/raid1/www/Hosts/bankrupt/TCREUR_Public/121025.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
E U R O P E
Thursday, October 25, 2012, Vol. 13, No. 213
Headlines
B E L G I U M
* BELGIUM: Moody's Says Banking System Outlook Remains Negative
F R A N C E
PERNOD RICARD: Fitch Raises LT Issuer Default Rating From 'BB+'
TV NUMERIC: In Receivership, May Close Operations
I R E L A N D
BLUEBONNET FINANCE: Moody's Affirms 'Ba2' Rating on Class D Notes
CAIRN EURO ABS: Fitch Affirms 'C' Ratings on Two Note Classes
CELTIC RESIDENTIAL 11: S&P Cuts Ratings on 3 Note Classes to 'B-'
FASTNET SECURITIES 2: S&P Cuts Ratings on 3 Note Classes to 'B-'
FASTNET SECURITIES 7: S&P Cuts Rating on Class A3 Notes to 'BB+'
KILDARE SECURITIES: S&P Cuts Ratings on Two Note Classes to 'B-'
I T A L Y
BANCA POPOLARE: Moody's Cuts Long-Term Deposit Rating to 'B3'
L U X E M B O U R G
EUROPROP SA: S&P Lowers Ratings on Two Note Classes to 'CCC-'
PATAGONIA FINANCE: Moody's Cuts Rating on Repack Notes to 'Caa2'
SIFCO CAPITAL: Fitch Rates US$200MM Senior Secured Notes 'B-'
N E T H E R L A N D S
BOYNE VALLEY: Moody's Raises Rating on Class D Notes From 'Ba1'
FAB UK 2004-1: Fitch Affirms 'CCsf' Ratings on Two Note Classes
HIGHLANDER EURO: S&P Affirms 'CCC-' Rating on Class E Notes
INDIGOLD CARBON: Moody's Rates US$350-Mil. 5-Year Term Loan 'Ba3'
LAURELIN II: S&P Affirms 'BB' Rating on Class E Notes
PANGAEA ABS 2007-1: Fitch Affirms Ratings on 4 Note Classes to C
UPPER DECK: Seeks U.S. Recognition of Dutch Proceedings
P O L A N D
* POLAND: Records 147 Construction Sector Bankruptcies in 1Q2012
R U S S I A
TRANSCONTAINER OJSC: Fitch Affirms 'BB+' IDR; Outlook Negative
UNIASTRUM BANK: Moody's Cuts National Scale Rating to 'Ba3'
UNIASTRUM BANK: Moody's Cuts Bank Deposit Ratings to 'Caa1'
S L O V E N I A
CM CELJE: Court Launches Receivership Proceedings
S P A I N
AUTOVIA DE LOS VINEDOS: Moody's Cuts Debt Rating to 'Caa1'
OBRASCON HUARTE: Moody's Confirms 'Ba2' CFR/PDR; Outlook Neg.
REYAL URBIS: May File for Creditor Protection if Loan Talks Fail
TDA 25: High Default Rates on Loans Prompt Liquidation
U N I T E D K I N G D O M
ATLAS REINSURANCE: S&P Assigns 'BB-' Rating to Class A Notes
CENTERPOINT VENUES: Pub Business in Administration
EUROFINANCE SA: London Court Won't Recognize US$10MM Judgment
ITV PLC: S&P Affirms 'BB+/B' Corp. Credit Ratings; Outlook Pos.
LONDON & WESTCOUNTRY: In Administration on Loan Repayments
PUNCH TAVERNS: Set to Enter Into Debt Restructuring Talks
X X X X X X X X
* Moody's Says Baltic Banking System Outlook Remains Negative
* Upcoming Meetings, Conferences and Seminars
*********
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B E L G I U M
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* BELGIUM: Moody's Says Banking System Outlook Remains Negative
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The outlook for Belgium's banking system remains negative, says
Moody's Investors Service in a new Banking System Outlook
published on Oct. 23. The main drivers of the outlook are (1)
weakening economic conditions, which will likely cause
deterioration in the asset quality of banks' loan portfolios; and
(2) the implications of pressure on Belgium's credit profile
(rated Aa3 with a negative outlook) for banks' funding positions
and overall creditworthiness, given the close linkage of
sovereign and bank credit strength.
The new report is entitled "Banking System Outlook: Belgium".
Moody's says that over the 12-18 month outlook period, the lower
growth prospects of the small and export-oriented Belgian economy
-- vulnerable to the ongoing euro area crisis and to slowing
global growth -- imply that operating conditions will remain
challenging for the banks. In addition, the weakening domestic
economy and pressure on the Belgian sovereign's credit profile
increasingly weigh on operating conditions for banks.
The ongoing euro area debt crisis is likely to weaken banks'
liquidity reserves and funding profiles. Given the high
interconnectedness between sovereign and bank credit risks,
Moody's believes that a worsening of market perceptions regarding
the Belgian sovereign would also affect banks' access to
wholesale funding.
Asset quality will likely deteriorate slightly as the weakening
economic environment will progressively impair the performance of
the banks' domestic loan portfolios. Moody's says that although
losses on some higher-risk non-domestic loan portfolios have
decreased, overall loan losses will remain sizeable. Exposures to
peripheral euro area sovereign bonds are limited, but some banks
have sizeable private-sector exposures to the euro periphery.
Moody's analysis suggests that the four large banks that the
report focuses on (Belfius Bank SA/NV, Fortis Bank SA/NV, ING
Belgium SA/NV and KBC Bank NV) have sufficient loss-absorption
buffers to cope with expected losses under the rating agency's
central scenario.
Over the 12-18 months outlook period, lower interest margins and
higher credit costs will weigh on bank profits. Moody's says that
a rise in wholesale funding costs, an increase in the use of more
costly term deposits and long-maturity retail bonds, as well as a
decline in investment yields will be the main drivers of pressure
on interest margins. Loans to small and medium-sized enterprises
and professionals have been the main drivers behind the increase
in credit costs in the domestic portfolio since 2007. Moody's
expects that these sectors will continue to drive overall loan
losses, as they are highly leveraged and vulnerable to the
weakening macro-environment.
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F R A N C E
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PERNOD RICARD: Fitch Raises LT Issuer Default Rating From 'BB+'
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Fitch Ratings has upgraded Pernod Ricard SA's Long-term foreign
currency Issuer Default Rating (IDR) and senior unsecured rating
to 'BBB-' from 'BB+', and Short-term IDR to 'F3' from 'B'. The
Outlook is Stable.
The upgrade reflects the achievement of an adequate liquidity
position and steady de-leveraging during the financial year ended
June 2012 (FY12) as well as Fitch's comfort that future financial
policies, combined with moderate and resilient free cash flow
(FCF) generation, should afford the company the resources to
satisfy its -- albeit limited -- M&A ambitions.
Despite possible cash outlays for some bolt-on acquisition
spending, Pernod should manage to retain lease and factoring
adjusted net debt/operating EBITDAR at or below 4.0x.
Acquisition spending prejudicing a continuation of the past de-
leveraging process would however further affect the company's
tight financial flexibility at the 'BBB-'rating level.
With a lease and factoring adjusted net debt/funds from
operations (FFO) ratio of 5.8x at FYE12, as Fitch's preferred
leverage measure, Pernod's credit metrics remain weaker than
those of 'BB+' and 'BBB-' rated peers in the alcoholic beverage,
tobacco and leisure sectors. Fitch projects that, in the absence
of M&A activity this ratio should drop below 5.0x by FYE14. High
leverage is mitigated by the company's strong and resilient
business profile, as well as the magnitude of its annual FCF
generation which, at EUR440m in FY12, is larger than higher rated
spirits peers Beam Inc ('BBB'/Stable Outlook) and Brown Forman
('A+'/Stable Outlook) although smaller than peers in the beer
sub-sector.
In order to accommodate sharply growing demand for Scotch whisky
and cognac, Pernod is now investing to increase both production
capacity and stocks of maturing inventories. Consequently, Fitch
projects that the growth of cash flow generation will be held
back over the period FY13-FY15 by heavier working capital
absorption and higher capex. Despite increased investments in
maturing inventories, Fitch expects Pernod to be able maintain
FCF above EUR400 million per year.
Pernod's volume size, brand and category portfolio, as well as
geographic diversification, with important presences both in
mature and developing markets, place its operations in a
different league to other industry players. This profile
underpins its capacity to generate consistent organic revenue and
profit growth and alleviate pressure for M&A activity.
As a point of vulnerability, Fitch notes that Pernod's organic
growth has been more than proportionately driven by the sale of
high-end products (notably long-aged whiskies, cognacs and
champagne) in its Asian markets. At the same time, Fitch notes
that in the event of a slow-down of this market the company would
be in a position to flex some of its advertising & promotion
expenditure in order to protect its profits.
What Could Trigger A Rating Action?
Negative: Future developments that may, individually or
collectively, lead to a negative rating action include:
-- Net Lease and factoring adjusted debt/FFO greater than 5.0x
-- Fixed charge cover ratio under 3.0x
-- EBITDA margin dropping below 25% and FCF below EUR200m on a
sustained basis
Positive: Although Fitch considers the scope for an upgrade to be
limited until at least 2014, upward rating pressure could
materialize in the presence of:
-- Net Lease and factoring adjusted debt / FFO under 3.5x-3.7x
-- Fixed charge cover ratio above 5.0x
A pre-condition for an upgrade would be Pernod maintaining FCF
above EUR700 million and preserving its position within the top
three players in the industry.
TV NUMERIC: In Receivership, May Close Operations
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Digital TV Europe.net reports French digital-terrestrial pay TV
service provider TV Numeric has been placed in receivership.
The report relates that the company had revealed at the start of
this year that its closure could be a possibility. A number of
terrestrial pay TV channels, including TPS Star and CFoot had
already withdrawn their offerings, leaving pay TV services on the
digital-terrestrial platform looking threadbare, according to
Digital TV Europe.net.
The report relays that that there are currently only five pay TV
services on terrestrial -- Eurosport, Paris PremiŠre, LCI,
Planete+ and TF6 -- giving little reason for subscribers to pay a
EUR10 a month fee to receive them. TV Numeric's base is believed
to have fallen from 100,000 at the start of the year to around
40,000, the report says.
The report discloses that TV Numeric will remain on air until the
end of the year, with the possibility of finding new backers
before that time.
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I R E L A N D
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BLUEBONNET FINANCE: Moody's Affirms 'Ba2' Rating on Class D Notes
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Moody's Investors Service has upgraded the Class C Notes and
affirmed the Class D Notes issued by Bluebonnet Finance plc
(amounts reflecting initial outstandings):
EUR85M Class C Notes, Upgraded to A3 (sf); previously on
Apr 8, 2009 Confirmed at Baa2 (sf)
EUR70M Class D Notes, Affirmed at Ba2 (sf); previously on
Apr 8, 2009 Confirmed at Ba2 (sf)
Moody's has withdrawn on October 13, 2012 the rating of the Class
B Notes due to the redemption in full. Moody's does not rate the
Class E Notes.
Ratings Rationale
The upgrade action reflects Moody's revised loss expectation for
the Class C Notes while the rating affirmation of the Class D
Notes continues to reflect Moody's expected loss for this
tranche. Moody's has updated its performance expectation
following an in-depth review of (i) the updated 2012 sub-
servicer's portfolio business plan, (ii) the portfolio's
remaining engagements with respect to their expected recovery
values, (iii) potential timing constraints faced by the sub-
servicer's work-out of the remaining portfolio, (iii) historical
recoveries and net collections as well as transaction costs, and
(iv) the current property market and lending conditions in
Germany and the potential impact on recoveries.
The key driver for Moody's rating actions were a combination of
the recent performance history of net collections, in particular
for the period since Q1 2011 and Moody's forward looking net
collection expectations. Moody's analysis focused in particular
on (i) a historical comparison of various business plan forecasts
against actual collections for the forecasted period, (ii) the
level of transaction costs and the key cost drivers, (iii) the
recovery potential of the remaining pool based on the relative
portfolio composition compared to closing and previous periods,
and (iv) factors which could potentially impact the sub-
servicer's recovery and timing expectations going forward.
Moody's evaluated various performance stress scenarios for each
of the rated tranches to test the resilience of Moody's base case
recovery and timing assumptions ahead of legal final maturity on
the notes. The scenarios assume that the sub-servicer would
realise lower recoveries that would further delay the redemption
of the Notes. In the case of the Class C Notes, ongoing cash
flows from rents and interest payments from performing loans as
well as Moody's stressed recovery values provide sufficient
cushion for a likely repayment of the Class C Notes principal
over the next three to seven payment dates. The Class D Notes
showed less resilience under scenarios at higher rating levels.
In Moody's opinion, further upgrade potential is capped as the
notes are exposed to operational risks due to the expiry of the
liquidity facility in December 2008. As a result, the increased
risk of non-timely payment of interest on the notes is not
commensurate with the timely payment of interest associated with
Aaa and Aa rated classes.
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.
Portfolio Analysis
Bluebonnet Finance plc represents the first non-performing loan
transaction with German collateral which closed in December 2006.
The transaction involves the securitization of secured notes
("LSF5 Senior Notes") issued by LSF5 Olympic, LLC ("LSF5 Note
Issuer" or "Borrower") to Citibank N.A., London Branch, which
were consequently sold to the Issuer. In addition to the LSF5
Senior Notes, the LSF5 Note Issuer issued certain subordinated
notes ("Junior Notes"), which were not sold to the Issuer. The
LSF5 Senior Notes incorporate a cash sweep mechanism and the LSF5
Note Issuer applies the net receipts (consisting of recovery
proceeds, debt service payments and rental income) from a
portfolio of non-performing, sub-performing and performing loans
and their related collateral ("Portfolio") to meet its payment
obligations under the LSF5 Senior Notes. The loans are mostly
secured by mortgages on commercial and residential (mostly multi-
family) properties located in Germany.
The maturity date of the LSF5 Senior Notes is in December 2013
and the legal final maturity date of the Notes is in December
2016.
The LSF5 Senior Notes are serviced by Morgan Stanley Mortgage
Servicing Limited ("Servicer"). The Portfolio itself is largely
serviced by Hudson Advisors Germany GmbH ("Sub-Servicer").
At the cut-off date (August 31, 2006), the portfolio comprised of
3,864 loans to 1,347 borrowers (forming 1,069 engagements)
representing approximately EUR2,772 million in legal claims. On
aggregate the Portfolio was secured by 1,957 properties valued at
approximately EUR2.2 billion. As per the Bond payment date at 8
October 2012, the number of loans in the Portfolio has reduced by
58% to 1,630. The remaining loans are granted to 358 borrowers
(202 engagements) and secured by on aggregate 639 properties
valued at approximately EUR 542 million. In the same period, the
aggregate legal claims were reduced to approximately EUR1,534
million.
On a net present value (NPV) basis at closing, the portfolio
consisted of 49% non-performing loans (NPLs) and 26% performing
loans (PLs) with the remaining 25% being sub-performing loans
(SPLs). The portfolio composition has changed and the current NPL
proportion is 60% while PLs only contribute 14% and SPLs 26%.
The Initial Portfolio Business Plan anticipated a completion of
its net collection target by June 2010, however the portfolio's
net collections to date represent a 25% underperformance to the
initial target. While a prolonged delay in collections results in
higher than initially expected interest due on the Notes (as
principal remains outstanding over a longer period), the impact
on the credit risk of the notes is linked to the cumulative
collections from the servicing of the portfolio in relation to
the initially anticipated net collections target and the timing
of collections ahead of the legal final maturity of the notes.
In reviewing the performance history of the transaction since
closing, the last seven quarters since Q1 2011 have shown a
downward trend in net collections. The average net collections
per quarter since Q1 2011 amounted to EUR22.6 million, with
maximum collections of EUR30.9 million in Q3 2012 and minimum
collections of EUR15.5 million in Q1 2012. In comparison, the
average net collections between closing in Q4 2006 and Q4 2010
were approx. EUR72.6 million. Moody's believes that the more
recent net collection performance is, inter alia, a function of
the growing proportion of non-performing and sub-performing loans
in the portfolio and the continuing subdued conditions on the
lending and property markets. In particular the increased
proportion of NPLs in the pool are likely to defer collection
timing and since a significant proportion of the NPLs have a very
high leverage, (typically above 100%) recoveries on engagements
are expected to remain on par with the most recent payment dates.
Based on the updated business plan of the sub-servicer as of July
2012, the expected net collections target for the remaining term
of the transaction is approx. EUR447 million. The sub-servicer's
expected net collections and collection timing are a key factor
in Moody's updated assessment. Moody's net collection
expectations, which have been used in the cash flow model, were
derived by a historical analysis of the average net collections.
In Moody's view the average net collection value of most recent
periods since Q1 2011 are most representative of the recovery
potential and timing considering the composition of the remaining
portfolio. For its sensitivity cases Moody's has assessed various
scenarios which deviate by 10% to 30% around the most recent
achieved average net collection levels adjusted for the most
recent trend (which formed Moody's base case).
Rating Methodology
In rating this transaction, Moody's benchmarked each note using
two approaches:
(1) Scenario analysis to test note repayment by legal maturity
This approach projects Moody's cash flow expectations both in
terms of size and timing, to determine the potential shortfall
for each tranche of notes at legal maturity. The cash flow model
evaluates the loss for each tranche by applying various
performance scenarios in respect of the sub-servicer's resolution
strategy. The respective principal recoveries for each class is
determined by reducing the remaining outstanding note balance in
accordance with the Issuer's pre-enforcement principal priority
waterfall in which principal is allocated sequentially to the
Notes. Principal to the Notes is paid junior to the Issuer's
senior expenses and interest of the Notes. In a post enforcement
scenario all proceeds received by the Issuer are allocated
sequentially to the Notes. Finally, Moody's tests if the Notes
are fully repaid at legal final maturity under a base case and
stressed scenarios as a function of the target rating.
In deriving the principal repayment amounts for the notes on each
respective payment date, Moody's applied its expected net cash
flow for the period adjusted for senior expenses and interest
payable on the notes:
For each targeted rating level, Moody's first adjusted its base
case expected cash flow (assumed to be around EUR15 million per
year) by applying haircuts corresponding to the various rating
categories. Class C Notes, rated A3 (sf) is able to withstand a
haircut of 30% to the base case cash flows. Class D Notes rated
Ba2 (sf) is able to withstand a 10% haircut to the base case cash
flows. The base case cash flow has been derived by establishing 1
to 2 standard deviations around the most recent achieved average
net collection levels and by applying the lower value of the
deviation results.
To compute net cash flows, Moody's assumed senior expenses of up
to 35% of expected net collections. Over the last seven quarters,
senior costs were on average between 20% - 25% of actual net
collections.
Finally a stress was also applied to the interest payable on the
notes. The notes pay interest based on 3-Month Euribor plus a
fixed margin. For future rates, Moody's assumed a base case
Euribor which is increasing every year. The applied rates are
between 1.25% and 3.25%.
Breakeven scenarios were also used to identify at which
cumulative net collection level either the Class C or Class D
Notes would suffer a principal loss as a function of the target
rating . Under these scenarios, the Class C Notes would suffer a
principal loss with a 70% underperformance to the sub-servicer
net collection target of EUR447 million over the remaining term
of the transaction. Meanwhile, the Class D Notes would suffer a
principal loss with a 44% underperformance to the sub-servicer
net collection target.
(2) Note to gross property value
Moody's has also reviewed the remaining pool with respect to its
recovery potential from the real estate security. The rating
agency positively notes that the note-to-gross property value
ratio (based on the July 2012 valuation update of the sub-
servicer) is 12.3% for the Class C Notes, 25.2% for the Class D
Notes and 32.6% for the Class E Notes. Even though these ratios
indicate strong recovery values on the individual tranche level,
Moody's remains concerned with respect to the work-out timing
given the characteristics adherent to NPLs and the overall
conditions on the real estate lending and investment markets.
CAIRN EURO ABS: Fitch Affirms 'C' Ratings on Two Note Classes
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Fitch Ratings has affirmed Cairn Euro ABS CDO I plc's notes, as
follows:
-- EUR2.0m Class X (ISIN XS0314777946): affirmed at 'AAAsf';
Outlook Stable
-- EUR188.0m Class A1S (ISIN XS0313770058): affirmed at 'B+sf';
Outlook Negative
-- EUR13.3m Class A1J (ISIN XS0314555615): affirmed at 'Bsf';
Outlook Negative
-- EUR24.5m Class A2 (ISIN XS0313783895): affirmed at 'CCCsf'
-- EUR19.3m Class A3 (ISIN XS0313783895): affirmed at 'CCsf'
-- EUR10.9m Class B (ISIN XS0313788936): affirmed at 'Csf'
-- EUR6.5m Class C (ISIN XS0313789314): affirmed at 'Csf'
The affirmation reflects the notes' levels of credit enhancement
relative to the portfolio credit quality. The portfolio credit
quality has deteriorated slightly since the last review, with
reported assets rated 'CCC' or below representing 21.1% of the
portfolio, up from 17.7% in November 2011. The transaction is
mainly exposed to RMBS and CMBS assets, which account for 60.1%
and 26.7% of the portfolio, respectively.
All overcollateralization (OC) tests have been breached since
2009 and OC test cushions have been deteriorating since then.
The OC test breaches have caused interest proceeds to be diverted
towards the repayment of the class A1S notes. As a result, the
class A3, B and C notes have accumulated substantial unpaid
interest. The class A2 and A3 interest coverage (IC) tests are
in compliance. The remaining IC tests are in breach. IC test
cushions on all tests have been volatile.
The Negative Outlook on the class A1S and A1J notes reflects the
notes' sensitivity to an increase in the weighted average life of
the underlying assets.
Cairn Euro ABS CDO I plc is a managed cash arbitrage
securitization of structured finance assets, primarily consisting
of RMBS and CMBS. The portfolio is managed by Cairn Capital
Limited. The reinvestment period ended in August 2012.
CELTIC RESIDENTIAL 11: S&P Cuts Ratings on 3 Note Classes to 'B-'
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Standard & Poor's Ratings Services lowered and removed from
CreditWatch negative its credit ratings on all classes of notes
in Celtic Residential Irish Mortgage Securitisation No. 11 PLC
(Celtic 11) and Celtic Residential Irish Mortgage Securitisation
No. 12 Ltd. (Celtic 12).
"The rating actions follow our Oct. 8, 2012 CreditWatch negative
placement of our ratings on all classes of notes in these
transactions, based on the continued deterioration in the Irish
housing market and the persistent increase in severe arrears in
the transactions," S&P said.
"Lender forbearance measures and legal and regulatory frameworks
in Ireland have led to low levels of repossessions and losses to
date. 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. As a result, even with the benefit of
recoveries, we have concluded that the class C notes in both
Celtic 11 and 12 are effectively undercollateralized," S&P said.
"Under our criteria, the maximum rating differential between
issuers or transactions and the related European Monetary Union
(EMU or eurozone) sovereign is six notches. As the long-term
sovereign credit rating on the Republic of Ireland is 'BBB+', the
maximum potential six-notch uplift under our nonsovereign ratings
criteria cap our ratings on the notes in structured finance
transactions backed by Irish assets at 'AA+ (sf)'," S&P said.
"In analyzing these transactions, we have applied our general
criteria for assigning and monitoring ratings," S&P said.
"We have analyzed the credit quality of the assets in these
transactions 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 these pools, S&P adopted the
methodology and assumptions described in the sections entitled
'Foreclosure Frequency Assumptions' and 'Loss Severity
Assumptions' in its Spanish residential mortgage-backed
securities (RMBS) criteria, with these adjustments for these
transactions:
'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.
"The criteria applicable to our cash flow analysis for these
transactions 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.
"With the challenges presented by the current legal and
regulatory frameworks in Ireland, we have observed persistent
increases in severe arrears in both transactions. In Celtic 11,
90+ days delinquencies have risen to 11.04% from 5.46% since June
2011. In comparison, Celtic 12 (backed by loans originated by
First Active PLC) exhibits both higher arrears and higher
increases in arrears since June 2011, with 90+ days delinquencies
having increased to 20.71% from 13.37% over this period," S&P
said.
"The continued decline in Irish house prices has also increased
our estimates of the weighted-average LTV ratios in both mortgage
pools to 141% in Celtic 11, and 136% in Celtic 12," S&P said.
"The increase in the LTV ratios for all loans in both
transactions, combined with the increases in arrears, has
increased the WAFF, WALS, and required level of credit
enhancement, which collectively provide an estimate of potential
losses in the transactions," S&P said.
CELTIC 11
Rating WAFF WALS CE
level (%) (%) (%)
AAA 47.44 45.65 21.66
AA 37.68 41.55 15.66
A 29.75 37.69 11.21
BBB 23.16 34.04 7.89
BB 12.73 30.60 3.89
WAFF--Weighted-average foreclosure frequency.
WALS--Weighted-average loss severity.
CC--Credit enhancement (required).
CELTIC 12
Rating WAFF WALS CE
level (%) (%) (%)
AAA 50.18 45.34 22.75
AA 41.67 41.67 17.37
A 33.70 38.21 12.88
BBB 26.63 34.95 9.31
BB 15.82 31.86 5.04
WAFF--Weighted-average foreclosure frequency.
WALS--Weighted-average loss severity.
CC--Credit enhancement (required).
"Both transactions benefit from a dynamically sized nonamortizing
reserve fund (i.e., partially sized based on the balance of
nonperforming loans). The increase in arrears has reduced excess
spread in both transactions, to the extent that the reserve funds
are not at the level required under the transaction documents.
The reserve funds in Celtic 11 and 12, are at 99% and 93% of the
required level for the current interest payment date," S&P said.
"Under the transaction documents, each transaction can use
principal to pay interest and features a liquidity reserve fund,
which is funded through principal receipts and can be replenished
up to 3% of the current collateral balance on each interest
payment date," S&P said.
"Principal receipts and the liquidity reserve cannot be used to
cover interest shortfalls on the class B or C notes if the
principal deficiency ledger (PDL) for the relevant class of notes
is greater than 20% of the note balance. Our foreclosure period
assumption of 48 months means that losses are not recorded on the
PDL until late into the life of the transaction. Therefore, if
transaction performance is weak, the issuer would continue to
borrow principal to meet timely payment of interest on the class
B and C notes, at the expense of meeting ultimate payment of
principal on the class A notes," S&P said.
"Our assumptions of undercollateralization and a 48-month
foreclosure period give rise to negative carry , which is further
exacerbated by a loss-based PDL (rather than default-based). The
fact that principal can be used to pay interest means that we
observe significant principal shortfalls in our cash flow
analysis at the current rating levels, for each of these
transactions," S&P said.
"Taking into account the results of our credit and cash flow
analyses, we consider the levels of credit enhancement in both
transactions to be insufficient for the notes to maintain their
current rating levels. Consequently, we have lowered and removed
from CreditWatch negative our ratings on the class A and B notes
in Celtic 11 to 'B+ (sf)' and 'B (sf),'" S&P said.
"We have lowered to 'BB (sf)' and removed from CreditWatch
negative our rating on the class A2 notes, based on the results
of our cash flow analysis. The class A2 notes have a current
outstanding balance of EUR164 million, representing 13% of the
transaction. Additionally, we have lowered to 'B+ (sf)' and
removed from CreditWatch negative our rating on the class A3
notes," S&P said.
When taking account of assumed recoveries of 50%, the class A and
B notes in both transactions are fully collateralized.
"We have also lowered to 'B- (sf)' and removed from CreditWatch
negative our ratings on the class C notes in Celtic 11 and Celtic
12. We have concluded that these classes of notes are effectively
undercollateralized, despite an assumed recovery rate of 50%,"
S&P said.
Celtic 11 and Celtic 12 are Irish residential mortgage-backed
securities (RMBS) transactions backed by mortgages originated by
Ulster Bank Ireland Ltd. and First Active (a subsidiary of Ulster
Bank Ireland).
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 Rating
To From
Ratings Lowered and Removed From CreditWatch Negative
Celtic Residential Irish Mortgage Securitisation No. 11 PLC
EUR2.434 Billion, GBP788.5 Million, US$328 Million Residential
Mortgage-Backed
Floating-Rate Notes
A3a B+ (sf) A+ (sf)/Watch Neg
A3c B+ (sf) A+ (sf)/Watch Neg
Ba B (sf) A- (sf)/Watch Neg
Ca B- (sf) BB (sf)/Watch Neg
Cc B- (sf) BB (sf)/Watch Neg
Celtic Residential Irish Mortgage Securitisation No. 12 Ltd.
EUR1.95 Billion Residential Mortgage-Backed Floating-Rate Notes
A2 BB (sf) A+ (sf)/Watch Neg
A3 B+ (sf) A- (sf)/Watch Neg
B B (sf) BBB (sf)/Watch Neg
C B- (sf) B (sf)/Watch Neg
FASTNET SECURITIES 2: S&P Cuts Ratings on 3 Note Classes to 'B-'
----------------------------------------------------------------
Standard & Poor's Ratings Services took various credit rating
actions on all classes of notes in Fastnet Securities 2 PLC
(Fastnet 2) and Fastnet Securities 4 Ltd. (Fastnet 4), which
are Irish residential mortgage-backed securities (RMBS)
transactions.
The 's rating actions reflect continued increases in 90+ days
arrears (albeit at a slightly lower level than that observed in
other Fastnet transactions) and declines in Irish house prices,
since our previous full review of these transactions in November
2010 (Fastnet 2) and July 2011 (Fastnet 4). We placed the ratings
in these transactions on CreditWatch negative for performance
reasons on Oct. 8, 2012," S&P said.
"Lender forbearance measures and existing legal and regulatory
frameworks in Ireland have kept repossessions low, with little
realized losses to date. We have addressed these risks through
assuming that all loans with arrears greater than nine monthly
payments are in default and will result in losses. This has led
us to conclude that certain classes of notes in these
transactions are effectively undercollateralized," S&P said.
"In analyzing these transactions, we have applied our general
criteria for assigning and monitoring ratings," S&P said.
"We have analyzed the credit quality of the assets in these
transactions 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 these pools, S&P adopted the
methodology and assumptions described in the sections entitled
'Foreclosure Frequency Assumptions' and 'Loss Severity
Assumptions' in its Spanish residential mortgage-backed
securities (RMBS) criteria, with the following adjustments for
these transactions:
'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.
"The criteria applicable to our cash flow analysis for these
transactions 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.
"In Fastnet 2, 90+ days delinquencies have increased to 14.6%
from 10.6% over the past 12 months. Fastnet 4 has also seen
increases in its 90+ days delinquencies to 13.23% from 8.67%. We
have observed this trend across other Irish RMBS transactions
that we rate and it can be largely attributed to the low
transition rate from severe delinquencies to repossession, due to
the prevailing political and legal environment surrounding
mortgage arrears and the foreclosure process. As 90+ days arrears
have breached the documented trigger of 4%, Fastnet 2 is now
paying down sequentially. Fastnet 4 is paying down sequentially
as per the transaction structure," S&P said.
"The continued decline in Irish house prices has led to an
increase in our calculated weighted-average LTV (WALTV) ratios in
both transactions. In Fastnet 2, this ratio has increased to 99%,
up from 80.4% in Q4 2010. The WALTV ratio in Fastnet 4 is
slightly lower at 85%, which also reflects the fact that at
closing, it had a much lower WALTV than Fastnet 2 (55% for
Fastnet 4 versus 71% for Fastnet 2)," S&P said.
"The decline in house prices, combined with the increase in
arrears, has resulted in an overall increase in our WAFF, WALS,
and required level of credit enhancement, which collectively
provide an estimate of potential losses in the transactions," S&P
said.
Fastnet 2
Rating WAFF WALS CE
level (%) (%) (%)
BB 17.53 29.96 5.25
Fastnet 4
Rating WAFF WALS CE
level (%) (%) (%)
BB 15.76 22.24 3.50
WAFF--Weighted-average foreclosure frequency.
WALS--Weighted-average loss severity.
CE--Credit enhancement.
"In both transactions, Permanent TSB PLC (PTSB; B+/Negative/B) is
the account bank provider. Applying our 2012 counterparty
criteria, the maximum potential rating on the notes in these
transactions is 'B+', the long-term issuer credit rating on
PTSB," S&P said.
FASTNET 2 RATING ACTIONS
"We have lowered to 'B (sf)' from 'B+ (sf)' and removed from
CreditWatch negative our rating on Fastnet 2's class A2 notes,
based on the results of our cash flow analysis. Although we have
modeled the transaction as undercollateralized (based on loans of
nine months or more in arrears assumed to have defaulted), our
analysis has given benefit to some recoveries (50%). Under these
assumptions, and the current reserve fund level, our analysis
shows that the class A2 notes would be fully collateralized," S&P
said.
"We have also lowered to 'B- (sf)' from 'B+ (sf)' and removed
from CreditWatch negative our ratings on Fastnet 2's class B, C,
and D notes. We have concluded that these classes of notes are
effectively undercollateralized, despite an assumed recovery rate
of 50%. The presence of a nonamortizing reserve fund (currently
5.7% of the transaction) provides support for the notes and we do
not anticipate any interest shortfalls to occur within the next
12 months," S&P said.
FASTNET 4 RATING ACTIONS
"We have affirmed and removed from CreditWatch negative our 'B+
(sf)' rating on Fastnet 4's class A1 notes, based on the results
of our cash flow analysis. The class A1 notes are fully
collateralized with the benefit of recoveries. In addition, given
that principal payments on this class of notes have been EUR316
million in the last 12 months, we expect this class (which has a
current outstanding balance of EUR139 million) to pay down in the
medium term," S&P said.
"As with Fastnet 2, we have lowered to 'B- (sf)' from 'B+ (sf)'
and removed from CreditWatch negative our ratings on Fastnet 4's
class A2 and A3 notes. We have concluded that these classes of
notes are effectively undercollateralized, despite an assumed
recovery rate of 50%. We do not anticipate the class A2 and A3
notes to suffer any interest shortfalls within the next 12 months
given the presence of the nonamortizing reserve fund (currently
1.43% of the transaction) and the availability of principal to
pay interest amounts on the notes," S&P said.
Fastnet 2 and Fastnet 4 are Irish RMBS transactions with loans
originated by Permanent TSB.
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 Rating
To From
Fastnet Securities 2 PLC
EUR2.15 Billion Mortgage-Backed Floating-Rate Notes
Ratings Lowered and Removed From CreditWatch Negative
2 B (sf) B+ (sf)/Watch Neg
B B- (sf) B+ (sf)/Watch Neg
C B- (sf) B+ (sf)/Watch Neg
D B- (sf) B+ (sf)/Watch Neg
Fastnet Securities 4 Ltd.
EUR6.5 Billion Mortgage-Backed Floating-Rate Notes
Rating Affirmed and Removed From CreditWatch Negative
A1 B+ (sf) B+ (sf)/Watch Neg
Ratings Lowered and Removed From CreditWatch Negative
A2 B- (sf) B+ (sf)/Watch Neg
A3 B- (sf) B+ (sf)/Watch Neg
FASTNET SECURITIES 7: S&P Cuts Rating on Class A3 Notes to 'BB+'
----------------------------------------------------------------
Standard & Poor's Ratings Services took various credit rating
actions on all classes of notes in Fastnet Securities 5 Ltd.
(Fastnet 5) and Fastnet Securities 7 Ltd. (Fastnet 7), which
are Irish residential mortgage-backed securities (RMBS)
transactions.
"The rating actions reflect continued increases in 90+ days
arrears and declines in Irish house prices, since our previous
full review of these transactions in October 2011 (Fastnet 5) and
September 2011 (Fastnet 7). We placed the ratings in these
transactions on CreditWatch negative for performance reasons on
Oct. 8, 2012," S&P said.
"Lender forbearance measures and existing legal and regulatory
frameworks in Ireland have kept repossessions low, with little
realized losses to date. We have addressed these risks through
assuming that all loans with arrears greater than nine monthly
payments are in default and will result in losses. This has led
us to conclude that certain classes of notes in these
transactions are effectively undercollateralized," S&P said.
"Under our nonsovereign ratings criteria, the maximum rating
differential between issuers or transactions and the related
European Monetary Union (EMU) sovereign is six notches. Given
that
the long-term sovereign credit rating on the Republic of Ireland
is 'BBB+', under our criteria, the ratings on the notes in
structured finance transactions backed by Irish assets should be
no higher than 'AA+," S&P said.
"In analyzing these transactions, we have applied our general
criteria for assigning and monitoring ratings," S&P said.
"We have analyzed the credit quality of the assets in these
transactions 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 these pools, S&P adopted the
methodology and assumptions described in the sections entitled
'Foreclosure Frequency Assumptions' and 'Loss Severity
Assumptions' in its Spanish residential mortgage-backed
securities (RMBS) criteria, with these adjustments for these
transactions:
'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.
"The criteria applicable to our cash flow analysis for these
transactions 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.
"Both transactions were restructured in 2011. These restructures
included changing the interest paid on the liabilities to a fixed
rate from floating, removing all swap arrangements, and switching
to a fully sequential payment structure. We have mitigated the
counterparty risk relating to Permanent TSB (collection account
provider) by assuming a loss of one month's interest and
principal receipts in our cash flow analysis," S&P said.
"In Fastnet 5, 90+ days delinquencies have increased to 16.9%
from 10.5% over the past 12 months. We have seen a considerable
increase in severe arrears in Fastnet 7 over the past year and
90+ days delinquencies are currently over 31%--having been less
than 18% a year ago. We have observed this trend across other
Irish RMBS transactions that we rate and it can be largely
attributed to the low transition rate from severe delinquencies
to repossession, due to the prevailing political and legal
environment surrounding mortgage arrears and the foreclosure
process. We have considered these trends in our analyses and have
projected a further increase in arrears over the coming year,"
S&P said.
"The continued decline in Irish house prices has led to an
increase in our calculated weighted-average LTV (WALTV) ratios in
both transactions. In Fastnet 5, this ratio has increased to
101%, up from 90% a year ago. The WALTV ratio in Fastnet 7--
currently 140%--is higher which reflects the fact that most of
the pool comprises buy-to-let loans," S&P said.
The decline in house prices, combined with the increase in
arrears, has resulted in an overall increase in our WAFF, WALS,
and required level of credit enhancement, which collectively
provide an estimate of potential losses in these transactions.
Fastnet 5
Rating WAFF WALS CE
level (%) (%) (%)
AAA 56.88 49.25 28.01
AA 48.88 45.34 22.17
A 41.31 41.64 17.20
BBB 34.41 38.16 13.13
BB 24.55 34.89 8.57
Fastnet 7
Rating WAFF WALS CE
level (%) (%) (%)
AAA 83.04 62.50 50.93
AA 77.99 58.71 44.73
A 72.38 54.99 38.69
BBB 61.79 51.37 30.58
BB 39.39 47.85 17.70
WAFF--Weighted-average foreclosure frequency.
WALS--Weighted-average loss severity.
CE--Credit enhancement.
FASTNET 5 RATING ACTIONS
"In Fastnet 5, based on the outcome of our cash flow analysis, we
have affirmed at 'AA+ (sf)' and removed from CreditWatch negative
our ratings on the class A1 and A2 notes. Although we have
assumed loans of nine months or more in arrears to have
defaulted, the adjusted level of credit enhancement with assumed
recoveries of 30% and the sequential payment structure of this
transaction provide sufficient support to maintain the ratings on
the class A1
and A2 notes," S&P said.
"Also, we have lowered to 'AA- (sf)' from 'AA+ (sf)' and removed
from CreditWatch negative our rating on the class A3 notes. In
our cash flow analysis, once the class A1 and A2 notes have
redeemed, we observe interest shortfalls for the class A3 notes
at rating levels above 'AA-'," S&P said.
FASTNET 7 RATING ACTIONS
"We have affirmed at 'A+ (sf)' and removed from CreditWatch
negative our rating on the class A1 notes. As in Fastnet 5, the
sequential payment structure in place since the 2011 restructure
has benefitted the most senior class of notes in terms of note
redemption. We have also based our affirmation on the notes'
sensitivity to the timing of recoveries on the defaulted amount
in our cash flow analysis and the deteriorating macroeconomic
conditions in Ireland," S&P said.
"We have lowered and removed from CreditWatch negative our
ratings on the class A2 and A3 notes to 'BBB (sf)' and 'BB+
(sf)'. Given our assumptions regarding the default of loans that
are nine months or more in arrears, the level of credit
enhancement for these notes has been eroded. Although we assume a
recovery rate of 40% ('BBB' rating level) and 45% ('BB' rating
level) and the transaction has a fully funded reserve fund
(currently 1.38% of the transaction), these notes have not been
able to pass our cash flow analysis at their current rating
levels," S&P said.
Fastnet 5 and Fastnet 7 are Irish RMBS transactions with loans
originated by Permanent TSB.
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
Fastnet Securities 5 Ltd.
EUR1.7 Billion Mortgage-Backed Floating-Rate Notes
Rating Lowered and Removed From CreditWatch Negative
A3 AA- (sf) AA+ (sf)/Watch Neg
Ratings Affirmed and Removed From CreditWatch Negative
A1 AA+ (sf) AA+ (sf)/Watch Neg
A2 AA+ (sf) AA+ (sf)/Watch Neg
Fastnet Securities 7 Ltd.
EUR1.363 Billion Mortgage-Backed Floating-Rate Notes
Ratings Lowered and Removed From CreditWatch Negative
A2 BBB (sf) A+ (sf)/Watch Neg
A3 BB+ (sf) A (sf)/Watch Neg
Rating Affirmed and Removed From CreditWatch Negative
A1 A+ (sf) A+ (sf)/Watch Neg
KILDARE SECURITIES: S&P Cuts Ratings on Two Note Classes to 'B-'
----------------------------------------------------------------
Standard & Poor's Ratings Services lowered and removed from
CreditWatch negative its credit ratings on all classes of notes
in Kildare Securities Ltd.
"The rating actions follow our Oct. 8, 2012 CreditWatch negative
placement of our ratings on all classes of notes in this
transaction, based on the continued deterioration in the Irish
housing market and the persistent increase in severe arrears in
this transaction," S&P said.
"Lender forbearance measures and legal and regulatory frameworks
in Ireland have led to low levels of repossessions and losses to
date. 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 (the transaction is
undercollateralized), and will result in losses, with recoveries
being realized at the end of our assumed foreclosure period," S&P
said.
"Under our criteria, the maximum rating differential between
issuers or transactions and the related European Monetary Union
(EMU) sovereign is six notches. Given that the long-term
sovereign credit rating on the Republic of Ireland is 'BBB+',
under our criteria, the ratings on notes in structured finance
transactions backed by Irish assets should be no higher than
'AA+'," 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 a loan-level analysis of the
mortgage pool. 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, S&P adopted the
methodology and assumptions described in the sections entitled
'Foreclosure Frequency Assumptions' and 'Loss Severity
Assumptions' in its Spanish residential mortgage-backed
securities (RMBS) criteria, with these adjustments for these
transactions:
'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.
"The criteria applicable to our cash flow analysis for these
transactions 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 Kildare Securities has been
increasing steadily. 90+ days delinquencies have risen to 7.44%
from 4.63% one year ago (according to the August 2012 investor
report).
"The continued decline in Irish house prices has also increased
the estimated weighted-average indexed LTV ratio in this
transaction to 108%, with 58% of the pool in negative equity.
This, combined with the increase in arrears, has resulted in an
overall increase in the WAFF, WALS, and required level of credit
enhancement, which collectively provide an estimate of potential
losses in our analysis," S&P said.
Rating WAFF WALS CE
level (%) (%) (%)
AAA 43.95 46.32 20.36
AA 34.28 42.18 14.46
A 26.84 38.23 10.26
BBB 20.31 34.48 7.00
BB 10.23 30.92 3.16
WAFF--Weighted-average foreclosure frequency.
WALS--Weighted-average loss severity.
CE--Credit enhancement (required).
"The nonamortizing reserve fund in this transaction is fully
funded to its required amount of EUR41.3 million and has never
been drawn. This transaction also features a liquidity reserve
fund, which was funded through principal receipts on the March
2011 interest payment date. This created a balance on the class D
principal deficiency ledger (PDL), which the transaction has now
cleared through excess spread. The liquidity reserve fund
combined with the reserve fund is 3% of the transaction and we
have reflected this in our analysis," S&P said.
"Principal receipts and the liquidity reserve cannot be used to
cover interest shortfalls on the class B, C, or D notes if the
PDL for the relevant class of notes is greater than 50% of the
note balance. Our foreclosure period assumption of 48 months
means that losses are not recorded on the PDL until late into the
life of the transaction. Therefore, if the transaction
performance is weak, the issuer would continue to borrow
principal to meet the timely payment of interest on the class B,
C, and D notes, at the expense of meeting ultimate payment of
principal on the class A notes," S&P said.
"Our undercollateralization and foreclosure period assumptions
cause severe negative carry for the transaction, which is further
exacerbated by a loss-based (as opposed to default-based) PDL.
The fact that principal can be used to pay interest, combined
with our above assumptions, means that we observe significant
principal shortfalls in our cash flow analysis at the current
rating levels. Consequently, we have lowered and removed from
CreditWatch negative our ratings on all classes of notes, based
on the results of our cash flow analysis. Taking into account
recoveries of 40% (for the class A2 notes) and 50% (for the A3,
B, C, and D notes), all classes of notes are fully
collateralized," S&P said.
"Under our 2012 counterparty criteria, we do not view the
interest rate swap counterparty (ICS Building Society, guaranteed
by Bank of Ireland [BB+/Negative/B]) to be an eligible
counterparty. Consequently, we have not considered this swap in
our analysis and have applied stresses to the cash flows from the
assets to reflect the unhedged structure," S&P said.
Kildare Securities is an Irish RMBS transaction backed by loans
originated and serviced by ICS Building Society, a wholly owned
subsidiary of Bank of Ireland.
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 Rating
To From
Ratings Lowered and Removed From CreditWatch Negative
Kildare Securities Ltd.
EUR1.276 Billion, US$2.176 Billion Mortgage-Backed
Floating-Rate Notes Series 1
A2 BBB (sf) AA- (sf)/Watch Neg
A3 BB (sf) BBB+ (sf)/Watch Neg
B B (sf) BBB- (sf)/Watch Neg
C B- (sf) BB- (sf)/Watch Neg
D B- (sf) B (sf)/Watch Neg
=========
I T A L Y
=========
BANCA POPOLARE: Moody's Cuts Long-Term Deposit Rating to 'B3'
-------------------------------------------------------------
Moody's Investors Service has downgraded Banca Popolare di
Spoleto SpA's (BP Spoleto) Ba2 long-term deposit rating to B3.
The standalone bank financial strength rating (BFSR) of D,
equivalent to a ba2 standalone credit assessment, was downgraded
to E/caa2. The ratings are under review, with direction
uncertain. BP Spoleto's Non-Prime short-term rating is unaffected
by this rating action.
Ratings Rationale
The downgrade of BP Spoleto's standalone ratings reflects Moody's
concerns about the bank's asset quality performance and internal
capital generation capacity, coupled with an uncertain and
evolving shareholder structure. The downgrade of the long-term-
deposit rating results from the downgrade of the BFSR and
incorporates Moody's assessment of a low probability of systemic
support. The rating agency however noted that given BP Spoleto's
low standalone rating, this now results in two notches of uplift
for the long-term deposit rating.
Standalone Credit Profile
The downgrade of the bank's standalone credit assessment to
E/caa2 reflects Moody's view of an increased likelihood that the
bank may require outside support. Given the current challenging
operating environment, BP Spoleto's ambitious growth objectives
in a recessionary environment (gross loans increased by 11% in
the first six months of 2012), are a cause for concern as
broadening the customer base may rapidly translate into further
impairments. Moody's is all the more concerned since the bank's
current capital level is rather modest at 7.5% Tier 1, which is
insufficient to cushion against a further asset quality
deterioration, as indicated by Moody's adverse scenario.
Furthermore, the approval of its planned capital raise of EUR30
million was postponed by the Bank of Italy (BoI) in September,
until the BoI completes its on-site inspection at the bank. The
conclusion of this could result in the bank being compelled to
further increase provisions and/or capital so as to offset some
asset deterioration that the bank might not have recognized. In
addition, at a time when the bank would need support from its
shareholders , the second largest -- i.e. Banca Monte dei Paschi
di Siena SpA (MPS, rated Ba2 Negative / E Stable / Non-Prime)
with directly 26% capital and indirectly through its minority
stake in controlling shareholder Spoleto Crediti e Servizi (SCS)
-- is keen on spinning off its stakes, as announced in August.
The bank's controlling shareholder SCS is a private mutual
institution owned by over 19,000 mainly local private
individuals. This adds to the current uncertainties and may
complicate the bank's planned capital increase and put into
question the ability to raise capital from shareholders should it
be necessary in the future, thereby increasing the risk that the
bank might require outside support.
BP Spoleto's internal capital generation is very weak and an
unlikely mitigant to potentially rising problem loans: For H1
2012, BP Spoleto reported a consolidated profit of EUR1.5 million
(H1 2011: EUR1.6 million profit; year-end 2011: EUR12.0 million
loss). Problem loans* amounted to Eur353 million (year-end 2011:
Eur304 million, H1 2011: Eur273 million) and coverage of non-
performing loans (sofferenze) stood at 55% and coverage of total
watchlist items (incagli) stood at 11% (down from 64% and 15%
respectively in 2008).
Long-Term Deposit Ratings
The downgrade of BP Spoleto's deposit rating to B3 follows the
downgrade of the standalone credit assessment and incorporates
Moody's expectation of a low likelihood of systemic support.
At BP Spoleto's new standalone credit assessment of caa2, this
low likelihood of systemic support nevertheless now results in
two notches of uplift for the bank's long-term deposit rating.
Focus of the Review
The ratings remain under review direction uncertain, indicating
that they could move in either direction subject to the outcome
of the BoI inspection and execution of the envisioned capital
increase.
What Could Move The Ratings Up/Down
Upward pressure could be exerted on the bank's standalone ratings
as a result of a significant strengthening of capital adequacy,
profitability and asset quality. An upgrade of the standalone
credit assessment could lead to an upgrade of the deposit rating.
Downward pressure on BP Spoleto's standalone credit assessment
could be triggered by failure to complete the planned capital
increase, an unfavorable BoI inspection, and further
deterioration in profitability and asset quality.
Methodology Used
The principal methodology used in these ratings was Moody's
Consolidated Global Bank Rating Methodology published in June
2012.
BP Spoleto is headquartered in Spoleto, Italy. At June 2012, it
had total assets of EUR3.9 billion.
* Problem loans include: non-performing loans (sofferenze),
watchlist (incagli - including only an estimated portion of those
over 90 days overdue), restructured (ristrutturati) and past due
loans (scaduti).
===================
L U X E M B O U R G
===================
EUROPROP SA: S&P Lowers Ratings on Two Note Classes to 'CCC-'
-------------------------------------------------------------
Standard & Poor's Ratings Services lowered its credit ratings on
all classes of notes issued by EuroProp (EMC) S.A. (Compartment)
1 (EuroProp).
"EuroProp is a pan-European commercial mortgage-backed securities
(CMBS) transaction that closed in July 2006. It was initially
secured against eight loans, seven of which have repaid in full.
The outstanding note balance has reduced to EUR246.06 million,
from EUR648.55 million at closing. The sole remaining loan, the
Sunrise loan, has been in default since 2010. The transaction's
legal maturity date is April 2013," S&P said.
"The downgrades reflect our view of the increased probability of
a note event of default in April 2013. The Sunrise loan, in
special servicing since July 2010, is unlikely to be worked out
by note maturity in April 2013, in our opinion. Under the
transaction documents, a failure to repay the outstanding notes
by the note maturity date could cause a note event of default. We
have lowered our ratings on the remaining classes of notes to
reflect this risk," S&P said.
SUNRISE LOAN
"The Sunrise loan (100% of the pool) is the only loan left in the
pool and is currently secured by 54 secondary retail properties
throughout Germany (down from 61 properties at closing). The
current whole-loan balance is EUR507.5 million, which includes
EUR26.3 million in B-notes. The senior loan is a syndicated loan,
with 50% securitized in this transaction, and 50% in the DECO
9-Pan Europe 3 PLC transaction. The legal final maturity date of
EuroProp is April 2013; in contrast, the maturity date of DECO 9-
Pan Europe 3 is July 2017," S&P said.
The loan was transferred to special servicing on July 6, 2010,
due to the borrower's insolvency, and it matured in January 2011.
The portfolio was last valued in June 2011. According to the July
2012 servicer report, the whole-loan loan-to-value (LTV) ratio is
140.22% and the senior loan LTV ratio is 132.9%. This is based on
the 2011 reported value of EUR361.9 million.
In July 2012, the servicer reported that of the 54 properties
left in the pool:
Six were about to be sold for cumulative gross sale proceeds
of about EUR22.1 million (against a June 2011 market value of
EUR19.7 million);
Twenty-three assets were in the advanced stages of due
diligence, with the best bids received being EUR141.6 million
(against a June 2011 market value of EUR149.1 million). The
special servicer expects the sales to take place by the end
of 2012;
Eight assets received price indications;
Eleven assets were still being marketed; and
Six assets have seen no investor interest to date.
"Given these short-term expected asset recoveries, a full
repayment of the notes by April 2013 is unlikely, in our opinion.
A payment default at note maturity could cause a note event of
default under the transaction documents. As our ratings address
timely payment of interest and repayment of principal no later
than the note maturity date (April 2013), we would likely lower
all our ratings to 'D (sf)' in this scenario. This is the case
even though we believe that the class A and B notes might
ultimately be repaid in full, post note maturity date," 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 our Nov. 8, 2011 Advance Notice Of Proposed
Criteria Change, our review may result in changes to the
methodology and assumptions that we use when rating European
CMBS. Consequently, it may affect both new and outstanding
ratings in European CMBS transactions," S&P said.
"On Sept. 5, 2012, we published our updated criteria for CMBS
property evaluation. These criteria do not significantly change
our longstanding approach to deriving property net cash flows and
values in European CMBS transactions. We do not expect any rating
action in Europe as a result of adopting these criteria," S&P
said.
"However, because of its global scope, our criteria for global
CMBS property evaluation do not include certain market-specific
adjustments. We will herefore publish an application of these
criteria to European CMBS transactions along with our updated
criteria for rating European CMBS," S&P said.
"Until such time that we adopt updated 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 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
EuroProp (EMC) S.A. (Compartment) 1
EUR648.55 Million Commercial Mortgage-Backed Floating-Rate Notes
Series 4
Ratings Lowered
A B (sf) BB+ (sf)
B B- (sf) BB (sf)
C CCC (sf) B+ (sf)
D CCC- (sf) B- (sf)
E CCC- (sf) CCC (sf)
PATAGONIA FINANCE: Moody's Cuts Rating on Repack Notes to 'Caa2'
----------------------------------------------------------------
Moody's Investors Service has downgraded the rating of the
following notes issued by Patagonia Finance S.A.:
Issuer: Patagonia finance S.A. Restructuring
EUR453.2115M Senior Zero Coupon Notes, Downgraded to Caa2;
previously on May 15, 2012 Downgraded to Ba3
This transaction represents a repackaging of Banca Monte dei
Paschi di Siena S.p.A subordinate bonds, where the fixed coupon
is reinvested to match the accretion of the zero coupon notes.
Ratings Rationale
Moody's explained that the rating action taken is the result of a
rating action on the subordinate rating of Banca Monte dei Paschi
di Siena S.p.A, which was downgraded to Caa2 from Ba3 on
October 18, 2012.
This rating is essentially a pass-through of the rating of the
underlying securities. Noteholders are exposed to the credit risk
of Banca Monte dei Paschi di Siena S.p.A and therefore the rating
moves in lock-step.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, which could negatively impact the
ratings of the notes, as evidenced by 1) uncertainties of credit
conditions in the general economy especially as the transaction
is exposed to an obligor located in Italy and 2) more
specifically, any uncertainty associated with the underlying
credits in the transaction could have a direct impact on the
repackaged transaction.
The principal methodology used in this rating was "Moody's
Approach to Rating Repackaged Securities" published in April
2010.
No cash flow analysis, sensitivity or stress scenarios have been
conducted as the rating was directly derived from the rating of
the underlying securities.
SIFCO CAPITAL: Fitch Rates US$200MM Senior Secured Notes 'B-'
-------------------------------------------------------------
Fitch Ratings has assigned a 'B-/RR4' rating to Sifco Capital
Luxembourg S.A.'s (Sifco Luxembourg) proposed US$200 million
senior secured notes due in 2018. The notes will be fully
guaranteed by Sifco S.A. (Sifco) and its subsidiaries.
Fitch currently rates Sifco as follows:
-- Foreign and local currency Issuer Default Ratings (IDRs)
'B-';
-- US$75 million senior unsecured notes due 2016 'B-/RR4';
-- National scale long-term rating 'BB+(bra)'.
The Rating Outlook is Stable.
High Leverage:
Sifco's 'B-' and 'BB+(bra)' ratings reflect its highly leveraged
capital structure. The company's net adjusted debt-to-EBITDA
ratio was 5.3 times (x) during the last 12 months (LTM) ended
June 30, 2012. Total adjusted debt of BRL777 million includes
BRL33 million of debt of related companies of Grupo Brasil that
Sifco has guaranteed. This related party debt is expected to be
refinanced and the guarantee released within two years.
The company's balance sheet debt of BRL744 million compares with
BRL110 million of EBITDA during the LTM and a cash balance of
BRL200 million. Tax refinancing is a significant part of Sifco's
total debt. As of June 30, 2012, the total amount of refinanced
taxes was BRL211 million. The majority of tax refinancing is
composed of REFIS, which has a 180 month amortization period.
Fitch expects Sifco's leverage to be in the 4.5x to 5.0x range by
the end of 2013. The moderate decline in leverage will be driven
by an increase in operating cash flow, lower capital
expenditures, and the receipt of about BRL71 million of cash from
the aforementioned transaction. High interest expenses will
continue to constrain free cash flow and will limit a material
reduction in debt.
Liquidity Is Low, Operating Results Should Improve:
Over the past few years, the company's short-term debt as a
percentage of total debt has climbed to 49% from 39%. This growth
has continued to elevate refinancing risk. As of June 30, 2012,
Sifco had BRL356 million of short-term debt and BRL200 million of
cash and marketable securities. Most of the company's cash is
needed to manage sharp cycles in the auto industry and is not
available to repay short-term debt.
During the LTM, Sifco generated BRL138 million of cash flow from
operations - this is a decline from BRL204 million during 2011.
Results have been hurt by the changes in emission standards for
trucks and buses during 2012 that resulted in a sharp decline in
sales during this year, as many sales were accelerated to 2011 in
anticipation of this change. Economic growth in Brazil in excess
of 4% during 2013, as well as a more normal market for truck and
bus sales, should translate into higher demand for vehicles and
should positively impact the company's cash flow.
Spin Off Is Slightly Positive:
Sifco announced today its spin off from Grupo Brasil (GB) to the
former owners of GB. As part of this transaction, GB and two of
its subsidiaries -- MTP and Karmann Ghia -- were sold to private
investors. Fitch views this transaction as positive. In the
past, Sifco had provided financial support to affiliated
companies at GB that had weak capital structures. As part of the
transaction, Sifco's BRL287 million of account receivables from
related parties will be partially reduced through the receipt of
BRL33 million through the transfer of two real estate properties
from GB and the repayment of BRL38 million of receivables with
proceeds from an asset sale.
Potential Rating Or Outlook Drivers:
The ratings could be affected positively by an improvement in the
company's liquidity position and/or a successful refinancing of
its short-term debt. Strong cash generation on a sustainable
basis that resulted in free cash flow for debt reduction would
also be viewed positively. A downturn in the company's operating
results and increasing leverage could lead to a negative rating
action. The inability to refinance short-term debt could also
lead to rating downgrades.
=====================
N E T H E R L A N D S
=====================
BOYNE VALLEY: Moody's Raises Rating on Class D Notes From 'Ba1'
--------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of the
following notes issued by Boyne Valley B.V.
EUR38.8M Class C-1 Deferrable Interest Floating Rate Notes
due 2022, Upgraded to A2 (sf); previously on Jul 10, 2012
Baa1 (sf) Placed Under Review for Possible Upgrade
EUR6.8M Class C-2 Deferrable Interest Fixed Rate Notes due
2022, Upgraded to A2 (sf); previously on Jul 10, 2012 Baa1
(sf) Placed Under Review for Possible Upgrade
EUR15.6M Class D Deferrable Interest Floating Rate Notes due
2022, Upgraded to Baa3 (sf); previously on Jul 10, 2012 Ba1
(sf) Placed Under Review for Possible Upgrade
EUR10M Class P Combination Notes due 2022 (currently EUR
5.94m outstanding), Upgraded to A1 (sf); previously on Oct
13, 2011 Upgraded to Baa1 (sf)
EUR10M Class S Combination Notes due 2022 (currently EUR
5.46m outstanding), Upgraded to Aa3 (sf); previously on Oct
13, 2011 Upgraded to A3 (sf)
Moody's confirmed the ratings of the following notes issued by
Boyne Valley B.V.
EUR33.2M Class B Senior Floating Rate Notes due 2022,
Confirmed at Aa1 (sf); previously on Jul 10, 2012 Aa1 (sf)
Placed Under Review for Possible Upgrade
EUR13.5M Class E Deferrable Interest Floating Rate Notes due
2022, Confirmed at B1 (sf); previously on Jul 10, 2012 B1
(sf) Placed Under Review for Possible Upgrade
Moody's has also withdrawn the rating of the following notes
issued by Boyne Valley B.V.
EUR10M Class R Combination Notes due 2022, Withdrawn (sf);
previously on Oct 13, 2011 Upgraded to Baa1 (sf)
The Class R combination notes split back into its original
components and are no longer outstanding.
The ratings of the Combination Notes address the repayment of the
Rated Balance on or before the legal final maturity. For Classes
P and S, the 'Rated Balance' is equal at any time to the
principal amount of the Combination Note on the Issue Date minus
the aggregate of all payments made from the Issue Date to such
date, either through interest or principal payments. The Rated
Balance may not necessarily correspond to the outstanding
notional amount reported by the trustee.
Boyne Valley, issued in December 2005, is a single currency
Collateralised Loan Obligation ("CLO") backed by a portfolio of
mostly high yield European leveraged loans. The portfolio is
managed by GSO Capital Partners International LLP. This
transaction exited its reinvestment period on 12 February 2012.
It is predominantly composed of senior secured loans.
Ratings Rationale
According to Moody's, the rating actions taken on the notes are a
result of performance improvements since the last rating action
in October 2011. The actions also reflect a correction to the
rating model Moody's used for this transaction. Moody's corrected
the rating model and put the ratings of above tranches on review
for upgrade on 10 July 2012.
Moody's notes that the overcollateralization ratios of the rated
notes have decreased since the rating action in October 2011. The
Class A/B, Class C and Class D overcollateralization ratios are
reported at 133.57%, 115.30%, 110.14% and 106.04%, respectively,
versus August 2011 levels of 135.82%, 117.25%, 112% and 107.83%,
respectively. Moody's notes that these reported values as of the
August 2012 trustee report does not take into account the
principal pay down on the class A notes. Taking such pay down
into account would show an increase in the class A/B OC ratio,
compared to the level in August 2011. All coverage tests are
currently in compliance. The reported WARF improved slightly from
2913 to 2844 between August 2011 and August 2012 whilst the
weighted average spread increased from 3.32% to 3.82%.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as the portfolio par amount, WARF,
diversity score, and weighted average recovery rate, may be
different from the trustee's reported numbers. In its base case,
Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of EUR354.76
million, defaulted par of EUR10.1 million, a weighted average
default probability of 18.37% (consistent with a WARF of 2707), a
weighted average recovery rate upon default of 47.57% for a Aaa
liability target rating, a diversity score of 39 and a weighted
average spread of 3.82%. The default probability is derived from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average
recovery rate to be realized on future defaults is based
primarily on the seniority of the assets in the collateral pool.
For a Aaa liability target rating, Moody's assumed that 93.9% of
the portfolio exposed to senior secured corporate assets would
recover 50% upon default, while the remainder non first-lien loan
corporate assets would recover 10%. In each case, historical and
market performance trends and collateral manager latitude for
trading the collateral are also relevant factors. These default
and recovery properties of the collateral pool are incorporated
in cash flow model analysis where they are subject to stresses as
a function of the target rating of each CLO liability being
reviewed.
In the process of determining the final ratings, Moody's took
into account the results of a number of sensitivity analyses:
(1) Deterioration of credit quality to address the refinancing
and sovereign risks -- Approximately 20% of the portfolio are
rated B3 and below and maturing between 2014 and 2016, which may
create challenges for issuers to refinance. Approximately 10% of
the portfolio are exposed to obligors located in Greece,
Portugal, Ireland, Spain and Italy. Moody's considered a model
run where the base case WARF was increased to 3301 by forcing
ratings on 25% of such exposure to Ca. This run generated model
outputs that were one to two notches lower than the base case
results.
(2) Lower Weighted Average Spread and Diversity Score Levels - To
test the deal sensitivity to key parameters, Moody's modelled a
lower weighted average spread of 3.24% as well as a lower
diversity score of 36, which are the midpoints between reported
and covenanted values. This run generated model outputs that were
within one notch off the base case results.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, which could negatively impact the
ratings of the notes, as evidenced by 1) uncertainties of credit
conditions in the general economy and 2) the large concentration
of speculative-grade debt maturing between 2014 and 2016 which
may create challenges for issuers to refinance. CLO notes'
performance may also be impacted either positively or negatively
by 1) the manager's investment strategy and behavior and 2)
divergence in legal interpretation of CDO documentation by
different transactional parties due to embedded ambiguities.
Sources of additional performance uncertainties are described
below :
1) Deleveraging: The main source of uncertainty in this
transaction is the pace of amortization of the underlying
portfolio. Pace of amortization could vary significantly subject
to market conditions and this may have a significant impact on
the notes' ratings. In particular, amortization could accelerate
as a consequence of high levels of prepayments in the loan market
or collateral sales by the Collateral Manager or be delayed by
rising loan amend-and-extent restructurings. Fast amortization
would usually benefit the ratings of the notes.
2) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to be
defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus sell defaulted
assets create additional uncertainties. Moody's analyzed
defaulted recoveries assuming the lower of the market price and
the recovery rate in order to account for potential volatility in
market prices. Realization of higher than expected recoveries
would positively impact the ratings of the notes.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modelled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
The cash flow model used for this transaction, whose description
can be found in the methodology listed above, is Moody's CDOEdge
model.
This model was used to represent 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 binomial 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.
In addition to the quantitative factors that are explicitly
modelled, qualitative factors are part of the rating committee
considerations. These qualitative factors include the structural
protections in each transaction, the recent deal performance in
the current market environment, the legal environment, specific
documentation features, the collateral manager's track record,
and the potential for selection bias in the portfolio. All
information available to rating committees, including
macroeconomic forecasts, input from other Moody's analytical
groups, market factors, and judgments regarding the nature and
severity of credit stress on the transactions, may influence the
final rating decision.
On August 21, 2012, Moody's released a Request for Comment
seeking market feedback on proposed adjustments to its modelling
assumptions. These adjustments are designed to account for the
impact of rapid and significant country credit deterioration on
structured finance transactions. If the adjusted approach is
implemented as proposed, the rating of the notes affected by the
rating action may be negatively affected.
FAB UK 2004-1: Fitch Affirms 'CCsf' Ratings on Two Note Classes
---------------------------------------------------------------
Fitch Ratings has affirmed FAB UK 2004-1 B.V., as follows:
-- GBP101.8m Class A-1E Notes (ISIN: XS0187962104): affirmed at
'BBsf'; Outlook Negative
-- GBP4.8m Class A-1F Notes (ISIN: XS0187962369): affirmed at
'BBsf'; Outlook Negative
-- GBP10m Class A-2E Notes (ISIN: XS0187962799): affirmed at
'Bsf'; Outlook Negative
-- GBP8.8m Class A-3E Notes (ISIN: XS0187962872): affirmed at
'CCCsf'
-- GBP4.7m Class A-3F Notes (ISIN: XS0187963094): affirmed at
'CCsf'
-- GBP7.3m Class S1 Combination Notes (ISIN: XS0187963334):
affirmed at 'BBsf'; Outlook Negative
-- GBP7m class S2 Combination Notes (ISIN: XS0187963508):
affirmed at 'CCsf'
The affirmation of all the notes in the transaction reflects the
performance of the portfolio compared to the levels of credit
protection in place. The levels of credit enhancement (CE) have
increased for all of the notes, while the performance remains
almost stable with the weighted average rating of the underlying
assets at 'BBsf'/'BB-sf', one notch below the level at the last
review in November 2011.
The ratings also reflect the risk of a pool mainly comprised by
mezzanine tranches with low expected recoveries in case of
default, 63.4% of them corresponding to RMBS transactions.
Overcollateralization (OC) and Interest Coverage (IC) tests are
out of compliance as of the trustee report of 31 August 2012,
with OC tests failing since 2009.
Classes A-1E and A-1F are being repaid pari passu and pro rata
since the IC and OC tests are out of compliance, in line with the
transaction's documentation.
44% of the pool corresponds to non-investment grade assets and
14.7% is rated 'CCCsf' or below. The portfolio is 100%
concentrated in UK assets, composed mainly of RMBS mezzanine
assets (63.4%), followed by CMBS assets (18.5%) and a mix of
corporate CDOs (7.6%), commercial ABS (7.2%), SF CDOs (2.6%) and
consumer ABS (0.8%).
FAB UK 2004-1 B.V. is a securitization of European structured
finance assets, concentrated in the UK. At closing the SPV
issued GBP204.5 million worth of fixed and floating rate notes,
using the proceeds to buy a GBP200 portfolio managed by Gulf
International Bank (UK) Ltd.
HIGHLANDER EURO: S&P Affirms 'CCC-' Rating on Class E Notes
-----------------------------------------------------------
Standard & Poor's Ratings Services took various credit rating
actions on Highlander Euro CDO B.V.'s (primary issuer; issued the
class A-1, A-2, B, C, and D notes) outstanding EUR407.05 million
notes and Highlander Euro CDO (Cayman) Ltd.'s (secondary issuer;
issued the class E notes) outstanding EUR16.65 million notes
(collectively, Highlander Euro CDO).
Specifically, S&P:
Raised its rating on the class B notes; and
Affirmed its ratings on the class A-1, A-2, C, D, and E
notes.
"The rating actions follow our assessment of the transaction's
performance, take into account recent developments in the
transaction, and the application of our criteria relevant to this
transaction," S&P said.
"For our review of the transaction's performance, we used data
from the trustee report (dated Sept. 20, 2012), in addition to
our cash flow analysis. We have taken into account recent
developments in the transaction and have applied our 2012
counterparty criteria, as well as our 2009 collateralized debt
obligation (CDO) cash flow criteria," S&P said.
"From our analysis, we have observed a marginal change in the
credit quality of the portfolio since we last reviewed the
transaction. For example, we have observed a decrease in the
proportion of assets that we consider to be rated in the 'CCC'
category ('CCC+', 'CCC', and 'CCC-') to 11.00% from 12.28%. At
the same time, we have observed an increase in the proportion of
defaulted assets (those rated 'CC', 'SD' [selective default], and
'D') to 3.72% from 2.10%," S&P said.
"Our analysis indicates that credit enhancement for all classes
of notes has marginally changed since our July 2011 review of the
transaction. However, the weighted-average spread earned on the
collateral pool has increased," S&P said.
"Our analysis also indicates that the weighted-average maturity
of the portfolio since our July 2011 review has slightly
decreased, which has led to a small reduction in our scenario
default rates (SDRs) for all rating categories," S&P said.
"We subjected the capital structure to a cash flow analysis to
determine the break-even default rate for each rated tranche. In
our analysis, we have used the reported portfolio balance,
weighted-average spread, and weighted-average recovery rates that
we consider to be appropriate. We have incorporated various cash
flow stress scenarios, using alternative default patterns,
levels, and timings for each liability rating category (i.e.,
'AAA', 'AA', and 'BBB' ratings), in conjunction with different
interest rate stress scenarios," S&P said.
At closing, Highlander Euro CDO entered into perfect asset swap
obligations to mitigate currency risks in the transaction.
"We consider that the documentation for these swaps does not
fully reflect our 2012 counterparty criteria. Therefore, we
conducted our cash flow analysis assuming that the transaction
does not benefit from the support of the swaps. After conducting
our cash flow analysis, we have concluded that the ratings on the
class A-1 and A-2 notes can be maintained at their current rating
levels. We have therefore affirmed our ratings on these classes
of notes," S&P said.
"We have also applied the largest obligor default test, a
supplemental stress test that we introduced as part of our 2009
criteria update. The test aims to measure the effect on ratings
of defaults of a specified number of largest obligors in the
portfolio with particular ratings, assuming 5% recoveries. In
addition, we applied the largest industry default test, another
of our supplemental stress tests. Our cash flow stresses support
higher ratings on the class D and E notes. However, the
supplemental stress tests constrain our ratings on the class D
and E notes at their current rating levels," S&P said.
"Considering all of these factors, our analysis indicates that
the credit enhancement available to the class B notes is
commensurate with a higher rating than previously assigned. We
have therefore raised our rating on the class B notes to 'A+
(sf)' from 'A (sf)'," S&P said.
"We have also affirmed our rating on the class D and E notes to
reflect our view that these tranches have adequate credit support
to maintain their current rating levels," S&P said.
Highlander Euro CDO is a cash flow collateralized loan obligation
(CLO) transaction that closed in August 2006 and securitizes
loans to primarily speculative-grade corporate firms. The
reinvestment period for this transaction ended in August 2012.
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
Highlander Euro CDO B.V.
EUR500 Million Secured Floating-Rate and Subordinated Notes
Rating Raised
B A+ (sf) A (sf)
Ratings Affirmed
A-1 AAA (sf)
A-2 AA+ (sf)
C BBB- (sf)
D CCC+ (sf)
Highlander Euro CDO (Cayman) Ltd.
EUR38.25 Million Secured Floating-Rate Notes
Rating Affirmed
E CCC- (sf)
INDIGOLD CARBON: Moody's Rates US$350-Mil. 5-Year Term Loan 'Ba3'
-----------------------------------------------------------------
Moody's Investors Service assigned a Ba3 rating to Indigold
Carbon (Netherlands) BV's proposed US$350 million incremental
five year term loan and affirmed its Ba3 Corporate Family Rating
(CFR) and other debt ratings. Proceeds from the financing, along
with approximately US$75 million of existing balance sheet cash,
will be used to fund an intercompany loan to a newly formed,
wholly-owned subsidiary of SKI Investments Pte. Ltd. (Singapore),
which will fund the consolidation of the Aditya Birla Group's
carbon black businesses. The outlook is stable.
Rating assigned:
Indigold Carbon (Netherlands) BV
$350 million incremental term loan -- Ba3 (LGD3, 43%)
Ratings affirmed:
Indigold Carbon (Netherlands) BV
Corporate Family Rating -- Ba3
Probability of Default Rating -- Ba3
Outlook -- Stable
Indigold Carbon (Netherlands) BV, Indigold Carbon USA, Inc. &
other borrowers
$75mm sr sec revolving credit facilities due 2016 -- Ba3 (LGD3,
43%) from Ba3 (LGD3, 42%)
$500mm sr sec term loan A due 2016 -- Ba3 (LGD3, 43%) from Ba3
(LGD3, 42%)
Outlook -- Stable
RATINGS RATIONALE
The Ba3 CFR rating is supported by Indigold Carbon's strong
operating results since the acquisition by the Aditya Birla
Group. The company has outperformed Moody's expectations in 2012,
and has expanded margins to record levels, such that its credit
metrics will remain supportive of the Ba3 CFR with the additional
US$350 million of debt. Indigold Carbon's leverage is expected to
be 3.8x (as of June 30, 2012, pro forma for the proposed
financing and inclusive of Moody's standard analytical
adjustments), which is slightly lower than the debt/EBITDA metric
it had after the acquisition by the Aditya Birla Group (4.0x).
The CFR is also supported by the stable demand profile for carbon
black (relative to other commodity chemical businesses), the
company's strong market positions as one of the top three global
producers, long-term customer relationships, and geographic
diversity with operations in all major regions. Indigold Carbon
offers a complete product line from commodity carbon blacks to
higher margin specialty carbon blacks. Pressuring the ratings are
meaningful customer concentration, modest global demand growth,
exposure to volatile energy and petroleum-based feedstock costs,
limited product diversity (carbon black) and commodity nature of
the majority of the company's carbon black business.
The stable outlook reflects Moody's expectation that the carbon
black market will continue to grow at GDP-like rates, the company
will maintain its margins and will generate positive free cash
flow. Upside to the rating is limited due to the leverage, size
of the company (annual revenues of approximately US$1.5 billion),
the commodity nature of the majority of its products, and recent
volume softness, but a positive outlook could be considered
should the company be able to reduce leverage toward 3.0x on a
sustained basis. Any decline in EBITDA margins prior to the firm
de-levering, or increase in leverage above 4.5x on a sustained
basis could result in a downgrade of the ratings.
Indigold Carbon has a good liquidity position, supported by the
cash balances (US$21 million as of 9/30/2012, pro forma for the
transactions), positive free cash flow, and full availability
under its US$75 million revolving credit facility. The company is
expected to remain in compliance with its leverage and coverage
financial covenants, which are not changing with the amendment to
the existing credit facility.
The principal methodology used in rating Indigold Carbon was the
Global Chemical Industry Methodology published in December 2009.
Other methodologies used include Loss Given Default for
Speculative-Grade Non-Financial Companies in the U.S., Canada and
EMEA published in June 2009.
Indigold Carbon (Netherlands) BV is a holding company formed in
connection with the acquisition of Columbian Chemicals
Acquisition LLC (Columbian Chemicals) by the Aditya Birla Group
(Birla) in June 2011. The Birla carbon black business and
Indigold Carbon business, on a combined basis, constitute the
largest global carbon black producer with 17 production
facilities. Revenues for the year ended June 30, 2012 were $1.5
billion.
LAURELIN II: S&P Affirms 'BB' Rating on Class E Notes
-----------------------------------------------------
Standard & Poor's Ratings Services raised its credit ratings on
Laurelin II B.V.'s class A-1E, A-1R, A-1S, and A-2 notes to 'AA
(sf)' from 'AA- (sf)'. "At the same time, we have affirmed our
ratings on the class B-1, B-2, C, D-1, D-2, and E notes," S&P
said.
Laurelin II is a multiple-currency cash flow collateralized debt
obligation (CDO) transaction, backed primarily by leveraged loans
to speculative-grade corporate firms. The transaction closed on
July 11, 2007, and is managed GoldenTree Asset Management, L.P.
The transaction is in its reinvestment period until July 14,
2014.
"The rating actions follow our assessment of the transaction's
performance since our previous review on Dec. 20, 2011," S&P
said.
"In our review, we considered recent transaction developments. We
included data from the trustee report dated August 2012, along
with our ratings database and our cash flow analysis. We applied
our 2012 counterparty criteria, our 2009 cash flow CDO criteria,
and our 2011 nonsovereign ratings criteria," S&P said.
"In terms of the portfolio's credit quality, the level of assets
that we consider to be rated in the 'CCC' category ('CCC+',
'CCC', or 'CCC-') has decreased to 6.72% from 9.01%, as a
percentage of all assets," S&P said.
Additionally, the weighted-average life of the assets in the
portfolio has decreased to 5.19 years from 5.82 years.
"The evolution of those parameters has led to a lower scenario
default rate (SDR) for all classes of notes compared with our
previous review, as provided by our CDO Evaluator (Version 6.0.1)
model. Through a 'Monte Carlo' methodology, the CDO Evaluator
evaluates a portfolio's credit quality, considering the issuer
credit rating, size, domicile, and maturity date of each asset,
and the correlation between each pair of assets. It presents the
portfolio's credit quality in terms of a probability distribution
for potential default rates. From this distribution, it derives a
set of SDRs that identify, for each rating level, the minimum
level of portfolio defaults a class of notes should be able to
withstand without defaulting," S&P said.
"We also note that the transaction was negatively affected by a
rise in the percentage of defaulted assets (i.e., debt
obligations of obligors rated 'CC', 'SD' [selective default], or
'D') to 4.86% from 0.23%," S&P said.
"Following our credit analysis, we subjected the transaction's
capital structure to a cash flow analysis, to determine the
break-even default rate for each rated class of notes at each
rating level. The tranche BDR and the SDR, provided by CDO
Evaluator (Version 6.0.1) model, are the key parameters in our
methodology for the rating and the surveillance of CDO
transactions," S&P said.
"In our analysis, we used the portfolio balance that we
considered to be performing (EUR421.3 million), the reported
weighted-average spread (4.08%) and the weighted-average recovery
rates as per our 2009 cash flow CDO criteria. We incorporated
various cash flow stress scenarios using our standard default
patterns, levels, and timings for each rating category assumed
for each class of notes, in conjunction with different interest
rate and currency stress scenarios," S&P said.
COUNTERPARTY RISK
The issuer has entered into options agreements with Barclays Bank
PLC (A+/Negative/A-1).
"Our 2012 counterparty criteria provide that in cases where the
replacement language in the derivative agreements is in line with
any of our previous counterparty criteria, the maximum achievable
rating on a tranche is equal to the counterparty's long-term
rating plus one notch ('ICR+1'), unless we apply additional
stresses in our cash flow analysis to capture that risk," S&P
said.
"Therefore, in our cash flow analysis, we have tested additional
scenarios by assuming that there are no options in the
transaction for all notes with a rating higher than ICR+1, 'AA-
(sf)', i.e., only the class A-1E, A-1R, A-1S, and A-2 notes," S&P
said.
NONSOVEREIGN RATINGS CRITERIA
"Where a structured finance transaction invests in assets located
in investment-grade sovereigns within the European Economic and
Monetary Union (EMU or eurozone), we cap the maximum potential
rating at six notches above our rating on the related sovereign,
in line with our nonsovereign ratings criteria. To assess the
amount of securities that can achieve the maximum potential
rating, we apply a haircut to the cash flows from assets located
in jurisdictions rated below 'A-', i.e., six notches below a
'AAA' rating," S&P said.
"This transaction has an aggregate exposure of approximately
14.19% to assets in Spain (BBB-/Negative/A-3), Italy
(unsolicited; BBB+/Negative/A-2), Lithuania (BBB/Stable/A-2),
Ireland (BBB+/Negative/A-2), and South Africa (foreign currency;
BBB/Negative/A-2)," S&P said.
"In accordance with our nonsovereign ratings criteria, to assess
how many of the securities in the transaction could achieve the
maximum potential rating of 'AAA (sf)', our aggregate performing
balance can only include up to 10% of the assets in jurisdictions
rated in the 'BBB' rating category. This reduces the aggregate
performing balance considered in 'AAA' scenarios by EUR17.6
million," S&P said.
"Taking into account the maximum potential six-notch uplift under
nonsovereign ratings criteria, the transaction's sovereign
exposure does not constrain our ratings on the class B-1, B-2, C,
D-1, D-2, and E notes under our criteria. We have therefore not
applied any additional stresses in our cash flow analysis for
these classes of notes," S&P said.
RATING ACTIONS
"Our analysis shows that the level of credit enhancement
available to the class A-1E, A-1R, A-1S, and A-2 notes is
commensurate with a 'AA (sf)' rating level. Therefore, we have
raised to 'AA (sf)' our ratings on those classes of notes," S&P
said.
"Our analysis shows that the current level of credit enhancement
available to the class B-1, B-2, C, D-1, D-2, and E notes remains
commensurate with the currently assigned ratings. Therefore, we
have affirmed our ratings on these classes of notes," S&P said.
STANDARD & POOR'S 17G-7 DISCLOSURE REPORT
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and
a description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities. The Rule applies to in-scope securities initially
rated (including preliminary ratings) on or after Sept. 26, 2011.
If applicable, the Standard & Poor's 17g-7 Disclosure Reports
included in this credit rating report are available at:
http://standardandpoorsdisclosure-17g7.com
RATINGS LIST
Class Rating
To From
Laurelin II B.V.
EUR405 Million and GBP30.405 Million Secured Floating-Rate Notes
Ratings Raised
A-1E AA (sf) AA- (sf)
A-1R AA (sf) AA- (sf)
A-1S AA (sf) AA- (sf)
A-2 AA (sf) AA- (sf)
Ratings Affirmed
B-1 A+ (sf)
B-2 A+ (sf)
C BBB+ (sf)
D-1 BB+ (sf)
D-2 BB+ (sf)
E BB (sf)
PANGAEA ABS 2007-1: Fitch Affirms Ratings on 4 Note Classes to C
----------------------------------------------------------------
Fitch Ratings has affirmed Pangaea ABS 2007-1 B.V. as follows:
-- Class A floating-rate notes (ISIN XS0287257280): affirmed at
'CCCsf'
-- Class B floating-rate notes (ISIN XS0287266356): affirmed at
'CCsf'
-- Class C floating-rate notes (ISIN XS0287267677): affirmed at
'CCsf'
-- Class D floating-rate notes (ISIN XS0287268642): affirmed at
'Csf'
-- Class E floating-rate notes (ISIN XS0287271604): affirmed at
'Csf'
-- Class F floating-rate notes (ISIN XS0287272164): affirmed at
'Csf'
-- Class S1 combination notes (ISIN XS0289328394): affirmed at
'Csf'
The affirmations reflect Fitch's view of the portfolio's credit
quality and the notes' level of credit enhancement (CE). The
portfolio's credit quality has not materially changed since the
last review in October 2011, with assets rated 'CCC+' or below
constituting 27.68% of the portfolio notional, compared with
25.95% in October 2011. Investment grade assets increased to
36.37% of the portfolio notional, up from 33.19% as the last
review. There have been no new defaults in the portfolio since
the last review.
All over-collateralization (OC) tests are failing at present and
at least one OC test has been underwater since end-2008. As a
consequence of the OC test breach excess spread has been used to
repay the class A notes. The class A notes have paid down 15.50%
of their initial balance and have built up CE due to
deleveraging. Class A, B and C are making timely interest
payments while interest on class C, D, E and F is being deferred.
The interest coverage (IC) test is passing with a cushion of
120%.
The transaction is still within its reinvestment period, which
ends in June 2013. The collateral manager has over the past 12
months invested the principal pay downs in Dutch, Spanish and
Portuguese RMBS notes. After the end of the reinvestment period
the collateral manager has the discretion to continue to reinvest
unscheduled principal proceeds (defined as principal proceeds as
a result of an optional redemption of the asset) subject to
compliance with certain conditions.
As of September 2012, the two largest sub-sector exposures are
CMBS at 34.0% of the portfolio and RMBS at 33.0%. Additionally,
the pool mainly comprises corporate CDOs and ABS, which account
for 19.0% and 14.0% of the portfolio notional respectively.
United Kingdom and Germany are the largest country exposures at
33.0% and 34.0% while the combined portfolio exposure to assets
of the eurozone periphery (Spain, Ireland, Portugal and Greece)
is 11.0% of the portfolio.
Fitch believes that a material risk for the transaction is that
the portfolio assets' maturity may extend beyond their reported
weighted-average expected life. Fitch, in its analysis, stressed
the extension risk of the portfolio which resulted in a prolonged
risk horizon and thereby increasing the expected default rates.
The rating of the class S1 combination notes reflects the ratings
of its component classes i.e. EUR23.62m class D notes and
EUR16.80m unrated subordinated notes, total distributions to date
(which count towards reducing the rated balances) and future
distributions expected on each of the component classes. The
rated balance of the class S1 notes currently stands at EUR5.66m.
Fitch assigned an Issuer Report Grade (IRG) of 2 stars to the
transaction trustee reports. The report includes various
portfolio stratifications, coverage test results, information on
defaulted assets and collateral manager's trading activity. The
report does not include counterparty rating information which
prevents the assignment of an IRG of 3 stars.
The transaction is a managed cash arbitrage securitization of
structured finance assets, primarily mortgage-backed securities.
The collateral is actively managed by Investec Principal Finance
(Investec) over the life of the transaction.
UPPER DECK: Seeks U.S. Recognition of Dutch Proceedings
-------------------------------------------------------
Upper Deck International B.V., the European arm of the sports
trading-card company, is asking the United States' recognition of
its Dutch insolvency proceeding.
Upper Deck filed a Chapter 15 bankruptcy petition in Manhattan
(Bankr. S.D.N.Y. Case No. 12-14294) on Oct. 18. Loes A. van
Kooten-Hendriks, the company's insolvency administrator, signed
the bankruptcy petition.
UDI was in the business of, inter alia, publishing, producing and
distributing, as well as wholesale trading in, sports and
amusement cards and stickers, in particular collectable trading
cards, and acquiring capitalizing upon patents, trade names and
trademarks.
According to court filings, UDI encountered financial
difficulties because of a protracted conflict among its
beneficial shareholders, and because it was unable to extend
agreements with various contractual counterparties as a result of
Konami Digital Entertainment BV's attempt to terminate the
distributorship agreement, which led to the loss of exclusive
manufacturing, sale and distribution rights. As a consequence
and also due to external economic conditions, sales declined
dramatically.
In February 2012, the Dutch Court entered a judgment granting UDI
"provisional suspension of payments" under the Dutch Bankruptcy
Act. The Dutch Court later entered a judgment declaring UDI
bankrupt and appointed Mr. Kooten-Hendricks as insolvency
administrator. UDI has ceased its business.
The insolvency administrator is aware of at least two assets of
UDI located within the territorial jurisdiction of the United
States. Prior to the petition for recognition, UDI entered into
an agreement to sell certain of its assets to Hasbro, Inc. The
administrator asserts that UDI is entitled to payments under the
sale agreement, which rights the administrator seeks to monetize
as part of the Chapter 15 proceeding. UDI is also a plaintiff in
litigation pending in the U.S. District Court for the Southern
District of California (Case No. 3:11-cv-017141-LAB-KSC) against
Upper Deck Company (California) and Upper Deck Company (Nevada)
for the two defendant-companies' alleged counterfeiting products
that caused Konami to terminate their lucrative agreement. UDI
is seeking monetary damages against the two companies and their
ultimate owner, Richard McWilliam.
The Debtor is estimated to have at least US$50 million in assets
and liabilities up to US$50,000.
Judge Stuart M. Bernstein presides over the Chapter 15 case.
===========
P O L A N D
===========
* POLAND: Records 147 Construction Sector Bankruptcies in 1Q2012
----------------------------------------------------------------
According to Warsaw Business Journal, Rzeczpospolita reported
that in the first three quarters of 2012, 147 Polish construction
firms went belly up, marking the most bankruptcies the sector has
seen in five years.
WBJ relates that Professor Zofia Bolkowska of Warsaw's Higher
School of Management and Law, said 2011 saw 107 construction
firms close up shop, while 2010 brought 73 closures and 2009 and
2008 saw 54 and 45 respectively.
"Construction is a sector very vulnerable to the crisis," WBJ
quotes Ms. Bolkowska as saying. "It is natural that there are
periods of losses and gains in the economy, but the latter are
getting shorter."
She said 2012 is a lost year for the sector, since the losses
incurred in the year's first three quarters will be impossible to
make up in the fourth quarter, WBJ notes.
Representatives of building companies in Poland are hoping calls
for tenders on projects to be co-financed from EU grants for the
years 2007 to 2013 could help return some vigor to the road
building sector, WBJ discloses.
===========
R U S S I A
===========
TRANSCONTAINER OJSC: Fitch Affirms 'BB+' IDR; Outlook Negative
--------------------------------------------------------------
Fitch Ratings has affirmed OJSC TransContainer's Long-term Issuer
Default Rating (IDR) at 'BB+'. The Outlook is Negative.
TransContainer's 'BB+' Long-term IDR currently includes a one-
notch uplift for parental support from JSC Russian Railways (RZD,
'BBB'/Stable), its majority shareholder with a 50% stake. The
Negative Outlook reflects RZD's earlier decision to further
reduce its stake in TransContainer and persistent uncertainty
regarding the percentage of shares to be disposed, the timing of
the disposal, and identity of the future majority shareholder.
The agency highlights that TransContainer's ratings may be
further impacted by the relative credit strength of a new
majority shareholder and the parent-subsidiary arrangements put
in place, including the effect of possible acquisition funding.
Fitch applies the one-notch uplift for parental support from RZD
to TransContainer's ratings in accordance with its Parent-
Subsidiary Rating Linkage dated 8 August 2012. The agency
recognises the moderate operational and strategic ties between
TransContainer and RZD, whose intentions to maintain a 25% stake
in TransContainer implies a continued commitment to it and its
perceived importance to RZD in terms of strategy and operations.
RZD's recent agreement to purchase 75% of France's Gefco, a
logistics company, strengthens its position in cross-border
logistics operations and may potentially further delay
TransContainer's disposal. Lack of progress regarding RZD's
disposal of TransContainer's shares in the next six months may
result in a revision of the Outlook to Stable from Negative as
long as TransContainer's performance remains in line with
expectations for the current standalone rating level.
Fitch views TransContainer's standalone profile as commensurate
with a weak 'BB' rating. It is driven by TransContainer's
leading position in Russia by flatcar and container fleet size,
its strong presence in key locations across the country, a well-
diversified customer base and moderate leverage.
TransContainer's ratings are capped at the 'BB' level by its
moderate size as compared to 'BB'-rated Russian companies and the
historical cyclicality of container shipment volumes.
In 9M12 TransContainer's rail transportation volumes reached 1.1m
twenty-foot equivalent units (TEU), a 10.2% increase yoy mainly
due to higher import and transit container shipment volumes. Its
9M12 gross unconsolidated revenues under Russian Accounting
Standards reached almost RUB25 billion, up 19% yoy on the back of
strong operating results. Fitch conservatively estimates that
Russia's container transportation volumes will increase by mid-
to-high single digits in 2012-2014 fuelled by expected moderate
GDP growth and high potential for further cargo containerization
in Russia.
In 2011, TransContainer generated positive free cash flows (FCF)
for the first time since 2007 on the back of strong operating
performance. Fitch expects that in 2012-2013 TransContainer's
FCFs will be negative mainly due to a large step-up in capex
(nearly doubling over the next three years) and massive, by the
company's historical standards, 2011 dividends of RUB1.2 billion
paid out in July 2012.
In 2011, TransContainer reported gross funds from operations
(FFO) adjusted leverage of 1.5x, down from 2.2x in 2010, and FFO
interest cover of 8.6x. Fitch considers further deleveraging
unlikely at this time given the company's significant capex plans
in 2012-2013. The agency expects the company's FFO adjusted
leverage to remain under 1.6x in the medium term, and FFO
interest cover to remain 8.0x or above.
Fitch views TransContainer's debt structure and liquidity as
adequate. RUB bonds make up most of TransContainer's debt; the
rest is mainly unsecured bank loans. Virtually all debt is raised
at the parent level. At end-2011, RUB4.1 billion or 44% of
TransContainer's gross debt was due in 2013 including RUB3 bilion
domestic bonds maturing in February 2013. The company plans to
issue bonds for up to RUB5 billion in 2013 to refinance its
maturing liabilities. At June 30, 2012 TransContainer had cash
and short-term deposits placed at Russia's largest banks
including JSC Bank VTB ('BBB'/Stable) and OJSC Gazprombank of
RUB4.7 billion that was sufficient to cover short-term maturities
of RUB3.6 billion and dividend payments of RUB1.2bn that were
made in July 2012.
WHAT COULD TRIGGER A RATING ACTION
Positive: future developments that may, individually or
collectively, lead to a positive rating action include:
A delay in the disposal by RZD of TransContainer's shares in the
next six months may result in a revision of the Outlook to Stable
from Negative as long as TransContainer's performance remains in
line with expectations for the current standalone rating level.
Negative: future developments that may, individually or
collectively, lead to a negative rating action include:
FFO adjusted leverage consistently above 2x and FFO interest
coverage consistently below 8x, perhaps as a result of a
prolonged step-up in capex, could result in a negative rating
action. Once privatized, TransContainer's ratings may be affected
by the relative credit strength of a new majority shareholder and
the parent-subsidiary arrangements put in place. Sizeable
acquisition funding raised at the TransContainer level may put
pressure on the ratings.
The rating actions are as follows:
-- Long-term IDR: affirmed at 'BB+'; Negative Outlook
-- Long-term local currency IDR: affirmed at 'BB+'; Negative
Outlook
-- Short-term IDR: affirmed at 'B'
-- Short-term local currency IDR: affirmed at 'B'
-- National Long-term rating: affirmed at 'AA(rus)'; Negative
Outlook
-- Local currency senior unsecured rating: affirmed at 'BB+';
UNIASTRUM BANK: Moody's Cuts National Scale Rating to 'Ba3'
-----------------------------------------------------------
Moody's Interfax Rating Agency has downgraded national scale
rating (NSR) of Uniastrum Bank to Ba3.ru from A3.ru. NSRs do not
carry any outlook.
Moody's assessment is primarily based on Uniastrum's 2012 monthly
accounting statements prepared under local statutory accounting
rules (Russian Accounting Standards or RAS), as well as its
audited financial statements for 2011 prepared under IFRS.
Ratings Rationale
This rating action concludes Moody's review of Uniastrum's
ratings initiated on June 27, 2012. The downgrade is based on the
bank's weak standalone credit strength stemming from (1) pressure
on capital adequacy arising from low coverage of overdue loans by
loan loss reserves; and (2) weak liquidity, with high dependence
on funding from the parent (Bank of Cyprus, rated Caa1/Not
Prime/E/caa3 -- with a negative outlook on the senior debt and
deposit ratings), which business is under stress in the current
environment.
Moody's also notes Uniastrum's limited potential to overcome
capital shortage and liquidity constrains in the medium term due
to weak internal capital generation and limited ability to reduce
dependence on parental funding.
Moody's concluded the review on Uniastrum Bank's ratings after
rating review of its parent (Bank of Cyprus) was concluded on 9
October 2012.
According to Moody's, Uniastrum's weakened capital adequacy is
the result of several factors:(1) during the first nine months of
2012, Uniastrum's statutory capital adequacy ratio (N1) decreased
to a weak 10.9% (from13.3% as at YE2011) moving towards the 10%
regulatory minimum; and (2) Uniastrum's non-performing loans
(NPLs, 90+ days overdue loans plus restructured loans) continue
to be inadequately covered by loan loss reserves. As of YE2011,
NPLs accounted for 12.4% of the gross loan book, and loan loss
reserves (LLR) accounted for just 6.2% of gross loans, thus
covering only 50% of NPLs. According to RAS, during the first
nine months of 2012, Uniastrum's LLRs have increased by 41%,
leading to a significant net loss (annualized return on average
equity of -23%), which reduced the bank's capitalization. At end-
September, the level of NPLs stood at around 13.0% (according to
the bank), still not fully covered by LLR.
Moody's believes that, in the medium term, Uniastrum's capital
adequacy will remain under pressure due to the bank's moderate
profitability. Annual return on average equity was below 5%
during the three-year period 2009-11, therefore the bank is not
able to support growth and loan loss charges by internally
generated capital.
Negative pressure is also exerted on Uniastrum Bank's ratings as
a result of its weak liquidity profile. Uniastrum Bank's total
liquid assets accounted for only 12% of total liabilities as at
end-August 2012 compared to 17% as at YE2011.
Given that the standalone credit assessment of the parent (Bank
of Cyprus) is lower than that of Uniastrum Bank, the deposit
ratings of the latter do not benefit from any uplift from its
standalone credit strength of b3, in accordance with Moody's
Joint-Default Analysis Methodology.
What Can Change The Ratings Down/Up
According to Moody's, negative pressure on Uniastrum's ratings
could stem from further decline of the bank's capital adequacy as
a result of either further asset quality impairment, or lending
acceleration. The withdrawal of parental deposits from Uniastrum
ahead of schedule would also represent an adverse development for
Uniastrum.
Positive pressure on Uniastrum's ratings could be exerted in the
event of materially improved asset quality and/or capital
adequacy. A decrease in Uniastrum's dependence on parental
funding would also represent a positive development if
Uniastrum's franchise value is maintained.
Principal Methodologies
The principal methodology used in this rating was Moody's
Consolidated Global Bank Rating Methodology published in June
2012.
Headquartered in Moscow, Russia, Uniastrum reported -- under
audited IFRS -- total assets of US$2.8 billion and net profits of
US$14.3 million as at December 31, 2011.
UNIASTRUM BANK: Moody's Cuts Bank Deposit Ratings to 'Caa1'
-----------------------------------------------------------
Moody's Investors Service has downgraded the bank deposit ratings
of Uniastrum Bank to Caa1 from B2. Uniastrum Bank's standalone
bank financial strength rating (BFSR) was downgraded to E mapping
to standalone credit assessment caa1 from E+/b2. All the
aforementioned ratings carry a negative outlook.
Moody's assessment is primarily based on Uniastrum's 2012 monthly
accounting statements prepared under local statutory accounting
rules (Russian Accounting Standards or RAS), as well as its
audited financial statements for 2011 prepared under IFRS.
Ratings Rationale
This rating action concludes Moody's review of Uniastrum's
ratings initiated on June 27, 2012. The downgrade is based on the
bank's weak standalone credit strength stemming from (1) pressure
on capital adequacy arising from low coverage of overdue loans by
loan loss reserves; and (2) weak liquidity, with high dependence
on funding from the parent (Bank of Cyprus, rated Caa1/Not
Prime/E/caa3 -- with a negative outlook on the senior debt and
deposit ratings), which business is under stress in the current
environment.
Moody's said the negative outlook on Uniastrum's ratings also
reflects the bank's limited potential to overcome capital
shortage and liquidity constrains in the medium term due to weak
internal capital generation and limited ability to reduce
dependence on parental funding.
Moody's concluded the review on Uniastrum Bank's ratings after
rating review of its parent (Bank of Cyprus) was concluded on 9
October 2012.
According to Moody's, Uniastrum's weakened capital adequacy is
the result of several factors:(1) during the first nine months of
2012, Uniastrum's statutory capital adequacy ratio (N1) decreased
to a weak 10.9% (from13.3% as at YE2011) moving towards the 10%
regulatory minimum; and (2) Uniastrum's non-performing loans
(NPLs, 90+ days overdue loans plus restructured loans) continue
to be inadequately covered by loan loss reserves. As of YE2011,
NPLs accounted for 12.4% of the gross loan book, and loan loss
reserves (LLR) accounted for just 6.2% of gross loans, thus
covering only 50% of NPLs. According to RAS, during the first
nine months of 2012, Uniastrum's LLRs have increased by 41%,
leading to a significant net loss (annualized return on average
equity of -23%), which reduced the bank's capitalization. At end-
September, the level of NPLs stood at around 13.0% (according to
the bank), still not fully covered by LLR.
Moody's believes that, in the medium term, Uniastrum's capital
adequacy will remain under pressure due to the bank's moderate
profitability. Annual return on average equity was below 5%
during the three-year period 2009-11, therefore the bank is not
able to support growth and loan loss charges by internally
generated capital.
Negative pressure is also exerted on Uniastrum Bank's ratings as
a result of its weak liquidity profile. Uniastrum Bank's total
liquid assets accounted for only 12% of total liabilities as at
end-August 2012 compared to 17% as at YE2011.
Given that the standalone credit assessment of the parent (Bank
of Cyprus) is lower than that of Uniastrum Bank, the deposit
ratings of the latter do not benefit from any uplift from its
standalone credit strength of b3, in accordance with Moody's
Joint-Default Analysis Methodology.
What Can Change The Ratings Down/Up
According to Moody's, negative pressure on Uniastrum's ratings
could stem from further decline of the bank's capital adequacy as
a result of either further asset quality impairment, or lending
acceleration. The withdrawal of parental deposits from Uniastrum
ahead of schedule would also represent an adverse development for
Uniastrum.
In the next 12 months, upside rating potential is limited for
Uniastrum. However, in the longer term, Moody's might consider
changing the outlook on Uniastrum's ratings to stable in the
event of materially improved asset quality and/or capital
adequacy. A decrease in Uniastrum's dependence on parental
funding would also represent a positive development if
Uniastrum's franchise value is maintained.
Principal Methodologies
The principal methodology used in this rating was Moody's
Consolidated Global Bank Rating Methodology published in June
2012.
Headquartered in Moscow, Russia, Uniastrum reported -- under
audited IFRS -- total assets of US$2.8 billion and net profits of
US$14.3 million as at December 31, 2011.
===============
S L O V E N I A
===============
CM CELJE: Court Launches Receivership Proceedings
-------------------------------------------------
SeeNews, citing state-run news agency STA, reports that
Slovenia's Celje District Court on Tuesday launched receivership
proceedings at CM Celje.
The company had been in court-mandated debt restructuring since
August, SeeNews notes.
CM Celje is a Slovenian construction company.
=========
S P A I N
=========
AUTOVIA DE LOS VINEDOS: Moody's Cuts Debt Rating to 'Caa1'
----------------------------------------------------------
Moody's Investors Service has announced multiple rating actions
on the following project issuers domiciled in Spain: Autovia de
Los Vi¤edos S.A., Autovia de la Mancha S.A., and Autovia del
Camino S.A. The announcement concludes the review for downgrade
that Moody's had initiated on these issuers on June 19, 2012.
AUTOVIA DE LOS VINEDOS S.A.
The following debt obligations of Autovia de los Vi¤edos, S.A.
("Auvisa") have been downgraded to Caa1 from B3 and a negative
outlook has been assigned:
* EUR103 million senior secured loan provided by the European
Investment Bank due 2030.
* EUR64 million of senior secured bonds maturing in 2027.
AUTOVIA DE LA MANCHA S.A.
The underlying rating of the EUR110 million guaranteed senior
secured loan due 2031 raised by Autovia de la Mancha S.A.
("Aumancha") has been downgraded to Caa1 from B3 and a negative
outlook has been assigned.
AUTOVIA DEL CAMINO S.A.
The following loan facilities raised by Autovia del Camino S.A.
("AdC") have been confirmed at Ba1 and a negative outlook has
been assigned:
* EUR175 million senior secured loan provided by the European
Investment Bank, maturing in 2029.
* EUR145 million senior secured commercial bank loan maturing in
2030.
RATINGS RATIONALE
AUTOVIA DE LOS VINEDOS S.A. and AUTOVIA DE LA MANCHA S.A.
The actions for Auvisa and Aumancha follow the weakening of the
creditworthiness of Castilla-La Mancha (payer under the
concession agreements with the two toll road projects), as
captured by Moody's downgrade of Castilla La-Mancha on
October 22, 2012.
Presently, the four-notch differential between the Caa1
underlying ratings of Auvisa and Aumancha and the Ba3 rating of
Castilla-La Mancha sufficiently captures the region's negative
interference risk given its history of late payments to the two
projects (even though Moody's has noted some improvement lately).
However, in Moody's view, the credit fundamentals of Castilla-La
Mancha have been negatively affected by the economic conditions
in Spain and, going forward, this may further affect the region's
ability to make timely payments, in accordance with the two
projects' respective concession agreements. Also, the worsening
economic conditions may further affect the actual traffic volumes
of the projects, which may weaken their standalone credit quality
(i.e., the projects' unconstrained credit quality, ignoring the
rating of Castilla-La Mancha). Moody's notes that Aumancha's
standalone credit quality is stronger than Auvisa's and therefore
Aumancha should be more resilient to downward traffic pressure.
Auvisa's debt obligations benefit from an unconditional and
irrevocable guarantee of scheduled principal and interest
provided by SGUK, rated Ca/developing outlook. The rating is
determined as the higher of (1) SGUK's insurance financial
strength rating, and (2) the underlying rating of the loans,
which is Caa1/negative.
Aumancha's loans benefit from an unconditional and irrevocable
guarantee of scheduled principal and interest provided by Assured
Guaranty (Europe) Ltd ("Assured Guaranty", Aa3 on review for
downgrade, formerly Financial Security Assurance (U.K.) Ltd)
pursuant to a financial guarantee insurance policy (the "Insured
Loan"). On September 11, 2012, Moody's downgraded the Insured
Loan to A3 from Aa3 to reflect the specific risk, that in the
event of a currency redenomination, the guarantee will not
reliably and effectively mitigate the risks embedded in the A3
Local Currency Country Risk Ceiling for credits in Spain. The
rating is determined as the higher of (1) Insured Loan, and (2)
the underlying rating of the loans, which is Caa1/negative.
The negative outlook on the underlying ratings of Auvisa's and
Aumancha's debt obligations reflects the negative outlook on the
rating of Castilla-La Mancha.
AUTOVIA DEL CAMINO S.A.
The rating confirmation follows (1) Moody's confirmation of
Spain's government bond rating at Baa3 on 16 October and
assignment of a negative outlook to the rating; and (2) the
subsequent confirmation of the ratings of a number of Spanish
sub-sovereigns at or above the sovereign rating on October 22,
2012.
AdC entered into a 30-year concession agreement in 2002 with the
Spanish Regional Government of Navarra (the "Offtaker"). While
Moody's does not rate the Offtaker, the rating agency benchmarks
the credit quality of the Spanish Regional Government of Navarra
against the rating of Spain and the highest rated sub-sovereign
entities.
AdC's loans benefit from an unconditional and irrevocable
guarantee of scheduled principal and interest provided by Syncora
Guarantee (U.K.) Ltd (SGUK, formerly XL Capital Assurance (U.K.)
Limited), which is rated Ca with developing outlook. The rating
of the loans is determined as the higher of (1) SGUK's insurance
financial strength rating, and (2) the underlying rating of the
loans, which is Ba1 negative. The negative outlook on the ratings
of AdC's loans reflects the negative outlook on Spain's
government bond rating and of the Spanish sub-sovereigns rated by
Moody's.
WHAT COULD CHANGE THE RATINGS UP/DOWN
AUTOVIA DE LOS VINEDOS S.A. and AUTOVIA DE LA MANCHA S.A.
Given the negative outlook, Moody's does not anticipate upward
pressure on the underlying ratings of Auvisa's and Aumancha's
debt obligations in the short term. However, Moody's would
consider upgrading the underlying ratings if (1) it were to
upgrade the rating of Castilla-La Mancha; (2) there were evidence
of steady receipt of payments from Castilla-La Mancha with no
material delays in the payment for outstanding invoices; and (3)
the projects' traffic volumes were to stabilize or improve.
Conversely, Moody's could consider downgrading the underlying
ratings of the projects in the event of (1) a downgrade of the
rating of Castilla-La Mancha; (2) a prolonged decrease in
observed traffic levels, which is a risk for Auvisa particularly,
given that its standalone credit quality is weaker than
Aumancha's; (3) a trend of further delays in the receipt of
payment of outstanding invoices from Castilla-La Mancha or any
other actions taken by the region that may negatively affect the
projects' credit quality.
AUTOVIA DEL CAMINO S.A.
Given the negative outlook, Moody's does not anticipate upward
rating pressure on AdC's loans in the short term. Moody's would
consider upgrading AdC's loans if it were to upgrade Spain's
government bond rating and if the perceived credit quality of the
Offtaker were to improve. Any upgrade would be conditional on AdC
demonstrating strong debt service coverage ratios and robust
historical traffic data.
Conversely, the ratings of the loans may be subject to downgrade
in the event of any of the following: (1) actual or expected
material and persistent further declines in traffic levels; (2) a
trend of delays in the receipt of payment of outstanding invoices
from the Offtaker; and/or (3) a reduction in the perceived credit
quality of the Offtaker or a downgrade of Spain's government bond
rating.
Principal Methodology
The principal methodology used in rating Auvisa was the
Operational Toll Roads Industry Methodology published in December
2006. The principal methodology used in rating Aumancha was the
Operating Risk in Privately-Financed Public Infrastructure
(PFI/PPP/P3) Projects Industry Methodology published in December
2007. The principal methodology used in rating AdC was the
Operational Toll Roads Industry Methodology published in December
2006.
For further clarification of notching between the offtaker and
the project, Moody's implementation guidance report, titled "How
Offtakers' Default and Interference Risk Can Be a Drag on the
Ratings of PPP Projects", is available on www.moodys.com.
OBRASCON HUARTE: Moody's Confirms 'Ba2' CFR/PDR; Outlook Neg.
-------------------------------------------------------------
Moody's Investors Service has confirmed the Ba2 corporate family
rating (CFR), probability of default rating (PDR) and senior
unsecured debt instruments ratings of Obrascon Huarte Lain S.A.
(OHL). Concurrently, Moody's has assigned a negative outlook on
the ratings.
This concludes the review process initiated on April 27, 2012
following the announcement of OHL's transaction with Abertis, and
continued on June 27, 2012 following the downgrade of the Kingdom
of Spain's government bond ratings to Baa3.
The announcement follows Moody's confirmation of Spain's
government bond ratings at Baa3 with a negative outlook.
Ratings Rationale
The rating confirmation reflects Moody's assessment that OHL has
adequate liquidity in the current environment, with the company
facing no capital market debt redemptions until 2015, and
benefitting from a large recourse cash position of EUR812 million
as of June 2012. This cash position will be further strengthened
by OHL Concessions' planned repayment to OHL of a EUR250 million
intercompany loan in Q4 2012. OHL's liquidity profile will also
benefit from its 15% equity stake in Abertis, which Moody's
expects will provide an annual dividend inflow. This equity stake
is worth around EUR1.4 billion at current market prices, more
than OHL's current net recourse debt (EUR1.2 billion).
OHL's Ba2 CFR takes into account (1) its position as one of
Spain's leading construction companies and the world's eighth-
largest concessions operator; (2) its portfolio of businesses,
through which it balances cyclical construction activities with
more predictable concession-generated revenues; and (3) its
exposure to multiple geographies, with a growing portfolio of
international construction projects. However, the rating also
factors in (1) OHL's relatively high leverage, both on a recourse
and consolidated basis; (2) the macroeconomic situation affecting
its business in Spain; and (3) the potential for volatility in
the cyclical construction industry, mitigated by the revenue
visibility provided by OHL's strong international order backlog.
While OHL's international diversification enhances its credit
profile, Moody's believes that the company is not immune to the
challenges of the domestic macroeconomic environment. In Moody's
view, there are multiple channels of contagion between a
sovereign whose economic outlook is under risk and the corporate
issuers domiciled in the country, including (1) slowing economic
activity; (2) liquidity constraints and higher financing costs;
(3) scope for increased austerity measures; and (4) increased
risks of political interference.
Rationale for Negative Outlook
The negative outlook on OHL's rating reflects the challenging
macroeconomic environment affecting Spain, where the company is
domiciled. Moody's estimates that OHL generates around 18% of its
consolidated EBITDA in Spain (on a pro forma basis post-Abertis
transaction). In addition, its dividend inflow from Abertis has a
degree of Spanish exposure, given that around 43% of Abertis's
2011 EBITDA (on a pro forma basis post -consolidation of OHL's
Brazilian and Chilean concession assets) was generated in Spain.
The outlook also incorporates Moody's expectation that OHL's
credit metrics will be initially weakly positioned for the
current rating, with a likely improvement in 2013, supported by
the company's planned reduction in net recourse debt and
continued growth in EBITDA in its concessions activities.
In addition, the outlook reflects the potential pressures on
OHL's liquidity profile if access to capital markets and bank
lending becomes constrained in the future due to diminished
investor or lender confidence. This is relevant for OHL because
it continues to rely on short-term bank facilities to manage
seasonal working capital fluctuations. OHL relies on domestic
banks for approximately half of its availability of back-up
liquidity, but the banks' appetite to renew these facilities may
be reduced if their credit standing worsens in the future. This
means that OHL's access to funding may become less certain and
more expensive than in the past.
What Could Change The Rating Down/Up
Moody's could downgrade the Ba2 rating if OHL's credit metrics
weaken such that the company's (1) net consolidated debt/EBITDA
(as adjusted by Moody's) increases above 5.0x; (2) gross recourse
debt/recourse EBITDA (as reported by OHL) rises above 4.0x; and
(3) net recourse debt/recourse EBITDA remains above 3.0x on a
sustained basis. The rating could also could come under pressure
if the sovereign rating is downgraded to speculative grade or if
OHL's liquidity profile deteriorates significantly.
Moody's does not currently anticipate upward rating pressure in
light of the negative outlook, the weak macroeconomic conditions
in Spain and constraints related to the sovereign rating.
However, the rating agency could change the outlook on the
ratings to stable if OHL maintains credit metrics within the
following ranges on a sustainable basis: (1) net consolidated
debt/EBITDA (as adjusted by Moody's) between 4.5x-5.0x; (2) gross
recourse debt/recourse EBITDA (as reported by OHL) between 3.5x-
4.0x; and (3) net recourse debt/EBITDA (as reported by OHL)
between 2.5x and 3.0x.
Principal Methodology
The principal methodology used in rating Obrascon Huarte Lain
S.A. was the Global Construction Methodology published in
November 2010. 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 Madrid, OHL is one of Spain's leading
construction companies and the world's eighth-largest concessions
operator, with a large concession business in Mexico and a 15%
equity stake in Spanish infrastructure operator Abertis. In 2011,
OHL reported sales of EUR4.9 billion and EBITDA of EUR1.2
billion.
REYAL URBIS: May File for Creditor Protection if Loan Talks Fail
----------------------------------------------------------------
Sharon Smyth and Charles Penty at Bloomberg News report that
Reyal Urbis SA, which has EUR3.6 billion (US$4.7 billion) of
debt, said it may file for protection from creditors if it can't
renegotiate loans as Spain's real estate market copes with its
fourth year of crisis.
According to Bloomberg, Bloomberg said on Tuesday in a regulatory
filing "Reyal Urbis has initiated talks to reach a refinancing
agreement or, if not, to adhere to a proposal to enter the
preliminary phase of seeking protection from creditors."
"The company is using this method to force its banks to refinance
yet again," Bloomberg quotes Juan Jose Fernandez Figares, chief
analyst at Link Securities in Madrid, as saying. "It's biggest
problem is its exposure to the residential sector, which is in a
deep crisis, and these days property companies are competing with
banks, which are trying to offload their own residential real
estate."
Bloomberg notes that a regulatory filing in July showed the
company's first-half net loss widened to EUR211.4 million from
EUR161.4 million a year earlier.
Spanish real estate companies used debt to buy competitors during
a decade-long property boom and then struggled to meet sales
targets when the market collapsed, Bloomberg discloses.
Reyal Urbis renegotiated EUR4.6 billion of loans in 2010 and has
been trying to complete a second round of refinancing, Bloomberg
recounts.
About Reyal Urbis
The business of Madrid, Spain-based Reyal Urbis SA --
http://www.reyalurbis.com/-- focuses on four areas: residential
development, owned portfolio, land management and Rafaelhoteles.
In the residential development area, the Company is involved in
the construction of middle-range urban residences, as well as
property project and land management. The Company's owned
portfolio area comprises the management of residential and non-
residential properties, such as offices, shopping centers,
commercial space and industrial warehouses, among others. In the
land management area, the Company owns more than 300 land plots
located in 40 cities in Spain and Portugal. The Rafaelhoteles
area is operated by its subsidiary Rafael Hoteles SAU, which is
active in the management of the Rafaelhoteles hotel chain. In
addition, through Urbis USA Inc., the Company has operations
established in Miami, the United States.
TDA 25: High Default Rates on Loans Prompt Liquidation
------------------------------------------------------
Esteban Duarte at Bloomberg News reports that Titulizacion de
Activos SGFT, a Spanish manager of securitizations, said it will
liquidate two mortgage-backed bond transactions because of the
high default rates and low recovery values on the underlying
loans.
TDA 25 Fondo de Titulizacion de Activos and TDA 28 Fondo de
Titulizacion de Activos, special purpose companies set up to
issue mortgage-backed debt, have "grave and permanent financial
imbalances," Bloomberg quotes the manager as saying in regulatory
statements.
According to Bloomberg, the Oct. 18 filings said that
Titulizacion de Activos SGFT will manage the assets to "optimize"
recoveries for bondholders.
The two transactions include a pool of home loans originated by
Credifimo, a lender controlled by Banco Civica, which was bought
by CaixaBank earlier this year, Bloomberg discloses. The
issuers' senior notes, sold with the top ratings from Standard &
Poor's and Fitch Ratings before the financial crisis, are now
graded CCC, Bloomberg says, citing data compiled by Bloomberg.
Titulizacion de Activos SGFT is a manager of transactions set up
in 1992 by a group of banks to centralize the management and
servicing of securitization activities in Spain.
===========================
U N I T E D K I N G D O M
===========================
ATLAS REINSURANCE: S&P Assigns 'BB-' Rating to Class A Notes
------------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'BB- (sf)' and
'BB (sf)' preliminary ratings to the class A and B notes to be
issued by Atlas Reinsurance VII Ltd. (Atlas Re). The class A
notes cover losses from hurricanes and earthquakes in parts of
the U.S. on an annual aggregate basis and the class B notes cover
losses from Europe windstorm in certain countries on a
per-occurrence basis.
The preliminary ratings are based on the lower of:
-- The rating on the catastrophe risk ('BB-', for the class A
notes, and 'BB' for the class B notes);
-- The issuer credit rating on the European Bank for
Reconstruction and Development (EBRD) as the issuer of the
assets in the collateral accounts ('AAA'); and
-- The risk of nonpayment of the quarterly contract payment from
SCOR Global P&C SE (A+/Stable/--).
CENTERPOINT VENUES: Pub Business in Administration
--------------------------------------------------
Steven Vass at Herald Scotland reports that Centrepoint Venues
has gone into administration. The bar and subsidiary Merlin
McFlys, according to the report, own the Sugar Sugar/30 Something
and The Edge/Level 2 nightclubs, and the Inishmore bar in
Coatbridge.
Administrator BDO said the club was closed due to flood damage,
although the other three clubs and the pub were trading until a
buyer could be found, according to Herald Scotland.
The report, citing most recent accounts, notes that for the year
ended March 31, 2011, Centrepoint made a GBP662,000 loss and owed
GBP1.9 million to short-term creditors; while McFlys made a
profit of GP1.1 million and owed GBP344,000.
Herald Scotland relates that it comes only months after Raymond
Codona transferred the business to minority partner Steve Graham.
"We are hopeful of securing a sale and the companies will
continue to trade while all the options are explored," the report
quoted James Stephen from BDO as saying.
The report adds that Mr. Stephen confirmed Mr. Codona had sold
his interest in the business earlier this year.
EUROFINANCE SA: London Court Won't Recognize US$10MM Judgment
-------------------------------------------------------------
Erik Larson at Bloomberg News reports that Eurofinance SA, a
sales-promotion company that filed for Chapter 11 bankruptcy
court protection in New York in 2005, obtained a favorable ruling
from the U.K. Supreme Court in London.
David Rubin, receiver appointed in England to recover company
assets, had sought to have the New York proceeding in which he
won a US$10 million default judgment against Eurofinance, which
didn't defend itself in the proceeding, applied in the U.K.,
Bloomberg relates.
Britain's top court ruled for the first time that U.S. bankruptcy
court judgments against debtors that don't appear in court to
defend themselves can't be recognized in the U.K., affirming
current practice, Bloomberg discloses.
According to Bloomberg, the U.K. Supreme Court in London ruled on
Wednesday that allowing such judgments from foreign courts to be
recognized in the U.K. would be a "radical departure" from
current law and detrimental to business in Britain.
"The court did not agree that, in the interests of the
universality of bankruptcy and similar procedures, there should
be a more liberal rule for judgments given in foreign insolvency
proceedings," Bloomberg quotes the court's press office as saying
in a summary of the judgment.
ITV PLC: S&P Affirms 'BB+/B' Corp. Credit Ratings; Outlook Pos.
---------------------------------------------------------------
Standard & Poor's Ratings Services revised its outlook on U.K.
broadcaster ITV PLC (ITV) to positive from stable. "At the same
time, we affirmed our 'BB+/B' long- and short-term corporate
credit ratings on ITV," S&P said.
"We also affirmed our 'BB+' issue ratings on ITV's senior
unsecured debt. The recovery rating on these notes is unchanged
at '3', indicating our expectation of meaningful (50%-70%)
recovery for unsecured creditors in the event of a payment
default," S&P said.
"The rating action reflects our revised assessment of ITV's
business risk profile to 'satisfactory' from "fair," following
steady and significant improvement at its broadcasting operations
and solid performance at its content production business, ITV
Studios. It also reflects ITV's strong credit metrics for the
current ratings, which, if sustained over the next 12 months,
would be commensurate with an investment-grade rating ('BBB-'),
taking into account ITV's stronger business risk profile. ITV's
adjusted leverage dropped to 1.8x in the year ended June 30,
2012, from 2.3x at year-end 2011, thanks to steady earnings and
debt reduction. Importantly, we would view a financial policy
supportive of the company's currently strong balance sheet as key
to achieving an investment-grade rating," S&P said.
"We revised ITV's business risk profile to 'satisfactory' because
its overall audience and advertising market shares in the U.K.
free-to-air TV market have stabilized and improved, and the
company posted a sound EBITDA margin that exceeded 20% over the
last two years. In addition, we see solid growth and margins at
ITV's production arm, ITV Studios, which further diversify the
business away from cyclical advertising revenues. We consider
ITV's business risk profile to be in line with that of its main
broadcasting peers," S&P said.
"Under our base-case scenario of flat growth in the U.K.
advertising market in 2012, we anticipate that ITV will report
low single-digit growth in revenues and broadly stable EBITDA
margin. We assume that revenue growth will stem primarily from
ITV's non-advertising segments, while we anticipate flat
advertising revenues. Given the uncertain European macroeconomic
outlook for 2013, we prudently assume a low-single-digit decline
in advertising revenues and stable EBITDA margin for the year. As
a result, we anticipate that, if the group does not pursue
meaningful mergers and acquisitions (M&A) or shareholder returns,
adjusted leverage will remain below 2.0x over the next 12 months.
This includes GBP250 million of what we consider to be excess
cash," S&P said.
"We understand that the group intends to expand its production
business both organically and through acquisitions. Even if we
factor in sizable acquisitions, however, we anticipate that
adjusted leverage would not exceed 2.5x," S&P said.
"We currently view ITV's lack of a publicly stated financial
policy as not particularly supportive of an investment-grade
rating at this stage. We believe, however, that the next 12
months should grant us greater visibility about the
sustainability of ITV's current capital structure, which we view
as strong for the current ratings," S&P said.
"The positive outlook reflects our view that we could raise our
ratings on ITV by one notch over the next 12 months if we saw
financial policy and credit metrics as durably commensurate with
an investment-grade rating. It also reflects our revised
assessment of ITV's business risk profile to 'satisfactory.' Our
base-case forecasts include a low-single-digit decline in
advertising revenues and stable EBITA margin in 2013, with credit
metrics remaining in line with an investment-grade rating despite
expected sizable M&A activity during the period. We see adjusted
leverage of about 3x as commensurate with the current ratings,
factoring in ITV's 'satisfactory' business risk profile," S&P
said.
"We could raise the ratings if we gained more visibility on ITV's
medium-term capital structure over the next 12 months. In
particular, we would expect ITV to pursue a moderate financial
policy and balance acquisitions and shareholder remuneration with
credit metric protection. We view a ratio of adjusted debt to
EBITDA close to 2.5x and free operating cash flow of more than
10% as commensurate with an investment-grade rating," S&P said.
"We could revise the outlook to stable if ITV's operating
performance significantly weakened compared with our base-case
expectations, resulting in credit metrics that are no longer
commensurate with an investment-grade rating. An outlook revision
to stable could also be triggered by a more aggressive financial
policy than we currently expect. This would include material
acquisitions or shareholder returns that would durably weaken
ITV's capital structure to levels that are not commensurate with
an investment-grade rating," S&P said.
LONDON & WESTCOUNTRY: In Administration on Loan Repayments
----------------------------------------------------------
This is Plymouth reports that London and Westcountry Estates Ltd,
which collapsed as a result of rising interest swap loan
repayments is expected to generate income of GBP120,000 in the
six months since it entered into administration.
A creditors report relating to London and Westcountry Estates Ltd
shows that the Plymouth-based business is expected to make
GBP120,000 after costs, for quarters two and three, according to
This is Plymouth. The report relates that it follows an
allegation earlier this year from South West Devon MP Gary
Streeter in a Parliamentary debate on interest rate swap loan
misselling, that the company's administration was "completely
unnecessary."
This is Plymouth notes that the company's co-founder, Mike
Hockin, who was initially retained by administrators Ernst &
Young to help run the business, has since been made redundant,
along with his son, Matthew, while another son, James, remains
involved with the business.
"I believe it proves the point that there's nothing wrong with
the business. Even though they have sold off GBP4.5 million
worth of property, the rent roll has gone up. The rent roll has
taken up the slack that has been lost on sales - it's a very good
business," the report quoted Mr. Hockin as saying.
The report recalls that London & Westcountry took out a
GBP57 million interest swap loan from Royal Bank of Scotland in
2008 to finance the acquisition of business parks. This is
Plymouth relays that the swap deals were sold to protect
businesses against interest rate hikes, but actually led to them
repaying at pre-recessionary interest rates, which continued to
rise as the base rate fell to an all-time low of 0.5%. Four of
LWE's business parks have already been sold by administrators --
Centurion, in Exeter, Severnside, in Bridgwater, Taw Mill, in
Barnstaple and Brent Mill, at South Brent -- for around
GBP4.8 million, the report discloses.
The report says that a payment of GBP4.27 million has already
been made to Isobel Assetco Ltd, a company which bought a package
of loans, including LWE, from Royal Bank of Scotland.
Administrators Chris Marsden and Alan Bloom reported that they
are adopting a "piecemeal" approach to disposing of the remaining
sites with four parks currently on the market, the report notes.
They are aiming to have completed all sales by the end of
September 2013.
The report notes that Mr. Hockin alleges that RBS gave them
24 hours to sign the loan agreement and that he was given the
impression it had a three-year break clause that would allow
either party to exit the agreement. However, the report relates
that Mr. Hockin claims that when his company tried to terminate
the loan after three years, they were told that only RBS could
activate the break clause and that it would cost his business
GBP11 million to exit the arrangement.
This is Plymouth notes that their loan repayments had started at
4%, before rising to 6.4%, and then, last August, to 7.5%, which
the firm had not been able to afford.
London and Westcountry loan was bundled up with other troubled
loans and sold by RBS to a new company, Isobel Assetco Ltd, 25%
of which is owned by Blackstone, the US venture capital company,
and 75% by RBS, the report adds.
London and Westcountry Estates Ltd is a Plymouth-based business
that operates 27 business parks across the region.
PUNCH TAVERNS: Set to Enter Into Debt Restructuring Talks
---------------------------------------------------------
Rose Jacobs at The Financial Times reports that Punch Taverns is
squaring up for talks with bondholders after an internal review
called for the restructuring of the company's nearly GBP2.5
billion of debt
According to the FT, the pubs group is already in discussions
with shareholders about two securitized debt vehicles that
require regular cash injections from the parent company to keep
them from breaching banking covenants.
The FT relates that the company said on Wednesday a review of the
capital structure, launched this spring, had concluded that
"significant changes" would be necessary "to protect the material
financial and operational benefits that both [securitizations]
enjoy as part of the wider group".
Talks with bondholders would begin "at the appropriate time".
Punch's pubs are profitable, as underscored by preliminary
results on Wednesday showing pre-tax profits of GBP52.4 million
on revenues of GBP492 million, compared with a GBP335 million
pre-tax loss in 2011 thanks to more than GBP400 million in
impairment and goodwill charges, according to the FT.
But performance is deteriorating, with a decline in beer sold,
falling rental income from tenants and pub failures hitting
revenues and pushing down underlying profits, the FT states.
The two securitizations, which together constitute GBP2.4 billion
of debt, have multiple tranches, which will probably complicate
restructuring talks, the FT notes.
Punch, the FT says, has time to reach an agreement thanks in part
to GBP264 million it holds in cash. The board as cited by the
FT, said it had prepared Wednesday's results on the basis that
the company was a going concern, but emphasized that the
continuation of that status depended on achieving "a consensual
restructuring".
Punch Taverns plc is a United Kingdom-based pub company. The
Company is engaged in the operation of public houses under either
the leased model or as directly managed by the Company. The
Company operates in two business segments: punch partnerships, a
leased estate and punch pub company, a managed estate.
===============
X X X X X X X X
===============
* Moody's Says Baltic Banking System Outlook Remains Negative
-------------------------------------------------------------
The outlook for the banking system across the three Baltic
countries -- Estonia, Latvia and Lithuania -- remains negative,
says Moody's Investors Service in a new Banking System Outlook
published on Oct. 23. The key drivers of the outlook are (1) the
likelihood of continued asset-quality weakness amidst
persistently high problem loans; (2) funding concentrations that
leave smaller domestic banks vulnerable to deposit sensitivity
and larger institutions dependent on parental-funding support;
and (3) high unemployment and elevated household debt, which is a
long-term constraint on economic growth. Additionally, many
domestically owned banks (especially in Latvia) depend on non-
domestic, confidence-sensitive business.
The new report is entitled "Banking System Outlook: Baltics".
Across each of the Baltic countries, Moody's says that the banks'
operating environment will remain adversely affected by (1) a
deceleration of GDP growth to between 2%-3% in 2012 from between
6%-8% in 2011; and (2) economic headwinds in the euro area that
will cause weaker trade demand from the countries' main trading
partners [Source: Moody's Statistical Handbook Country Credit,
May 2012]. In addition, the domestic sector will remain adversely
affected by high unemployment and debt levels, and low credit
growth.
Despite the strong economic growth during 2011, over the next 12-
18 months the pressure on households' financial positions is
likely to increase as the region's economic recovery slows. As
such, Moody's expects little improvement in the very high problem
loans in Latvia and Lithuania. Banks' capital ratios are
generally high, with average Tier 1 ratios between 12%-19% across
the three countries at end-2011, although in many instances this
is necessitated by the individual banks' high credit-risk
profiles [Source: Lithuanian Central Bank, Estonian FSA, Latvian
Financial and Capital Markets Commission].
Subsidiaries of large Nordic banking groups dominate the Baltic
banking systems. These subsidiaries are largely dependent on
funding from their wholesale-reliant parents and are therefore
exposed to any funding challenges at the parent level and to the
risk of reduced parental support; many of the domestically owned
banks are almost entirely deposit-funded. Moody's says that this
exposes these banks to depositor confidence, which has been
particularly volatile in Latvia in recent years. Several of the
domestically owned Latvian banks have a high percentage of
deposits from non-domestic residents, which Moody's views as less
stable than domestic deposits.
* Upcoming Meetings, Conferences and Seminars
---------------------------------------------
November 1-3, 2012
TURNAROUND MANAGEMENT ASSOCIATION
TMA Annual Convention
Westin Copley Place, Boston, Mass.
Contact: http://www.turnaround.org/
Nov. 29 - Dec. 2, 2012
AMERICAN BANKRUPTCY INSTITUTE
Winter Leadership Conference
JW Marriott Starr Pass Resort & Spa, Tucson, Ariz.
Contact: 1-703-739-0800; http://www.abiworld.org/
April 10-12, 2013
TURNAROUND MANAGEMENT ASSOCIATION
TMA Spring Conference
JW Marriott Chicago, Chicago, Ill.
Contact: http://www.turnaround.org/
October 3-5, 2013
TURNAROUND MANAGEMENT ASSOCIATION
TMA Annual Convention
Marriott Wardman Park, Washington, D.C.
Contact: http://www.turnaround.org/
*********
Monday's edition of the TCR delivers a list of indicative prices
for bond issues that reportedly trade well below par. Prices are
obtained by TCR editors from a variety of outside sources during
the prior week we think are reliable. Those sources may not,
however, be complete or accurate. The Monday Bond Pricing table
is compiled on the Friday prior to publication. Prices reported
are not intended to reflect actual trades. Prices for actual
trades are probably different. Our objective is to share
information, not make markets in publicly traded securities.
Nothing in the TCR constitutes an offer or solicitation to buy or
sell any security of any kind. It is likely that some entity
affiliated with a TCR editor holds some position in the issuers'
public debt and equity securities about which we report.
Each Tuesday edition of the TCR contains a list of companies with
insolvent balance sheets whose shares trade higher than US$3 per
share in public markets. At first glance, this list may look
like the definitive compilation of stocks that are ideal to sell
short. Don't be fooled. Assets, for example, reported at
historical cost net of depreciation may understate the true value
of a firm's assets. A company may establish reserves on its
balance sheet for liabilities that may never materialize. The
prices at which equity securities trade in public market are
determined by more than a balance sheet solvency test.
A list of Meetings, Conferences and Seminars appears in each
Thursday's edition of the TCR. Submissions about insolvency-
related conferences are encouraged. Send announcements to
conferences@bankrupt.com
Each Friday's edition of the TCR includes a review about a book
of interest to troubled company professionals. All titles are
available at your local bookstore or through Amazon.com. Go to
http://www.bankrupt.com/booksto order any title today.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Europe is a daily newsletter co-
published by Bankruptcy Creditors' Service, Inc., Fairless Hills,
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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
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