/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/120713.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Friday, July 13, 2012, Vol. 13, No. 139 Headlines F R A N C E ESCALON MEDICAL: Had US$639,800 Net Loss in March 31 Quarter PEUGEOT CITROEN: To Close Factory in France; 14,000 Jobs Affected G E R M A N Y NECKERMANN.DE GMBH: At Risk of Insolvency After Labor Talks Fail NORDENIA INT'L: Moody's Reviews 'B1' PDR for Possible Upgrade NORDENIA INT'L: S&P Puts 'B+' Corporate Rating on Watch Positive N E T H E R L A N D S AI FINANCE: Moody's Expects Timely Repayment of US$150MM Bonds DUCHESS VI: S&P Raises Rating on Class E Notes to 'B+(sf)' HALCYON STRUCTURED: S&P Lowers Rating on Class D Notes to 'CCC+' PINAFORE HOLDINGS: Moody's Says Tender No Impact on 'Ba3' CFR P O L A N D PBG SA: Ministries Propose Different Rescue Options P O R T U G A L * PORTUGAL: Creditors May Have to Ease Terms of Bailout * PORTUGAL: S&P Affirms Ratings on Six Financial Institutions S P A I N CAJA GRANADA I: Fitch Affirms Rating on Class D Notes at 'Bsf' CAJA MADRID: S&P Cuts Debt Rating on Preferred Stock to 'C' * SPAIN: Private Sector Bear Cost of Bank Restructuring * SPAIN: Finland May Get Bank Shares as Bailout Collateral T A J I K I S T A N BANK ESKHATA: Moody's Assigns 'E+ BFSR; Outlook Stable U N I T E D K I N G D O M GLOBAL SHIP: DePrince Race Owns 10.3% of Class A Shares RANGERS FC: Players' Contracts Included in Green Acquisition SOUTH LONDON: In Administration Following Financial Woes TULLOCH HOMES: Implements Second Massive Debt-for-Equity Swap WINDERMERE VIII: Fitch Affirms 'Dsf' Rating on GBP19-Mil. Notes X X X X X X X X * BOOK REVIEW: Corporate Debt Capacity ********* =========== F R A N C E =========== ESCALON MEDICAL: Had US$639,800 Net Loss in March 31 Quarter ---------------------------------------------------------- Escalon Medical Corp. filed its quarterly report on Form 10-Q, reporting a net loss of US$639,786 on US$6.07 million of revenues for the three months ended March 31, 2012, compared with a net loss of US$1.92 million on US$6.40 million of revenues for the three months ended March 31, 2011. For the nine months ended March 31, 2012, the Company reported a net loss of US$5.0 million on US$18.37 million of revenues, compared with a net loss of US$3.62 million on US$19.08 million of revenues for the nine months ended March 31, 2011. The Company's balance sheet at March 31, 2012, showed US$10.57 million in total assets, US$8.97 million in total liabilities, and stockholders' equity of US$1.60 million. "The Company has incurred recurring operating losses, no longer have the benefit of cash inflows from Vascular and on May 11, 2012, the BHH debtholder informed the Company that it intends to declare the BHH debt, which is guaranteed by Escalon, into default, as such, the entire debt of US$4,149,516 is recorded as a current liability. These conditions raise substantial doubt about the Company's ability to continue as a going concern." "On Jan. 12, 2012, BH Holdings, S.A.S. ("BHH"); a wholly owned subsidiary of Drew [Drew Scientific, Inc., a wholly owned subsidiary of Escalon] initiated the filing of an insolvency declaration with the Tribunal de Commerce de Rennes, France ("Commercial Court"). The Commercial Court on Jan. 18, 2012, opened the liquidation proceedings with continuation of BHH's activity for three months and named an administrator to manage BHH. Since BHH is no longer controlled by Drew it was deconsolidated in the Dec. 31, 2011, consolidated financial statements and prior period amounts are presented as discontinued operations." "The filing of the insolvency declaration at BHH will have a material effect on results of operations in subsequent periods. BHH's product line revenues from operations were US$4,763,056, US US$5,254,574 and US$2,647,877 in fiscal 2011, 2010 and 2009, respectively. Losses from operations, net of taxes, were (US$1,232,904), (US$635,952) and (US$1,068,040) in 2011, 2010 and 2009, respectively." As reported in the TCR on Oct. 18, 2011, Mayer Hoffman McCann P.C., in Plymouth Meeting, Pennsylvania, says that the ongoing debt payments on the debt related to the Biocode Hycel acquisition and continued losses from operations and negative cash flows from operating activities raise substantial doubt about Escalon Medical's ability to continue as a going concern. A complete text of the Form 10-Q is available for free at: http://is.gd/HpuKU3 Wayne, Pa.-based Escalon Medical Corp. operates in the healthcare market, specializing in the development, manufacture, marketing, and distribution of medical devices and pharmaceuticals in the areas of ophthalmology, diabetes and hematology. The Company and its products are subject to regulation and inspection by the United States Food and Drug Administration (the "FDA"). PEUGEOT CITROEN: To Close Factory in France; 14,000 Jobs Affected ----------------------------------------------------------------- Mathieu Rosemain at Bloomberg News reports that PSA Peugeot Citroen, Europe's second biggest carmaker, will shut the first auto factory in France in 30 years and reduce its workforce by 6.7% in an effort to stem widening operating losses. According to Bloomberg, Chief Executive Officer Philippe Varin said on Thursday that the automaker will cut a total of 14,000 jobs, with 8,000 additional positions being eliminated on top of the 6,000 posts already announced last year. Moody's Investors Service in March was the last of the three main credit-reporting companies to cut Peugeot's debt rating to junk, Bloomberg recounts. "Peugeot is struggling with the power of Volkswagen, especially on the credit side, as VW benefits from lower costs of financing," Bloomberg quotes Kristina Church, a Barclays analyst in London with an "underweight/neutral" rating on Peugeot shares, as saying. "More importantly, Peugeot still has an issue with overcapacity and is in a worse position than Renault." It said that the French company will stop production at its 39- year-old factory in Aulnay, on the outskirts of Paris, in 2014 and focus the building of small cars at a nearby plant in Poissy, Bloomberg notes. Peugeot will also lower production at a plant in Rennes to slash operational costs, Bloomberg says. Peugeot said on Thursday that the company's first-half operating loss in the automotive unit will hit EUR700 million compared with a profit of EUR405 million a year earlier, Bloomberg relates. PSA Peugeot Citroen S.A. -- http://www.psa-peugeot-citroen.com/ -- is a France-based manufacturer of passenger cars and light commercial vehicles. It produces vehicles under the Peugeot and Citroen brands. In addition to its automobile division, the Company includes Banque PSA Finance, which supports the sale of Peugeot and Citroen vehicles by financing new vehicle and replacement parts inventory for dealers and offering financing and related services to car buyers; Faurecia, an automotive equipment manufacturer focused on four component families: seats, vehicle interior, front end and exhaust systems; Gefco, which offers logistics services covering the entire supply chain, including overland, sea and air transport, industrial logistics, container management, vehicle preparation and distribution, and customs and value added tax (VAT) representation, and Peugeot Motocycles, which manufactures scooters and motorcycles. In 2008, PSA Peugeot Citroen S.A. sold more than 3.2 million vehicles in 150 countries worldwide. ============= G E R M A N Y ============= NECKERMANN.DE GMBH: At Risk of Insolvency After Labor Talks Fail ---------------------------------------------------------------- Julie Cruz at Bloomberg News, citing Handelsblatt, reports that Neckermann.de GmbH is at risk of insolvency as owner Sun Capital Partners Inc. and Ver.di labor union can't agree on conditions for job cuts amid restructuring plans for the company. Neckermann.de GmbH is a German mail order company. NORDENIA INT'L: Moody's Reviews 'B1' PDR for Possible Upgrade ------------------------------------------------------------- Moody's Investors Service affirmed Mondi Group's Baa3 issuer rating and senior unsecured rating and changed the outlook to stable from positive. Concurrently, Moody's placed the credit ratings of Nordenia International AG under review for upgrade. The rating actions follow the announcement that Mondi has reached an agreement with Oaktree, the majority shareholder of Nordenia, regarding the acquisition of Nordenia for a total enterprise value of EUR655 million including assumed debt, valuing Nordenia at around 6.6 times 2011 reported EBITDA. The acquisition will be funded through a new bridge facility of EUR250 million with a 24 months tenor and incremental drawings under the group's existing credit lines. Debt to be assumed amounts to approximately EUR400 million, including EUR280 million second priority notes issued by Nordenia Holdings GmbH. The corporate family and probability of default ratings of Nordenia are likely to be withdrawn following the closing of the proposed transaction. With regards to Nordenia's B2 second priority notes rating, the review will focus on the pro forma capital structure following closing of the transaction and the relative ranking of Nordenia's debt securities (including the type of support provided, if any). The transaction is subject to customary closing conditions including approval from regulatory authorities, which is only expected to be obtained by Q4 2012. Ratings Rationale The stabilization of the outlook of Mondi's Baa3 rating is a reflection of Moody's assessment that the proposed acquisition is overall credit negative. This assessment is substantiated by the expected increase in net debt by about EUR655 million as a result of the transaction, which will consume much of the headroom incorporated in the current rating, making an upgrade within the next 12-18 months rather unlikely. It is also a reflection of the a more aggressive approach towards cash spending with approximately EUR1 billion earmarked for acquisitions and portfolio clean ups in 2012 so far, including the Nordenia transaction. Moody's notes however that despite the expected weakening of credit metrics, Mondi will remain comfortably positioned in the Baa3 rating category with Debt/EBITDA pro forma for the acquisition of around 2.5x and RCF/Debt above 25%. In terms of business profile, Moody's views the transaction as modestly positive, considering that Nordenia will extend Mondi's customer base with more stable fast moving consumer goods companies and adds growth perspectives on the back of rising demand for hygiene products, where Nordenia has a particularly strong position for diaper components. At the same time, Moody's notes that Nordenia's product offering is fairly complementary and therefore, synergy potential is in Moody's view modest. While the acquisition of Nordenia will be dilutive in terms of profitability margins, Moody's nevertheless expects solid free cash flow generation of the combined group to allow for a fairly swift reduction in incremental leverage. The stable rating outlook reflects Moody's expectation of a moderate weakening of financial metrics due to the incremental debt load as well as lower operating profitability of Mondi, reflecting weak industry conditions during the last months and continued low visibility for the second half of 2012. At the same time, driven by improving demand for most of the group's products as well as price increases implemented, these should help Mondi to improve operating profitability sequentially compared to Q1 2012. Liquidity of Mondi is expected to remain solid post the transaction closing. Cash of EUR191 million as of December 2011 and internal cash flow generation, with funds from operations of EUR833 million during the last twelve months ending December 2011 should be sufficient to comfortably cover operational cash needs of the combined group. In addition, Mondi has access to various credit lines, the core facility being a EUR750 million syndicated revolving credit facility, which was fully undrawn per year end 2011 and protected by a financial covenant with currently solid headroom. An upgrade would require a track record of sustaining the improved profitability and cash flow generation as evidenced by EBITDA margins in the high teens, RCF/Debt towards 30% and leverage in terms of Debt/EBITDA close to 2x. A further important consideration will be the group's approach to cash usage going forward, in particular with regards to shareholder return and growth projects. Rating pressure could build up were Mondi unable to sustain recent performance improvements as indicated by RCF/Debt trending to below 20%, EBITDA margins deteriorating towards 10% or should the group generate negative free cash flows. The review for upgrade of Nordenia's ratings reflects the better credit profile of Mondi and Moody's assumption that there is a high likelihood that the transaction will be completed as presented. With regards to Nordenia's B2 second priority notes rating, the review will focus on the pro forma capital structure following closing of the transaction and the relative ranking of Nordenia's debt securities (including the type of support provided, if any). Outlook Actions: Issuer: Mondi Plc Outlook, Changed To Stable From Positive Issuer: Mondi Finance plc Outlook, Changed To Stable From Positive Issuer: Nordenia Holdings GmbH Outlook, Changed To Rating Under Review From Stable Issuer: Nordenia International AG Outlook, Changed To Rating Under Review From Stable On Review for Possible Upgrade: Issuer: Nordenia Holdings GmbH Senior Unsecured Regular Bond/Debenture, Placed on Review for Possible Upgrade, currently B2, LGD4, 67 % Issuer: Nordenia International AG Probability of Default Rating, Placed on Review for Possible Upgrade, currently B1 Corporate Family Rating, Placed on Review for Possible Upgrade, currently B1 The methodologies used in these ratings were Global Paper and Forest Products Industry published in September 2009 and Global Packaging Manufacturers: Metal, Glass, and Plastic Containers published in June 2009. Mondi is an integrated paper and packaging group which generated revenues of EUR5.7 billion in 2011. The group is principally involved in the manufacture of packaging paper and converted packaging products, uncoated fine paper as well as specialty products. Mondi has production operations in 28 countries, with a focus on Northern and Eastern Europe, as well as South Africa, and employs about 23,400 people. Nordenia International AG, based in Greven, Germany, is an integrated developer and manufacturer of customized plastic hygiene components and flexible plastic packaging products, largely focused on the consumer goods industry. In 2011, Nordenia generated revenues of EUR881 million. NORDENIA INT'L: S&P Puts 'B+' Corporate Rating on Watch Positive ---------------------------------------------------------------- Standard & Poor's Ratings Services placed its 'B+' long-term corporate credit rating on Germany-based flexible film and packaging manufacturer Nordenia International AG (Nordenia) on CreditWatch with positive implications. "At the same time, we placed our 'B' issue rating on Nordenia's EUR280 million senior unsecured second-priority notes due 2017 on CreditWatch with positive implications," S&P said. The CreditWatch placement follows the announcement by South Africa-headquartered paper and packaging producer Mondi Group (Mondi; BBB-/Stable/--) that it has agreed to acquire Nordenia. Mondi will pay EUR240 million for over 93% of Nordenia. Nordenia has been majority controlled by Los Angeles-based investment management company Oaktree Capital Management L.P. (Oaktree; A-/Stable/A-2) since 2006. "In accordance with our corporate criteria on rating parents and their subsidiaries, we would likely raise our long-term corporate credit rating on Nordenia following its acquisition by Mondi, because we assess Mondi as having stronger credit quality than Nordenia. This could result in a multi-notch upgrade of Nordenia. While Mondi and Oaktree have signed a sale and purchase agreement, we note that the transaction will have to pass certain regulatory checks before it is completed," S&P said. "The ratings on Nordenia reflect our view of the group's "aggressive" financial risk profile and "fair" business risk profile. In our opinion, the key ratings constraints for Nordenia include an aggressive financial policy; exposure to volatile raw material prices; and significant customer and production capacity concentration. We view these constraints as being partly offset by Nordenia's leading positions in niche markets, established long-term customer relationships, and a strong record of passing on input cost increases," S&P said. "We aim to resolve the CreditWatch placement on completion of the acquisition. We will seek to understand the integration and operational implications of the transaction, as well as the liquidity and funding of the consolidated group. We anticipate that, in the event of a successful acquisition, we would raise our long-term corporate credit rating on Nordenia. At the same time, we could raise our issue rating on the EUR280 million senior unsecured second-priority notes accordingly. In contrast, we could remove the ratings from CreditWatch if Mondi does not complete the acquisition," S&P said. ===================== N E T H E R L A N D S ===================== AI FINANCE: Moody's Expects Timely Repayment of US$150MM Bonds -------------------------------------------------------------- Moody's Investors Service says that it expects the US$150 million of bonds issued by AI Finance B.V. and guaranteed by Agri International Resources Pte Ltd (Caa2, stable, "Agri"), which mature on July 15th , to be repaid on time, following the efforts made by Agri's parent company, Bakrie Sumatera Plantations (Caa2, stable, "BSP") to refinance the bond. Once confirmed, a successful refinancing and repayment of the bond could lead to some upward pressure on both corporate family ratings. However, the performance of the downstream oleochemical and refining assets continues to disappoint and this part of the business is many months late in coming on-stream. In addition, the yields of BSP's plantations are consistently weaker than those achieved by rated peers. These fundamental constraints are thus likely to limit the extent of any recovery in ratings. Moody's however also notes that the recent changes in senior management may help to re-invigorate the company. "Based on the good prospects for the palm oil sector, the repayment of the bond may be the first step in what could be the long-drawn out recovery of BSP's rating," says Alan Greene, a Vice President -- Senior Credit Officer at Moody's. Moody's notes the tight conditions and heavy amortization schedules of the previously refinanced loans for "Domba Mas" and for BSP's own bond refinancing last year. "However, depending on the terms of any Agri bond refinancing, there is a risk that the debt service burden could yet extinguish any glimmer of recovery at BSP," adds Mr. Greene, who is also Lead Analyst for BSP. Assuming that there is no default on the Agri bond, Moody's would expect to re-assess the rating of BSP in the light of the changes to the financial profile of the Group post-refinancing, and of any significant variances in operating performance. Bakrie Sumatera Plantations Tbk is an Indonesian plantation company operating mainly in Sumatra, Indonesia, with rubber plantations of some 19,000 planted hectares and oil palm plantations of 107,000 planted hectares (including Agri's 32,000 hectares). During 2010, it acquired a downstream oleochemicals business, "Domba Mas", for US$440 million. It is 27.4%-owned by the conglomerate PT Bakrie & Brothers. Its IPO occurred in 1990 and BSP is listed on the Indonesia Stock Exchange. DUCHESS VI: S&P Raises Rating on Class E Notes to 'B+(sf)' ---------------------------------------------------------- Standard & Poor's Ratings Services raised its credit ratings on Duchess VI CLO B.V.'s class A, B, C, D, and E notes, and the Rev ln fac notes. "The rating actions follow our assessment of the transaction's performance since our previous review in October 2010. We have used data from the trustee report dated May 2012 and our cash flow analysis, considering recent transaction developments," S&P said. "In our review, we have applied our 2012 counterparty criteria and our 2009 collateralized debt obligation (CDO) cash flow criteria (see "Counterparty Risk Framework Methodology And Assumptions," published on May 31, 2012, and "Update To Global Methodologies And Assumptions For Corporate Cash Flow And Synthetic CDOs," published on Sept. 17, 2009). Our analysis shows that the level of assets that we consider to be rated in the 'CCC' category ('CCC+', 'CCC', and 'CCC-') has decreased to 4.38% from 16.95% of the portfolio balance, excluding cash. Assets that we consider to be rated in the 'BB' category ('BB+', 'BB', and 'BB-') have also decreased to 3.57% from 11.95%. The bucket of defaulted assets ('CC', 'C', 'SD' [selective default], or 'D']) has increased to 6.90% from 0.32%," S&P said. Additionally, the weighted-average life of assets in the portfolio has decreased to 4.44 years from 5.07 years, and the weighted-average spread has increased to 3.94% from 2.77%. "We have subjected the transaction's capital structure to a cash flow analysis, to determine the break-even default rate for each rated class of notes at each rating level. In our analysis, we used the portfolio balance that we considered to be performing (EUR443.9 million), the reported weighted-average spread (3.94%), 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 stress scenarios," S&P said. "All of the transaction's coverage tests have improved and currently meet the minimum levels of coverage required. Based on our analysis, we have raised our ratings on the class A, B, C, D, and E notes, and the Rev ln fac notes in this transaction to levels that reflect the current levels of credit enhancement, portfolio credit quality, and transaction performance. Based on this analysis, the class A notes and the Rev ln fac notes can achieve 'AA- (sf)' ratings, when giving credit to the hedge agreement with Citibank N.A. (A/Negative/A-1). However, we do not consider that the transaction documents relating to the hedge counterparty support a 'AA- (sf)' rating under our 2012 counterparty criteria. Therefore, in our cash flow analysis, we have tested additional scenarios without giving benefit to the options agreement. Without giving benefit to the hedge agreement, the class A notes and the Rev ln fac notes can achieve 'A+ (sf)' ratings in our cash flow scenarios. We have therefore raised our ratings on the class A notes and the Rev ln fac notes to 'A+ (sf)'," S&P said. "In any case, if the replacement language in the hedge agreement reflects any of our previous counterparty criteria, we allow the counterparty to support tranches rated not higher than our long- term issuer credit rating (ICR) on the counterparty plus one notch, which is 'A+( sf)' in this transaction," S&P said. Duchess VI CLO is a cash flow CDO transaction, backed primarily by leveraged loans to speculative-grade corporate firms. It closed in August 2006, and is managed by Babson Capital Europe Ltd. Ratings List Class Rating Rating To From Duchess VI CLO B.V. EUR501 Million Senior Secured and Deferrable Floating-Rate Notes Ratings Raised A A+ (sf) A (sf) Rev ln fac A+ (sf) A (sf) B A (sf) BBB+ (sf) C BBB+ (sf) BB+ (sf) D BB+ (sf) B+ (sf) E B+ (sf) CCC+ (sf) HALCYON STRUCTURED: S&P Lowers Rating on Class D Notes to 'CCC+' ---------------------------------------------------------------- Standard & Poor's Ratings Services took various credit rating actions on Halcyon Structured Asset Management CLO 2008-II B.V.'s outstanding EUR189.28 million notes. "Specifically, we have raised our ratings on the class A1, A2, B, C1, C2, and D notes, and lowered our rating on the class E notes," S&P said. "The rating actions follow our assessment of the transaction's performance since our previous review on Dec. 9, 2010, taking into account recent developments. We have used data from the trustee report dated May 31, 2012, and our cash flow analysis. We have applied our 2012 counterparty criteria and our 2009 cash flow criteria," S&P said. "Based on our analysis, the portfolio's performance has deteriorated. This has been primarily due to the decreased proportion of assets that we consider to be rated in the 'BB' category ('BB+', 'BB', or 'BB-') to 5.16% from 16.95%," S&P said. "At the same time, the proportion of assets that we consider to be rated in the 'CCC' category ('CCC+', 'CCC', or 'CCC-') has decreased marginally to 8.03% from 8.42%, and the proportion of defaulted assets (rated 'CC', 'SD' [selective default], or 'D') decreased to 0.00% from 1.76%. Our analysis indicates that credit enhancement levels for all classes of notes have increased (significantly for the class A1 notes, to 53.13% from 31.95%), due to the deleveraging of the class A1 notes. Additionally, the weighted-average spread earned on the collateral portfolio has increased, and the portfolio's weighted-average maturity has decreased," S&P said. "However, the portfolio's negative credit migration has caused our scenario default rate to increase at each rating level in the transaction. We have subjected the capital structure to a cash flow analysis, to determine the break-even default rate for each rated class of notes. In our analysis, we have used the reported portfolio balance, weighted-average spread, and weighted-average recovery rates that we consider appropriate. We have incorporated various cash flow stress scenarios, using alternative default patterns, levels, and timings for each liability rating category ('AAA', 'AA', and 'BBB'), in conjunction with different interest rate stress scenarios," S&P said. At closing, Halcyon Structured Asset Management CLO 2008-II entered into derivative obligations to mitigate currency risks in the transaction. "We consider that the documentation for these derivatives does not fully reflect our 2012 counterparty criteria. Therefore, in our cash flow analysis, we have assumed that the transaction does not benefit from the support of derivatives," S&P said. "Based on this analysis, we have raised our rating on the class A1 notes to 'AAA (sf)' from 'AA+ (sf)'. We have applied our largest obligor default test--a supplemental stress test in our 2009 cash flow criteria. Additionally, we have applied our largest industry default test--another of our supplemental stress tests. These supplemental stress tests have constrained our ratings on the class A2, B, C1, C2, D, and E notes, which could achieve higher ratings when only considering our cash flow analysis," S&P said. "Considering all of these factors, we have raised our ratings on the class A2, B, C1, C2, and D notes because our analysis indicates that the credit enhancement level available to each class of notes is commensurate with higher ratings than we previously assigned. We have lowered our rating on the class E notes, based on the outcome of our supplemental stress tests, which have constrained our rating to a lower level than that commensurate with the results of our cash flow analysis. Halcyon Structured Asset Management CLO 2008-II is a cash flow collateralized loan obligation (CLO) transaction that closed in August 2008 and securitizes loans to primarily speculative-grade corporate firms," S&P said. Ratings List Class Rating To From Halcyon Structured Asset Management CLO 2008-II B.V. EUR444 Million Subordinated Notes Ratings Raised A1 AAA (sf) AA+ (sf) A2 AA+ (sf) A+ (sf) B A+ (sf) A- (sf) C1 BBB+ (sf) BBB (sf) C2 BBB+ (sf) BBB (sf) D BB- (sf) B+ (sf) Rating Lowered E CCC+ (sf) B- (sf) PINAFORE HOLDINGS: Moody's Says Tender No Impact on 'Ba3' CFR ------------------------------------------------------------- Moody's Investors Service said that the announcement by Pinafore Holdings B.V. that its tender offer for up to $475 million in aggregate principal amount of its 9% Senior Secured Second Lien Notes, due 2018, has been oversubscribed is viewed as a positive credit development. Concurrent with the tender offer, Pinafore has received approval under a consent solicitation to amend its indenture to allow for increased restricted payments, including shareholder returns. The benefits of the debt reduction under the tender offer are balanced against the potential for increasing shareholder returns under the consent agreement and result in no immediate change to the Ba3 Corporate Family Rating. Pinafore Holding BV is the parent holding company for the operations of Tomkins Ltd (Tomkins) following its acquisition by Pinafore Acquisitions Limited (jointly owned by Onex and the Canada Pension Plan Investment Board). Tomkins is a diversified global engineering company focused on industrial and automotive- related activities -- including power transmission, fluid power and fluid systems, accounting for 78% of sales; as well as building products, accounting for 22% of sales. In FY 2011, Tomkins generated sales of US$4.6 billion and employed around 24,700 people through operations in 32 countries. =========== P O L A N D =========== PBG SA: Ministries Propose Different Rescue Options --------------------------------------------------- Anthony Adams reports that Warsaw Business Journal reports that the Treasury is pushing for state support for PBG SA, while the finance minister has called for a free-market approach. Different ministries in the Polish government have contradictory views on the course of action to take with PBG, WBJ says. On Wednesday, Treasury Minister Mikolaj Budzanowski, Economy Minister Waldemar Pawlak and Finance minister Jacek Rostowski all offered different solutions, from bailouts to a fully free-market approach, WBJ relates. According to WBJ, Mr. Budzanowski told Reuters that "We will either decide to grant state support (to PBG) worth PLN385 million, which requires the approval of the European Commission and that will take a few months. The other option is that ARP (state-agency) takes over some subsidiaries of PBG." Meanwhile, Mr. Pawlak has proposed that the government buy bonds from troubled construction companies, many of which became indebted due to their involvement in Euro 2012 infrastructure projects, WBJ discloses. On the other end of the spectrum, Finance Minister Jacek Rostowski has said that the government should refrain from involving itself, WBJ notes. As reported by the Troubled Company Reporter-Europe on June 15, 2012, Bloomberg News related that a Poznan, western Poland-based court agreed to declare bankruptcy of PBG SA aimed at arrangement with creditors. PBG SA is Poland's third largest builder. =============== P O R T U G A L =============== * PORTUGAL: Creditors May Have to Ease Terms of Bailout ------------------------------------------------------- Henrique Almeida at Bloomberg News reports that Portugal's international creditors may soon have to ease terms of the country's bailout to prevent the plan from derailing as the government faces setbacks in attaining its deficit goals. Prime Minister Pedro Passos Coelho's struggle to meet deficit pledges were further hampered last week when about EUR2 billion (US$2.5 billion) of planned cuts to pensions and civil servants' holiday pay were ruled unconstitutional, Bloomberg discloses. With Portugal's 10-year bond yield above 10%, returning to the markets next year may be untenable, requiring more international aid despite the premier's insistence he won't seek concessions, Bloomberg states. "Lisbon's strategy is to continue to be the good student among bailed-out countries until it becomes clear that Brussels and Berlin must ease the rules of the game for it to succeed," Bloomberg quotes Antonio Barroso, a London-based analyst at Eurasia group, as saying. Finance Minister Vitor Gaspar signaled the government's intentions not to seek concessions on Tuesday in Brussels even after euro-region finance ministers agreed to give Spain an extra year to meet its deficit goals and eased terms of its EUR100 billion bank bailout, Bloomberg relates. Mr. Gaspar, as cited by Bloomberg, said that the Portuguese and Spanish cases are different and the government won't be deterred by the court ruling. According to Bloomberg, he said that "The Portuguese government is studying measures of equal impact on the budget" to compensate for the court's ruling. Ricardo Santos, a London-based economist at BNP Paribas SA, said that Portugal may end the year with a deficit of more than 5.5% of GDP, missing the rescue plan's target by more than 1 percentage point and prompting an easing of bailout terms, Bloomberg notes. * PORTUGAL: S&P Affirms Ratings on Six Financial Institutions ------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its ratings on six Portugal-based financial institutions: Banco BPI S.A. (BPI) and its core subsidiary Banco Portugues de Investimento S.A., Banco Comercial Portugues S.A. (Millennium bcp), Caixa Geral de Depositos S.A. (CGD), and Banco Espirito Santo S.A. (BES) and its core subsidiary Banco Espirito Santo de Investimento S.A. (BESI). The outlooks on the long-term ratings remain negative. "At the same time, we took various negative rating actions or CreditWatch placements on the non-deferrable subordinated debt, preferred stock, and junior subordinated debt of BPI, Millennium bcp, and CGD," S&P said. "The rating actions follow our review of the implications of the recent recapitalization measures taken by these Portuguese banks. We had already incorporated into our ratings the likelihood that these Portuguese banks would reinforce their capital this year to comply with the European Banking Authority's (EBA) 9% core tier 1 ratio by end-June 2012, and with the Bank of Portugal's 10% core Tier 1 ratio by year-end 2012," S&P said. The banks have recently undertaken different actions to ensure their compliance with the higher capital requirements: BPI, Millennium bcp and CGD have issued a hybrid instrument that has been subscribed by the Portuguese government. CGD has also received a capital injection from the state. BES has reinforced its capital privately. The Portuguese government (Republic of Portugal, BB/Negative/B) has subscribed to the hybrid issues of Millennium bcp, BPI, and CGD, which allowed these banks to comply with the higher EBA capital requirement by end-June 2012, and will allow them to meet Bank of Portugal's core minimum capital requirement by year-end 2012. "However, in contrast with the EBA and regulatory approach, these hybrid instruments don't qualify for equity credit under our criteria," S&P said. This is because of these instruments' short residual life -- with repayment expected within five years -- and the annual step-ups that provide an incentive to redeem the instruments even sooner. "We have therefore assigned these hybrid instruments "minimal equity content," as our criteria define the term, and we have excluded them from our risk-adjusted capital (RAC) calculations. That said, we think that the hybrid issues help mitigate some vulnerabilities to which these banks' capital bases are exposed, including the potential impact of sizable unrealized losses resulting from banks' sovereign exposures," S&P said. "We have therefore improved our risk position assessments for those banks that have issued hybrid instruments subscribed to by the government. We raised BPI and CGD's stand-alone credit profiles (SACPs) by one notch to reflect the positive impact of the Portuguese government's support on their financial profiles," S&P said. "The ratings nevertheless remained unchanged because the improvement in these banks' SACPs is offset by the fact that we no longer incorporate a one-notch uplift into the ratings for government support. This is because we believe that any uplift for government support should not result in bank ratings that are at the same level as the long-term rating on the sovereign, which in Portugal's case is 'BB'," S&P said. "The affirmation of Millennium bcp reflects our view that the marginally positive impact we see from the government's subscription to the bank's hybrid issue is offset by weaker profitability prospects. As a result, Millennium bcp's SACP remains unchanged. As opposed to the other Portuguese banks we rate, our ratings on Millenium bcp continue to stand one notch above the SACP because we factor in government support," S&P said. "We affirmed our ratings on BES and BESI because, although we view their recapitalization positively, we had already incorporated into the ratings the likelihood of BES undertaking a capital increase this year. We took several negative rating actions on nondeferrable subordinated debt, preferred stock, and junior subordinated debt issued by Millennium bcp, BPI, and CGD. These mainly reflect possible EU restrictions on payment of coupons following the state aid," S&P said. Ratings List Ratings Affirmed Banco BPI S.A. BB-/Negative/B Banco Portugues de Investimento S.A. BB-/Negative/B Banco Comercial Portugues S.A. B+/Negative/B Caixa Geral de Depositos S.A. BB-/Negative/B Banco Espirito Santo S.A. BB-/Negative/B Banco Espirito Santo de Investimento S.A. BB-/Negative/B ========= S P A I N ========= CAJA GRANADA I: Fitch Affirms Rating on Class D Notes at 'Bsf' -------------------------------------------------------------- Fitch Ratings has affirmed Ayt Caja Granada Hipotecario I, Fondo de Titulizacion de Activos's (Caja Granada I) notes, as follows: -- Class A (ISIN ES0312212006) 'AA-sf'; placed on Rating Watch Negative; -- Class B (ISIN ES0312212014) affirmed at 'BBBsf'; Outlook Negative; -- Class C (ISIN ES0312212022) affirmed at 'BBsf'; Outlook Negative; -- Class D (ISIN ES0312212030) affirmed at 'Bsf'; Outlook Negative. Caja Granada I's pool comprises residential loans originated and serviced in Spain by Caja General de Ahorros de Granada, part of Banco Mare Nostrum S.A. ('BB+'/Stable/'B'). The affirmation of the ratings reflects the sufficient level of credit enhancement available to the rated notes. The notes are paying down sequentially and the reserve fund is not expected to amortize due to breach of arrears triggers, which is benefiting the rated notes. The Negative Outlook assigned to the class B, C and D notes reflects Fitch's concerns over the future performance of the pool. Fitch believes that the performance of the underlying assets remains exposed to the stresses in the Spanish macroeconomic environment. Loans in arrears by more than three months increased to 4.9% of the current pool balance in March 2012, from 2.3% as of December 2011. No period defaults (defined as loans in arrears by more than 18 months) have been reported at the past four interest payment dates (IPDs), although the volume of loans in later-stage arrears is above levels seen in most other Fitch-rated Spanish RMBS transactions. The transaction replenished its reserve fund to the target level at the March 2011 IPD after incurring several draws between September 2009 and December 2010. Fitch believes that the replenishment was driven by the high volume of recoveries on defaulted loans (total amount reached EUR6.2 million). The reported recovery rate on defaulted loans is 100%, which is unusually high in comparison to transactions with similar characteristics. In most cases these recoveries are the result of the originator refinancing the defaulted loans leading to the full repayment of the defaulted loans in the pool. Given the tightening in liquidity on the market, Fitch believes that the practice of refinancing defaulted borrowers may not be sustainable indefinitely. For this reason, Fitch has applied its standard market value decline assumptions to derive the recovery rates on future defaults. Following the downgrades of the servicer, Banco Mare Nostrum S.A. ('BB+'/Stable/'B'), there is an increased risk of note payment interruption. In the event of a default of the servicer the transaction's structure may not be able to cover the resultant liquidity shortfalls. Although the reserve fund is presently at the target amount, the agency believes that future reserve fund draws are likely to occur, which means that in case of servicer disruption, the reserve fund cannot be relied upon. For this reason, the agency has placed the class A notes on Rating Watch Negative. CAJA MADRID: S&P Cuts Debt Rating on Preferred Stock to 'C' ----------------------------------------------------------- Standard & Poor's Ratings Services lowered to 'C' from 'CC' its debt rating on preferred stock issued by Caja Madrid Finance Preferred S.A. and guaranteed by Banco Financiero y de Ahorros S.A. (BFA, B+/Watch Neg/B), parent company of Spanish bank Bankia S.A. (BB+/Watch Neg/B). The issue concerned has the ISIN number ES0115373005. According to BFA the current amount outstanding is 2 million. Due to an error, the rating on this issue was not lowered when the dividend payment was skipped on June 17, 2012. Ratings List Downgraded To From Caja Madrid Finance Preferred S.A. Preference Stock* C CC * Guaranteed by Banco Financiero y de Ahorros S.A. * SPAIN: Private Sector Bear Cost of Bank Restructuring ------------------------------------------------------- John O'Donnell at Reuters reports that the private sector will be involved in bearing the cost of restructuring Spain's banks, but senior bank bondholders and depositors will not be affected by such burden-sharing. "Once we have a clear sense of the costs of restructuring . . . we will work on the principle that private sector participation in the distribution of losses is necessary in order to ensure that taxpayers do not have to shoulder an unfair burden," Reuters quotes Simon O'Connor, a spokesman for the European Commission, as saying on Wednesday. "This approach has been based on the principles of minimizing the costs to taxpayers while at the same time safeguarding financial stability." The spokesman said, however, that senior bondholders and depositors would not be involved, Reuters relates. * SPAIN: Finland May Get Bank Shares as Bailout Collateral ---------------------------------------------------------- Kati Pohjanpalo at Bloomberg News reports that Finland Finance Minister Jutta Urpilainen said the Nordic country is in talks to get shares in Spanish banks in exchange for its contribution to a bailout agreed last month. "We've discussed the option of bank shares," Bloomberg quotes Ms. Urpilainen said in an interview on state-owned broadcaster YLE TV1 as saying on Wednesday. "There are several different alternatives and it's still impossible to say what the concrete model for collateral will be." Finland wants the collateral in exchange for loans to Spain paid from Europe's temporary rescue fund to shield its taxpayers from losses, Bloomberg discloses. Ms. Urpilainen only has a few weeks in which to strike a deal as the first installment of Spain's rescue is due to be paid this month, Bloomberg notes. Euro-area finance ministers this week decided Spain will get the first EUR30 billion (US$36.7 billion) in July, Bloomberg relates. =================== T A J I K I S T A N =================== BANK ESKHATA: Moody's Assigns 'E+ BFSR; Outlook Stable ------------------------------------------------------ Moody's Investors Service has assigned the following ratings to Bank Eskhata: - E+ standalone bank financial strength rating (BFSR) - B3 long-term and Not Prime short-term local-currency deposit ratings - Caa2 long-term and Not Prime short-term foreign-currency deposit ratings The outlook on all long-term ratings is stable Moody's assessment is primarily based on Bank Eskhata's financial statements for 2011 (audited) -- prepared under IFRS. Ratings Rationale "Eskhata's ratings are constrained by the bank's vulnerability to the weak and potentially volatile operating environment in Tajikistan where the bank operates. In addition, Eskhata's ratings reflect (i) its increasing credit risk appetite as demonstrated by recent rapid loan book growth and (ii) a very high proportion of FX-denominated loans which raises asset quality concerns," says Lev Dorf, Moody's lead analyst for this issuer. At the same time, Moody's notes that Eskhata's ratings are underpinned by: (i) the high granularity of its loan book, supported by the bank's focus on microfinance and retail business; (ii) currently satisfactory financial fundamentals including asset quality, liquidity and profitability; and (iii) currently sufficient capitalization to absorb expected credit losses under Moody's central scenario. Moody's notes that Eskhata's deposit ratings are strongly dependent upon government policy and Tajikistan's operating and economic environment. Despite the acceleration of economic growth in recent years (Tajikistan GDP grew by 7.4% in 2011, and 6.5% in 2010), Tajikistan's economic conditions and the operating environment remain weak and constrained by the country's limited economic development, weak institutions and high levels of dollarization. "Given the country's heavy dependence on remittances from Russia (in 2011 remittances accounted for around 50% of Tajikistan GDP), the local economy and the banking sector are highly vulnerable to external shocks -- particularly to a drop in international commodity prices which would undermine a major source of foreign exchange, economic growth and household income," adds Mr. Dorf. Despite the challenging economic environment, opportunities are being created for local banks aided by the low level of financial intermediation in Tajikistan and low competitive pressures in the domestic banking sector. In recent years, Eskhata has materially improved its market franchise, and became the fifth-largest bank in Tajikistan in terms of assets at year-end 2011, as its loan portfolio grew by 50% in 2011 (compared with 40% growth in 2010). The bank is focusing on microfinance, SME and retail businesses that, together, accounted for 80% of the bank's loan portfolio. In 2010-2011, Eskhata reported good profitability. Its net income in 2011 grew by 87% to TJS15.8 million (US$3.3 million), translating into return on average assets (RoAA) of 3.67% (2010: 2.63%). The rating agency notes that Eskhata's solid profitability metrics are driven by its healthy net interest margins (10% in 2011) given the bank's focus on high-margin microfinance and retail lending. Eskhata's profitability also benefited from its strong fee-generating capacity. The bank's fee and commission income (which accounted for around 32% of total operating income in 2011) was mostly generated by remittance business, and will, in Moody's opinion, remain one of the main income sources for Eskhata in 2012. In light of Eskhata's highly profitable lending business, Moody's views the bank's asset quality as adequate (loans 90+ days overdue and restructured loans together accounted for around 4.5% of gross loans in 2011). However, the rapid loan book growth in recent years, along with a very high proportion of FX-denominated loans (90% of gross loans) could adversely impact asset quality and could raise concerns if the operating environment deteriorates. Furthermore, the assigned ratings reflect Eskhata's satisfactory liquidity position which has been supported by growing retail deposits and sufficient level of liquid assets (23-30% of total assets in the period 2011-Q1 2012). Moody's also notes that Eskhata's capital position -- with a Total capital adequacy ratio (CAR) of 19 % at Q1 2012 -- would be sufficient to absorb expected credit losses under Moody's central scenario. WHAT COULD CHANGE THE RATINGS UP/DOWN According to Moody's, an upgrade of Eskhata's ratings is unlikely in the near term, given the weak and potentially volatile operating environment in which the bank operates. However, downward pressure could be exerted on Eskhata's ratings if economic conditions were to worsen beyond current expectations, leading to materially weaker asset-quality profiles, impaired profitability and weaker capitalization levels. The principal methodology used in this rating was Moody's Consolidated Global Bank Rating Methodology published in June 2012. Headquartered in Khudjand, Tajikistan, Eskhata reported -- as at December 31, 2011 -- total assets of TJS516.6 million (US$108.6 million), shareholders equity of TJS54.6 million (US$11.5 million) and net income of TJS15.8 million (US$3.3 million), according to its audited IFRS. =========================== U N I T E D K I N G D O M =========================== GLOBAL SHIP: DePrince Race Owns 10.3% of Class A Shares ------------------------------------------------------- In an amended Schedule 13G filing with the U.S. Securities and Exchange Commission, DePrince, Race & Zollo, Inc., disclosed that, as of June 30, 2012, it beneficially owns 4,871,738 shares of Class A Common Stock of Global Ship Lease, Inc., which represents 10.26% of the shares outstanding. A copy of the filing is available for free at http://is.gd/Vlq6T1 About Global Ship Lease London, England-based Global Ship Lease (NYSE: GSL, GSL.U and GSL.WS) -- http://www.globalshiplease.com/-- is a containership charter owner. Incorporated in the Marshall Islands, Global Ship Lease commenced operations in December 2007 with a business of owning and chartering out containerships under long-term, fixed rate charters to world class container liner companies. Global Ship Lease owns 17 vessels with a total capacity of 66,297 TEU with a weighted average age at June 30, 2010, of 6.3 years. All of the current vessels are fixed on long-term charters to CMA CGM with an average remaining term of 8.6 years. The Company has contracts in place to purchase two 4,250 TEU newbuildings from German interests for approximately US$77 million each that are scheduled to be delivered in the fourth quarter of 2010. The Company also has agreements to charter out these newbuildings to Zim Integrated Shipping Services Limited for seven or eight years at charterer's option. As reported in the Dec. 1, 2012 edition of the TCR, Global Ship Lease disclosed that it had entered into an agreement with its lenders to waive until Nov. 30, 2012 the requirement under its credit facility to conduct loan-to-value tests. The credit facility requires that loan-to-value, which is the ratio of outstanding borrowings under the credit facility to the aggregate charter-free market value of the secured vessels, cannot exceed 75%. The Company's balance sheet at March 31, 2012, showed US$937.52 million in total assets, US$595.25 million in total liabilities and US$342.26 million in total stockholders' equity. RANGERS FC: Players' Contracts Included in Green Acquisition ------------------------------------------------------------ STV reports that Charles Green's GBP5.5 million agreement to buy the assets of Rangers included a GBP2.75 million payment to purchase the contracts and registrations of the club's players. According to STV, a report from administrators Duff and Phelps has broken down the "asset realisations" of their sale of the business to Sevco Scotland Limited. It shows Mr. Green paid for the club's employees to transfer to his company under TUPE regulations, STV notes. Numerous players have subsequently refused to take up employment with Sevco, exercising their right under employment law to terminate their contracts, STV says. Mr. Green has vowed to challenge those who have departed, with the Scottish FA so far having refused to issue International Transfer Certificates to allow players to complete transfers to new clubs. It is claimed Mr. Green also paid GBP1.5 million for "heritable properties", understood to be Ibrox Stadium, Murray Park and the Albion car park, STV notes. About Rangers Football Club Rangers Football Club PLC -- http://www.rangers.premiumtv.co.uk/ -- is a United Kingdom-based company engaged in the operation of a professional football club. The Company has launched its own Internet television station, RANGERSTV.tv. The station combines the use of Internet television programming alongside traditional Web-based services. Services offered include the streaming of home matches and on-demand streaming of domestic and European games, which include dedicated pre-match, half-time and post- match commentary. The Company will produce dedicated news magazine and feature programs, while the fans can also access a library of classic European, Old Firm and Scottish Premier League (SPL) action. Its own dedicated television studio at Ibrox provides onsite production, editing and encoding facilities to produce content for distribution on all media platforms. SOUTH LONDON: In Administration Following Financial Woes -------------------------------------------------------- BBC News reports that South London Healthcare NHS Trust is to be put into administration after it ran into financial trouble. Health Secretary Andrew Lansley has appointed Matthew Kershaw as special administrator to go into the trust, BBC relates. The trust has run up deficits of more than GBP150 million since being created in 2009, BBC discloses. It is the first time an NHS trust has been put into administration, BBC notes. It is expected that even in the best case scenario the yearly deficit of the trust will shrink to GBP15 million over the next five years, BBC says. Mr. Lansley, as cited by BBC, said that the decision to put the trust into administration followed a recent statutory consultation with the trust board, the strategic health authority and local NHS commissioners. South London Healthcare NHS Trust was created by merging three hospitals - the Princess Royal in Orpington, Queen Mary's in Sidcup and the Queen Elizabeth in Woolwich - and serves more than one million people. TULLOCH HOMES: Implements Second Massive Debt-for-Equity Swap ------------------------------------------------------------- Peter Ranscombe at The Scotsman reports that Lloyds Bank has carried out a second massive debt-for-equity swap at Tulloch Homes that will "secure the future" of the business but will also see it post losses of GBP65 million. It is understood that the lender has written off GBP50 million of Tulloch's GBP145 million debt, on top of the GBP30 million refinancing the bank mounted in December 2009, the Scotsman discloses. Bank of Scotland, now part of Lloyds, bought its original 40% stake in the Inverness-based firm in April 2008 for GBP27.5 million, the Scotsman recounts. According to the Scotsman, the bank will be issued with further "preference shares" as a result of the latest deal, which do not carry voting rights. Lloyds now has 90 million preference shares in Tulloch, which would have to be bought out in any takeover, the Scotsman says. Under the refinancing, Tulloch -- which has 120 directly employed staff -- will write down the value of its land and unsold houses by some GBP56 million, which will lead to a loss of GBP65 million for the 18 months to June 30, the Scotsman notes. The firm had posted a loss of GBP7.2 million for 2010 after a GBP2.9 million write down, according to the Scotsman. Tulloch Homes is an Inverness-based housebuilder. WINDERMERE VIII: Fitch Affirms 'Dsf' Rating on GBP19-Mil. Notes --------------------------------------------------------------- Fitch Ratings has taken the following rating actions on Windermere VIII CMBS plc: -- GBP34.9m class A2: affirmed at 'AAAsf'; Outlook Stable -- GBP46.5m class A3: upgraded to 'AAAsf' from 'AAsf'; Outlook Stable -- GBP49.7m class B: upgraded to 'AAsf' from 'Asf'; Outlook Stable -- GBP50.1m class C: upgraded to 'Bsf from 'CCCsf'; Outlook Stable -- GBP43.7m class D: affirmed at 'CCsf'; Recovery Estimate (RE) 50% -- GBP19.1m class E: affirmed at 'Dsf'; Recovery Estimate (RE) 0% The upgrades of the class A3, B and C notes are driven by the higher than expected recovery proceeds from the sale of the Monument loan collateral and by the strong income profile of the largest remaining loan in the pool (the Government Income loan, which accounts for 81.6% of portfolio balance). The special servicer, Hatfield Philips International ('CSS2-'), announced that the properties securing the GBP15.6 million Monument loan (6.4% of the portfolio) had been sold on July 4, 2012. The sale price was significantly higher than the March 2009 valuation: GBP13.3 million against a value of GBP3 million. While final net recoveries are yet to be disclosed, the sales proceeds will be applied sequentially to the capital structure, to the benefit of the senior noteholders. Full recovery is not anticipated and the loss will be allocated reverse sequentially to the notes, resulting in a further partial write-down of the class E note balance. While the loss should not be allocated until the July 2012 interest payment date (IPD), it is already reflected in the 'Dsf' rating. After the full repayment of the Mid City loan and the AMG loan occurred in 2011, the outstanding portfolio now has significant exposure to the Government Income loan, which falls due in October 2012. A weighted average (WA) lease length of just over eight years, the almost 98% occupancy and the dominance of public sector tenants are all credit positive. However, Fitch expects the asset value to continue to be eroded as the residual lease terms falls and the secondary nature of most of the assets should limit the investment demand. While options to extend the loan are limited for the special servicer at loan maturity (legal final maturity of the bonds is April 2015), Fitch believes that the collateral remains an attractive investment, given the strength of the tenancy profile and the average size of the assets (GBP7 million by market value). Even in scenarios where the residual value of the collateral beyond lease expiries is close to zero or very limited, the classes A3 to C notes would still be protected by the credit enhancement offered by the junior bonds. The other two remaining loans, together accounting for 12% of the loan pool balance, are both in special servicing. Although the special servicer is currently exploring a number of different exit strategies, Fitch believes there is a high risk of loss on both the Amadeus and Wood Green loans, which have both experienced declines in value. This is reflected in the lower ratings at the bottom of the structure. =============== X X X X X X X X =============== * BOOK REVIEW: Corporate Debt Capacity -------------------------------------- Author: Gordon Donaldson Publisher: Beard Books, Washington, D.C. 2000 (reprint of 1961 book published by the President and Fellows of Harvard College). List Price: 294 pages. $34.95 trade paper, ISBN 1-58798-034-7. "The research project who results are reported in this volume was primarily concerned with the risk element involved in the utilization of debt as a source of permanent capital for business," Bertrand Fox, Director of Research, succinctly writes in the "Foreword". The research project was funded by and conducted by an organization connected with Harvard College, the original publishers of this book in the early 1960s. The research was not a body of data for analysis as research typically is in business studies or sociological studies. In the end, Donaldson recommends perspectives and practices going beyond the research. This doesn't necessarily go against the findings of the research, but rather shows the limitations of the thinking of most businesspersons at the time or their blind spots regarding the role of debt, especially with respect to potentials for growth, longevity, and other interests of business management. The businesses are not identified. Given Donaldson's credibility and reputation and the Harvard name behind the research project however, the research data is taken as factual and reliable. The research was garnered from participating corporations and financial institutions. Though there are a few tables, the research is not limited to financial information strictly as figures and other balance sheet data. Donaldson was interested as much in corporate leaders' psychology and presumptions about debt more than current debt situations and corporate policies regarding debt. Financial institutions were included as part of the study as well because their views toward corporate debt and the way they worked with the 210 financial parts of corporations had an effect on corporate debt of the time. As Donaldson found from the research, both corporations and financial institutions understood debt in conventional, traditional, ways. For the corporations, these ways could be hampering operations and strategy. The ways corporations were being hampered were unseen however unless they started looking at their books differently and became open to taking on debt differently. Donaldson's singular achievement was to see in the research ways in which corporations were being hampered and in thus propose a new way of regarding debt. This was a revolutionary step for the large majority of businesses. And for even the small number of businesses which were pursuing unconventional debt practices, Donaldson's studies and new perspective put these on solid ground giving better guidance. Donaldson's readings of the research reflect corporate managers' own statements (also part of the research) regarding their views on their company's financial analysis and debt. Managers are quoted, "Our management is essentially conservative."; "The word which describes our corporate image is 'dignified'."; "I supposed in a way we're lazy." The author treats these as "attitudes"--as in a chapter "Management Attitudes to Non-Debt Sources"-- realizing that it is such "attitudes" more than what financial figures disclose or debt itself which colors practices about the fundamental business matter of debt. Donaldson brings into the open managers false sense of debt. This false sense is bound in with conventional, inherited concepts and images of a corporation having no relation to facts. Such conventional views are perpetuated by an aversion to risk. The less debt, the less risk, according to the prevailing precept. But Donaldson points out that managers who observe this actually often pursue greater risks in product development, entering new markets, mergers, and other activities. Corporate "attitudes" to debt since the book's 1961 publication attest to the deep influence of Donaldson's groundbreaking perspective. Consumer debt, the growth of credit cards, and other financial phenomena also evidence changed regard of debt found in Donaldson's work. The tipping of the balance to too much debt for many corporations and beyond cannot be attributed to the book however. For in urging new concepts and uses of debt for the better management of corporations, Donaldson also goes into determination and control of risks entailed in new types of debt. Gordon Donaldson retired in 1993 after close to 20 years at the Harvard Business School. ********* 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 * * *