/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/121101.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, November 1, 2012, Vol. 13, No. 218 Headlines F R A N C E AUVERSUN: Faces Liquidation; 53 Jobs Affected G E R M A N Y GERMAN RESIDENTIAL: Moody's Comments on Restructuring Proposal H U N G A R Y * HUNGARY: Construction Sector Liquidations Down in Third Qtr. I R E L A N D CURRAGH CARPETS: Goes Into Liquidation; 60 Workers Lose Jobs WATERFORD PILOT: To Face Probe Amid Claims of Law Breaches * IRELAND: Almost Seven Companies Folding Every Day Last Month I T A L Y UNIPOL GRUPPO: Moody's Confirms 'Ba2' Sr. Rating; Outlook Neg. L A T V I A LATVIJAS KRAJBANKA: KMPG Continues Loan Disposal Process P O L A N D BANK ZACHODNI: Moody's Confirms 'D+' BFSR; Outlook Stable PBG SA: CEO Wieslaw Rozacki Steps Down POLIMEX-MOSTOSTAL: Inwestycje Files Insolvency Motion R U S S I A * MOSCOW OBLAST: Moody's Upgrades Currency Ratings to 'Ba2' S P A I N AP-36 OCANA-LA: Put Into Bankruptcy by Ferrovial S W E D E N VOLVOFINANS BANK: Moody's Reviews 'D+' BFSR for Downgrade S W I T Z E R L A N D UBS AG: Moody's Confirms 'B2' Rating on Credit-Linked Notes T U R K E Y TURKIYE IS BANKASI: Moody's Assigns Ba2 Subordinated Debt Rating U N I T E D K I N G D O M BRIDAL GALLERY: Directors to Decide on Liquidating Chain WESTMORLAND GAZETTE: 20% of Cumbria Pubs at Risk of Collapse U Z B E K I S T A N IPAK YULI: Moody's Assigns 'B2/E+' Ratings; Outlook Stable X X X X X X X X * EUROPE: Moody's Says Covered Bond Downgrades Accelerates * Upcoming Meetings, Conferences and Seminars ********* =========== F R A N C E =========== AUVERSUN: Faces Liquidation; 53 Jobs Affected --------------------------------------------- Photo International, citing local news source La Montagne, reports that the Commercial Court of Clermont-Ferrand has ruled that struggling Auversun will be liquidated. The company's 53 employees will lose their jobs, Photon discloses. According to Photon, Auversun needed to attract at least EUR2 million (US$2.6 million) in new investment to stay in business, but negotiations with two potential suitors fell through. Auversun began insolvency proceedings on Aug. 1, 2012, at which time it halted production activities, Photon relates. Auversun is a French module producer. ============= G E R M A N Y ============= GERMAN RESIDENTIAL: Moody's Comments on Restructuring Proposal -------------------------------------------------------------- Moody's Investors Service has determined that the proposed restructuring of the transaction would constitute a distressed exchange for the Classes D, E and F Notes. Following the downgrade due to the distressed exchange definition, Moody's expects an upgrade of the ratings of these classes of notes to similar levels as Oct. 30. The upgraded ratings would be based on the amended terms and conditions of the notes that include several restructuring features that Moody's views as credit positive, as described in its press release dated July 18, 2012. For the Classes A, B and C Notes, Moody's has determined that the proposed restructuring of the transaction would not constitute a distressed exchange. The main aspect considered in the distressed exchange analysis is the extension of the final legal maturity of the Notes by five years, which avoids an ultimate default of the affected classes of notes. Moody's would adjust the ratings for the affected classes of notes if the proposed restructuring was implemented. The downgrade would reflect the expected losses for the respected classes of notes in a scenario without the proposed restructuring. After the restructuring, Moody's would adjust the ratings to reflect the amended terms and conditions of the notes including the extended final legal maturity. The adjusted ratings would address the expected loss posed to investors by the amended legal final maturity and incorporate the other features of the restructuring. Transaction Overview The transaction follows the principles of a secured loan structure. The Issuer used the issuance proceeds of each class of Notes to purchase REF Notes (equivalent to loans) from 31 REF Note Issuers (equivalent to borrowers) in a corresponding aggregate amount. Despite the 31 individual REF Note Issuers and the fact that the security structure does not provide for cross- collateralization between the REF Note Issuers, the structure is effectively a single borrower deal. In addition to the interest payment obligations with respect to the REF Notes, each REF Note Issuer has also entered into a global facility agreement, in which global LTV targets are defined that have to be met by the borrower group as a whole. Two holding companies, both subsidiaries of DAIG that ultimately own each REF Note Issuer and their general partners, guarantee the obligations under the global facility agreement. Distressed Exchange Analysis To assess the presence of a distressed exchange, Moody's assumed a payment default at loan maturity in 2013 absent a restructuring. Moody's has highlighted as main risks for the transaction (i) a failure to refinance the loans and (ii) the uncertainty around the timely repayment of the notes by the current legal final maturity date of the notes given the size of the issuance and the short time period to the legal final maturity date. The size of the EUR4.4 billion issuance will make a complete refinancing of the loans in 2013 unlikely without a restructuring of the loans and the notes. Financing for multifamily portfolios is in general more easily available compared to other property types as evidenced by other refinancings this year, but neither the lending nor the capital markets currently offer sufficient depths for such a high debt amount. Moody's does not expect a significant recovery of the lending market in the next two years as per its EMEA CMBS 2012 Central Scenario. The issuance shows a current Moody's loan to value (LTV) ratio of 73.0% including prior ranking debt. In the analyzed default scenario of the loans Moody's would expect the servicer to start enforcement actions and selling the underlying property portfolio. Given the size of the portfolio at over EUR8 billion current Underwriter (UW) market value (MV), a sale of the total portfolio is highly unlikely. The portfolio size is larger than estimates of the total transaction volume in German multifamily portfolios in 2011. The largest transactions over the past two years have also been significantly below this level. Due to the size of the portfolio, the limited number of investors capable of buying large residential portfolios and the time constraints Moody's would expect the sales price to reflect the distressed work-out. This impacts junior notes more than senior notes given that senior notes could withstand high discounts on sale prices without suffering a loss. A limiting factor for any work-out strategy of the servicer and the reason for a lower expected sales price is the rather short tail period of three years for the transaction, i.e. the time between the loan maturity and the note maturity. Moody's has considered that there is a risk that not all recovery proceeds would be paid to the noteholders by the legal final maturity of the notes considering the limited time for a refinancing or a work-out of the loan. Rating Levels After Restructuring Overall, the default probability during the loan term due to decreasing rental income will decrease mainly due to the deleveraging of the portfolio as a consequence of equity injection and lower interest rates. Moody's determined a low risk of cash flow shortfall even if the refinancing fell behind the sponsor's business plan and the unhedged amount of debt increased. The restructuring effectively staggers refinancing risk over the new loan term due to the annual amortization targets and the bullet repayment at the amended loan maturity date. Moody's determined the refinancing default probability in the medium/ high range (25-50%) based on the expected leverage and the size of the sub portfolios and the total issuance. Moody's has also reviewed its value estimate of the portfolio and kept it at the same level as in its last review in 2011. The pro-rata allocation of principal proceeds to the notes is a credit negative to the senior noteholders. The allocation rule causes senior noteholders to be exposed to repayment risk until the whole securitized debt amount is redeemed. In contrast, a sequential allocation of principal proceeds in a default scenario absent of the restructuring would ensure that senior noteholders are repaid first. Hence junior noteholders benefit more from the proposed restructuring than senior notes. Moody's has determined that the new liquidity facility arrangements including the reduced liquidity facility amount in connection with the profile of the interest rate hedges is weaker compared to the current arrangements. Especially in scenarios of delayed refinancings and an increase of unhedged debt amounts due to the interest rate hedge profile the liquidity facility amount could become tight to cover cash flow shortfalls in default scenarios. Delayed refinancings could lead to an event of default under the loans if the amortization targets are not met which could potentially result in a borrower insolvency and a stoppage of payments to the issuer. The liquidity facility would need to cover the subsequent cash flow shortfall. Relevant variables in such a scenario are the interest rate environment and the portion of the unhedged debt amount. A loan default might not affect the ultimate repayment of the senior notes due to credit enhancement, but in such a scenario the continuing timely payment of interest through liquidity drawings could be at risk. The weaker liquidity arrangements are commensurate with the current rating levels but could become a constraining factor for potential upgrades for performance reasons. Moody's will continue to closely monitor further developments with respect to the restructuring efforts. The principal methodology used in this rating was Moody's Approach to Real Estate Analysis for CMBS in EMEA: Portfolio Analysis (MoRE Portfolio) published in April 2006. ============= H U N G A R Y ============= * HUNGARY: Construction Sector Liquidations Down in Third Qtr. -------------------------------------------------------------- MTI-Econews reports that Opten, which compiles information on companies, on Tuesday said creditors and suppliers launched liquidation procedures against 1,076 Hungarian construction companies in the third quarter of 2012, compared to 1,255 in the second quarter. The figure was the lowest measured since the first quarter of 2011, MTI notes. Opten noted, however, that the statistics could vary because of regulatory changes and the rise in the orders of the sector proved temporary, MTI discloses. According to MTI, the number of voluntary liquidations came to 552 in the third quarter, well below the figure in first quarter and second quarter, when the number of voluntary liquidations surpassed 1,400. ============= I R E L A N D ============= CURRAGH CARPETS: Goes Into Liquidation; 60 Workers Lose Jobs ------------------------------------------------------------ Conor McHugh at Leinster Leader reports that 60 workers at Newbridge's Curragh Carpets plant have been told by a liquidator appointed to the company on October 26 that they are to lose their jobs. The report says SIPTU which represents 35 of the workers has condemned the manner of the announcement, given that there was no warning. At the meeting, they were informed that the plant was closing with immediate effect and they were to directly leave the premises, Leinster Leader reports. According to the report, the move brings to an end the 70-year history of carpet manufacturing in Newbridge when Curragh Carpets was established as an off-shoot of Irish Ropes. WATERFORD PILOT: To Face Probe Amid Claims of Law Breaches ---------------------------------------------------------- Claire O'Sullivan at Irish Examiner reports that the Waterford Pilot Training College which left hundreds of trainee pilots stranded in Florida after taking up to EUR80,000 in tuition fees from them is being investigated by the Office of the Director of Corporate Enforcement (ODCE). According to the report, the Department of Transport said a complaint concerning breaches of company law by Waterford Pilot Training College (PTC) was referred to the ODCE. The Irish Examiner relates that the ODCE is not allowed to reveal the identity of complainants and the Department of Transport said they did not have any further details about the referral. The Irish Examiner contacted the Irish Aviation Authority on October 25 to see if it intended referring PTC Waterford to ODCE but the body said "they had nothing further to add" having made an appearance at the D il Transport Committee on Wednesday. At the committee, the report relates, IAA chief executive Eamonn Brennan had gone so far as to say "it looks like this should probably go to the Director of Corporate Enforcement". The Irish Examiner adds Mr. Brennan has repeatedly denied that PTC's collapse was due to a failure of regulation on the part of the IAA. He said the IAA's remit is to ensure and regulate flight safety and not oversee the general financial health of a flight training company, the report relays. Mr. Brennan, as cited by Irish Examiner, told the Dail committee "we need to get the principals of the company in here" and the company's auditors need to answer questions "if we can't place reliance on audited statements" presented to the IAA just months before the company went under. The Irish Examiner notes the Dail Transport Committee on October 25 agreed to a full and forensic investigation into the collapse of PTC. The IAA had earlier likened the financing of the company to a Ponzi scheme, the report adds. As reported in the Troubled Company Reporter-Europe on July 23, 2012, The Irish Times said that Pilot Training College was granted examinership by the High Court. The appointment of Michael McAteer of Grant Thornton as examiner is a first step in restructuring the firm. According to the Irish Times, the High Court was told by an independent accountant that the company has a "reasonable prospect of survival". Pilot Training College is based in Waterford. * IRELAND: Almost Seven Companies Folding Every Day Last Month -------------------------------------------------------------- Irish Examiner reports that an average of almost seven Irish companies went bust every day from October 1-25, according to the latest figures from the credit risk analysis firm Vision-net. Vision-net's figures, covering the period between October 1 and 25, show that 168 companies were declared insolvent - up 39% on the same month last year, according to Irish Examiner. The report relates that of those, 110 were liquidated, 54 entered receivership, and an examiner was appointed to four companies. Irish Examiner notes that Vision-net said receiverships more than doubled over the same period last year, and receivers were appointed to 10 companies to which businessman Bill Cullen is linked. Irish Examiner relates that a county-by-county breakdown of the figures for this month shows that Dublin accounted for 48% of all insolvencies, with Wexford the second highest on 10%. In all, 94 companies held meetings of creditors showing short- term debts of more than EUR38million, the report notes. However, the report relates that Vision-net's figures recorded that 3,053 company and business start-ups this month - up 19% on the same month last year - showing an average of 122 start-ups each day. The professional services sector accounted for almost one-quarter of new companies, followed by the wholesale and retail sector at 12%, social and personal services at 11%, and information technology at 8%, Irish Examiner says. In the first nine months of the year, 10,439 companies were formed but 10,635 collapsed, showing a net loss of 196, Irish Examiner relays. Irish Examiner says that companies in the professional services, construction, wholesale and retail, real estate, social and personal services, and manufacturing sectors made up 72% of closures this year so far. Vision-net's figures for September show that 455 registered commercial and consumer judgments worth EUR26.5million were awarded in the courts, Irish Examiner notes. The report discloses that of these, 296 were judgments awarded against consumers worth EUR18.8million, with the Revenue Commissioners, credit unions, banks, real estate and utilities making up most of the creditors. Christine Cullen, managing director of Vision-net, said the figures show that the domestic economy is showing few signs of uplift, the report adds. ========= I T A L Y ========= UNIPOL GRUPPO: Moody's Confirms 'Ba2' Sr. Rating; Outlook Neg. -------------------------------------------------------------- Moody's Investors Service has confirmed the Ba2 senior rating of Unipol Gruppo Finanziario S.p.A. (UGF), the holding company of Unipol Group, and the Baa2 insurance financial strength rating (IFSR) of Unipol Assicurazioni SpA (Unipol), the main insurance operating company. The confirmation of the Ba2 senior rating of UGF and the Baa2 IFSR reflects Moody's view of Unipol's very strong business profile following the acquisition of a controlling stake in Fondiaria Sai SpA (Fondiaria Sai; unrated), which is partly offset by the group's high investment risk and execution risk arising from the acquisition. At the same time, Moody's has confirmed Unipol Banca's Ba2 long- term deposit rating and downgraded the standalone bank financial strength rating (BFSR) to E, equivalent to a standalone credit assessment of caa1, from D-/ba3. The lowering of Unipol Banca's standalone credit assessment reflects Moody's view of the bank's weak financial fundamentals, and an increased likelihood that the bank may require further capital support from UGF. The confirmation of the long-term deposit rating reflects the confirmation of UGF's ratings, as well as Moody's view of a very high probability of support from the parent, in case of need. These actions and announcements conclude the review for downgrade Moody's initiated on July 17, 2012. All the ratings now carry a negative outlook, except the BFSR at Unipol Banca which carries a stable outlook. A complete list of actions is listed below. RATINGS RATIONALE -- UNIPOL ASSICURAZIONI In September 2012, UGF raised EUR1.1 billion of equity capital to fund its proposed purchase of a controlling stake in Fondiaria- Sai, the second largest Italian P&C insurance group. UGF is expected to obtain control of over 60% of the newly merged insurance group, which includes Unipol Assicurazioni, Fondiaria- Sai, Milano Assicurazioni and Premafin. Unipol's management board expects to approve the merger by year-end 2012 and to receive authorisation from the insurance regulator in 2013. The new insurance group generated by the merger of Unipol and Fondiaria Sai will be a clear market leader in the Italian P&C segment, with a pro forma 30% market share, well ahead of the second (21%) and third (11%) market players. Moody's expects this strong P&C market position to translate into substantial pricing power with its customers. The group will continue to focus mainly on retail P&C insurance, and will also have a sizeable life insurance business (pro forma, premiums are split 2/3 in P&C, 1/3 in Life). More negatively, the new group will have a high concentration to Italian sovereign risk in terms of both its investment portfolio and business profile. On a pro forma basis, Moody's estimates that Italian government bonds will represent around 50% of the new group's total investment portfolio (around 4x pro forma capital), and almost the entire new group's premiums will be sourced in Italy. In addition, other investment risks include the elevated exposure to property (estimated to be over 10% of total investments on a pro forma basis at year-end 2011), although Moody's understands that the insurer aims to reduce this exposure to below 8% by 2015. The level of intangibles is also high as a percentage of total pro-forma capital for the new group. Furthermore Moody's views the execution and legal risk of the merger as high, given its complex nature: the transaction involves the integration of three listed companies and will demand considerable management time and effort in securing operational efficiency. An additional risk is the potential for further loss-reserve strengthening in the future -- Fondiaria Sai had already strengthened its reserves by EUR0.8 billion in 2011 -- although this is partially mitigated by Unipol's plan to strengthen reserves by an additional EUR0.5 billion between 2013- 15. Moody's views the new group's consolidated capitalization as adequate and in line with Moody's expectations for a Baa-rated company. In September 2012, both Unipol and Fondiaria Sai concluded their capital increases for a total net amount of EUR1.7 billion (this amount includes EUR1.1 billion raised by Unipol and an additional EUR1.1 billion raised by Fondiaria Sai, minus the share of Fondiaria Sai' s capital underwritten by Unipol). This results in a Solvency I ratio for the new group of 139% on a pro forma basis at year-end 2011 (124%, after deducting unrealised losses on sovereign bonds). With respect to financial flexibility, Moody's views the group's financial leverage as within the rating agency's tolerance levels for the current rating at a pro forma 34% at year-end 2011. However, earnings coverage is expected to remain somewhat subdued in 2012. RATINGS RATIONALE -- UNIPOL BANCA Unipol Banca's profitability has been weak in recent years, with net losses in 2008 and 2009, and break-even results in 2010 and 2011 (adjusted to exclude a EUR300 million impairment on goodwill). In H1 2012, excluding extraordinary gains on debt buyback, the bank's recurring profitability deteriorated further, both on a pre-provision and on a net level. In Moody's view, asset quality is also weak, with gross problem loans accounting for around 15% of gross loans in 2011, significantly higher than the Italian average of 8.9% (source: Bank of Italy's 2011 annual report). Considering Unipol Banca's low recurring profitability, and its weak and deteriorating asset quality, Moody's cautions that the bank's 8.2% core Tier 1 ratio as of June 2012 might not, in its opinion, provide a sufficient cushion to absorb losses in case of stress, resulting in a relatively high probability that further capital support from UGF might be required. In June 2012, Unipol Banca reported a pre-tax profit of EUR10 million, a decrease of 33% from June 2011, with an increase in provisions for loan losses and other financial assets of 55% to EUR44 million, and also benefited from a substantial non-recurring gain on debt buybacks. The above rating drivers were the cause for the lowering of Unipol Banca's standalone credit assessment to caa1. The bank's long-term deposit rating was, however, confirmed at Ba2, based on Moody's assessment of a very high probability of parental support from UGF, resulting in five notches of rating uplift from the caa1 standalone credit assessment. In recent years, UGF has demonstrated its willingness and effectiveness in providing support to Unipol Banca. UGF has provided support in the form of (1) capital, with around EUR300 million injected between 2009 and 2011, which represents around one-third of the bank's shareholders' equity in 2011; (2) liquidity, through the provision of funding to the bank when required; and (3) asset quality, through a EUR550 million guarantee for part of the bank's loan portfolio, provided in 2011. OUTLOOK Moody's negative outlook on UGF, Unipol and Unipol Banca's long- term deposit rating reflects the execution challenge arising from the acquisition of Fondiaria Sai, as well as the risk of further reserve strengthening for the new group. The negative outlook also mirrors the negative outlook on Italy's Baa2 government bond rating and reflects the uncertainties around the economic and financial environment in Italy. WHAT COULD MOVE THE RATING OF UNIPOL ASSICURAZIONI and UGF UP/DOWN At present, there is limited upwards pressure on the ratings given the negative outlook. Downwards rating pressure could develop following any further significant reserves strengthening and costs associated to the integration, including legal and compensatory expenses. Any significant loss of market share would also exacerbate negative rating pressures, whilst any further downgrade of Italy's government bond rating would also likely lead to a downgrade of Unipol's ratings, due to various credit linkages between the two. These linkages include the reduced quality of the group's investment portfolio and the potential constraints on the profitability of the insurance business, if operating conditions in Italy decline further. WHAT COULD MOVE THE RATING OF UNIPOL BANCA UP/DOWN A degree of upwards pressure could develop on the bank's BFSR following (1) a substantial increase in the bank's core capital ratios; and (2) an improvement in the bank's recurring profitability and asset quality. An upgrade of the bank's BFSR would be unlikely to result in an upgrade of the deposit ratings, given the very high level of support Moody's already incorporates into the deposit ratings. Upwards pressure on the deposit ratings might develop following an upgrade of UGF's Ba2 long-term debt rating; however, this is unlikely at present because of the negative outlook on that rating. Further deterioration of profitability and asset quality, and/or a reduction of the bank's core capital ratios, could exert downwards pressure on the caa1 standalone credit assessment. A downgrade of UGF, or a reduction in support and commitment from UGF towards Unipol Banca might lead to a downgrade of Unipol Banca's long-term deposit rating. The following ratings were confirmed and their outlook revised to negative from on review for downgrade: Unipol Assicurazioni S.p.A. -- insurance financial strength rating: Baa2 Unipol Assicurazioni S.p.A. -- subordinated debt rating: Ba1 (hyb) Unipol Gruppo Finanziario SpA -- senior rating: Ba2 Unipol Gruppo Finanziario SpA -- senior MTN rating: (P) Ba2 Unipol Gruppo Finanziario SpA -- long term issuer rating: Ba2 Unipol Banca -- long-term bank deposits rating: Ba2 The following rating was downgraded and outlook revised to stable from negative: Unipol Banca -- bank financial strength rating: E/caa1 from D- /ba3 METHODOLOGY USED The methodologies used in rating Unipol Assicurazioni S.p.A. and Unipol Gruppo Finanziario S.p.A were Moody's Global Rating Methodology for Life Insurers published in May 2010, Moody's Global Rating Methodology for Property and Casualty Insurers published in May 2010, and Moody's Guidelines for Rating Insurance Hybrid Securities and Subordinated Debt published in January 2010. The principal methodology used in rating Unipol Banca was Moody's Consolidated Global Bank Rating Methodology published in June 2012. =========== L A T V I A =========== LATVIJAS KRAJBANKA: KMPG Continues Loan Disposal Process -------------------------------------------------------- KPMG as Insolvency Administrator to JSC Latvijas Krajbanka is continuing its loan disposal process launched in June 2012 whereby KPMG is seeking to attract potential investors for the loan portfolios of JSC Latvijas Krajbanka, in liquidation. The loans have been split into five tranches based of selected characteristics of the loans (corporate, retail etc). KMPG said: "The process for sale of these loan portfolios proceeds according to schedule and as a result of the initial market sounding phase to identify potential interested parties, KPMG has been in contact with or has been contacted by more than 100 parties. "In its role as the insolvency Administrator KPMG's primary goal is to maximize the recovery of funds for the Bank's creditors including the State and accordingly key selection criteria for potential bidders includes but is not limited to the price offered by the interested party, the ability to finance the transaction, the terms of the bid, the willingness to work within the proposed timetable and the operational experience in servicing similar sizes and types of loan portfolios. "Over the next few weeks the Administrator will commence the second phase of the sale process, during which Parties who have participated in the first phase and which remain interested and meet the criteria to be included in the second phase, will be invited to continue their analysis and submit their binding offers. KPMG requires that any interested party who has not yet been invited to participate in Phase 1 expresses their interest no later than 5 November 2012." About Latvijas Krajbanka Headquartered in Riga, Latvia, AS Latvijas Krajbanka provides commercial banking services to businesses and private individuals in Latvia and the markets of the Commonwealth of Independent States. As of Dec. 31, 2009, AS Latvijas Krajbanka had 115 customer service centers and 190 automated teller machines. AS Latvijas Krajbanka is a subsidiary of AS banka Snoras. As reported in the Troubled Company Reporter-Europe on May 10, 2012, Baltic Business News said the Riga District Court on May 8 decided to start the bankruptcy procedure of Latvijas Krajbanka. The move was initiated by Krajbanka's insolvency administrator SIA KPMG Baltics, BBN disclosed. The company believes that it is impossible to revive the bank without state support, which is not coming, BBN noted. Latvian regulators halted Krajbanka's operations on Nov. 21, 2011, after discovering LVL167 million (US$301 million) was missing, Bloomberg News recounted. =========== P O L A N D =========== BANK ZACHODNI: Moody's Confirms 'D+' BFSR; Outlook Stable --------------------------------------------------------- Moody's Investors Service has confirmed Bank Zachodni WBK SA's (BZ WBK) long-term deposit rating of Baa1 with a negative outlook and the bank's standalone bank financial strength rating (BFSR) of D+ (equivalent to a baa3 standalone credit assessment) with a stable outlook. The short-term deposit rating Prime-2 was also confirmed. This action concludes the review of the bank's rating initiated on June 28, 2012. The announcement follows the confirmation of the ratings of the bank's parent, Banco Santander SA (Baa2 deposits; BFSR C-/baa2, Prime-2, Negative) announced on October 24, 2012. Ratings Rationale The confirmation of BZ WBK's standalone BFSR D+/baa3 takes into account the following factors: a) the confirmation of the parent's ratings and ; b) Moody's view of the Polish subsidiary's relatively independent franchise from that of the parent; no reliance on parental funding, strong standalone financial fundamentals; and stringent regulatory controls on dividend distributions. The outlook on BZ WBK's stand-alone BFSR D+ (equivalent to a baa3 standalone credit assessment) is stable due to above mentioned factors that, to some extent, insulate BZ WBK's stand-alone credit strength from its parent group. However, Moody's notes that should the worsening operating conditions in Poland weigh down on the bank's hitherto robust financial fundamentals, also in light of the proposed merger with a significantly weaker entity, Kredyt bank (unrated), this could lead to a possible lowering of the bank's standalone credit assessment within the same BFSR category. BZ WBK's long-term rating of Baa1 is sensitive to the downgrade of parent's stand-alone rating, which remains on negative outlook after the recent rating actions. The negative outlook on BZ WBK's long-term rating, therefore, reflects this sensitivity and is aligned with that of Banco Santander's negative outlook. Currently, the bank's long-term rating continues to benefit from a two-notch uplift due to the combination of parental and systemic support. As noted in Moody's previous announcement BZ WBK's plans to merge with Kredyt bank may put pressure on the profitability and efficiency of the combined entity in the short term but is expected to have a medium-term positive impact on the franchise. At this stage the merger plans remain in an intentional bases and is expected to be approved by the Polish banking regulatory authorities by end of 2012. What Could Change The Ratings Up/Down As a result of the recent rating actions, an upgrade of the banks ratings is unlikely at the current time. Further downgrade of the parent and/or a downgrade of the bank's standalone rating would likely prompt a downgrade of the long-term ratings as indicated above. The principal methodology used in these ratings was Moody's Consolidated Global Bank Rating Methodology published in June 2012. PBG SA: CEO Wieslaw Rozacki Steps Down -------------------------------------- Poland A.M. reports that Wieslaw Rozacki on Tuesday resigned from his position as CEO of PBG SA. He will be replaced by Pawel Mortas, who has been working for the group since 2010, Poland A.M. discloses. In June, PBG filed for bankruptcy with the possibility of an arrangement with creditors, Poland A.M. relates. According to Poland A.M., Mr. Rozacki's statement published on Tuesday said that the main reason for his resignation was the fact that PBG lost control over its key subsidiary, Rafako, after a series of transactions that he did not authorize. PBG SA is Poland's third largest builder. POLIMEX-MOSTOSTAL: Inwestycje Files Insolvency Motion ----------------------------------------------------- Minda Alicja at Polska Agencja Prasowa reports that Inwestycje Przemyslowe, one of Polimex-Mostostal's creditors, filed an insolvency and liquidation motion against the company. According to PAP, the firm said that Polimex considers the motion to be groundless and will take action aimed at its dismissal. Polimex-Mostostal is a Polish builder. =========== R U S S I A =========== * MOSCOW OBLAST: Moody's Upgrades Currency Ratings to 'Ba2' ----------------------------------------------------------- Moody's Investors Service has upgraded the global-scale foreign and local-currency ratings of Moscow Oblast to Ba2 from Ba3, reflecting sustainable improvements in its financials over the last two years and the rating agency's expectations of strong results in 2012. The outlook on the ratings is stable. Ratings Rationale The rating action is driven by the steady improvement in the region's operating balances and financing surpluses over the last two years, and the corresponding fall in its overall debt burden. These factors have been underpinned by the region's continuing economic growth and the supportive stance of the federal government towards the region. "We expect the region to record an operating margin of between 10% and 15% of operating revenue in 2012, which will be either in line with or slightly better than previous years' results. Given that we expects that Moscow Oblast will record a financing surplus in 2012 (following a 13.5% surplus as a proportion of revenue in 2011), the region's overall debt should fall to 30%- 35% of operating revenue in 2012 from 41% in 2011 and 63% in 2010," says Alexander Proklov, a Moody's Vice President - Senior Analyst and lead analyst for Moscow Oblast. These positive results indicate that the region's administration has managed to correct the budget imbalances, off-balance liabilities and debt burden, which were crucial for the region's rating over past few years. "Successful budget consolidation, low-interest bearing loans and transfers from the central government as well as lending through state-owned banks have supported this overall improvement," adds Mr. Proklov. In addition, rapid economic growth in 2010-11 has led to growth in tax revenue and financing surpluses, and Moody's anticipates that the regional economy will continue to grow in 2012 and likely beyond at a pace exceeding the national average. Nevertheless, the ratings remain constrained by the region's relatively short-term debt maturity profile, which carries refinancing risks. A possible slowdown in the national economy would put pressure on the region's tax revenue stream, particularly its corporate income tax proceeds. Additional challenges may come from recent federal initiatives to increase salaries in education and in some other areas of the public sector, which is not expected to be offset by an appropriate increase in funding from the federal government. In conjunction with the growing rigidity of operating expenditure, weakening tax revenue could lead to a decline in operating balances. Moody's also notes that the region will need to increase its infrastructure investments in areas such as road construction and maintenance, social facilities, housing and utility sectors over the medium term, which will require external funding and new borrowing. "Given its financial pressures, the regional government's capacity to maintain a prudent budget and debt policy will remain crucial for future rating developments," says Mr. Proklov. What Could Change The Ratings Up/Down Further decline in Moscow Oblast's debt burden, an improving debt-maturity profile and sustained double-digit operating margins would be considered as positive rating drivers. However, weakening of the Oblast's budget and debt management, coupled with substantial debt growth and material deterioration in borrowing conditions may exert downward pressure on the ratings. Moscow Oblast is located in the area surrounding the City of Moscow. With 6.8 million inhabitants, it accounts for 4.8% of the total population of Russia, and contributions 5% to the total national GDP. The methodologies used in this rating were Regional and Local Governments Outside the US published in May 2008, and The Application of Joint Default Analysis to Regional and Local Governments published in December 2008. ========= S P A I N ========= AP-36 OCANA-LA: Put Into Bankruptcy by Ferrovial ------------------------------------------------ Lance Duroni at Bankruptcy Law360 reports that eight years after inking a EUR525 million (US$680 million) contract to build and operate the AP-36 Ocana-La Roda highway near Madrid, Spanish infrastructure giant Ferrovial SA has put the asset into bankruptcy, a spokesman confirmed Thursday. Madrid-based Ferrovial, which holds a 55% stake in the AP-36 toll road, and two minority owners requested a "judicial declaration of voluntary insolvency" for the project from a Spanish court on Oct. 19, according to the company. =========== S W E D E N =========== VOLVOFINANS BANK: Moody's Reviews 'D+' BFSR for Downgrade --------------------------------------------------------- Moody's Investors Service has placed on review for downgrade Volvofinans Bank AB's Baa2 long-term deposit rating, P-2 short- term deposit rating and its D+ bank financial strength rating (BFSR) which is equivalent to a standalone credit assessment of baa3. Ratings Rationale The review partly reflects Moody's concerns related to wider pressures on European auto financing groups following the rating actions taken on October 19, 2012. Of particular concern is Volvofinans's interconnectivity with, and financial strength of, its majority owners: the network of Volvo dealerships, for example in originating loans and providing guarantees on those loans. In addition to such general factors, the review reflects Moody's Volvofinans-specific concerns related to (1) the increase in unsecured lending through the bank's credit card business and the increase in non-auto-related unsecured credit card lending; (2) the high, albeit reduced, dependence on market funding exhibited by the bank; and (3) uncertainty surrounding the involvement of AP6, the government pension scheme, which is a 40% shareholder in the bank. Volvofinans's credit card offering, the Volvo Card, has become increasingly important to the bank's profitability. Launched in 1984 as a means of payment and offering discounts for repairs, services and fuel at Volvo dealers, the card has evolved following the addition of a VISA offering which allows for general, non-auto, transactions. Moody's views the subsequent gradual shift in the business and lending mix as increasing risk, which requires the adaptation of the risk management culture beyond the bank's traditional areas of core competence, such as secured auto lending. Since obtaining a banking license in 2008, Volvofinans has established an internet deposit funding base which accounts for around 45% of total funding at end-June 2011, thereby significantly reducing the market funding reliance. While the funding diversification is a credit positive factor, the rating agency has some concerns over the sustainability of the deposit base over time, particularly given the internet-based nature of the deposits, the competitive Swedish banking system and Volvofinans' modest banking franchise. Moody's also believes that Volvofinans has had to pay a comparatively high price for this funding. Volvofinans is 40% owned by the Swedish state-owned pension fund AP6. In 2011, the Swedish government appointed a Special Investigator to evaluate the wider Swedish pension system. The conclusions and recommendations of the report include the possibility of merging AP6, the only fund with a mandate for Swedish private equity investments such as that in Volvofinans, with one or more of the other funds, although the exact investment mandate for such a merged fund remains unclear. The report's recommendations will next be considered by the government before any legislation is drafted. Moody's has previously regarded the involvement of AP6 as shareholder as supportive of Volvofinans's credit quality, and consequently any changes to the rating agency's perception of AP6's role may have credit implications. Whilst Volvofinans has some similarities with the other European auto financing groups, the ratings agency notes it has several differentiating features. For example, Volvofinans is not exclusively owned by a single auto manufacturer, has a higher deposit-to-loan ratio than many other auto finance companies, and the Swedish macro economy (and therefore auto industry) has been less impacted than the market in some other European countries. During the review process, Moody's will primarily focus on analysing the sustainability of the deposit base, the future role of the AP6 fund as a part-owner of the bank and any impact that may have on support, and the similarities or otherwise with the wider European auto and auto financing markets. Principal Methodology The principal methodology used in this rating was Moody's Consolidated Global Bank Rating Methodology published in June 2012. Unless otherwise stated, all figures shown are from Volvofinans's annual and/or interim reports. ===================== S W I T Z E R L A N D ===================== UBS AG: Moody's Confirms 'B2' Rating on Credit-Linked Notes ----------------------------------------------------------- Moody's Investors Service has confirmed the rating of the following notes issued by UBS AG: Issuer: UBS AG .Ser 857, EUR1.83m FIX Credit-Linked Zero Cpn Euro Medium Term Notes, Confirmed at B2; previously on Jul 2, 2012 Downgraded to B2 and Placed Under Review for Possible Downgrade. The transaction is a credit linked note issued by UBS AG referencing the subordinated debt of Banco Bilbao Vizcaya Argentaria S.A. Ratings Rationale Moody's explained that the rating action taken on Oct. 30 is the result of a rating action on Banco Bilbao Vizcaya Argentaria, S.A., whose subordinate rating was confirmed at Ba1 on 24 October 2012. 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 Spain 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. Moody's quantitative analysis of Repacks is designed to estimate the expected loss "EL" borne by the Repack investor, given the transaction structure, the Collateral and any other credit risks arising under the transaction. To this end, Moody's relies on an EL analysis in which Moody's identifies and attaches probabilities to events that might give rise to losses to Repack noteholders. Moody's EL calculation assesses the probability and severity of each possible loss-inducing event happening at discrete (typically one-year) intervals through the life of the transaction. The EL for each of these time points can then be aggregated to provide a weighted-average EL for the rated notes. No additional cash flow analysis have been conducted as the rating was directly derived as described above using the ratings of BBVA and UBS. Moody's also applied stresses on the default probability and severity of the BBVA subordinated debt in order to take into account the widely defined credit event definitions and deliverable obligations. =========== T U R K E Y =========== TURKIYE IS BANKASI: Moody's Assigns Ba2 Subordinated Debt Rating ---------------------------------------------------------------- Moody's Investors Service has assigned a first-time Ba2 foreign- currency subordinated debt rating to the senior subordinated debt issuance by Turkiye Is Bankasi AS (Isbank). The debt instrument is expected to be eligible for Tier 2 capital treatment under Turkish law. The outlook is stable. Ratings Rationale Isbank's subordinated debt rating is positioned one notch below the bank's adjusted standalone credit assessment, and does not incorporate any rating uplift from systemic (government) support. Moody's believes that at present, there is a strong prudential bank-supervisory framework in Turkey. The regulator has extensive intervention tools available to preserve a bank's solvency and financial stability within the banking system, although within Turkey, imposing losses on bank creditors outside of a liquidation scenario is untested. However, if future regulatory intervention is required to support Turkish banks, Moody's believes that the Turkish frameworks for bank resolution could develop further, similar to the policy initiatives in numerous banking systems, particularly in Europe. These frameworks provide for burden sharing of bank bailouts with bank creditors, in particular affecting the most junior classes of bank securities. As a result, Isbank's subordinated debt rating does not incorporate any uplift from systemic support. What Could Move The Rating Up/Down The subordinated debt rating is notched off the standalone credit assessment. Therefore, any upwards or downwards pressure on the bank's standalone credit profile will result in a similar rating action on the bank's subordinated debt. Principal Methodolgies The principal methodology used in this rating was Moody's Consolidated Global Bank Rating Methodology published in June 2012. =========================== U N I T E D K I N G D O M =========================== BRIDAL GALLERY: Directors to Decide on Liquidating Chain -------------------------------------------------------- Liam Murphy at Liverpool Echo reports that a decision is due to be made on liquidating a chain of bridal shops which closed down suddenly earlier this month. Insolvency specialists Begbies Traynor said directors at The Bridal Gallery Group Limited will meet within the next 10 days. According to the report, the chain of north west bridal stores, which closed with the loss of 28 jobs, has consulted David Moore of Begbies Traynor, who has recommended that the company be placed into creditors' voluntary liquidation. Brides-to-be had laid siege to the Liverpool Bridal Gallery in Woolton Village after the shop and the family-owned company's outlets in Chester, Southport, Tarleton and Preston also closed. "For the past six years the company has failed to produce a profit and has only remained with the financial support of the directors," the report quotes Mr. Moore as saying. "The company experienced a brief upturn in trade but this was superseded by a quiet period and the directors forecast a quiet year for 2013 in the wedding market, hence the current difficulties. "Directors, working together with Begbies Traynor, are now making all efforts for as many brides as possible to see their orders for dresses being completed in time for their big day." Eric Stables from The Bridal Gallery told the ECHO: "We wrote to all employees on Monday advising them that they would be paid in full." WESTMORLAND GAZETTE: 20% of Cumbria Pubs at Risk of Collapse ------------------------------------------------------------ Helen Perkins at The Westmorland Gazette reports that insolvency experts have warned that nearly a third of Cumbria's pubs and bars are at risk of failure in the next 12 months. The report, citing figures released by insolvency trade body R3, discloses that 46 pub businesses in Cumbria face collapse. Some restaurants are also struggling, with 20% considered at risk, equivalent to 38 businesses. The Westmorland Gazette says R3's findings come as Punch Taverns, the UK's largest pub operator, has revealed it is experiencing financial distress. "The downturn has gone on far longer than could have been predicted and it is getting harder for people to find the money to spend on discretionary items," the report quotes Jeremy Oddie, the North West regional chair of R3, as saying. "The strain on pubs and bars is really showing." The report relates that despite the grim reading for hospitality workers, latest statistics suggest Cumbrian establishments are faring marginally better than the national average. In the UK, the report says, 35% of pubs are at risk and in London the figure has reached 37%. =================== U Z B E K I S T A N =================== IPAK YULI: Moody's Assigns 'B2/E+' Ratings; Outlook Stable ---------------------------------------------------------- Moody's Investors Service has assigned a standalone E+ bank financial strength rating (BFSR) and B2/Not Prime long-term and short-term global local and foreign currency deposit ratings to Joint Stock Innovation Commercial Bank "Ipak Yuli" ("Ipak Yuli") which operates in the Republic of Uzbekistan. The outlook on all of the bank's ratings is stable. Ratings Rationale According to Moody's, Ipak Yuli's E+ BFSR (which maps to a standalone credit assessment of b2) and B2 deposit ratings are constrained by (i) high single-name concentration whereby the aggregate credit exposure to the top five borrowers amounted to 77% of the bank's Tier 1 capital as at January 1, 2012, (ii) the unseasoned nature of the bank's rapidly growing loan portfolio that grew 48% in 2011, as well as (iii) immobilization of a large proportion of the bank's capital (approximately two thirds of Tier 1 capital as at year-end 2011) in real estate holdings, although these assets comprise the office buildings used for Ipak Yuli's core banking activities. Factors underpinning Ipak Yuli's ratings include (i) a wide distribution network of 11 branches and 62 mini-banks providing good client outreach throughout the whole territory of the Republic of Uzbekistan, as well as entrenched positions in certain market niches; (ii) sound profitability underpinned by stable and recurring core earnings, including a robust fee and commission component which accounted for 48% of total revenues in 2011; (iii) the good quality of the bank's loan portfolio, to date, with 4% of all loans being impaired and another 2.5% of the loans being less than 90 days 'past due' at year-end 2011; and (iv) its diversified funding mix which includes both customer deposits and wholesale funding (the latter derived from the state and international financial institutions). Moody's explained that Ipak Yuli's global local currency deposit ratings of B2/Not Prime do not incorporate any element of systemic support given the bank's limited franchise value and its low importance for the Uzbek banking system as a whole. Nor do Ipak Yuli's ratings incorporate any probability of shareholder support to the bank, in case of distress. What Could Change The Ratings Up/Down According to the rating agency, Ipak Yuli's BFSR has limited upside potential at its current level. However, in the longer term, the BFSR might map to a higher standalone credit assessment (currently b2), if the bank were to diversify its credit exposures and decrease the level of its fixed assets as a proportion of capital, thus increasing the proportion of "free" capital. These conditions would also need to be accompanied by sustainably good asset quality and sound financial fundamentals. Negative pressure could be exerted on Ipak Yuli's ratings as a result of the bank's failure to maintain (i) a good-quality loan book, (ii) a sustainably strong financial performance, and (iii) adequate capital and liquidity cushion. A substantial increase in the volume of related-party business or non-core investments (such as equities or fixed assets) represents another factor that could have an adverse impact on Ipak Yuli's ratings. Principal Methodologies The principal methodology used in this rating was Moody's Consolidated Global Bank Rating Methodology published in June 2012. Headquartered in Tashkent, Uzbekistan, Ipak Yuli reported -- under audited IFRS -- total assets of US$354 million and total shareholder equity of US$31 million as at December 31, 2011; net IFRS income for 2011 stood at US$7 million. =============== X X X X X X X X =============== * EUROPE: Moody's Says Covered Bond Downgrades Accelerates ---------------------------------------------------------- European-covered bond downgrades have increased sharply over the last few months, says Moody's Investors Service in a new Special Comment published on Oct. 30. In the seven months since February 2012, the overall level of covered bond downgrades was similar to the level seen in the four years before this period (between the start of the global financial crisis in 2008 and February 2012). The new report, entitled "European Covered Bonds: Downgrades Accelerate due to Bank and Sovereign Credit Deterioration", is now available on www.moodys.com. Moody's subscribers can access this report via the link provided at the end of this press release. Moody's has based this rating migration study on the performance of European covered bonds outstanding as of January 1, 2008, and analyses these bonds' performance over the crisis. The analysis is split between covered bond performance in countries that have experienced a sovereign downgrade during the crisis (downgraded sovereigns), and those where the sovereign has not experienced a downgrade over the crisis (stable sovereigns). This study is an update on the initial study published in March this year. Moody's says that the gulf in the performance of covered bonds between stable sovereigns and downgraded sovereigns persists; covered bond downgrades in downgraded sovereigns remain ten times higher than the level of downgrades in stable sovereigns. "The primary cause of the covered bond rating downgrades continues to be the downgrades of the banks supporting the covered bonds, with the impact of these downgrades being particularly severe in downgraded sovereigns," explains Juile Ng, a Moody's analyst and author of the report. "A reason for this is that the uplift a covered bond can achieve over and above its supporting bank is further restricted as the credit strength of the sovereign deteriorates," adds Ms. Ng. Moody's notes that the average notch downgrade of covered bonds in downgraded sovereigns since the start of 2008 is now over seven notches, whilst the equivalent number for stable sovereigns is lower than one notch. The average level of covered bond downgrades remains below the level of downgrades in the banks supporting the covered bonds. Moody's explains that this difference is due, among other things, to the collateral provided to the covered bonds by the supporting banks. The lower level of rating migration in covered bonds is most evident in the case of stable sovereigns. * 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, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland USA. Valerie U. Pascual, Marites O. Claro, Rousel Elaine T. Fernandez, Joy A. Agravante, Ivy B. Magdadaro, Frauline S. Abangan and Peter A. Chapman, Editors. Copyright 2012. All rights reserved. ISSN 1529-2754. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Europe subscription rate is US$625 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter Chapman at 240/629-3300. * * * End of Transmission * * *