/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/121005.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, October 5, 2012, Vol. 13, No. 199 Headlines C R O A T I A HRVATSKA ELEKTROPRIVREDA: S&P Cuts Corp. Credit Rating to 'BB-' F R A N C E ODDO ET COMPAGNIE: Fitch Cuts Subordinated Debt Rating to 'BB+' G E R M A N Y DAPD: Mulls 300 Job Cuts After Bankruptcy Filing QUIRINUS PLC: Moody's Affirms 'Ba3' Rating on Class X2 Notes QUIRINUS PLC: Fitch Downgrades Rating on Class F Notes to 'CC' H U N G A R Y KAPUVARI HUS: Liquidation Order Takes Effect I R E L A N D CELTIC RESIDENTIAL 9: S&P Lowers Rating on Class B Notes to 'B-' MCEVOY FAMILY: Exit Examinership Following Glanbia Investment I T A L Y BANCA MONTE: Fails to Meet European Union Capital Targets L I T H U A N I A BANKAS SNORAS: Ernst & Young Appeals Court Ruling on Audit N E T H E R L A N D S DUTCH MBS: Moody's Assigns 'Ba1' Rating to EUR6.5-Mil. E Notes DUTCH MBS XVII: Fitch Assigns 'B' Rating to EUR6.5MM Cl. E Notes NORTHERN LIGHTS: Moody's Assigns 'Ba3' Rating to US$150MM LPNs R U S S I A NATIONAL STANDARD: Moody's Assigns Rating to Domestic Bonds NATIONAL STANDARD: Moody's Assigns 'B3' Sr. Unsecured Debt Rating NS FINANCE: Moody's Assigns Rating to Domestic Bonds NS FINANCE: Moody's Assigns 'B3' Senior Unsecured Debt Rating S L O V E N I A * SLOVENIA: Moody's Says Banking System Outlook Remains Negative U N I T E D K I N G D O M CLINTON CARDS: American Greetings Buys Stores, Brand JJB SPORTS: Crewe Store Closes Following Administration OPTICAL EXPRESS: Unit in Administration, Closes 40 Stores X X X X X X X X * BOOK REVIEW: Performance Evaluation of Hedge Funds ********* ============= C R O A T I A ============= HRVATSKA ELEKTROPRIVREDA: S&P Cuts Corp. Credit Rating to 'BB-' --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its long-term corporate credit and senior secured debt ratings on Hrvatska Elektroprivreda d.d. (HEP), the 100% state-owned, vertically integrated Croatian electricity utility, to 'BB-' from 'BB'. "At the same time, we placed the ratings on CreditWatch with negative implications," S&P said. "The downgrade reflects our view that HEP's business prospects have deteriorated; that poor hydrological conditions, rising commodity prices, and an increased share of electricity imports to be procured at volatile market prices likely will lead to persistent cash flow pressures. Negative cash flows have already led to aggressive use of short-term credit lines and deferral of investments. However, we understand that to alleviate its immediate funding needs and extend debt maturities, the company aims to raise medium-to-long-term financing, which we expect to happen in October," S&P said. "We have revised our assessment of HEP's business risk profile to 'fair' from 'satisfactory.' This reflects the company's inherent earnings volatility in the context of unpredictable, politically determined, regulated tariffs. Although the government raised tariffs by 18.9% in May 2012, we are uncertain as to whether future tariff resets will allow an adequate return on investments and sufficient and timely compensation of cost overrun," S&P said. "However, the company benefits from some flexibility as most of its new generation projects are non-committed (that is, discretionary at this stage). It is also pursuing a plan to optimize costs, which aims to achieve about Croatian kuna HRK2.0 billion of savings over 2012-2016. Also, we expect the state to potentially support the investments by forgoing dividends, as in the past (excluding a one-off dividend in 2011)," S&P said. "Over the next approximately three to five years we expect HEP to generate consistently negative free operating cash flows (FOCF) (after capital expenditures, net of connection income). This is because HEP has an ambitious capital investment program, planned at HRK19.0 billion for the period between 2012 and 2016, which will result in ongoing funding needs and increase of leverage. What's more, HEP faces HRK1.3 billion of principal repayments in 2013 alone (notwithstanding new loans) and risks related to the annual renewal of its HRK1.0 billion fully used committed credit lines. Even factoring new planned financing, we see little prospect for a sustainable recovery in HEP's liquidity position over the next 12 months. This is why we have revised HEP's financial risk profile to 'highly leveraged' from 'aggressive,'" S&P said. "The 'BB-' rating on HEP is based on the company's stand-alone credit profile (SACP), which we assess at 'b', as well as on our opinion that there is a 'high' likelihood that the government of the Republic of Croatia (BBB-/Negative/A-3) would provide timely and sufficient extraordinary support to HEP in the event of financial distress. In accordance with our criteria for government-related entities (GREs), our view of a 'high' likelihood of extraordinary government support is based on our assessment of HEP's 'very important' role for the energy sector and the broader economy in Croatia; and on its 'strong' link with the Croatian government, which is the sole shareholder and is actively involved in defining the company's strategy," S&P said. "We continue to view HEP's liquidity position as 'less than adequate' under our criteria. We base our assessment on what we view as HEP's 'weak' stand-alone liquidity arrangements, combined with our view that the Croatian government has the ability and willingness to provide sufficient liquidity support to HEP in a timely manner," S&P said. As of June 30, 2012, HEP had the following liquidity sources: -- HRK240.5 million of cash balances (about EUR32.5 million). -- S&P understands that HEP has about HRK350.0 million (about EUR47.3 million) available for specific project financing facilities and has concluded EUR123.2 million (HRK925.5 million) of long-term funding from the European Bank for Reconstruction and Development. -- About HRK2.4 billion of Standard & Poor's-adjusted funds from operations over the next 12 months. As of the same date, S&P believes liquidity uses comprise: -- About HRK0.9 billion of principal repayments under its bonds and mostly amortizing loans. Furthermore, the company has fully used HRK1.3 billion under revolving lines and framework agreements, out of which HRK1.0 billion is due for renewal in June 2013, with the remainder due earlier. -- About HRK3.0 billion capex (net of connection charges), which S&P understands is about 35% deferrable. -- No dividend payout on 2011 profit as per the shareholders' decision. "We see HEP's interest costs and principal repayment as sensitive to any domestic currency depreciation and increase in loan pricing. On Dec. 31, 2011, HEP reported that about 72% of its total debt is euro-denominated. The company does not hedge its foreign currency exposure," S&P said. "Furthermore, HEP has stated that framework agreements of a total HRK68.6 million are available for short-term borrowing purposes. The company has said that at June 30, 2012, it was in breach of financial covenants, but has procured waivers from all lending banks," S&P said. "We aim to resolve the CreditWatch placement within a month. During this period, we will monitor whether HEP completes its planned financing. We could affirm the ratings and remove them from CreditWatch if HEP completes the planned financing in October and if, at the same time, we believe the company will meet its financial covenants as per the end of 2012. This will require a stabilization of operational performance and active management of investment levels," S&P said. "We will likely lower HEP's SACP if the company is not successful with its planned financing, as this will exert pressure on the company's liquidity. In such a case, we will assess how the government and HEP intend to find alternative ways to fund the liquidity shortfall by the end of 2012. We could reassess our opinion of 'high' likelihood of extraordinary state support if we were to doubt the government's capacity or willingness to provide timely liquidity support. A combination of one notch lower SACP and 'moderately high' likelihood of state support could result in a one notch lowering of the corporate credit rating," S&P said. =========== F R A N C E =========== ODDO ET COMPAGNIE: Fitch Cuts Subordinated Debt Rating to 'BB+' --------------------------------------------------------------- Fitch Ratings has downgraded Oddo et Compagnie's (Oddo) Long-Term Issuer Default Rating (IDR) to 'BBB-' from 'BBB+', Short-Term IDR to 'F3' from 'F2' and Viability Rating (VR) to 'bbb-' from 'bbb+'. The Outlook on the Long-Term IDR is Negative. Rating Action Rationale The downgrades of Oddo's IDRs and VR reflect Fitch's view that Oddo's franchise and earnings generation have been negatively affected by the tougher operating environment, particularly for the investment banking (IB) division. It is not clear to Fitch whether Oddo can establish a viable IB franchise in the medium term. Oddo has recently acquired two small companies that focus on asset management and private banking. RATING DRIVERS AND SENSITIVITIES - IDR and VR Oddo's IDRs and VR reflect the bank's niche franchise, small size and weak profitability in the IB division. They also take into account the bank's prudent risk-taking approach, sound liquidity and adequate capital. Several of Oddo's IB businesses are suffering from overall lower volumes in the industry. Moreover, Oddo's lack of scale means that some of its IB businesses are not profitable. In H112, Oddo managed to reduce costs through synergies with entities acquired in 2010 and 2011 (Robeco, Banque d'Orsay) and headcount reduction in less profitable businesses. However, cost reduction may not be sufficient to offset Oddo's weak revenue generation. The IB industry as a whole is in a process of change without much transparency around how developments will play out. In Fitch's view, Oddo's small franchise makes it particularly vulnerable to such changes. Fitch considers Oddo's ownership to drive a prudent risk-taking approach. Philippe Oddo (one of the two unlimited partners) is personally liable for any loss, and around one-third of Oddo's employees hold 30% of the bank's capital. Moreover, Oddo maintains cautious liquidity management and relatively low leverage, in line with its ambition to remain an independent financial institution. The bank runs an ample liquid asset portfolio, which largely covers its relatively modest short-term funding needs. The Negative Outlook on Oddo's Long-Term IDR reflects Fitch's concerns that the prevailing difficult operating environment is likely to continue weighing on both the bank's IB and asset management revenue generation. Any further deterioration in Oddo's recurring profitability, or indication of a weakening of its IB franchise, could result in a downgrade of Oddo's IDRs and VR. A similar rating action could be taken if the bank's capital level materially worsened or its liquidity position materially decreased. Upside potential for the IDRs and VR is not expected. RATING DRIVERS AND SENSITIVITIES - SUPPORT RATING AND SUPPORT RATING FLOOR Fitch considers that the probability of sovereign or institutional support for Oddo, although possible, cannot be relied upon, resulting in a '5' Support Rating and a 'No Floor' Support Rating Floor This is not expected to change. RATING DRIVERS AND SENSITIVITIES - SUBORDINATED DEBT The lower Tier 2 subordinated debt issued by Oddo is notched off Oddo's VR in accordance with Fitch's criteria 'Rating Bank Regulatory Capital and Similar Securities'. Therefore, lower Tier 2 debt's rating has been downgraded to 'BB+' from 'BBB' and is sensitive to any change in Oddo's VR. Subordinated lower Tier 2 debt is rated one notch below Oddo's VR to reflect below average loss severity of this type of debt when compared to average recoveries. The rating actions are as follows: -- Long-Term IDR: downgraded to 'BBB-' from 'BBB+'; Negative Outlook -- Short-Term IDR: downgraded to 'F3' from 'F2' -- Viability Rating: downgraded to 'bbb-' from 'bbb+' -- Support Rating: affirmed at '5' -- Support Rating Floor: affirmed at 'No Floor' -- Senior unsecured debt: downgraded to 'BBB-' from 'BBB+' -- Subordinated (Lower Tier 2) debt (FR0010494419): downgraded to 'BB+' from 'BBB' -- Commercial paper: downgraded to 'F3' from 'F2' ============= G E R M A N Y ============= DAPD: Mulls 300 Job Cuts After Bankruptcy Filing ------------------------------------------------ According to Bloomberg News' Annette Weisbach, Financial Times Deutschland, citing German news agency DAPD's mandated insolvency administrator Wolf von der Fecht, reported that the company, which filed for bankruptcy on Tuesday, will look into cutting jobs among 300 of its 500 employees. FTD said another six affiliated units of DAPD were set to file for bankruptcy yesterday, Bloomberg relates. FTD said that DAPD's investor Voderwuelbecke would welcome new investors such as other media outlets, Bloomberg notes. Mr. von der Fecht, as cited by FTD, said that there are many interested investors, according to Bloomberg. As reported by the Troubled Company Reporter-Europe on Oct. 4, 2012, Deutsche Welle related that administrator spokeswoman Brigitte von Haacke said the news agency had been losing money since its foundation and that the parent company had now stopped trying to plug its shortfalls. QUIRINUS PLC: Moody's Affirms 'Ba3' Rating on Class X2 Notes ------------------------------------------------------------ Moody's Investors Service has downgraded the following class of Notes issued by Quirinus (European Loan Conduit No. 23) plc (amount reflect initial outstanding): EUR560M Class A Notes, Downgraded to Baa1 (sf); previously on May 26, 2011 Downgraded to Aa2 (sf) At the same time, Moody's has affirmed the following ratings: X2 Notes, Affirmed at Ba3 (sf); previously on Aug 22, 2012 Downgraded to Ba3 (sf) Moody's does not rate the Class B, Class C, Class D, Class E or Class F Notes of the Issuer and has withdrawn the rating on the Class X1 Notes on August 21, 2012. Ratings Rationale The downgrade of the rating of the Class A Notes is driven by the increase in the expected loss of the remaining pool due to the increase in the assessed refinancing risk and lower value estimates compared to the last review. The increase in credit enhancement through the prepayment of the previously largest loan, the Lumiere Loan, is not sufficient to offset the higher expected loss for the remaining pool. The modified pro-rata allocation of the prepayment proceeds prevented a higher increase in the credit enhancement of the Class A Notes. In its base case Moody's assumes that the H&B Retail Loan will not be repaid at scheduled maturity and will be transferred to special servicing which would breach the sequential pay trigger and principal proceeds would be allocated sequentially. However, even the sequential allocation will not sufficiently increase the credit enhancement for Class A to provide a buffer against the expected and potential further value declines. The rating already reflects the single loan pool after the repayment/ work-out of the Fairacre and the H&B Retail Loan and considers potential further value declines of the Eurocastle portfolio. The rating on the Class X2 Detachable Coupons is affirmed because the current rating already incorporates the updated risk assessment. The key parameters in Moody's analysis are the default probability of the securitized loan (both during the term and at maturity) as well as Moody's value assessment for the prime single office property securing this loan. Moody's derives from those parameters a loss expectation for the securitized pool. Moody's weighted average (WA) loan-to-value (LTV) ratio for the pool is 98.0%, which compares to the reported WA LTV of 79.7%. At last review, Moody's WA whole loan LTV was 70.5%, which was mainly driven by the lower LTV of the prepaid Lumiere Loan. Given the high LTV levels Moody's expects overall a high default probability (>50%) for the remaining loans. One loan, the Fairacre Loan accounting for 6.9% to the current pool balance is in special servicing undergoing workout. Moody's expects losses on this loan in the range of 0-25%. The other two loans have maturities in November 2012 (21.4% of the pool) and in February 2016 (71.8%). The concentration of the pool is above average with all loans secured by retail properties in Germany. The rating of the Class A Notes is very sensitive to the breach of the sequential pay trigger. Given the concentration of the pool with only three loans remaining and the deteriorating credit quality of the remaining loans a sequential allocation of repayment proceeds is necessary to build up sufficient credit enhancement to off-set higher expected losses of the remaining loans. If the H&B Retail Loan was not transferred to special servicing, the repayment and even the recovery proceeds would be allocated modified pro-rata. In such a scenario, the rating of the Class A would potentially be further downgraded. In general, Moody's analysis reflects a forward-looking view of the likely range of commercial real estate collateral performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside an acceptable range of the key parameters such as property value or loan refinancing probability for instance, may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated when the related securities ratings were issued. Even so, a deviation from the expected range will not necessarily result in a rating action nor does performance within expectations preclude such actions. There may be mitigating or offsetting factors to an improvement or decline in collateral performance, such as increased subordination levels due to amortization and loan re- prepayments or a decline in subordination due to realised losses. Primary sources of assumption uncertainty are the current stressed macro-economic environment and continued weakness in the occupational and lending markets. Moody's anticipates (i) delayed recovery in the lending market persisting through 2013, while remaining subject to strict underwriting criteria and heavily dependent on the underlying property quality, (ii) strong differentiation between prime and secondary properties, with further value declines expected for non-prime properties, and (iii) occupational markets will remain under pressure in the short term and will only slowly recover in the medium term in line with anticipated economic recovery. Overall, Moody's central global macroeconomic scenario is for a material slowdown in growth in 2012 for most of the world's largest economies fuelled by fiscal consolidation efforts, household and banking sector deleveraging and persistently high unemployment levels. Moody's expects a mild recession in the Euro area. Moody's Portfolio Analysis Quirinus (European Loan Conduit No. 23) plc is a securitization of initially 10 loans that closed in July 2006. The remaining three loans in the pool are secured on portfolios of in total 51 retail properties, for the most part supermarkets, spread across Germany. At the August 2012 interest payment date, the total securitized loan balance was EUR118.8 million, down by 83% from EUR700.8 million at closing. The seven loan repayment and prepayment proceeds have been allocated on a modified pro-rata basis according to loan buckets. Therefore, the credit enhancement of the Class A Notes has only increased to 30.5% compared to 20.1% at closing. Since last review, the largest loan in the pool at closing (Lumiere Loan, 53.8% of the initial pool) has been prepaid ahead of its scheduled maturity date in February 2013. Moody's assessed the quality of the loan from an expected loss perspective as above average compared to the total pool. To date, no loan has realised a loss. The smallest loan in the pool, Fairacre (6.9%) is currently in special servicing due to its inability to refinance at its maturity date in February 2011. This EUR8.2 million loan has a reported ICR of 2.0x and is secured on five German supermarkets. The borrowers have filed for insolvency and the portfolio is currently marketed. The currently largest loan, Eurocastle (71.8%) is secured on 41 German retail properties. The interest only loan has shown relatively stable rental income through time with a currently reported ICR of 1.8x. The underlying portfolio faces lease rollover risk for more than 41% of the rental cash flow in 2015 and 2016 and the WA remaining lease is rather short at approximately 4 years. The loan has the longest maturity in the pool in February 2016. Moody's LTV is 100%. The currently second largest loan is the H&B Retail (21.4%) which is secured on five German retail properties. The loan is currently able to afford its scheduled loan interest, although H&B Retail Loan's sponsors have been injecting cash in order to meet the loan's scheduled principal payments. In its base case Moody's assumes that the H&B Retail Loan will not be repaid on its scheduled maturity date in November 2012 given its rather high LTV of 89% based on Moody's value and the rather short WA remaining lease term of approximately 4 years. Portfolio Loss Exposure: Moody's expects a significant amount of losses on the securitized portfolio, stemming mainly from the refinancing profile of the securitized portfolio. Given the default risk profile and the anticipated work-out strategy for defaulted and potentially defaulting loans, these expected losses are likely to crystallize only towards the end of the transaction term. Rating Methodology The methodologies used in this rating were Moody's Approach to Real Estate Analysis for CMBS in EMEA: Portfolio Analysis (MoRE Portfolio) published in April 2006 and Moody's Approach to Rating Structured Finance Interest-Only Securities published in February 2012. Other Factors used in this rating are described in European CMBS: 2012 Central Scenarios published in February 2012. The updated assessment is a result of Moody's on-going surveillance of commercial mortgage backed securities (CMBS) transactions. Moody's prior assessment is summarized in a press release dated May 26, 2011. The last Performance Overview for this transaction was published on September 12, 2012. In rating this transaction, Moody's used both MoRE Portfolio and MoRE Cash Flow to model the cash flows and determine the loss for each tranche. MoRE Portfolio evaluates a loss distribution by simulating the defaults and recoveries of the underlying portfolio of loans using a Monte Carlo simulation. This portfolio loss distribution, in conjunction with the loss timing calculated in MoRE Portfolio is then used in MoRE Cash Flow, where for each loss scenario on the assets, the corresponding loss for each class of notes is calculated taking into account the structural features of the notes. As such, Moody's analysis encompasses the assessment of stressed scenarios. Moody's ratings are determined by a committee process that considers both quantitative and qualitative factors. Therefore, the rating outcome may differ from the model output. QUIRINUS PLC: Fitch Downgrades Rating on Class F Notes to 'CC' -------------------------------------------------------------- Fitch Ratings has downgraded Quirinus (European Loan Conduit No. 23) plc's commercial mortgage-backed notes, as follows: -- EUR82.7m Class A (XS0259561925) downgraded to 'A+sf' from 'AA+sf'; Outlook Stable -- EUR5.2m Class B (XS0259562576) downgraded to 'Asf' from 'AAsf'; Outlook Stable -- EUR6.3m Class C (XS0259562907) downgraded to 'BBBsf' from 'Asf'; Outlook Stable -- EUR8.3m Class D (XS0259563202) downgraded to 'BBsf' from 'BBBsf'; Outlook Stable -- EUR9.3m Class E (XS0259563624) downgraded to 'CCCsf' from 'Bsf'; Recovery Estimate (RE) 75% -- EUR7m Class F (XS0259564192 downgraded to 'CCsf' from 'CCCsf'; RE0% The downgrades are driven by the high leverage of the remaining three loans in the transaction, which Fitch believes will struggle to redeem at their respective maturity dates. All the loans are backed by similar collateral: German retail warehouse assets tenanted by high quality German discount retailers on WA lease terms that range from 4.4 to 6.4 years. Fairacre, the smallest loan in the pool, representing 6.9% of outstanding principal balance, was scheduled to mature in February 2009. It failed to redeem and entered special servicing in January 2011. The borrower subsequently filed for bankruptcy and at present the agency understands that the insolvency administrator and special servicer have marketed the portfolio for sale. Fitch views the loan as a bellwether to the forthcoming maturities of the larger H&B and Eurocastle loans in November 2012 and February 2016, respectively. Although Fitch estimates that all three loans have loan-to-value ratios approaching or in excess of 100%, all still provide very strong interest coverage, with ratios between 1.8x and 2.2x. A full cash sweep is currently in place for the defaulted Fairacre loan, which has reduced the loans' outstanding balance to EUR8.2 million from EUR9.4 million at closing. However, the benefit of a strategy of sweeping cash at loan maturity in order to de-lever the loans may be undermined by the weak lease profiles across the remaining loans. For example, the H&B loan portfolio contains a single lease expiring in October 2014 that accounts for one-third of that loan's current rent, exposing the loan to severe income concentration risk. Fitch expects that the EUR25.4 million H&B loan will fail to redeem at loan maturity and will follow Fairacre into entering special servicing. By doing so, the aggregate balance of loans in special servicing would be above 25%, thereby causing a switch in principal paydown to fully sequential and offering stronger credit enhancement to the higher rated tranches. Since the last rating action in October 2011, Lumiere, the largest loan in the pool, has repaid in full in a modified pro- rata fashion, which along with the minor amortization receipts has reduced the outstanding note balance by EUR376.8 million. ============= H U N G A R Y ============= KAPUVARI HUS: Liquidation Order Takes Effect -------------------------------------------- MTI-Econews reports that a judge for the Gyor Court on Thursday said a court order placing Kapuvari Hus under liquidation took legal effect on Oct. 1. Kinga Mate said that the company's receiver is Hitelintezeti Felszamolo, MTI-Econews relates. The government declared Kapuvari Hus of "special significance" in September, MTI-Econews recounts. According to MTI-Econews, government spokesman Andras Giro-Szasz said that the declaration was made to prevent assets from being removed from the company, putting jobs in danger. Kapuvari Hus is a Hungarian meat company. ============= I R E L A N D ============= CELTIC RESIDENTIAL 9: S&P Lowers Rating on Class B Notes to 'B-' ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its credit ratings on all classes of notes in Celtic Residential Irish Mortgage Securitisation No. 9 PLC (Celtic 9) and Celtic Residential Irish Mortgage Securitisation No. 10 PLC (Celtic 10). "The rating actions follow the continued increases of severe arrears in these transactions, and deterioration of the Irish housing market. With lender forbearance measures and legal and regulatory frameworks in place, we have witnessed low levels of repossessions within these transactions. In order to address these risks, inherent within the Irish housing market, we have assumed that all loans that are more than nine months delinquent are in default, and will result in losses, with recoveries being realized at the end of our assumed foreclosure period. Consequently, and even with the benefit of recoveries, we have concluded that the class B notes in both Celtic 9 and 10 are effectively undercollateralized," S&P said. "In analyzing this transaction, we have applied our general criteria for assigning and monitoring ratings," S&P said. "We have analyzed the credit quality of the assets in this transaction through conducting loan-level analyses of the mortgage pools. For each loan in the pool, our analysis estimated the foreclosure frequency and the loss severity and, by multiplying the foreclosure frequency by the loss severity, the potential loss associated with each loan. To quantify the potential losses associated with the entire pool, we calculated a weighted-average foreclosure frequency (WAFF) and a weighted- average loss severity (WALS) at each rating level. The product of these two variables estimates the required loss protection, in the absence of any additional factors. We assume that the probability of foreclosure is a function of both borrower and loan characteristics, and to become more likely (and the realized loss on a loan more severe) as the economic environment deteriorates," S&P said. "In performing the credit analysis on this pool, we adopted the methodology and assumptions described in the sections entitled 'Foreclosure Frequency Assumptions' and 'Loss Severity Assumptions' in our Spanish residential mortgage-backed securities (RMBS) criteria, with these adjustments for this transaction," S&P said: 'AA ' base foreclosure frequency: 9%; 'A ' base foreclosure frequency: 7%; 'BBB ' base foreclosure frequency: 5%; 'AA ' market value decline: 40%; 'A ' market value decline: 35%; 'BBB ' market value decline: 30%; 'BB ' market value decline: 25%; Jumbo loan penalty: EUR500,000 in Dublin; Jumbo valuation penalty: EUR625,000 in Dublin; First-time buyer penalty: 10% addition to adjusted base foreclosure frequency; Income multiple penalty: 20% addition to adjusted base foreclosure frequency; Self-certified penalty: 25% addition to adjusted base foreclosure frequency; No adjustment is made for loans with loan-to-value (LTV) ratios of less than 50%; Geographic concentration penalty: 1% addition to adjusted base foreclosure frequency for all loans if the concentration is greater than 60% in Dublin and greater than 20% in any other county; The fixed costs of foreclosure are assumed to be 4% of the loan balance; and The foreclosure period is assumed to be 48 months for the reasons set out further. "The criteria applicable to our cash flow analysis for this transaction are primarily our 'Cash Flow Criteria for European RMBS Transactions,' published on Nov. 20, 2003, and 'Methodology And Assumptions: Update To The Cash Flow Criteria For European RMBS Transactions,' published on Jan. 6, 2009," S&P said. "Due to current forbearance measures and the legal uncertainty regarding the foreclosure process, repossessions have generally been limited in the Irish residential mortgage market. To address this risk, we have increased our foreclosure period in our analysis to 48 months. Additionally, we have assumed that all loans with arrears greater than nine monthly payments default on Day 1 in our cash flow analysis, with losses and recoveries being realized at the end of the 48 month foreclosure period," S&P said. "The level of severe arrears in both transactions has been increasing steadily. In Celtic 9, 90+ day delinquencies have risen to 19.09% from 11.71% since our previous review in March 2011, while In Celtic 10, 90+ day delinquencies have increased to 17.85% from 12.42% over the same period," S&P said. "The continued decline in Irish house prices has also pushed up the weighted-average indexed LTV ratios in both mortgage pools, with both transactions exhibiting higher proportions of borrowers in negative equity, compared with our previous review. This, combined with the increases in arrears, has resulted in an overall increase in the WAFF, WALS, and required loss protection estimates in our analysis," S&P said. "The reserve fund for both transactions are dynamically sized (i.e., partially sized based on the balance of nonperforming loans) and are nonamortizing. The reserve fund for Celtic 10 is currently at the level required by the transaction documents. However, with reduced excess spread, the reserve fund in Celtic 9 is currently at 98.7% of the required level for the current interest payment date," S&P said. "Each transaction also features a liquidity reserve fund, which is funded through principal receipts and can be replenished on each interest payment date up to 1% of the current collateral balance. Thus, in a situation where transaction performance is weak, the issuer can continue to borrow principal to meet timely payment of interest on the class B notes, at the expense of meeting ultimate payment of principal on the class A2 notes," S&P said. "When taking into account recoveries, the class A2 notes in both transactions are fully collateralized. However, our assumptions of undercollateralization give rise to negative carry. This, combined with the fact that principal can be used to pay interest through the liquidity reserve fund, means that we observe significant principal shortfalls in our cash flow analysis of each of these transactions. Our analysis shows that the levels of credit enhancement in both transactions are insufficient for the notes to maintain our current rating levels. Consequently, we have lowered to 'B+ (sf)' from 'A (sf)' and 'B (sf)' from 'BBB+ (sf)' our ratings on Celtic 9's class A2 notes and Celtic 10's class A2 notes," S&P said. "We have also lowered to 'B- (sf)' our ratings on the class B notes in both transactions. This reflects our view on credit enhancement erosion due to assumed undercollateralization, even when considering recoveries (assumed at 50%) and the available reserve fund level," S&P said. Celtic 9 and Celtic 10 are Irish RMBS transactions backed by mortgages originated by First Active--a subsidiary of Ulster Bank Ireland Ltd. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Reports included in this credit rating report are available at: http://standardandpoorsdisclosure-17g7.com RATINGS LIST Class Rating To From Ratings Lowered Celtic Residential Irish Mortgage Securitisation No. 9 PLC EUR1.75 Billion Mortgage-Backed Floating-Rate Notes A2 B+ (sf) A (sf) B B- (sf) BB (sf) Celtic Residential Irish Mortgage Securitisation No. 10 PLC EUR1.79 Billion Residential Mortgage-Backed Floating-Rate Notes A2 B (sf) BBB+ (sf) B B- (sf) BB- (sf) MCEVOY FAMILY: Exit Examinership Following Glanbia Investment ------------------------------------------------------------- Business and Leadership reports that McEvoy Family Foods, which is co-headed by former UK apprentice star Jane McEvoy, has exited examinership following an investment of EUR420,000 in the business by Glanbia Consumer Foods. The company is now a subsidiary of Glanbia Consumer Foods, but will continue to trade under its existing name, with Gary and Jane McEvoy continuing to run the company, Business and Leadership notes. According to Business and Leadership, Gary McEvoy will continue to lead the business, while Jane McEvoy will focus on developing a new brand of children's foods -- Harry's Little World. Business and Leadership relate that in a statement, Glanbia said it had invested in McEvoy Family Foods as "it reflects its new chilled food strategy of developing artisan food brands". McEvoy Family Foods was established in April 2009 and generated sales of EUR1.8 million in 2011 after securing contracts with SuperValu, Centra and Lidl, Business and Leadership recounts. The company specializes in the production of soups and garlic breads for retail chains' own brand ranges and has won a range of awards for its produce, according to Business and Leadership. ========= I T A L Y ========= BANCA MONTE: Fails to Meet European Union Capital Targets --------------------------------------------------------- Ben Moshinsky and Jim Brunsden at Bloomberg News report that Banca Monte dei Paschi di Siena SpA and banks in Cyprus and Slovenia failed to meet European Union capital targets as lenders raised more than EUR200 billion (US$258 billion) to bolster investor confidence. According to Bloomberg, Monte Paschi, the world's oldest bank, said in a statement on its Web site that the bank missed a June capital target by EUR1.7 billion. The bank, as cited by Bloomberg, said that this "is being addressed" with the explicit support of the Italian government." "The news is only the confirmation of what was already known," Bloomberg quotes Fabrizio Bernardi, a Milan-based analyst at Fidentiis Equities, as saying. "Monte Paschi needs to address the issue by the year end. The implementation of state aid request will allow it to become EBA compliant." Monte Paschi is borrowing EUR3.4 billion by selling bonds to the state to plug the capital gap, after Chief Executive Officer Fabrizio Viola, who took over in January failed to find private funding to meet the European Banking Authority's requirement, Bloomberg discloses. Banca Monte dei Paschi di Siena SpA -- http://www.mps.it/-- is an Italy-based company engaged in the banking sector. It provides traditional banking services, asset management and private banking, including life insurance, pension funds and investment trusts. In addition, it offers investment banking, including project finance, merchant banking and financial advisory services. The Company comprises more than 3,000 branches, and a structure of channels of distribution. Banca Monte dei Paschi di Siena Group has subsidiaries located throughout Italy, Europe, America, Asia and North Africa. It has numerous subsidiaries, including Mps Sim SpA, MPS Capital Services Banca per le Imprese SpA, MPS Banca Personale SpA, Banca Toscana SpA, Monte Paschi Ireland Ltd. and Banca MP Belgio SpA. ================= L I T H U A N I A ================= BANKAS SNORAS: Ernst & Young Appeals Court Ruling on Audit ---------------------------------------------------------- Aaron Eglitis and Bryan Bradley at Bloomberg News, citing Baltic News Service, report that Ernst & Young Baltic UAB appealed a ruling by Lithuanian authorities that auditing controls were inadequate when it reviewed the financial reports of Bankas Snoras AB. Bloomberg relates that the newswire said that a Vilnius court has agreed to hear the appeal of the June 20 decision by the Authority of Audit and Accounting. According to Bloomberg, BNS said that separately, Lithuanian prosecutors this week said they would investigate whether Ernst & Young Baltic properly conducted the audit of Snoras's 2010 financial statements. BNS, as cited by Bloomberg, said Ernst & Young Baltic stands by its audit opinion given on Mar. 10, 2011, and will continue to use all resources to defend its work on the audit. BNS said that the bank's auditor, Ramunas Bartasius, whose auditor's license was canceled by Lithuanian authorities in June, no longer works for Ernst & Young Baltic, Bloomberg notes. Lithuania's central bank took over Snoras, then the country's third biggest bank by deposits, in November 2011 after discovering assets reported on the lender's balance sheet were missing, Bloomberg recounts. About Bankas Snoras Bankas Snoras AB is Lithuania's fifth biggest lender. Snoras held LTL6.05 billion in deposits and had assets of LTL8.14 billion at the end of September. It competes with Scandinavian lenders including SEB AB, Swedbank AB (SWEDA), and Nordea AB. It also controls investment bank Finasta and Latvian lender Latvijas Krajbanka AS. As reported in the Troubled Company Reporter-Europe on Dec. 2, 2011, The Baltic Times, citing LETA/ELTA, said Vilnius District Court accepted the application regarding the initiation of bankruptcy proceedings against Snoras bank. The Bank of Lithuania delivered application on Snoras bankruptcy on Nov. 28, 2011. The TCR-Europe, citing Bloomberg News, reported on Nov. 28, 2011, that Lithuania's central bank said that Snoras' financial situation is "worse than previously identified" and saving the bank "would cost significantly more and would take longer than the available liquidity" at Snoras. Governor Vitas Vasiliauskas said at a news conference on Nov. 24 that some LTL3.4 billion (US$1.3 billion) in assets are missing, according to Bloomberg. ===================== N E T H E R L A N D S ===================== DUTCH MBS: Moody's Assigns 'Ba1' Rating to EUR6.5-Mil. E Notes -------------------------------------------------------------- Moody's Investors Service has assigned definitive credit ratings to the following classes of notes issued by Dutch MBS XVII B.V.: EUR135MM A1 Notes, Definitive Rating Assigned Aaa (sf) EUR365MM A2 Notes, Definitive Rating Assigned Aaa (sf) EUR8MM B Notes, Definitive Rating Assigned Aa1 (sf) EUR7MM C Notes, Definitive Rating Assigned Aa3 (sf) EUR5MM D Notes, Definitive Rating Assigned A2 (sf) EUR6.5MM E Notes, Definitive Rating Assigned Ba1 (sf) The class F notes are not rated by Moody's. The transaction represents the securitization of Dutch prime mortgage loans backed by residential properties located in the Netherlands and originated or acquired by subsidiaries of NIBC Bank N.V. ("NIBC" rated Baa3/P-3). The portfolio will be serviced by NIBC. Ratings Rationale The ratings of the notes take into account the credit quality of the underlying mortgage loan pool, from which Moody's determined the MILAN Credit Enhancement and the portfolio expected loss. The expected portfolio loss of 0.65% of the portfolio at closing and the required MILAN Credit Enhancement of 5.0% served as input parameters for Moody's cash flow model, which is based on a probabilistic lognormal distribution as described in the report "The Lognormal Method Applied to ABS Analysis", published in July 2000. The key drivers for the MILAN Credit Enhancement number, which is in line with other prime Dutch RMBS transactions which closed during the past twelve months, are (i) the weighted average loan- to-foreclosure-value (LTFV) of 81.9%, which is in line with other prime Dutch RMBS transactions, (ii) the proportion of interest- only loan parts (70.0%) which is slightly higher than for other prime Dutch RMBS transactions, (iii) the weighted average seasoning of 9.5 years which is high relative to the Dutch market. The key drivers for the portfolio expected loss are (i) the performance of the seller's precedent transactions as well as the performance on the seller's book, (ii) benchmarking with comparable transactions in the Dutch RMBS market, and (iii) the current economic conditions in the Netherlands in combination with historic recovery data of foreclosures received from the seller. Approximately 26.5% of the portfolio is linked to life insurance policies (life mortgage loans), which are exposed to set-off risk in case an insurance company goes bankrupt. The seller has provided loan-by-loan insurance company counterparty data, whereby 90.7% of all life insurance-linked products are linked to insurance policies provided by group companies of SRLEV N.V. (Baa1 IFSR), which is part of REAAL Verzekeringen group. Moody's considered the set-off risk in the cash flow analysis. The transaction benefits from a non-amortizing reserve fund that will be funded at 0.5% of the outstanding portfolio from the proceeds of the class F notes. The reserve account is replenished before interest payments on the class F notes. Apart from the reserve fund, the transaction benefits from an excess margin of 50 bps through the swap agreement. The swap counterparty is Credit Suisse International (A1/P-1). The transaction also benefits from an amortizing liquidity facility of 1.5% of the outstanding principal amount of the notes (excluding the class F notes) with a floor of 0.75% of the principal amount of the notes at closing (excluding the class F notes). The liquidity facility is available for as long as the class A1 and A2 notes are outstanding. Operational Risk Analysis: Moody's has analyzed the potential operational risks associated with the servicing and cash management functions in the transaction. NIBC provides loan servicing and cash management services and has sub delegated the loan administration to Stater (not rated). If NIBC's rating falls below Baa3, the issuer and the security trustee will use best efforts to appoint a back-up servicer and cash manager. Moody's Parameter Sensitivities: At the time the rating was assigned, the model output indicated that class A2 would have achieved Aaa if the expected loss was as high as 2.0% assuming MILAN Credit Enhancement to 7.0% and all other factors remained the same. Class A1 would have achieved Aaa in all tested scenarios. Moody's Parameter Sensitivities provide a quantitative/model- indicated calculation of the number of rating notches that a Moody's structured finance security may vary if certain input parameters used in the initial rating process differed. The analysis assumes that the deal has not aged and is not intended to measure how the rating of the security might migrate over time, but rather how the initial rating of the security might have differed if key rating input parameters were varied. Parameter Sensitivities for the typical EMEA RMBS transaction are calculated by stressing key variable inputs in Moody's primary rating model. The Foreign Account Tax Compliance Act (FATCA), a US legislation, may impact the transaction. The regulations implementing the Act are still in draft form and Moody's is currently reviewing the potential impact of FATCA. Should this transaction become subject to US withholding tax under FATCA the rating of the Notes may be negatively impacted. The V Score for this transaction is Low/Medium, which is in line with the V Score assigned for the Dutch RMBS sector, mainly due to the fact that it is a standard Dutch prime RMBS structure for which Moody's has over 13 years of historical performance data on precedent transactions. The primary source of uncertainty is due to operational risks relating to the servicing arrangement. The contractual servicer (NIBC) is rated Baa3/P-3 by Moody's. This risk is mitigated by the fact that Stater Nederland N.V. will be appointed at closing as sub-agent of NIBC and will perform the loan administration. V Scores are a relative assessment of the quality of available credit information and of the degree of dependence on various assumptions used in determining the rating. High variability in key assumptions could expose a rating to more likelihood of rating changes. The V Score has been assigned according to the report "V Scores and Parameter Sensitivities in the Major EMEA RMBS Sectors" published in April 2009. The principal methodology used in this rating was Moody's Approach to Rating RMBS in Europe, Middle East, and Africa published in June 2012. In rating this transaction, Moody's used ABSROM to model the cash flows and determine the loss for each tranche. The cash flow model evaluates all default scenarios that are then weighted considering the probabilities of the lognormal distribution assumed for the portfolio default rate. In each default scenario, the corresponding loss for each class of notes is calculated given the incoming cash flows from the assets and the outgoing payments to third parties and noteholders. Therefore, the expected loss or EL for each tranche is the sum product of (i) the probability of occurrence of each default scenario; and (ii) the loss derived from the cash flow model in each default scenario for each tranche. As such, Moody's analysis encompasses the assessment of stressed scenarios. The rating addresses the expected loss posed to investors by the legal final maturity of the notes. In Moody's opinion, the structure allows for timely payment of interest and ultimate payment of principal with respect to the notes by the legal final maturity. Moody's ratings only address the credit risk associated with the transaction. Other noncredit risks have not been addressed, but may have a significant effect on yield to investors. Moody's will monitor this transaction on an ongoing basis. DUTCH MBS XVII: Fitch Assigns 'B' Rating to EUR6.5MM Cl. E Notes ---------------------------------------------------------------- Fitch Ratings has assigned Dutch MBS XVII B.V.'s EUR526,500,000 mortgage-backed notes final ratings, as follows: -- EUR135,000,000 floating-rate class A1 mortgage-backed notes: 'AAAsf'; Outlook Stable; -- EUR365,000,000 floating-rate class A2 mortgage-backed notes: 'AAAsf'; Outlook Stable; -- EUR8,000,000 floating-rate class B mortgage-backed notes: 'AA+sf'; Outlook Stable; -- EUR7,000,000 floating-rate class C mortgage-backed notes: 'A+sf'; Outlook Stable; -- EUR5,000,000 floating-rate class D mortgage-backed notes: 'BBB+sf'; Outlook Stable; -- EUR6,500,000 floating-rate class E mortgage-backed notes: 'Bsf'; Outlook Stable; -- EUR2,700,000 floating-rate non-collateralized class F notes: 'NRsf'.: This EUR526.5 million transaction is a true sale securitization of Dutch residential mortgage loans, originated in the Netherlands and owned by NIBC Bank N.V. (NIBC, 'BBB'/Negative/'F3'). The final ratings are based on Fitch's assessment of the underlying collateral, available credit enhancement (CE), the origination and underwriting procedures used by the seller's, the servicing capabilities of NIBC and STATER Nederland and the transaction's sound legal structure. The transaction is backed by a nine-year seasoned non-revolving portfolio of prime residential mortgage loans, with a relatively low weighted-average (WA) original loan-to-market-value (LTMV) of 74.2% and a debt-to-income ratio (DTI) of 28.0%. The purchase of further advances into the pool will not be allowed after closing CE for the class A notes totaled 5.5% at closing, which is provided by the subordination of the class B notes (1.5%), the class C notes (1.3%) the class D notes (0.9%), the unrated class E notes (1.2%) and the reserve account (0.50%). The transaction benefits from a fully funded non-amortizing reserve account equating to 0.50% of the initial class A to E notes balance and a cash advance facility equating to 1.5% of the outstanding class A to E notes balance, which may amortize to 0.75% of the initial class A to E notes balance. Under the interest rate swap agreement, the swap counterparty pays the interest on the notes in exchange for the scheduled interest on the mortgages, interest earned on the guaranteed investment contract account, less senior fees and excess spread of 0.50%. The collateral review of the mortgage portfolio involves reviewing vintage performance data and loan-by-loan loss severity information on the originator's sold repossessions, which Fitch uses to validate the frequency of foreclosure assumptions, quick sale adjustments and foreclosure timing assumptions used within its analysis. Whilst NIBC was unable to provide cumulative default data by vintage, it did provide static three-months plus arrears data by vintage for both NHG and non-NHG loans and loan- by-loan repossession data on all loans foreclosed over the past few years. This data was found to be in line with Fitch's performance assumptions for the Dutch market and consequently no additional adjustments to the standard assumptions were made. To analyze the CE levels, Fitch evaluated the collateral using its default model, details of which can be found in the reports entitled "EMEA Residential Mortgage Loss Criteria", dated 7 June 2012, "EMEA RMBS Criteria Addendum - Netherlands", dated 14 June 2012, available at www.fitchratings.com. The agency assessed the transaction cash flows using default and loss severity assumptions under various structural stresses including prepayment speeds and interest rate scenarios. The cash flow tests showed that each class of notes could withstand loan losses at a level corresponding to the related stress scenario without incurring any principal loss or interest shortfall and can retire principal by the legal final maturity In Fitch's view, commingling risk is minimal due to the use of a foundation structure. Consequently, the agency did not consider the risk of a loss of funds due to commingling or disruption of payments in its cash flow analysis. The transaction is not exposed to the risk of deposit set-off or other claims. Fitch did incorporate in its analysis the risk that borrowers might exercise set-off following the failure of insurance providers. NORTHERN LIGHTS: Moody's Assigns 'Ba3' Rating to US$150MM LPNs -------------------------------------------------------------- Moody's Investors Service has assigned the following definitive rating to notes issued by Northern Lights Bulgaria B.V.: US$150,000,000 Loan Participation Notes due 2014 Series 2012-1, Definitive Rating Assigned Ba3 Ratings Rationale The rating of the Notes addresses the expected loss posed to investors by the legal final maturity, and is based on the long term senior unsecured rating of Corporate Commercial Bank AD. The issue proceeds from the Notes will be used to fund a facility agreement made between the Issuer as lender and Corporate Commercial Bank AD as receiver. Payments received by the Issuer under the Facility Agreement will be used to make payments due under the Notes. Given the pass through nature of the transaction, holders of the notes will have effectively similar credit risk exposure to that of the facility receiver Corporate Commercial Bank AD. The principal methodology used in this rating was Moody's Approach to Rating Repackaged Securities published in April 2010. No cash flow analysis or stress scenarios have been conducted as the rating was directly derived from the rating of the facility receiver. =========== R U S S I A =========== NATIONAL STANDARD: Moody's Assigns Rating to Domestic Bonds ----------------------------------------------------------- Moody's Interfax has assigned Baa3.ru long-term National Scale Rating to the domestic rouble-denominated bonds issued in March 2011 by National Standard Bank (NS-Bank). The issue size is RUB1.5 billion (approximately US$50 million) with a maturity of three years. Ratings Rationale Moody's notes that the Baa3.ru rating for the bonds is primarily based on the fundamental ability of NS-Bank to make timely payments of interest and ultimate payment of principal on the bonds. The bonds have an embedded annual put option, which allows bondholders to receive early repayment of the bonds' face value. The next and last put option period is March 4, 2013 to March 10, 2013. NS-Bank is currently rated B3/Not Prime for global long- and short-term foreign and local currency deposits, and E+ for standalone bank financial strength rating (BFSR) mapping to b3 on the long-term scale. All of the bank's global scale ratings carry a stable outlook. What Could Move The Ratings Up/Down A material reduction in the loan portfolio concentrations and improved profitability are key factors that could exert upside pressure on the ratings. The ratings may be downgraded from a significant weakening of the bank's liquidity and asset quality, or due to a material increase in borrower concentration. Principal Methodologies The principal methodology used in this rating was Moody's Consolidated Global Bank Rating Methodology published in June 2012. National Standard Bank is headquartered in Moscow and reported total assets and net income of $1.4 billion and $8.5 million, respectively, as of year-end 2011, according to the bank's audited financial statements. Moody's Interfax Rating Agency's National Scale Ratings (NSRs) are intended as relative measures of creditworthiness among debt issues and issuers within a country, enabling market participants to better differentiate relative risks. NSRs differ from Moody's global scale ratings in that they are not globally comparable with the full universe of Moody's rated entities, but only with NSRs for other rated debt issues and issuers within the same country. NSRs are designated by a ".nn" country modifier signifying the relevant country, as in ".ru" for Russia. About Moody's and Moody's Interfax Moody's Interfax Rating Agency (MIRA) specializes in credit risk analysis in Russia. MIRA is a joint-venture between Moody's Investors Service, a leading provider of credit ratings, research and analysis covering debt instruments and securities in the global capital markets, and the Interfax Information Services Group. Moody's Investors Service is a subsidiary of Moody's Corporation (NYSE: MCO). NATIONAL STANDARD: Moody's Assigns 'B3' Sr. Unsecured Debt Rating ----------------------------------------------------------------- Moody's Investors Service has assigned a B3 long-term local currency senior unsecured debt rating to the domestic rouble- denominated bonds issued in March 2011 by National Standard Bank (NS-Bank). The outlook on the debt rating is stable. The issue size is RUB1.5 billion (approximately US$50 million) with a maturity of three years. Ratings Rationale Moody's notes that the B3 local currency debt rating for the bonds are primarily based on the fundamental ability of NS-Bank to make timely payments of interest and ultimate payment of principal on the bonds. The bonds have an embedded annual put option, which allows bondholders to receive early repayment of the bonds' face value. The next and last put option period is March 4, 2013 to March 10, 2013. NS-Bank is currently rated B3/Not Prime for long- and short-term foreign and local currency deposits, and E+ for standalone bank financial strength rating (BFSR) mapping to b3 on the long-term scale. All of the bank's ratings carry a stable outlook. What Could Move The Ratings Up/Down A material reduction in the loan portfolio concentrations and improved profitability are key factors that could exert upside pressure on the ratings. The ratings may be downgraded from a significant weakening of the bank's liquidity and asset quality, or due to a material increase in borrower concentration. Principal Methodologies The principal methodology used in this rating was Moody's Consolidated Global Bank Rating Methodology published in June 2012. National Standard Bank is headquartered in Moscow and reported total assets and net income of US$1.4 billion and US$8.5 million, respectively, as of year-end 2011, according to the bank's audited financial statements. NS FINANCE: Moody's Assigns Rating to Domestic Bonds ---------------------------------------------------- Moody's Interfax Rating Agency has assigned Baa3.ru long-term National Scale Rating to the domestic rouble-denominated bonds issued in May 2011 by NS Finance, a wholly owned subsidiary of National Standard Bank (NS-Bank). National scale ratings carry no specify outlook. The issue size is RUB2 billion (approximately $65 million) with a maturity of three years. Ratings Rationale Moody's notes that the Baa3.ru rating for the bonds are primarily based on the fundamental ability of NS-Bank to make timely payments of interest and ultimate payment of principal on the bonds. NS Finance has been established for the sole purpose of attracting funding for NS-Bank. The obligations of NS Finance to bondholders are guaranteed by a surety from NS-Bank. The bank and its subsidiary are jointly liable on the bonds. NS-Bank is currently rated B3/Not Prime for global long- and short-term foreign and local currency deposits, and E+ for standalone bank financial strength rating (BFSR) mapping to b3 on the long-term scale. All of the bank's global scale ratings carry a stable outlook. What Could Move The Ratings Up/Down A material reduction in the loan portfolio concentrations and improved profitability are key factors that could exert upside pressure on the ratings. The ratings may be downgraded from a significant weakening of the bank's liquidity and asset quality, or due to a material increase in borrower concentration. Principal Methodologies The principal methodology used in this rating was Moody's Consolidated Global Bank Rating Methodology published in June 2012. National Standard Bank is headquartered in Moscow and reported total assets and net income of US$1.4 billion and US$8.5 million, respectively, as of year-end 2011, according to the bank's audited financial statements. Moody's Interfax Rating Agency's National Scale Ratings (NSRs) are intended as relative measures of creditworthiness among debt issues and issuers within a country, enabling market participants to better differentiate relative risks. NSRs differ from Moody's global scale ratings in that they are not globally comparable with the full universe of Moody's rated entities, but only with NSRs for other rated debt issues and issuers within the same country. NSRs are designated by a ".nn" country modifier signifying the relevant country, as in ".ru" for Russia. About Moody's and Moody's Interfax Moody's Interfax Rating Agency (MIRA) specializes in credit risk analysis in Russia. MIRA is a joint-venture between Moody's Investors Service, a leading provider of credit ratings, research and analysis covering debt instruments and securities in the global capital markets, and the Interfax Information Services Group. Moody's Investors Service is a subsidiary of Moody's Corporation. NS FINANCE: Moody's Assigns 'B3' Senior Unsecured Debt Rating ------------------------------------------------------------- Moody's Investors Service has assigned a B3 long-term local currency senior unsecured debt rating to the domestic rouble- denominated bonds issued in May 2011 by NS Finance, a wholly owned subsidiary of National Standard Bank (NS-Bank). The outlook on the debt rating is stable. The issue size is RUB2 billion (approximately US$65 million) with a maturity of three years. Ratings Rationale Moody's notes that the B3 local currency debt rating for the bonds are primarily based on the fundamental ability of NS-Bank to make timely payments of interest and ultimate payment of principal on the bonds. NS Finance has been established for the sole purpose of attracting funding for NS-Bank. The obligations of NS Finance to bondholders are guaranteed by a surety from NS- Bank. The bank and its subsidiary are jointly liable on the bonds. NS-Bank is currently rated B3/Not Prime for long- and short-term foreign and local currency deposits, and E+ for standalone bank financial strength rating (BFSR) mapping to b3 on the long-term scale. All of the bank's ratings carry a stable outlook. What Could Move The Ratings Up/Down A material reduction in the loan portfolio concentrations and improved profitability are key factors that could exert upside pressure on the ratings. The ratings may be downgraded from a significant weakening of the bank's liquidity and asset quality, or due to a material increase in borrower concentration. Principal Methodologies The principal methodology used in this rating was Moody's Consolidated Global Bank Rating Methodology published in June 2012. National Standard Bank is headquartered in Moscow and reported total assets and net income of US$1.4 billion and US$8.5 million, respectively, as of year-end 2011, according to the bank's audited financial statements. =============== S L O V E N I A =============== * SLOVENIA: Moody's Says Banking System Outlook Remains Negative ---------------------------------------------------------------- The outlook on Slovenia's banking system remains negative, says Moody's Investors Service in a new Banking System Outlook published recently. The negative outlook reflects a persistently difficult operating environment and severe asset-quality deterioration, particularly in the highly leveraged corporate sector. The new report is entitled "Banking System Outlook: Slovenia". Moody's expects the operating environment for Slovenian banks to remain challenging with a 2% contraction in Slovenia's real GDP in 2012 and a further 1.4% in 2013. This difficult operating environment will continue to weigh on fragile business confidence and limit demand for credit. Moody's also notes that the asset-quality ratios, capitalization levels and provisioning buffers of Slovenian banks remain among the weakest in Central and Eastern Europe. Moody's also expects that unless the country's three leading banks are further recapitalized, the banking system could struggle to significantly reverse the downward trends and resume intermediation and lending activities to the economy. Slovenia banks' high dependence on wholesale funding will remain a major challenge in Moody's view as they face difficult refinancing conditions amidst volatile international markets. However, Moody's notes that this reliance on wholesale market funding has been partially mitigated by access to medium-term funds provided by the European Central Bank. Owing largely to increasing loan loss provisions, Moody's expects the Slovenian banking system to remain loss-making over the outlook period despite stable trends in gross operating income and core profitability until now. The rating agency also expects deleveraging and contraction in lending to translate into lower interest margins and fee income while their funding costs are likely to increase as competition intensifies for the limited pool of domestic deposits to replace maturing wholesale liabilities. =========================== U N I T E D K I N G D O M =========================== CLINTON CARDS: American Greetings Buys Stores, Brand ---------------------------------------------------- Carla Main, substituting for Bloomberg bankruptcy columnist Bill Rochelle, reports that American Greetings Corp. disclosed in an annual report to the U.S. Securities and Exchange Commission that it bought stores and financial assets from Clinton Cards Plc, a U.K. greeting card business in administration, a process similar to Chapter 11 bankruptcy in the U.S. According to the report, before entering administration, Clinton Cards had 750 stores and annual revenue of about US$600 million and had long been one of American Greetings' "largest customers," the U.S. company said in the SEC filing. Before the May 9 administration filing, American Greetings, through its unit, Lakeshore Lending Ltd., purchased all the outstanding senior secured debt of Clinton for US$56.6 million. An administration auction was conducted June 7 and Clinton sold some units to Lakeshore for US$37.2 million. The bid took the form of a "credit bid" under which American Greetings used a portion of the senior secured debt Clinton owed to Lakeshore to pay the purchase of the assets, according to the SEC filing. The Bloomberg report discloses that under the auction agreement, American Greetings would acquire 400 stores, complete with inventory and overhead, "as well as the Clinton Cards and related brands," according to the filing. The stores and assets that weren't acquired remain subject to the U.K. administration proceeding. It's anticipated these assets "will be liquidated," American Greetings said in its filing. Based in Cleveland, Ohio, American Greetings Corporation (NYSE:AM) is engaged in the design, manufacture and sale of everyday and seasonal greeting cards, and other social expression products. JJB SPORTS: Crewe Store Closes Following Administration ------------------------------------------------------- Ellie Cullen at Crewe Chronicle.co.uk reports that twelve staff at JJB Sports in Crewe have lost their jobs after the store shut its doors with immediate effect. A total of 133 stores across the country were closed when the company officially went into administration, according to Chronicle.co.uk. The report relates that only 50 shops were saved from closure after they were bought by rival sports retailer Sports Direct -- but the Crewe Market Centre store was not one of them. KPMG had been appointed as administrators. The report notes that 167 employees across the company have been retained to assist the administrators with one from Crewe. "Successive attempts to restructure the business, both financially and operationally, have not been enough to prevent the company falling into administration . . . . Unfortunately a buyer could only be found for 20 stores on a going concern basis. All staff made redundant as a result of store closures have had their arrears of wages and holiday entitlements paid in full . . . . Our team of employment specialists will be supporting staff on completing redundancy forms and putting them in touch with job seeker services . . . . We will now be reviewing what options are available for the remainder of the business, such as selling leasehold interests," the report quoted Richard Fleming, UK head of restructuring at KPMG, as saying. The report discloses that David McCorquodale, corporate finance partner who led the sales process, added: "Unfortunately, the level of cash and further restructuring required to rescue a substantial part of the business was too much risk for most interested parties." OPTICAL EXPRESS: Unit in Administration, Closes 40 Stores --------------------------------------------------------- Tiffany Holland at Retail Week reports that Optical Express is to close 40 stores after plunging its subsidiary into administration in the face of a "significant economic slowdown on the high street." =============== X X X X X X X X =============== * BOOK REVIEW: Performance Evaluation of Hedge Funds ---------------------------------------------------- Edited by Greg N. Gregoriou, Fabrice Rouah, and Komlan Sedzro Publisher: Beard Books Hardcover: 203 pages Listprice: $59.95 Review by Henry Berry Hedge funds can be traced back to 1949 when Alfred Winslow Jones formed the first one to "hedge" his investments in the stock market by betting that some stocks would go up and others down. However, it has only been within the past decade that hedge funds have exploded in growth. The rise of global markets and the uncertainties that have arisen from the valuation of different currencies have given a boost to hedge funds. In 1998, there were approximately 3,500 hedge funds, managing capital of about $150 billion. By mid-2006, 9,000 hedge funds were managing $1.2 trillion in assets. Despite their growing prominence in the investment community, hedge funds are only vaguely understood by most people. Performance Evaluation of Hedge Funds addresses this shortcoming. The book describes the structure, workings, purpose, and goals of hedge funds. While hedge funds are loosely defined as "funds with no rules," the editors define these funds more usefully as "privately pooled investments, usually structured as a partnership between the fund managers and the investors." The authors then expand upon this definition by explaining what sorts of investments hedge funds are, the work of the managers, and the 139 reasons investors join a hedge fund and what they are looking for in doing so. For example, hedge funds are characterized as an "important avenue for investors opting to diversify their traditional portfolios and better control risk" -- an apt characterization considering their tremendous growth over the last decade. The qualifications to join a hedge fund generally include a net worth in excess of $1 million; thus, funds are for high net-worth individuals and institutional investors such as foundations, life insurance companies, endowments, and investment banks. However, there are many individuals with net worths below $1 million that take part in hedge funds by pooling funds in financial entities that are then eligible for a hedge fund. This book discusses why hedge funds have become "notorious as speculating vehicles," in part because of highly publicized incidents, both pro and con. For example, George Soros made $1 billion in 1992 by betting against the British pound. Conversely, the hedge fund Long-Term Capital Management (LTCP) imploded in 1998, with losses totalling $4.6 billion. Nonetheless, these are the exceptions rather than the rule, and the editors offer statistics, studies, and other research showing that the "volatility of hedge funds is closer to that of bonds than mutual funds or equities." After clarifying what hedge funds are and are not, the book explains how to analyze hedge fund performance and select a successful hedge fund. It is here that the book has its greatest utility, and the text is supplemented with graphs, tables, and formulas. The analysis makes one thing clear: for some investors, hedge funds are an investment worth considering. Most have a demonstrable record of investment performance and the risk is low, contrary to common perception. Investors who have the necessary capital to invest in a hedge fund or readers who aspire to join that select club will want to absorb the research, information, analyses, commentary, and guidance of this unique book. Greg N. Gregoriou teaches at U. S. and Canadian universities and does research for large corporations. Fabrice Rouah also teaches at the university level and does financial research. Komlan Sedzro is a professor of finance at the University of Quebec and an advisor to the Montreal Derivatives Exchange. ********* 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 * * *