so creating "mortgage prisoners"; and (iv) continued historically low levels of unscheduled principal payments, which occur when borrowers move property. * UK: Moody's Says Olympics Give Short-Term Boost to Corporates --------------------------------------------------------------- Although the 2012 Summer Olympic and Paralympic Games are expected to provide a huge marketing opportunity for corporates, the benefits are likely to be largely short-lived, providing only a temporary fillip to corporate earnings, says Moody's investors Service in a Special Comment published on May 1. The new report is entitled "London 2012 Olympics Provide a Short- term Boost, But No Gold Medal for Corporates". "Overall, we think that the Olympics are unlikely to provide a substantial boost to the UK economy and believe that the impact of infrastructure developments on UK GDP has probably already been felt," says Richard Morawetz, a Vice President -- Senior Credit Officer in Moody's Corporate Finance Group. "We expect the net impact of the Olympics on UK tourism will be positive overall, but far less than gross visitor numbers would suggest." Moody's expects that corporate sponsors will benefit most from the Games. However, given the largely one-off impact of the Games on corporate profits, the rating agency does not expect that this alone will have an impact on its ratings, which tend to take a longer-term view. The hotel sector will be a clear beneficiary and can expect some very positive revenue per room (revpar) numbers during and around the events themselves. However, Moody's cautions that this could result in some weak year-on-year comparable results in 2013. While increased visitor numbers could boost sales of retail and consumer products, Moody's expects that any longer-term benefits will be mainly from increased visibility of the brands, rather than actual sales. The advertising and marketing sectors are also likely to benefit not only from the Games, but also from the UEFA European Football Championship and the US presidential elections, which make up a trio of events that occur in the same year every four years. In addition, the earnings uplift for the transport sector may not be clear-cut, in Moody's view, as lower-margin tourist travellers may displace business travellers during the Games. Some sectors, such as construction, may already be affected by a slowdown in projects as the infrastructure for the Games is largely complete. =============== X X X X X X X X =============== * Upcoming Meetings, Conferences and Seminars --------------------------------------------- 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 * * *