/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/120829.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Wednesday, August 29, 2012, Vol. 13, No. 172 Headlines D E N M A R K * DENMARK: Bank Resolution Unit Chairman to Resign G E R M A N Y Q-CELLS SE: Isofoton Obtains Approval to Lodge Bid QUOKKA FINANCE: S&P Lowers Rating on Class E Notes to 'B-' H U N G A R Y * HUNGARY: Little Change on Construction Sector Liquidations I R E L A N D ALEXANDRIA CAPITAL: S&P Reinstates 'CCC-' Rating on A2-e1 Notes AQUILAE CLO I: S&P Affirms 'CCC+' Rating on Class E Notes TREASURY HOLDINGS: Liquidation to Affect 300 Jobs In Ireland L I T H U A N I A BANKAS SNORAS: Selects Investor to Buy Leasing Unit N E T H E R L A N D S CEVA GROUP: S&P Cuts Corp. Credit Rating to 'B-'; Outlook Stable P O L A N D PNI SP ZOO: Files for Bankruptcy Protection P O R T U G A L * PORTUGAL: May Seek Debt Reprieve Amid Deep Recession R O M A N I A EDY INTERNATIONAL: Files for Insolvency U N I T E D K I N G D O M JAGUAR LAND: Moody's Upgrades CFR/PDR to 'Ba3'; Outlook Stable MEDIA SHOP: Goes Into Administration, 20 Clients Affected STERLINGMAX I: S&P Affirms 'CCC' Rating on Class A-2 Notes X X X X X X X X * S&P Takes Various Rating Actions on 22 European CDO Tranches ********* ============= D E N M A R K ============= * DENMARK: Bank Resolution Unit Chairman to Resign -------------------------------------------------- Jonas Bergman at Bloomberg News reports that Denmark's state agency for winding down insolvent banks, Financial Stability A/S, said its Chairman Henning Kruse Petersen will step down. According to Bloomberg, the agency said in an e-mailed statement on Monday that he will be replaced by Deputy Chairman Jakob Brogaard. ============= G E R M A N Y ============= Q-CELLS SE: Isofoton Obtains Approval to Lodge Bid -------------------------------------------------- Stefan Nicola and Sangim Han at Bloomberg News report that Hanwha Group's bid to buy the insolvent German manufacturer Q-Cells SE drew a competing approach from Spanish power-plant builder Isofoton SA that also wants to own what was once the biggest solar-cell maker. Bloomberg relates that Isofoton said an e-mailed statement it was approved to bid for Q-Cells after Chief Executive Officer Angel Luis Serrano met with the German company's insolvency administrator Henning Schorisch on Monday. Isofoton said Mr. Serrano will present the bid, to be made with a U.S. investor it didn't identify, to Q-Cells' creditors at a meeting today, Aug. 29, Bloomberg notes. According to Bloomberg, Hanwha, South Korea's 10th largest industrial group, said in an e-mailed statement on Monday that on Sunday it signed a contract with Q-Cells to pay as much as EUR40 million (US$50 million) for the Thalheim-based company's headquarters, factories in Germany and Malaysia, as well as sales units in the U.S., Australia and Japan. Hanwha, as cited by Bloomberg, said that the deal is subject to approval from Q-Cells' creditors at their meeting. Interest has increased in Q-Cells after its filing for protection from creditors in April, Bloomberg recounts. Hanwha, whose purchase contract signed with Mr. Schorisch on Sunday will be reviewed by creditors, said it also plans to assume EUR850 million Malaysian ringgit ($273 million) in debt guaranteed by Q-Cells Malaysia, Bloomberg relates. Q-Cells SE is a German solar-panel maker. QUOKKA FINANCE: S&P Lowers Rating on Class E Notes to 'B-' ---------------------------------------------------------- Standard & Poor's Ratings Services lowered its credit ratings on all classes of notes in Quokka Finance PLC, and removed from CreditWatch negative its rating on the class A notes. Quokka Finance is a secured-loan commercial mortgage-backed securities (CMBS) transaction backed by 11 loans. All of the loans are cross-collateralized and cross-defaulted, and backed by multifamily housing properties in Germany. The loans are scheduled to mature in August 2013 and the notes mature three years later in 2016. The loans' original combined principal balance was EUR617.5 million; it has now amortized to EUR558.9 million. The issuer has applied repayments predominantly to the class A notes, with a small amount (less than 10%) applied pro rata to all of the notes. "The rating actions follow our assessment of declining cash flows from the underlying properties, due to reduced net rents per square meter and increased nonrecoverable expenses. They reflect our view that refinance risk has increased, in the light of the one year to maturity," S&P said. PROPERTY PORTFOLIO "The loans are secured by a portfolio of 25,418 residential, commercial, parking, and other units. The properties were most recently revalued in 2008 at an aggregate of EUR910.8 million (EUR718 per square meter). There is regional concentration in the city of Salzgitter, Lower Saxony, where 34.2% of the properties (by rental income) are located," S&P said. "The portfolio's cash flow has been declining since closing, and vacancies have increased to 14.5% from 12.7% at closing. The 2.2% increase in gross rental income has been exceeded by a steep increase in operating expenses (expenses that can be recovered from the tenants) of 30% since closing. We consider that energy prices may be one of the key reasons for this increase," S&P said. "While gross rents per square meter saw a small increase of about 3.3% since closing, net rents per square meter have actually reduced by nearly 10%, and the net rental income has reduced by 10.9%. Along with operating expenses, nonrecoverable expenses have also increased by 38%. While they represented 32.7% of the net rental income at closing, they now account for 50.6%, which we consider a significant increase," S&P said. "We note that maintenance expenses (which are nonrecoverable) were about 60% higher in the most recent four quarters than the average annual amount over the life of the transaction. In our view, this is because borrowers are spending more on unit upgrades to increase the occupancy rate and rental income per unit, which have been declining since closing," S&P said. "Consequently, net operating income (NOI) is down by 38% since closing. However, the portfolio's external value has increased by 13.5% to EUR911 million, from EUR802 million at closing," S&P said. "Based on the NOI and the interest obligation, we calculate an interest coverage ratio (ICR) of 1.03x and a debt service coverage ratio (DSCR) of 0.80x," S&P said. "The servicer, Capita Asset Services (London) Ltd., reports a significantly higher DSCR of 3.62x in its Q2 2012 report. The calculations in the report include the funds in the borrower accounts (EUR10.3 million) and the equity that the sponsor, BGP S.a.r.l. (the European joint venture vehicle of Babcock & Brown Group and the GPT Group), injected in Q2 2012 (EUR1.25 million for the previous four periods combined). We exclude these funds from our ICR and DSCR calculations because they are not recurring incomes," S&P said. RATING ACTIONS "We consider that the recent decline in cash flow may not be reflected in the closing property valuation of 802 million, from which the servicer has derived the current loan-to-value (LTV) ratio of 69.6%. Given that the portfolio's value has likely decreased, the loans may have more difficultly refinancing at Maturity," S&P said. "If the loans were to default, the parties would then have three years to either refinance or sell the underlying properties in order to repay the securitized debt," S&P said. "Given this increased refinance risk, we have lowered our ratings on the class A, B, C, and D notes by two notches each, and our rating on the class E notes by three notches," S&P said. "We have also removed our rating on the class A notes from CreditWatch negative, where we had placed it on Jan. 31, 2012, following our downgrade of all dependent counterparties in this transaction. This is because our updated rating is now below the highest ratings that the counterparties can support under our 2012 counterparty criteria," S&P said. POTENTIAL EFFECTS OF PROPOSED CRITERIA CHANGES "We have taken the rating actions based on our criteria for rating European CMBS. However, these criteria are under review," S&P said. "As highlighted in the Nov. 8 Advance Notice Of Proposed Criteria Change, our review may result in changes to the methodology and assumptions we use when rating European CMBS, and consequently, it may affect both new and outstanding ratings on European CMBS transactions," S&P said. "On June 4, 2012, we published a Request For Comment outlining our proposed criteria changes for CMBS Global Property Evaluation Methodology. The proposed criteria do not significantly change Standard & Poor's longstanding approach to deriving property net cash flow and value. We therefore anticipate limited impact for European outstanding ratings when the updated CMBS Global Property Evaluation Methodology criteria are finalized," S&P said. "However, because of its global scope, the proposed CMBS Global Property Evaluation Methodology does not include certain market- specific adjustments. An application of these criteria to European transactions will therefore be published when we release our updated rating criteria," S&P said. "Until such time that we adopt new criteria for rating European CMBS, we will continue to rate and monitor these transactions using our existing criteria," S&P said. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an property-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATINGS LIST Class Rating To From Quokka Finance PLC EUR617.5 Million Secured Floating-Rate Notes Rating Lowered and Removed From CreditWatch Negative A A+ (sf) AA (sf)/Watch Neg Ratings Lowered B BBB (sf) A- (sf) C BB+ (sf) BBB (sf) D B+ (sf) BB (sf) E B- (sf) BB- (sf) ============= H U N G A R Y ============= * HUNGARY: Little Change on Construction Sector Liquidations ------------------------------------------------------------ MTI-Econews reports that Opten, which compiles information on companies, related on Monday that creditors and suppliers launched liquidation procedures against 414 construction sector companies in July, the number was similar to July 2011 or July 2010. The number of voluntary liquidations started in July fell by a third year-on-year to 209, MTI-Econews notes. ============= I R E L A N D ============= ALEXANDRIA CAPITAL: S&P Reinstates 'CCC-' Rating on A2-e1 Notes --------------------------------------------------------------- Standard & Poor's Ratings Services reinstated its 'CCC- (sf)' credit rating on Alexandria Capital PLC's series 2006-4 class A2- e1 notes, which is a European synthetic collateralized debt obligation (CDO) tranche. "On April 15, 2011, we withdrew in error the rating on the class A2-e1 notes. One of the transaction participants recently informed us that the notes were not repurchased in full, which was our assumption at the time. Therefore, we have reinstated our rating on the class A2-e1 notes at the rating level at which it was withdrawn," S&P said. AQUILAE CLO I: S&P Affirms 'CCC+' Rating on Class E Notes --------------------------------------------------------- Standard & Poor's Ratings Services raised its credit ratings on Aquilae CLO I PLC's class A, B, and C notes. "At the same time, we have affirmed our ratings on the class D and E notes," S&P said. "According to the latest available trustee report dated July 2011, the class A notes have continued to amortize as the transaction has entered its fourth year of amortization and the weighted-average life has reduced to 2.5 years from 3.6 years. As of the last payment date in June 2012, the class A principal amount outstanding is EUR31.5 million or about 15% of its original amount. This compares with about 70% when we last reviewed the transaction in March 2011. Accordingly, the aggregate collateral balance has dropped to EUR93 million from EUR219 million," S&P said. "Since our last review, we have therefore noticed a general improvement in the results of the class A, B, C, and D par value tests, which measure overcollateralization. However, the class E par value test is now failing as it is more sensitive than other classes to the relative increase of defaulted and 'CCC' rated assets in the portfolio. None of the junior notes has deferred any interest payments," S&P said. "In our opinion, these developments have helped to increase the credit enhancement available to all classes of notes," S&P said. "However, at the same time, we have observed that the weighted- average spread (WAS) generated by the portfolio has dropped to 2.54% from 3.04%, below the covenant of 2.65% specified in the transaction documents. This is because relatively higher-paying assets have amortized earlier than other assets. The weighted- average recovery rates (WARRs) have also decreased as assets with lower seniorities are left in the portfolio," S&P said. "We have also noted an increase in the balance of assets that we consider to be defaulted in our analysis (i.e., assets rated 'CC' or 'D'). Defaulted assets currently account for about 10.3% of the total portfolio balance, compared with about 1.7% at our last review. This is mainly due to the general amortization of performing assets as the increase only amounts to EUR150,000 in nominal terms. Similarly, 'CCC' rated assets have increased to 18% from 7%--to EUR18.5 million from EUR16.1 million in nominal terms," S&P said. "Finally, we have continued to monitor the proportion of so- called 'long-dated assets', i.e., assets that mature after June 18, 2015, the final maturity date of the rated notes. In our view, this exposes the transaction to the non-credit-related risk of loss of par, insofar as these assets need to be sold ahead of their maturity date in order for the issuer to repay the rated notes on time. Since our last review, we have noted a nominal decrease in long-dated assets to EUR15.9 million from EUR26.2 million. More importantly, we consider EUR10.5 million of these long-dated assets to be defaulted. We therefore treat and stress these assets separately in our cash flow analysis, leaving only EUR5.4 million of performing long-dated assets, or 6% of the total performing balance. As we did in our previous review, we reduced the par credit given to these assets. Our analysis has shown that the class A, B, and C notes can withstand these stresses at higher ratings than previously assigned," S&P said. "Based on these developments, we therefore consider that the levels of credit enhancement available to the class A, B, and C notes are now consistent with higher ratings than previously assigned. We have therefore raised our ratings on these classes of notes. We note that the class C notes could potentially achieve a higher rating than 'A+ (sf)', but is constrained at this rating level by our largest obligor test, a supplemental stress test in our 2009 corporate collateralized debt obligation (CDO) criteria. This test assesses whether a CDO tranche has sufficient credit enhancement (not counting excess spread) to withstand specified combinations of underlying asset defaults, with a flat recovery rate of 5%," S&P said. "We believe the overall increase in credit enhancement available to the class D and E notes, combined with the shorter weighted- average life of the portfolio are currently sufficient to mitigate the effect of the decrease in WAS and WARR--but only at the rating levels currently assigned. We have therefore affirmed our ratings on these classes of notes," S&P said. Aquilae CLO I is a cash flow collateralized loan obligation (CLO) transaction that securitizes loans to primarily European speculative-grade corporate borrowers. The transaction closed in December 2003 and is managed by Henderson Global Investors Ltd. RATINGS LIST Class Rating To From Aquilae CLO I PLC EUR300 Million Floating-Rate Notes Ratings Raised A AAA (sf) AA (sf) B AA+ (sf) A+ (sf) C A+ (sf) BBB- (sf) Ratings Affirmed D BB+ (sf) E CCC+ (sf) TREASURY HOLDINGS: Liquidation to Affect 300 Jobs In Ireland ------------------------------------------------------------ Donal O'Donovan at Independent.ie reports that the High Court was set to decide yesterday whether or not to pull the plug on Treasury Holdings. KBC Bank is seeking the appointment of a liquidator to shut the company and sell off its assets over an unpaid debt of EUR70 million, Independent.ie discloses. The debt is KBC's share of EUR300 million of loans that financed the Spencer Dock developments in Dublin's IFSC, Independent.ie says. The bulk of the debt is owed to National Asset Management Agency, Independent.ie notes. On Monday, lawyers for Treasury tried to block the move, Independent.ie relates. They want the court to delay making any decision to allow time for negotiations between the parties and US bank Morgan Stanley, which has offered more than EUR160 million for the properties secured on the debt, Independent.ie states. Treasury, as cited by Independent.ie, said liquidation would jeopardize 300 jobs in Ireland, and 100 jobs abroad. According to Independent.ie, they said that delaying liquidation for a matter of weeks could save those jobs with no adverse impact on KBC. Lawyers for Treasury told Mr. Justice Brian McGovern that the Morgan Stanley offer would mean the bank getting a better price than the current market value for Treasury's assets, Independent.ie notes. Lyndon MacCann, for KBC, said the bank rejected that argument, and that Treasury was "wholly insolvent" and should be wound up, Independent.ie relates. According to Independent.ie, he said his client was entitled to take steps to get back money that was due to be repaid in January 2009. KBC asked the court to appoint David Carson, an accountant with Grant Thornton, as liquidator, Independent.ie discloses. KBC said that if the skills of Treasury Holdings are valuable the liquidator would be free to hire them to help wind up the business, according to Independent.ie. Lawyers for Treasury said KBC had not shown the court that it would suffer if the application for an adjournment was allowed, Independent.ie notes. They said KBC would not improve its recovery on the debt by liquidating Treasury, Independent.ie relates. Treasury Holdings is an Irish property developer. The company owns the Westin Hotel in Dublin and the Irish headquarters of accounting firm PricewaterhouseCoopers. ================= L I T H U A N I A ================= BANKAS SNORAS: Selects Investor to Buy Leasing Unit --------------------------------------------------- Milda Seputyte at Bloomberg News reports that The Bankas Snoras AB's creditors committee picked an investor to buy the bank's leasing unit and Finasta Bank AB. Bloomberg relates that Aurelija Mazintiene, the chairwoman of the creditors committee, said in an e-mailed statement on Friday the creditors received bids from four potential investors. The investor will still require an approval from Lithuania's central bank, Bloomberg states. It said that the size of the transaction and the buyer's name will be disclosed later, Bloomberg notes. The central bank took over Snoras, once Lithuania's third-biggest bank by deposits, in November after discovering that assets reported on its balance sheet were missing, Bloomberg recounts. The lender was declared bankrupt, Bloomberg discloses. Bankas Snoras AB is Lithuania's fifth biggest lender. ===================== N E T H E R L A N D S ===================== CEVA GROUP: S&P Cuts Corp. Credit Rating to 'B-'; Outlook Stable ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its long-term corporate credit rating on Netherlands-based integrated logistics services provider CEVA Group PLC (CEVA) to 'B-' from 'B'. The outlook is stable. "At the same time, we lowered the issue rating on CEVA's senior secured debt by two notches to 'B-' from 'B+' and removed it from CreditWatch, where it was placed with negative implications on May 11, 2012. We also revised downward the recovery rating on the senior secured debt to '3' from '2' previously. The recovery rating of '3' indicates our expectation of meaningful (50%-70%) recovery prospects in the event of a payment default," S&P said. "In addition, we lowered our issue ratings on CEVA's senior unsecured notes, 1.5-lien secured notes, and junior-priority senior secured notes to 'CCC+' from 'B-', which is one notch lower than the long-term corporate credit rating on CEVA. The recovery rating on these instruments remains unchanged at '5', indicating our expectation of modest (10%-30%) recovery in the event of a payment default," S&P said. =========== P O L A N D =========== PNI SP ZOO: Files for Bankruptcy Protection ------------------------------------------- Maciej Martewicz at Bloomberg News reports that PNI Sp. z o.o., Budimex SA's rail-building unit filed for bankruptcy protection from creditors. Budimex, which bought PNI from the state railway for PLN225 million (US$69 million) last year, wrote down the unit's entire value, citing unprofitable contracts signed before the acquisition, Bloomberg relates. According to Bloomberg, Budimex Chief Executive Officer Dariusz Blocher told a news conference on Friday that the company had helped PNI pay back PLN100 million of liabilities after taking it over, adding Budimex will write down this amount in the second half of the year. He wouldn't say what PNI's debt currently was, Bloomberg notes. "We decided to file for PNI's bankruptcy because we couldn't risk losing several hundred million zloty" more on the company, Bloomberg quotes Mr. Blocher as saying. PNI has no outstanding bank loans and its liabilities are mainly to its subcontractors and employees, Bloomberg discloses. Mr. Blocher, as cited by Bloomberg, said that the company is seeking to renegotiate its unprofitable contracts. Budimex SA is Poland's largest construction company. =============== P O R T U G A L =============== * PORTUGAL: May Seek Debt Reprieve Amid Deep Recession ------------------------------------------------------ The News reports that analysts say dwindling tax revenues brought on by record joblessness and deep recession will force Portugal to seek breathing space, much like Greece has, on commitments to EU-IMF creditors. As things stand, the government, which had forecast an increase in revenue of 2.6% this year, is set to miss this year's deficit target of 4.5%, several analysts agreed, if it cannot come up with an extra EUR2-EUR3 billion (US$2.5-3.8 billion). According to The News, Paulo Mourao, economist at the University of Minho, said the new data served to "lay the ground" for "needed flexibility on Portugal's rescue program." As part of the program agreed in May 2011, in return for EUR78 billion in rescue loans, to be paid out in tranches over several years, Portugal has carried out deep budget cuts and pursued structural reforms, The News discloses. In the deal, which followed similar ones for Greece and Ireland, Portugal agreed to bring its public deficit to the EU ceiling of 3% of output by 2013 after 4.5% in 2012, The News notes. But a key plank of that effort, slashing 13th and 14th month salary bonuses for civil servants and pensioners for three years, was ruled unconstitutional and threw the center-right government's austerity budget into disarray, The News states. With the controversial measure now impossible, the government must find an equivalent cut in spending, which analysts said was all but impossible within the timeframe set by lenders, The News relates. ============= R O M A N I A ============= EDY INTERNATIONAL: Files for Insolvency --------------------------------------- Bogdan Alecu at Ziarul Financiar, citing a Hunedoara court, reports that edy International Spedition has filed for insolvency earlier this month. edy International Spedition is a Romanian transport company. =========================== U N I T E D K I N G D O M =========================== JAGUAR LAND: Moody's Upgrades CFR/PDR to 'Ba3'; Outlook Stable -------------------------------------------------------------- Moody's Investors Service has upgraded to Ba3 from B1 the corporate family rating (CFR) and probability of default rating (PDR) of Jaguar Land Rover PLC ("JLR") and to Ba3 from B1 the ratings on JLR's senior unsecured notes. The outlook is stable. Upgrades: Issuer: Jaguar Land Rover Plc Probability of Default Rating, Upgraded to Ba3 from B1 Corporate Family Rating, Upgraded to Ba3 from B1 Senior Unsecured Regular Bond/Debenture, Upgraded to Ba3 from B1 Ratings Rationale "The rating action was triggered by the continuous improvement in JLR's financial metrics over the past several quarters, as reflected by its results for fiscal year 2011/12, which exceeded our expectations," says Falk Frey, a Moody's Senior Vice President and lead analyst for JLR. "JLR's better-than-expected results were driven by strong demand for the company's sport utility vehicles, or SUVs, and its successful broadening of its model range, especially the introduction of the Range Rover Evoque model," explains Mr. Frey. "As a result, JLR's operating performance, cash flow generation and key credit metrics are currently more commensurate with a higher rating category." In fiscal year (FY) 2011/12 (ended March 31, 2012), JLR reported a 27% increase in its retail volumes compared with the previous year, to 305,859 vehicles. This increase was helped by the successful launch of a new model, the Range Rover Evoque, but also by generally strong demand for SUVs, especially in China, which resulted in the company generating revenues of GBP13.5 billion, 37% higher than the previous year. These factors, together with cost efficiency improvements and a favorable impact from exchange rates, led to JLR reporting EBITDA of GBP2.0 billion (FY 2010/11: GBP1.5 billion) and cash flow from operating activities of GBP2.1 billion (GBP1.5 billion) -- both figures were above Moody's expectations. In addition, despite a significant increase in its investment activities in FY 2011/12, JLR reported positive free cash flow (FCF) of about GBP1.0 billion before dividend payments. This compares with Moody's initial expectation of FCF in the low three-digit million range. JLR has announced a further increase in its capital expenditure (capex) in FY 2012/13 to around GBP2.0 billion from GBP1.5 billion in FY 2011/12 to support further growth, comply with emissions reduction requirements and start an own-engine production facility. Given that Moody's expects this level to rise further in the next two years, the rating agency anticipates a slight deterioration in some of JLR's key financial metrics, especially profit margins and FCF generation, which is likely to turn slightly negative. Nonetheless, Moody's would expect the majority of JLR's credit metrics to remain within the current rating category. In the first quarter of the current year, FY 2012/13, JLR reported a further rise in its EBITDA compared with the same period in the previous year, to GBP527 million from GBP362 million. The company also reported that its FCF remained positive, at GBP106 million compared with GBP114 million in the same period of the previous year. JLR's Ba3 CFR positively reflects (1) the company's strong brand names, which JLR is able to leverage when launching new products; (2) moderate leverage, measured by adjusted debt/EBITDA, of 1.7x in FY 2011/12, although this is most likely measured at the top of the cycle; and (3) the commitment of its sole shareholder, Tata Motors, to support JLR's product strategy, capex plan and financial strategy, in line with previous practice. However, JLR's CFR also reflects some key challenges, such as (1) its small scale as a niche player, with a currently limited product range and materially less financial strength than other premium car manufacturers; (2) the cyclical nature of the automotive industry, which can be exposed to big swings in performance combined with high fixed costs; (3) JLR's strong focus on the mature markets of Europe and North America (together representing 60.6% of the company's unit sales) and on the growing Chinese market (16.7% of unit sales); (4) challenges the company faces in ensuring its model range meets the required emissions and fuel consumption levels in Europe and the US; (5) Moody's expectation that there will be a sizeable increase in JLR's capex and research & development expenditure to fund the company's ongoing expansion of its model range, which will burden FCF generation in the short to medium term and lead to increasing net debt levels; (6) the company's high foreign exchange rate exposure; and (7) JLR's limited track record of growth and profitability, and the fact that a substantial part of the company's recent growth was mainly reliant on the successful introduction of the Range Rover Evoque. In addition, Moody's notes that the Jaguar brand has not recorded substantial growth and remains a small niche business within the luxury car market. Although Tata Motors has no legal obligation to back the debt of JLR, Moody's nonetheless recognizes the support the owner provided during the 2008-09 global financial crisis and its conversion of GBP1.0 billion of preference shares (treated as debt by Moody's) in JLR into equity (ordinary shares) in 2011. On the back of strong net profit generated in FY 2011/12, JLR decided to pay a GBP150 million dividend to its sole shareholder, Tata Motors, which represents a further constraint on the rating. Moody's notes that in the financial year ended (FYE) 31 March 2012, JLR generated nearly two-thirds of the consolidated revenues and more than 70% of the consolidated reported EBITDA of the Tata Motors Group, and thus is of considerable strategic importance to its owner. Given the importance of JLR to Tata Motors, Moody's does not anticipate JLR's rating being positioned higher than that of Tata Motors, which is currently rated Ba3 with a stable outlook. The stable outlook reflects JLR's currently strong credit metrics for the Ba3 rating category. The outlook also reflects Moody's expectation that, despite increasing capex and rising challenges and risks from slowing economic growth in many of JLR's key markets, the company will be able to sustain its current operating performance and financial metrics. What Could Change Ratings Up/Down Moody's could consider upgrading JLR's ratings over the medium to long term if the company demonstrates (1) an ability to retain key credit metrics at current levels; and (2) the sustainability of these metrics through cyclical swings in market demand and product life cycles. Examples of metrics (all on a Moody's- adjusted basis) that could trigger an upgrade, should they be achieved over the cycle, are (1) an adjusted EBITA margin materially above 5% on a sustainable basis; (2) at least break- even FCF over the next two years followed by an FCF/debt ratio above 5% thereafter; and (3) the maintenance of a solid liquidity profile (Moody's considers that JLR currently has a well-spread debt maturity profile, with the majority of debt coming due from 2018/2019 onwards). Conversely, the ratings could come under pressure in the event of a material deterioration in JLR's key credit metrics, as adjusted by Moody's, reflected by (1) debt/EBITDA rising well above 2.0x; (2) negative free cash flow generation exceeding GBP300 million p.a. as well as (3) the company's EBITA margin falling below 5% in FY 2012/13 and beyond from 8.2% in FY 2011/12. Liquidity JLR's liquidity profile as of March 31, 2012 is deemed to be strong, covering the next 12-18 months of anticipated cash needs. Moody's expects the company to have total cash sources of around GBP4.8 billion, comprising readily available cash, funds from operations and undrawn committed credit lines of more than GBP0.7 billion. In contrast, cash uses over the next 12 months amount to GBP2.9 billion and include capex, debt repayments, cash for day- to-day operations, working capital and dividend payout. Moody's also anticipates sufficient headroom under the existing financial covenants. Principal Methodology The principal methodology used in rating JLR was Moody's "Global Automobile Manufacture Industry" rating methodology, published in June 2011. Other methodologies used include "Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA", published in June 2009. Headquartered in Gaydon, UK, Jaguar Land Rover PLC manufactures and sells passenger vehicles under the Jaguar and Land Rover brands and employs around 23,879 staff (as on June 12). In FYE 31 March 2012, JLR sold 314,433 units, generating revenues of GBP13.5 billion. JLR is ultimately/indirectly 100% owned by Tata Motors Ltd (rated Ba3), which is India's largest automobile company, with a sales volume of 1,252,173 units and revenues of around US$32.6 billion in FY 2011/12. MEDIA SHOP: Goes Into Administration, 20 Clients Affected --------------------------------------------------------- The Drum reports that Media Shop has recently confirmed that it has gone into administration. The administration is believed to affect more than 20 clients, including Space NK, Florette and Fitness First, according to The Drum. The report relates that some clients have already been moved to TCS Media whilst others are waiting to be assigned new agencies. The Drum notes that Chantry Vellacott DFK was appointed as the administrator working to release the assets of the agency, which has combined billings of around GBP20million. The report discloses that Caroline McGrath, managing director The Media Shop (Scotland) Ltd, told The Drum: "In case misinformation starts to spread, I can confirm that the demise of The Media Shop Ltd is nothing to do with The Media Shop (Scotland) Ltd and that the companies split from each other about 7 years ago. There is no longer any connection between the companies." "I made all my clients aware of the situation three weeks ago so that they would not get the wrong end of the stick," the report quoted Ms. McGrath as saying. London-based The Media Shop is a media planning and buying agency. STERLINGMAX I: S&P Affirms 'CCC' Rating on Class A-2 Notes ---------------------------------------------------------- Standard & Poor's Ratings Services affirmed its credit ratings on all of STERLINGMAX I MBS Ltd.'s classes of rated notes. "At the same time, we have removed from CreditWatch negative our rating on the class A-2 notes," S&P said. "The rating actions follow our assessment of the transaction's recent development. We received the issuer's event of default notice dated Nov. 25, 2010, which stated that there were insufficient proceeds to fully pay the interest due on the class B notes on the November payment date. Consequently, on Dec. 3, 2010, we lowered our ratings on the class B notes to 'D (sf)', the class A-1 notes to 'BBB (sf)', the class A-2 notes to 'CCC (sf)', and the class C and D notes to 'CCC- (sf)'," S&P said. "In November 2011, the class A-1 notes were fully redeemed and we subsequently withdrew our rating on the class A-1 notes in January 2012. Following our February 2012 updated criteria for CDOs of structured finance securities, we placed the class A-2 notes on CreditWatch negative," S&P said. "From our analysis, we have concluded that the defaulted interest on the class B notes has not yet been repaid, and thus the class B notes are still in interest default," S&P said. "We understand that when an event of default has occurred and is continuing, under the transaction documents, the holders of most senior outstanding class of notes (class A-2 notes) may direct the trustee to declare the notes immediately due and payable. Following such direction, the trustee is likely, in our opinion, to take steps to liquidate the collateral and distribute the proceeds," S&P said. "Although the class A-2 notes may suffer principal losses if the transaction is liquidated, the class A-2 noteholders are the most senior outstanding class and can decide whether to declare the notes immediately due and payable. We have therefore affirmed and removed from CreditWatch negative our 'CCC (sf)' rating on the class A-2 notes," S&P said. "We have affirmed our 'CCC- (sf)' ratings on the class C and D notes to reflect our opinion of the risks that classes other than the A-2 notes may experience -- namely principal losses if the collateral is liquidated," S&P said. STERLINGMAX I MBS is a cash flow collateralized debt obligation (CDO) comprising mostly U.K. residential and commercial mortgage- backed securities (RMBS and CMBS), and commercial asset-backed securities (ABS). STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATINGS LIST Class Rating To From STERLINGMAX I MBS Ltd. GBP157 Million Secured Floating-Rate And Residual Notes Rating Affirmed and Removed From CreditWatch Negative A-2 CCC (sf) CCC (sf)/Watch Neg Ratings Affirmed B D (sf) C CCC- (sf) D CCC- (sf) =============== X X X X X X X X =============== * S&P Takes Various Rating Actions on 22 European CDO Tranches --------------------------------------------------------------- After running its month-end SROC (synthetic rated overcollateralization) figures, Standard & Poor's Ratings Services took various credit rating actions on 22 European synthetic collateralized debt obligation (CDO) tranches. Specifically, S&P has: -- placed on CreditWatch negative its ratings on four tranches; -- placed on CreditWatch positive its ratings on two tranches; -- removed from CreditWatch negative its rating on one tranche; and -- affirmed its ratings on 15 tranches. For the full list of rating actions, see "European Synthetic CDO CreditWatch Actions After Running July 2012 Month-End SROC Figures." "The SROC levels for the ratings placed on CreditWatch negative fell below 100% during the July 2012 month-end run. We will publish these SROC figures in the SROC report covering July 2012, which is imminent. The Global SROC Report provides SROC and other performance metrics on over 828 individual CDO tranches," S&P said. "For those transactions where our September 2009 CDO criteria are not applicable, we have run our analysis on the CDO Evaluator 2.7 and CDO Evaluator 4.1 models," S&P said. "For the transactions where our September 2009 CDO criteria apply, we have run our analysis on CDO Evaluator 6.0. For transactions run on this model, the ratings list includes the top obligor and industry test SROCs at the current rating level. The 'largest obligor default test' assesses whether a CDO tranche has sufficient credit enhancement to withstand specified combinations of underlying asset defaults based on the ratings on the assets, with a flat recovery of 5%. The 'largest industry default test' assesses whether a CDO tranche rated 'AAA' to 'AA-' has sufficient credit enhancement to withstand the default of all obligors in the transaction's largest industry, with a flat recovery of 17%," S&P said. "In addition, we have affirmed our ratings on the tranches for which credit enhancement is, in our opinion, still at a level consistent with their current ratings," S&P said. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Reports included in this credit rating report are available at: http://standardandpoorsdisclosure-17g7.com ********* 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. 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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 * * *