/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/121108.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 8, 2012, Vol. 13, No. 223 Headlines A U S T R I A HILBER SOLAR: Enters Insolvency Proceedings; Owes EUR12.94MM B E L G I U M ETHIAS SA: Fitch Raises Subordinated Debt Rating to 'B+' C Y P R U S SONGA OFFSHORE: S&P Cuts Long-Term Corp. Credit Rating to 'B' F I N L A N D METSA BOARD: Moody's Affirms 'B3' CFR/PDR; Outlook Positive F R A N C E PETROPLUS HOLDINGS: Netoil Submits Revised Offer for French Site G E R M A N Y DECO 7 - PAN EUROPE: S&P Lowers Rating on Class F Notes to 'D' LINDENAU SCHIFFSWERFT: Nobiskrug Keen on Acquiring Lindenau TALISMAN-3: Fitch Downgrades Rating on Class D Notes to 'Csf' TECHEM ENERGY: Moody's Rates EUR325-Mil. Sr. Sub. Notes 'B3' * GERMANY: Moody's Says Uncertainties Remain in Wind Farm Law I R E L A N D ADAGIO III: S&P Raises Rating on Class D Notes to 'BB+' BANK OF IRELAND: S&P Raises Ratings on Sub. Debt Issues to 'CC' I T A L Y CAPITAL MORTGAGE: Fitch Lowers Rating on Class B Notes to 'Bsf' GUALA CLOSURES: Moody's Assigns '(P)B1' Rating to EUR275MM Notes GUALA CLOSURES: S&P Assigns 'B' Rating to EUR275MM Sr. Sec. Notes K A Z A K H S T A N BTA BANK: Former Chairman Loses Lawsuits in London High Court KASPI BANK: Moody's Assigns 'Ba2' National Scale Rating L U X E M B O U R G ARCELORMITTAL: Moody's Cuts Sr. Unsecured Note Ratings to 'Ba1' N E T H E R L A N D S GRUPO EMBOTELLADOR: Fitch Affirms 'BB+' Issuer Default Ratings HARBOURMASTER CLO: Fitch Affirms 'B-' Rating on Class E Notes NEW WORLD: Moody's Changes Outlook on 'B1' CFR to Stable PALLAS CDO II: Fitch Affirms 'CCsf' Ratings on Two Note Classes R U S S I A EUROPLAN 03: Fitch Assigns 'BB-' Rating to Senior Unsecured Bonds S P A I N BBVA EMPRESAS 1: S&P Lowers Rating on Class C Notes to 'CCC+' COLATERALES GLOBAL: S&P Retains 'BB' Rating on Class D Notes ORIZONIA: Expects to Complete Debt Restructuring by November TREE INVERSIONES: Moody's Confirms 'B1' Rating on EUR112MM Loan * SPAIN: Prime Minister Rajoy Not in Hurry to Seek Bailout S W E D E N NOBINA AB: Moody's Raises Corp. Family Rating to 'Caa1' NOBINA AB: S&P Raises Corp. Credit Rating to 'B'; Outlook Stable S W I T Z E R L A N D MATTERHORN MIDCO: Moody's Assigns Definitive 'Caa1' LGD Rating PETROPLUS HOLDINGS: Netoil Submits Revised Offer for French Unit T U R K E Y EKSPO FAKTORING: Moody's Assigns 'Ba3' CFR; Outlook Stable * REPUBLIC OF TURKEY: Fitch Upgrades Long-Term IDR From 'BB+' U K R A I N E * CITY OF KYIV: S&P Assigns 'B-' Rating to Sr. Unsecured Bond U N I T E D K I N G D O M AEROSPACE MACHINING: Placed in Liquidation; 70 Jobs Lost CLARIS LIMITED: Moody's Cuts Ratings on Two Tranches to 'B1' COMET: Dixons Retail to Help Save Jobs NORTH YORKSHIRE: Court Taps Chantrey Vellacott as Liquidators PERSEUS 22: S&P Retains 'D' Ratings on 2 Note Classes X X X X X X X X * Moody's Sees Negative Outlook for Unregulated EMEA Utilities * EUROPE: Moody's Says Renewable Power to Hit Thermal Generators * EUROPE: Moody's Says Investment Requirements Pressure TSOs * Upcoming Meetings, Conferences and Seminars ********* ============= A U S T R I A ============= HILBER SOLAR: Enters Insolvency Proceedings; Owes EUR12.94MM ------------------------------------------------------------ Evertiq.com reports that Hilber Solar GmbH started insolvency proceedings with the District Court Innsbruck on Oct. 31, 2012. RA Herbert Matzunski has been named insolvency administrator for the company. The company has debts of EUR12.94 million as of Oct. 31, 2012. According to the report, the elimination of government subsidies for photovoltaic system in Germany, Italy and Spain has contributed to the decision to apply for insolvency proceedings. Recently, a major contract could not be realized and it was canceled by the client. The company intends to submit a recovery plan, the report notes. Hilber Solar is a photovoltaic company based in Steinach a. Brenner, Austria. The company currently employs 69 people. ============= B E L G I U M ============= ETHIAS SA: Fitch Raises Subordinated Debt Rating to 'B+' -------------------------------------------------------- Fitch Ratings has affirmed Ethias S.A.'s (Ethias) Insurer Financial Strength (IFS) rating and Issuer Default Rating (IDR) at 'BBB-'. Both ratings have Stable Outlooks. At the same time, Fitch has upgraded the company's subordinated debt rating to 'B+' from 'B'. The affirmations reflect Fitch's expectation that additional support would be provided to Ethias by the Belgian authorities should the need arise. This is based on the authorities' majority ownership of the insurance company, combined with the company's activity as a provider of insurance to Belgian public organizations and their employees. The ratings are also supported by the good technical profitability shown in 2011 and forecast for year-end 2012, Ethias's strong business position and the expected improved capital position for 2012. At end-June 2012, Ethias published a net profit of EUR88m and a regulatory solvency margin of 164%. The upgrade of Ethias's subordinated debt reflects the reduced risk of coupon deferral as the EC did not impose any constraints on this debt. Nevertheless, both execution risk and limited capital adequacy buffer above the optional coupon deferral threshold set at 150% of regulatory minimum continue to justify a low non-investment grade rating for this debt issue. Management has made vigorous efforts since 2010 to implement the European Commission's (EC) restructuring plan, which is aimed at restoring the group's profitability and raising capital adequacy levels by 2013. This is evident from the significant improvement of the non-life technical result and of the regulatory solvency margin in 2012. The main restructuring measures taken in 2011 were the disposal of Nateus, the reinsurance subsidiary Bel Re and its banking operation Ethias Banque. Also, in July 2011, Ethias announced the disposal of its entire stake in Dexia to its parent company Vitrufin S.A. (formerly Ethias Finance S.A.). In addition, management is seeking to reduce drastically Ethias's retail life business by end-2013. Fitch expects that there will be no change in Ethias's ownership in the next 12-24 months. Ethias's shareholder funds decreased by 5% in 2011. Capital adequacy, based on Fitch's own risk-adjusted assessment, remained low in 2011 for an entity rated in the 'BBB' category. The regulatory solvency margin is adequate and was broadly stable in 2011. Considering the good level of profitability and the improvement in financial markets conditions, Fitch expects capital adequacy to materially improve by year-end 2012. The level of shareholder's funds was up by 8% at end June 2012. Key rating triggers for a downgrade include any adverse change in Fitch's view about the Belgian authorities' willingness and ability to provide support to Ethias group in case of need. Any significant deterioration of capital adequacy and/or profitability would also trigger a downgrade. Key rating triggers for an upgrade include implementation of the remaining measures requested by the EC with limited adverse effects on the group's franchise, and a sustainable demonstration of Ethias's ability to rebuild capital strength to bring it back sustainably into line with Fitch's expectations for a company rated in the 'BBB' category. As a group, Ethias is one of the leading composite insurers in Belgium with EUR2.7bn consolidated gross written premiums in 2011. The rating actions are as follows: Ethias S.A.: -- Long-term IDR: affirmed at 'BBB-'; Outlook Stable -- IFS rating: affirmed at 'BBB-'; Outlook Stable -- Undated subordinated debt: upgraded to 'B+' from 'B' Ethias Droit Commun AAM: -- IFS rating: affirmed at 'BBB-'; Outlook Stable =========== C Y P R U S =========== SONGA OFFSHORE: S&P Cuts Long-Term Corp. Credit Rating to 'B' ------------------------------------------------------------- Standard & Poor's Ratings Services lowered its long-term corporate credit rating on Cyprus-domiciled mid-water oil and gas driller Songa Offshore SE (Songa) to 'B' from 'B+'. "At the same time, we placed the rating on CreditWatch with negative implications," S&P said. "The downgrade reflects our revised forecasts for Songa's 2012 operating performance, which are substantially lower than our previous forecasts. This reflects a lower utilization rate in the rig fleet in the first nine months of the year due to technical issues and yard stays," S&P said. "We believe that weaker operating performance alongside an increase in capital expenditure (capex) owing to extensive maintenance work on two rigs in 2012 will result in greater negative free operating cash flow (FOCF) than we previously assumed, and will also constrain liquidity and reduce covenant headroom," S&P said. "Consequently, and on the basis of our revised forecasts for full-year 2012, we have revised downward our assessment of Songa's liquidity to 'less than adequate' from 'adequate' and its financial risk profile to 'highly leveraged' from 'aggressive' previously. We continue to assess Songa's business risk profile as 'weak,'" S&P said. "To improve liquidity, on Oct. 22, 2012, Songa announced a nonbinding agreement with offshore deep-water drilling company Seadrill Ltd. (not rated) for the potential sale of Songa's Eclipse rig. We also note that on Oct. 24, 2012, Songa announced the departure of its CEO. Songa has also postponed the release of its third-quarter results until Nov. 26, 2012," S&P said. "We had previously projected negative FOCF of about US$250 million in 2012 before debt repayments. We now anticipate negative FOCF at least US$300 million in 2012, following of an outflow of US$235 million in the first half of the year to June 30, 2012, partly due to a working capital outflow of $78.9 million. The negative FOCF reflects," S&P said: An initial deposit of about US$110 million in the second half 2012 for one of the new tailor-made Cat-D rigs that Songa has already funded under a contract with Norway-based oil and gas producer Statoil ASA (AA-/Stable/A-1+)," S&P said; and Lower cash flows from the Songa's Trym and Delta rigs as a result of longer yard stays. "We now forecast EBITDA of nearer US$200 million in 2012, rather than the US$235 million we forecast previously, because of extensive yard stays for the two rigs, overall weaker operating performance, and a delay in the Eclipse rig starting operations. A sale of Eclipse could strengthen Songa's liquidity, but this would mark a strategic retrenchment to the mid-water market," S&P said. "We aim to resolve the CreditWatch placement within the next six weeks, once we have further information on the sale of the Eclipse rig, the likelihood of covenant breaches, and Songa's third-quarter results," S&P said. "As part of the CreditWatch resolution, we will review the implications for liquidity of the sale or non-sale of the Eclipse rig, operating performance in the first nine months of 2012, and the outlook for both operations and leverage in 2013," S&P said. "We could lower the rating further if Songa does not secure its liquidity and covenant positions over the coming weeks, if it reschedules debt repayments, or if we see prospective leverage as inconsistent with our revised forecasts," S&P said. "We could remove the rating from CreditWatch and affirm it if Songa is able to improve its liquidity through the sale of the Eclipse rig and to resolve its operating problems. We consider a funds from operations-to-debt ratio of more than 10% to be commensurate with the current rating," S&P said. ============= F I N L A N D ============= METSA BOARD: Moody's Affirms 'B3' CFR/PDR; Outlook Positive ----------------------------------------------------------- Moody's Investors Service has affirmed Metsa Board's B3 Corporate Family Rating, Probability of Default Rating and the B3 senior unsecured notes rating. Concurrently, Moody's changed the outlook on all ratings to positive from stable. Ratings Rationale "The outlook change to positive was prompted by expected improvements in the group's profit and cash generation ability following extensive capacity closures and restructuring activities over the past quarters" says Anke Rindermann, Moodys's lead analyst for Metsa Board. These restructuring measures should provide for more stability in the group's operating profit generation, considering fairly stable end customer industries for the company's core packaging boards, such as food, beverage, pharmaceuticals and tobacco. At the same time, Moody's cautions that Metsa Board's remaining paper and pulp activities will continue to have a cyclical impact on the group's cash generation while paper consumption is also challenged by structural demand pressure. The positive outlook recognizes the potential for a higher rating over the next 6-12 months should the group be able to build a track record of improving operating profitability that would allow its financial leverage in terms of Moody's adjusted Debt/EBITDA to move to below 5.5x over the next few quarters and to return to positive free cash flow generation over 2013. Key drivers of expected profit improvements relate to capacity additions in the group's paperboard operations as well as the closure of loss-making paper capacity since H2 2011. While Moody's expects restructuring payments to continue to burden Metsa Board cash generation ability also in 2013, Moody's nevertheless forecast moderate amounts of free cash flow to be generated that should allow the company to gradually reduce its leverage also beyond 2013. The affirmation of the group's B3 rating is supported by (i) Metsa Board's strong market position, being among the leading producers of paperboard in Europe, (ii) its good vertical integration, (iii) the continued solid performance of the group's paperboard division (almost 2/3 of continued group sales), which will be the major profit contributor going forward. At the same time, Moody's notes that Metsa Board still needs to prove the potential for improving operating profitability following extensive restructuring measures. In addition, refinancing challenges, although clearly reduced, remain, with a EUR150 million bridge financing coming due in June 2014. A rating upgrade would therefore require Metsa Board to build a track record of improved operating profitability and cash flow generation despite the challenging macroeconomic conditions in its European stronghold as evidenced by EBITDA margins in the high single digits, allowing financial leverage in terms of Moody's adjusted Debt/EBITDA moving sustainably to below 5.5x, also helped by positive free cash flow generation from 2013 onwards. In addition, a rating upgrade would require visibility with regards to proactively managing upcoming debt maturities and retaining ample headroom under its financial covenants. Although unlikely at this point in time considering the positive outlook, the rating could come under negative pressure if the company would be unable to timely refinance upcoming debt maturities over 2013, if Debt/EBITDA exceeds 7x or if material negative free cash flow generation weakens the group's liquidity position. Outlook Actions: Issuer: Metsa Board Corporation Outlook, Changed To Positive From Stable Issuer: Metsa Group Financial Services Oy Outlook, Changed To Positive From Stable Adjustments: Issuer: Metsa Board Corporation Senior Unsecured Medium-Term Note Program, Upgraded to LGD3, 49% from LGD4, 52% Senior Unsecured Regular Bond/Debenture, Upgraded to LGD3, 49% from LGD4, 52% Issuer: Metsa Group Financial Services Oy Senior Unsecured Medium-Term Note Program, Upgraded to LGD3, 49% from LGD4, 52% The principal methodology used in rating Metsa Board Corporation and Metsa Group Financial Services Oy was the Global Paper and Forest Products Industry Methodology published in September 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. Metsa Board, headquartered in Espoo, Finland, is a leading European primary fibre paperboard producer. Metsa Board also produces office paper and coated papers as well as market pulp. Sales during the last twelve months ending September 2012 amounted to EUR2.1 billion. =========== F R A N C E =========== PETROPLUS HOLDINGS: Netoil Submits Revised Offer for French Site ---------------------------------------------------------------- Nidaa Bakhsh at Bloomberg News reports that Netoil Inc., a Dubai- based company, has submitted a revised offer for insolvent Petroplus Holdings AG's Petit-Couronne refinery in Normandy, France, teaming up with BP Plc. According to Bloomberg, Roger Tamraz, Netoil's chairman, said Netoil expects to pay EUR60 million (US$77 million) for inventories on site and EUR100 million for liabilities, without identifying his creditors. The 154,000 barrel-a-day facility faced liquidation last month after bids from Netoil and Alafandi Petroleum Group were rejected, Bloomberg recounts. Laurent Patinier, an official for the CFDT union at the site, said that a local court was scheduled to meet on Monday to discuss the new offers, Bloomberg notes. Arnaud Montebourg, the country's industry minister, said on Monday on RTL radio more time was needed to examine Libyan interest in the refinery after being contacted by the nation's sovereign wealth fund, Bloomberg relates. Petroplus on Monday said the court will either give a new date for a decision or extend the deadline for bids, according to Bloomberg. Petroplus filed for insolvency in January after lenders froze credit lines, Bloomberg recounts. Bloomberg notes that union officials have said the plant has been running since June under a so-called tolling deal with Royal Dutch Shell Plc, and may shut later this month if a credible buyer or plan isn't approved by the court. Based in Zug, Switzerland, Petroplus Holdings AG is one of Europe's largest independent oil refiners. ============= G E R M A N Y ============= DECO 7 - PAN EUROPE: S&P Lowers Rating on Class F Notes to 'D' -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its credit ratings on the class A2 to F notes issued by DECO 7 - Pan Europe 2 PLC. "At the same time, we have affirmed our ratings on the class G and H notes," S&P said. DECO 7 - Pan Europe 2 closed in March 2006. It is backed by five loans secured over properties in Germany and the Netherlands. The loans were originated and are serviced by Deutsche Bank AG (London branch). "We last reported on this loan in December 2011, when we lowered the ratings on most classes of notes following interest shortfalls on the October 2011 interest payment date," S&P said. INTEREST SHORTFALLS "The 2011 valuation of the Karstadt Kompakt assets triggered an appraisal reduction mechanism in the loan. This reduced the amount that can be drawn under the liquidity facility at each interest payment date to 56% of the required quarterly amount," S&P said. "Three loans, Procom, Schmeing, and Lyran failed to repay at maturity in October 2012; and have been transferred into special servicing. These increased costs cannot be covered by the liquidity facility and are therefore likely to disrupt cash flows further. Furthermore, the class X notes are not obliged to cover interest shortfalls in the transaction. Although the termination of the interest rate swap at loan maturity will make excess cash available to pay interest on the notes, in our opinion this will not be enough to prevent continued shortfalls on the lower classes of notes. We do, however, anticipate that further asset sales from the Karstadt Kompakt loan will have the potential to repay accrued and current interest payments on the loan," S&P said. "We anticipate that these factors may lead to recurring interest shortfalls, especially when combined with further deferred interest. We also expect possible loan prepayments to increase the mismatch in the loan-to-note margins. We have lowered our ratings on the class C to F notes to the speculative-grade category to reflect this increased risk of cash flow disruptions and potential interest shortfalls. In addition, we have lowered our ratings on the class A2 and B notes because of their heightened exposure to potential interest shortfalls. Additionally, we have affirmed our 'D (sf)' ratings on the class G and G notes due to continued interest shortfalls," 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 does not include certain market-specific adjustments. We will therefore 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 Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATINGS LIST DECO 7 - Pan Europe 2 PLC EUR1.556 Billion Commercial Mortgage-Backed Variable- and Floating-Rate Notes Class Rating To From Ratings Lowered A2 BBB+ (sf) A+ (sf) B BBB- (sf) A+ (sf) C BB (sf) A (sf) D B (sf) BB+ (sf) E CCC- (sf) BB (sf) F D (sf) B- (sf) Ratings Affirmed G D (sf) H D (sf) LINDENAU SCHIFFSWERFT: Nobiskrug Keen on Acquiring Lindenau ----------------------------------------------------------- Tom Todd at The Motorship reports that Germany's Nobiskrug Shipyard in Rendsburg -- part of the Abu Dhabi Mar (ADM) Group -- wants to take over Lindenau Schiffswerft in Kiel, which has been in the hands of the receivers for nearly four years. Peter Seeger, the head of the Kiel branch of the IG Metall trade union, told The Motorship that Nobiskrug had expressed interest in Lindenau Werft. He also confirmed media reports that Nobiskrug's top managers had visited the Kiel shipyard. The Motorship relates that media reports said MDs Susanne Wiegand and Holger Kahl had in fact been to Lindenau twice and that an offer to receivers HWW Wienberg Wilhelm was now under consideration. The media also quoted Mr. Seeger as saying the offer was "a final chance" for Lindenau, The Motorship relays. Lindenau MD Dieter K�hne told The Motorship he could not comment on the reports of a Nobiskrug purchase offer. He did say however that the yard was becoming increasingly well-known as a repair location and that "things were happening" in that sector. Nobiskrug is believed to be interested in Lindenau as a repair facility. Lindenau Schiffswerft owns medium-sized shipyard in Germany. The yard went into receivership in late 2008. Once Germany's leading tanker builder, it has kept its head above water with repair and maintenance work since then as its work force has shrunk from about 370 to some 30, according to The Motorship. TALISMAN-3: Fitch Downgrades Rating on Class D Notes to 'Csf' ------------------------------------------------------------- Fitch Ratings has downgraded Talisman-3 Finance p.l.c.'s class D notes and affirmed the class E and F notes, as follows: -- EUR42.7m class D (XS0256115865) downgraded to 'Csf' from 'CCsf'; Recovery Estimate (RE) 80% -- EUR10m class E (XS0256116327) affirmed at 'Csf'; RE 0% -- EUR5m class F (XS0256116673) affirmed at 'Csf'; RE 0% The downgrade of the class D notes follows the announcement of final recoveries on the Berlin/Dresden loan, indicating that approximately EUR5.7 million of the class D notes will be written off at the January 2013 interest payment date (IPD). The class E and F notes will be entirely written off at the same time. The recoveries were applied to the notes sequentially in October 2012, redeeming the class B notes (EUR13.7 million) and C notes (19.6m) in full and the class D notes in part (by EUR9.8 million). As the special servicer confirmed that no more recoveries are expected after the IPD, the corresponding losses will be allocated to the class D, E and F notes three months in arrears. The only remaining loan, Waterloo (EUR27.2 million), is performing well. Vacancy is currently at 2.8%, the lowest level since origination and slightly down from 2.9% a year ago. The stability of the collateral is reflected in the December 2010 re- valuation, which showed only a modest 1.3% decline in asset value since December 2005. Fitch expects a full recovery on this loan, ultimately redeeming the remainder of Class D. TECHEM ENERGY: Moody's Rates EUR325-Mil. Sr. Sub. Notes 'B3' ------------------------------------------------------------ Moody's Investors Service has assigned a definitive B3 instrument rating with an LGD6 90% to the EUR325 million senior subordinated notes issued by Techem Energy Metering Service GmbH & Co. KG ("TEMS", "Techem"). Concurrently, Moody's has assigned a Ba3 instrument rating with an LGD3 37% to Techem's EUR410 million senior secured notes raised at the level of Techem GmbH, a subsidiary of Techem Energy Metering Service GmbH & Co. KG. Techem's B1 Corporate Family Rating (CFR) and B1 Probability of Default Rating (PDR) remain unaffected. The outlook on all ratings remains stable. Ratings Rationale Techem's business model of submetering provides for very stable and high profitability, but moderate organic growth. Techem's business in Germany is subject to current regulation, and therefore is subject to changes, although this is considered very unlikely. Techem's strong business model is offset by the high current leverage, leading to high interest payments, and therefore limited ability to generate free cash flow combined with the expectation of continuous dividend payments. Deleveraging therefore is only expected by gradually improving EBITDA, rather than a reduction in overall indebtedness. In more detail, the B1 CFR and PDR ratings reflect: i) Techem's high profitability levels with a reported EBITDA-margin of 31% in FY2011/12 supported by the group's high market penetration, particularly in Germany, ii) good revenue visibility and stability driven by the non-discretionary nature of demand and long-term contracts with a typical duration of 5-10 years in Energy Services and 10-15 years in Energy Contracting, iii) high entry barriers and low net churn rates below 5%, as well as iv) a supportive regulatory environment and focus on energy efficiency. These positive factors are offset by (i) the group's high leverage with a Moody's adjusted debt/ EBITDA of 7.3x in FY2011/12 (5.3x when normalized for losses of EUR81 million on interest rate SWAPS), (ii) limited ability to deleverage due to relatively high interest payments, capex requirements and dividend payments, and (iii) the challenge to successfully transform the energy contracting business into a growth business after the end of ecotax subsidies in Germany, when tax reimbursements had been cut and Techem discontinued the efficiency contracting product. The stable outlook reflects the good level of revenue visibility and Moody's expectation of a stable operating performance in the mid-term. It also incorporates the assumption that Techem achieves a Moody's adjusted leverage of around 5.5x debt/ EBITDA in the current financial year and is able to maintain a satisfactory liquidity profile. Given the expectation of continuous dividend payments and the stability of the business Moody's does not expect a meaningful deleveraging going forward. Techem's B1 rating could be upgraded if both Moody's adjusted Debt/ EBITDA remains below 5.5x and FCF/ debt improves to at least 5% on a sustainable basis. Techem's rating could come under pressure if Moody's adjusted Debt/ EBITDA ratio increases sustainably above 6.0x and/or the adjusted EBIT/ interest ratio weakens below 1.2x. Also double digit negative free cash flow (after dividend payments) in any financial year with no signs of improvement could put pressure on the rating. Liquidity As of March 31, 2012, Techem has an adequate liquidity. This assessment is supported by a high cash balance of EUR72 million, sufficient availability under the new revolving credit facilities (EUR50 million for working capital needs, EUR50 million for capital expenditures) as well as a stable ongoing cash flow generation. Furthermore Moody's takes into account the seasonality of cash collection during the year as well as cash outflows for dividend payments. Moody's also assumes a sustained comfortable headroom under the financial covenants agreed in the new financing contracts. Structural Considerations The senior secured notes which have been issued by Techem GmbH are guaranteed by the parent, Techem Energy Metering Service GmbH & Co. KG and certain operating subsidiaries. Guarantors represent 90.0% of the group's EBITDA and 91.2% of consolidated gross assets, respectively. The senior secured notes, senior secured bank facilities and hedging facilties rank pari passu with each other and are secured by share pledges, intercompany receivables and holding accounts. The senior subordinated notes which have been issued by Techem Energy Metering Service GmbH & Co. KG are unconditionally guaranteed on a senior subordinated basis by Techem GmbH and certain operating subsidiaries. Guarantors represent 88.4% of the group's EBITDA and 90.7% of consolidated gross assets, respectively. The senior subordinated notes are secured by a second-priority pledge over shares and intercompany accounts and rank behind senior secured notes and senior secured bank facilities. In Moody's analysis of the priority of claims the senior secured notes (approx. EUR410 million) and senior secured bank facilities (approx. EUR550 million) as well as trade payables, operating lease obligations and unfunded pension obligations rank prior to the senior subordinated notes (approx. EUR325 million). As a result of Moody's Loss given Default analysis the senior secured notes are rated one notch above the corporate family rating. The senior subordinated notes are rated two notches below the corporate family rating given their claims contractually ranking behind the senior secured notes and senior secured bank facilities in a default scenario. The principal methodology used in rating Techem Energy Metering Service GmbH & Co KG and Techem GmbH was the Global Business & Consumer Service Industry Rating Methodology published in October 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. Assignments: Issuer: Techem Energy Metering Service GmbH & Co. KG Senior Subordinated Regular Bond/Debenture, Assigned B3 Issuer: Techem GmbH Senior Secured Regular Bond/Debenture, Assigned Ba3 Headquartered in Eschborn (Germany), Techem is a leading provider of energy services which operates through two divisions: Energy Services (around 90% of EBITDA in FY2011/12) provides sub- metering of heating use and water consumption for individual housing units and ancillary services. Energy Contracting (around 10% of EBITDA in FY2011/12) offers a holistic management of the client's energy consumption through the planning, financing, construction and operation of heat stations, boilers, cooling equipment and combined heating and power units, including from time to time delivery of primary energy. In FY2011/12 Techem group had revenues of EUR692.9 million and thereof around 80% were generated in Germany. * GERMANY: Moody's Says Uncertainties Remain in Wind Farm Law ------------------------------------------------------------- Although the liability-sharing mechanism introduced by Germany's draft law, dated August 29, 2012 and reviewed by the German parliament in October 2012, improves planning visibility and allows affected transmission system operators (TSOs) to pass on the costs for delays in network connections to end consumers, some uncertainties remain regarding the application of the law, says Moody's Investors Service in a Special Comment published on Nov. 6. The new report is entitled "Winds of Change for German Transmission Networks: German Draft Law on Offshore Wind Farm Connections Stabilises Investment Environment, but Uncertainties Remain". Moody's says that the draft law is credit positive because it will ensure that investors will continue to fund the offshore developments necessary to achieve the goals of the German energy policy by providing investors with the ability to earn a return on their investment even if the network connection may be delayed. The rating agency also notes that the new law will allow the TSOs to invest with significantly less risk, as it provides a framework for passing the costs of connection delays through to end consumers, and limits the TSOs' liabilities in those cases where delays result from negligence. Moreover, the requirement for TSOs to provide an annual offshore network development plan that details investments on a 10-year forward-looking basis will create planning security for the relevant companies and allow them to schedule their capex requirements accordingly, rather than reacting purely on the timetable of the wind farms, as is currently the case. However, Moody's says that TSOs may require significant additional liquidity reserves in order to address the potential time-lag in passing potential costs on to customers. An annual cap on the amount that can be passed through to the end consumer will limit the amount that a TSO can recover during a calendar year. The draft law does not specify how unrecovered amounts that are carried forward may be passed on in future years, if new cost claims occur. This adds to existing liquidity pressures created by the legal requirement to purchase electricity produced from renewable sources and market them on the German power exchange. With the existing requirements related to renewable energy generation already causing concern in terms of affordability, it is questionable how much more end customers will be willing to pay and politicians will be willing to put to them, particularly considering a national election due in autumn 2013. The report also notes that, although the draft law stipulates that TSOs can share the cost of delays caused by negligence, it remains unclear what constitutes negligent behavior and who will be responsible for assessing it as such. Lastly, Moody's says that due to the technical complexity related to long distance offshore connections, particularly in the North Sea environment, and limited availability of experienced suppliers, the industry sees the risk of potentially significant delays. ============= I R E L A N D ============= ADAGIO III: S&P Raises Rating on Class D Notes to 'BB+' ------------------------------------------------------- Standard & Poor's Ratings Services raised its credit ratings on Adagio III CLO PLC's class A1B, A2, A3, B, C, D, and V Combo notes. "At the same time, we have affirmed our ratings on the class A1A and E notes," S&P said. "The rating actions follow our assessment of the transaction's performance. We have used data from the trustee report (dated Sept. 28, 2012), performed our credit and cash flow analysis, and considered recent transaction developments. We have also applied our 2012 counterparty criteria and our 2009 cash flow criteria," S&P said. "Since our previous review of the transaction on May 28, 2010, we have observed a significant decrease in the proportion of assets rated in the 'CCC' category ('CCC+', 'CCC', or 'CCC-') in the collateral pool. In addition, the proportion of assets that we consider to be defaulted (rated 'CC', 'C', 'SD' [selective default], or 'D') have decreased to EUR9.8 million. The transaction is still in its reinvestment period, which ends in September 2013. All par coverage tests are in compliance with the required trigger under the transaction documents. The weighted- average spread on the collateral pool has also increased to 3.75%," S&P said. "We have subjected the capital structure to our cash flow analysis, based on the methodology and assumptions outlined in our 2009 cash flow criteria to determine the break-even default rate (BDR) at each rating level. We used the reported portfolio balance that we considered to be performing, the principal cash balance, the weighted-average spread, and the weighted-average recovery rates that we considered to be appropriate. We incorporated various cash flow stress scenarios, using various default patterns, levels, and timings for each liability rating category, in conjunction with different interest rate stress scenarios. We have also conducted our credit analysis, to determine the scenario default rate (SDR) at each rating level, which we then compared with its respective BDR," S&P said. "Taking into account the increase in the weighted-average spread, the higher proportion of performing collateral in the transaction, and the lower payments on the capital structure, we consider the level of credit enhancement available to the class A1B, A2, A3, B, C, D and V Combo notes in this transaction to be commensurate with higher ratings then we previously assigned. We have therefore raised our ratings on these classes of notes," S&P said. "Although the results of our cash flow analysis above also suggest higher ratings on the class E notes, we have affirmed our 'B+ (sf)' rating on these notes because the results of our largest obligor default test cap our rating at this level," S&P said. "The largest obligor test is a supplemental stress test that we introduced in our 2009 cash flow collateralized debt obligation (CDO) criteria. This test addresses event and model risk that might be present in the transaction and assesses whether a CDO tranche has sufficient credit enhancement (not counting excess spread) to withstand specified combinations of underlying asset defaults based on the ratings on the underlying assets, with a flat recovery of 5%," S&P said. "We have analyzed the derivative counterparties' exposure to the transaction and concluded that the derivative exposure is currently sufficiently limited, so as not to affect the ratings that we have assigned," S&P said. "We consider the level of credit enhancement available to the class A1A notes to be commensurate with the currently assigned rating. We have therefore affirmed our 'AA+ (sf)' rating on these notes," S&P said. Adagio III CLO is a cash flow corporate loan collateralized loan obligation (CLO) that securitizes loans to primarily speculative- grade corporate firms. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATINGS LIST Class Rating Rating To From Adagio III CLO PLC EUR575.242 Million, US$5 Million Senior and Subordinated Deferrable Floating-Rate Notes Ratings Raised A1B AA- (sf) A+ (sf) A2 AA- (sf) A+ (sf) A3 AA- (sf) A+ (sf) B A (sf) BBB+ (sf) C BBB+ (sf) BB+ (sf) D BB+ (sf) BB- (sf) V Combo AA- (sf) A+ (sf) Ratings Affirmed A1A AA+ (sf) E B+ (sf) BANK OF IRELAND: S&P Raises Ratings on Sub. Debt Issues to 'CC' --------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on five Bank of Ireland (BOI; BB+/Negative/B) dated subordinated debt issues to 'CC' from 'D'. "In addition, we have raised the rating on one BOI junior subordinated debt issue to 'CC' from 'C'," S&P said. "We understand that BOI is now servicing all of its subordinated debt issues. We rate these issues at this low level, and at the same level as each other despite the different degree of subordination, because we believe that they are currently highly vulnerable to future nonpayment. This level is also consistent with the existing 'CC' rating on BOI's rated preference shares," S&P said. "We note that BOI's risk-adjusted capital (RAC) ratio, Standard & Poor's preferred measure of capitalization, is relatively low. We calculate that BOI's RAC ratio was about 4.4% at June 30, 2012 (down from 5.3% at year-end 2011 after taking into account the large first-half loss) and we now assume that BOI's projected RAC ratio will be in the 3.5%-4.0% range through end-2014," S&P said. RATINGS LIST To From 5 Dated subordinated debt issues CC D 1 Junior subordinated debt issue CC C ========= I T A L Y ========= CAPITAL MORTGAGE: Fitch Lowers Rating on Class B Notes to 'Bsf' --------------------------------------------------------------- Fitch Ratings has downgraded Capital Mortgage Series 2007-1's class B notes and affirmed the others, as follows: -- Class A1 (ISIN IT0004222532): affirmed at 'AAsf'; Outlook Negative -- Class A2 (ISIN IT0004222540): affirmed at 'AAsf'; Outlook Negative -- Class B (ISIN IT0004222557): downgraded to 'Bsf' from 'BBsf'; Outlook Stable -- Class C (ISN IT0004222565): affirmed at 'CCCsf'; Recovery Estimate revised to 0% from 70% The deal comprises loans originated by Banca di Roma (now part of the UniCredit Group). The downgrade of the class B notes reflects Fitch's concern about the performance of the underlying assets. As of October 2012 interest payment date (IPD), the reserve fund remained fully utilized and the outstanding balance on the class C principal deficiency ledger (PDL) stood at 75.4% of the original balance of the tranche. The deal structure includes a provisioning mechanism, whereby the full outstanding balance of loans in arrears by more than six months is 100% provisioned using excess revenues. Although Fitch views provisioning mechanisms as a positive structural feature, as it mitigates the cost of carry of defaulted loans, the high volume of non-performing borrowers, compared with the available excess spread, has led to a decline in the credit support available to all rated tranches. Period defaults remain above the level of gross excess spread generated by the transaction. At present, loans in arrears by more than three months are trending upwards but remain low at 1.15% of the current portfolio balance in October 2012 IPD. Cumulative gross defaults as a percentage of the initial pool balance stand at 8.15%. The average roll-through rate of loans in three month plus arrears to default over the past four quarters is 46%, up from 42% 12 months ago. If the transaction continues to incur defaults at the current pace, a full build-up in the class C PDL, and to some extent the class B PDL, can be expected. In addition, the class B gross cumulative default trigger on the notes was breached in October 2011, which means principal collections can be used to cover senior fees plus future class A and class B interest shortfalls. In Fitch's view, the transaction remains highly dependent on recoveries from defaulted loans (currently at 7.1% of the cumulative gross default balance), the timing of which is uncertain and may take up to seven years from the point of default. UniCredit S.p.A. performs the role of servicer, cash administrator, and account bank in the transaction. The agency recognizes that the bank has abided by the transaction documentation, opened an account and posted EUR238 million of cash collateral at BNP Paribas ('A+'/Stable/'F1+') in the name of the issuer as of October 2012. The loan-by-loan analysis of the pool showed that a significant number of loans that are currently in arrears are to non-Italian borrowers. A significant portion of the current loans in arrears have original loan-to-value (LTV) ratios between 70% and 80%. The Fitch-calculated weighted-average current LTV of the arrears loans is at 61.7% compared with 54.24% for the total pool. In its analysis of the transaction, Fitch assumes such borrowers are more likely to default on their payments in times of economic stress and applies more conservative assumptions, as outlined in its criteria addendum for Italy. On the October 2012 IPD, the servicer reported 1.46% of the current pool as being on payment holiday, of which EUR9.9 million are registered with the ARCA payment holiday scheme, while EUR9.7 million are under the ABI Famiglie scheme. In its analysis, Fitch applied more conservative default probability assumptions for such borrowers, as limited information is available on the performance of such borrowers once the payment holiday is complete. GUALA CLOSURES: Moody's Assigns '(P)B1' Rating to EUR275MM Notes ---------------------------------------------------------------- Moody's Investors Service has assigned a provisional (P)B1 rating with a loss given default (LGD) assessment of LGD 4 -56%, to the proposed EUR275 million of senior secured notes to be issued by Guala Closures S.p.A., a subsidiary of GCL Holdings S.C.A. (together "Guala" or "the group"). Concurrently, Moody's has placed under review for upgrade the Caa1 senior unsecured rating on Guala's existing EUR200 million of notes issued in 2011 and the B2 probability of default rating (PDR) of the group. GCL Holdings' B2 corporate family rating (CFR) is unchanged and is not under review. Ratings Rationale "The (P)B1 rating on the EUR275 million of senior secured notes reflects the fact that the notes will be contractually subordinated to a new EUR75 million super priority revolving credit facility, but structurally and contractually senior to Guala's existing EUR200 million of senior unsecured notes issued in 2011 and due in 2018," says Paolo Leschiutta, a Moody's Vice President - Senior Credit Officer and lead analyst for Guala. Like the existing notes, the new notes will be secured against pledged assets and shares of the group, although they will also benefit from a senior guarantee from operating companies. Guala intends to use the proceeds of the new notes to refinance existing senior bank obligations maturing between 2015 and 2017. As Moody's does not expect the new revolving credit facility to contain maintenance financial covenants, it considers Guala's new capital structure as covenant light. As a result, following Guala's issuance of the new instrument, together with the signing of the new revolving credit facility at the expected terms, the rating agency would lower the group's corporate family recovery rate assumption to 35%. This would trigger an upgrade of the existing notes to B3 from Caa1 and an upgrade of Guala's PDR to B1. The CFR of B2 would in such scenario remains unchanged. For this reason, Moody has placed under review for upgrade the Caa1 senior unsecured rating on Guala's existing EUR200 million of notes and the B2 PDR of the group, pending the proposed bond issuance. Moody's issues provisional ratings in advance of the final sale of securities and these reflect Moody's credit opinion regarding the transaction only. Upon a conclusive review of the final documentation, Moody's will endeavor to assign definitive ratings to the proposed senior bank facilities. A definitive rating and assigned LGDs may differ from provisional ones. Guala's B2 CFR reflects its relatively small size compared with its much larger, consolidated customer base and credit metrics, which are likely to remain in the mid-single B rating category over the short term. However, key positives encompassed within the rating include (1) the group's sound business profile thanks to its market leadership position in safety closures for the spirits industry; (2) the growing potential offered by the increasing penetration of safety closures in emerging markets; and (3) Guala's historical relatively stable operating performances, despite exposure to raw material prices. However, Guala's recent operating performances have remained slightly below Moody's expectations and resulted in a contraction in the group's reported headroom under its existing financial covenants as at June 2012. That said, the absence of maintenance financial covenants in Guala's new super priority revolving credit facility will result in the group having a greater flexibility to absorb weakening operating performances. In the absence of a change in the group's capital structure Moody's will continue to monitor closely the existing headroom on the financial covenants contained in the group existing bank facility. Moody's notes that these covenants will become more demanding over time. The ratings are currently under review. Once the transaction completes Moody's expects to have a stable outlook on Guala's ratings in light of the rating agency's expectation that Guala will (1) continue to grow while maintaining a conservative financial policy; and (2) gradually improve key credit metrics, benefitting from the growing market penetration of safety closure and wine caps. What Could Change The Rating Up/Down A track record of sustained profitability and positive free cash flow that led to a gradual reduction in financial leverage could result in positive rating pressure over the next 18 to 24 months. In addition, upward pressure on the rating could result if the company's operating profitability were to improve, leading to financial leverage well below 5.0x, together with EBIT interest coverage above 2.0x. Conversely, deteriorating operating profitability, resulting in financial leverage, measured as debt/EBITDA, increasing towards 6.0x on an ongoing basis or negative free cash flow, would result in a rating downgrade. Moreover, immediate downward rating pressure could result from a deterioration in the company's liquidity profile and failure to regain more headroom under its existing financial covenants. The rating incorporates Moody's assumption that Guala will not make any large debt-financed acquisition. Principal Methodology The principal methodology used in rating GCL Holdings S.C.A. and Guala Closures S.p.A. was the Global Packaging Manufacturers: Metal, Glass, and Plastic Containers Industry Methodology, published in June 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. GCL Holdings, incorporated in Luxemburg, is the holding company of Guala Closures, one of the world largest producers of closures for the spirits and wine industries. The group holds a market- leading position in safety closures, which are used to prevent counterfeit spirits and offer evidence of tampering, and in the wine screw caps segment. The group generated revenues of around EUR418 million and a company adjusted EBITDA, of EUR87.6 million (21% margin) during FYE December 2011 (EUR231 million and EUR42 million, respectively, during the first six months of 2012). GUALA CLOSURES: S&P Assigns 'B' Rating to EUR275MM Sr. Sec. Notes ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B' issue rating to the proposed EUR275 million senior secured notes due 2019 to be issued by Italian bottle closures manufacturer Guala Closures SpA (Guala; B/Stable/--). "At the same time, we assigned our '3' recovery rating to the notes, indicating our expectation of meaningful (50%-70%) recovery in the event of a payment default. Although the recovery prospects nominally exceed 70%, we cap the recovery rating at '3', because we view the insolvency regime in Italy as relatively unfavorable for creditors," S&P said. "The recovery rating on the EUR200 million senior unsecured notes is unchanged at '6'," S&P said. "The recovery rating of '3' on the proposed senior secured notes reflects our understanding that Guala will use the proceeds of the proposed notes to fully repay its outstanding EUR262 million senior secured bank facilities, comprising a revolving credit facility (RCF), an acquisition facility, and term loans A, B, and C. At the same time, the company will issue a new EUR75 million super senior RCF, to which we have not assigned a rating," S&P said. RECOVERY ANALYSIS "The proposed EUR275 million senior secured notes will rank structurally and contractually senior to the existing EUR200 million senior unsecured notes due 2018. According to the intercreditor agreement, the proposed term notes will rank junior to the new super senior RCF due 2017. The proposed notes are guaranteed and secured on the same basis as the new super senior RCF," S&P said. "Our 'B' issue and '3' recovery ratings on the proposed senior secured notes are underpinned by our valuation of Guala as a going concern and by the amount of subordinated debt ranking below the notes, which creates a surety cushion. This is tempered by the amount of debt ranking ahead of the proposed notes (the super senior RCF and debt at the subsidiary level), by some material debt baskets that the notes' documentation permits, and by the security package being limited to share pledges and some assets. Furthermore, we consider that the Italian insolvency regime is less creditor-friendly than other jurisdictions in Western Europe," S&P said. "Our recovery rating on the existing unsecured notes is constrained at '6' by these notes' unsecured nature and their position at the bottom of the creditors' waterfall," S&P said. "The lenders of the new super senior RCF lenders and the proposed EUR275 million senior secured noteholders have a first-lien claim on the shares in most of Guala's material subsidiaries, some pledges over intellectual property, and over some assets (limited by Italian law). They further benefit from guarantees from material subsidiaries representing at least 60% of the group's EBITDA. The RCF lenders benefit from some additional 'privilegio speciale' or special privilege guarantees from Guala," S&P said. "The proposed senior secured notes' documentation restricts, among other things, Guala's ability to raise additional debt, pay dividends, sell certain assets, or merge with other entities. However, the documentation for the proposed notes allows Guala to raise new debt if the fixed-charge coverage ratio is greater than 2.0x (compared with 1.95x pro forma for the refinancing). The documentation allows the issue of additional secured debt if the consolidated secured leverage ratio is less than 3.0x (compared with 2.94x pro forma for the refinancing)," S&P said. "However, these covenants do not prevent the company from raising some additional debt. This includes, among other things," S&P said: -- A credit facility basket of up to EUR100 million (including the EUR75 million super senior RCF); -- A capital lease basket of up to the greater of EUR25 million or 3% of total assets; -- An overdraft/working capital facility basket of EUR20 million; -- Up to EUR40 million of debt issued by non-guarantor subsidiaries; and -- A general debt basket of EUR25 million, as well as a EUR10 million liens to secure indebtedness. Furthermore, the proposed notes' documentation contains: -- A change-of-control clause; -- A cross default clause (for any amount of more than EUR20 million); -- Restrictions on transactions with affiliates and asset sales; and -- Limitations on restricted payments (including dividend payments and the redemption of capital stocks). "The documentation also permits Guala to raise and draw a receivables securitization facility (of an undetermined amount), which, if used, would erode the enterprise value available for creditors at default. The proposed notes' documentation does not contain maintenance financial covenants," S&P said. "Similarly, the documentation on the new super senior RCF does not include maintenance covenants, but it does include incurrence covenants, which are the same as for the proposed notes. It also contains a change-of-control clause, a stop-drawdown clause (if the senior secured leverage ratio is greater than 4.5x), and a springing maturity clause. The latter allows Guala to repay the RCF three months before the proposed senior secured notes mature," S&P said. "The documentation governing the existing senior unsecured notes contains nonfinancial covenants restricting changes of control, asset disposals, mergers, acquisitions, and dividend payments, although these restrictions are subject to some carve-outs. The incurrence of additional indebtedness is restricted and subject to compliance with a fixed-charge coverage ratio of 2.0x and the incurrence of additional senior secured indebtedness subject to compliance with a senior secured leverage ratio of 2.5x. However, these covenants do not prevent Guala from raising some additional debt, including debt ranking ahead of the proposed notes. This includes, among other things, a capital lease basket of up to the greater of EUR25 million or 3% of the total assets, an overdraft/working capital facility basket of EUR10 million, and a general debt basket of EUR25 million," S&P said. "To determine recoveries, we simulate a hypothetical default scenario. We base our default scenario on our assumption of pressure on revenues stemming from the loss of key customers and a fiercely competitive environment, and diminishing margins due to increases in raw material prices. Under this hypothetical scenario, we calculate that Guala would default in 2015. At the point of default, our projections show that EBITDA would decline to about EUR70 million," S&P said. "Our estimate of the stressed enterprise value at default is about EUR350 million, translating into a stressed EBITDA multiple of 5x. We then deduct priority liabilities of about EUR105 million, consisting of enforcement costs, finance leases, debt at the subsidiary level, and the super senior RCF. We consider the RCF to be partially drawn at the hypothetical point of default, due to the stop-drawdown clause," S&P said. "Assuming EUR285 million outstanding at default (including six months of prepetition interest), we forecast coverage in the 50%- 70% range, which results in our recovery rating of '3'. Although the recovery prospects nominally exceed 70%, we cap the recovery rating at '3' to reflect our view of the insolvency regime in Italy as relatively unfavorable for creditors," S&P said. "This leaves no value for the existing EUR200 million senior unsecured notes, translating into a recovery rating of '6' on these notes," S&P said. =================== K A Z A K H S T A N =================== BTA BANK: Former Chairman Loses Lawsuits in London High Court ------------------------------------------------------------- Jane Croft at The Financial Times reports that Mukhtar Ablyazov, BTA Bank's former chairman, is set to be prevented from defending himself against US$6 billion of lawsuits brought in London's High Court by the bank after he lost a key legal battle on Tuesday. BTA has been pursuing Mr. Ablyazov to recover billions of dollars which it alleges were misappropriated from the bank under his leadership, in a series of lawsuits brought against Mr. Ablyazov and others, the FT discloses. The Court of Appeal on Tuesday dismissed Mr. Ablyazov's appeal against two earlier court rulings, and now effectively paves the way for BTA to apply to the court so he is prevented from defending the lawsuits, the FT relates. The bank wants to commence enforcement against his assets the FT says. One of the court orders had sentenced Mr. Ablyazov to 22 months in prison for contempt of court, the FT notes. Mr. Ablyazov never served the jail term because he fled England on a coach bound for Europe in February just before the ruling was handed down, the FT discloses. He has not been seen in public since and his whereabouts is not known, the FT notes. According to the FT, Mr. Ablyazov also lost his appeal on Tuesday against the second court order which had required him to turn himself in and make proper disclosure of his assets or he would be barred from defending himself in some of the civil lawsuits. About BTA Bank BTA Bank AO (BTA Bank JSC), formerly Bank TuranAlem AO -- http://bta.kz/-- is a Kazakhstan-based financial institution, which is involved in the provision of banking and financial products for private and corporate clients. The BTA Group is one of the leading banking groups in the Commonwealth of Independent States and has affiliated banks in Russia, Ukraine, Belarus, Georgia, Armenia, Kyrgyzstan and Turkey. In addition, the Bank maintains representative offices in Russia, Ukraine, China, the United Arab Emirates and the United Kingdom. The Bank has no branch or agency in the United States, and its primary assets in the United States consist of balances in accounts with correspondent banks in New York City. As of November 30, 2009, the Bank employed 5,043 people inside and 4 people outside Kazakhstan. It has no employees in the United States. Most of the Bank's assets, and nearly all its tangible assets, are located in Kazakhstan. JSC BTA Bank, also known as BTA Bank of Kazakhstan, commenced insolvency proceedings in the Specialized Financial Court of Almaty City, Republic of Kazakhstan. Anvar Galimullaevich Saidenov, the Chairman of the Management Board of BTA Bank, then filed a Chapter 15 petition (Bankr. S.D.N.Y. Case No. 10-10638) on Feb. 4, 2010, estimating more than US$1 billion in assets and debts. On March 9, 2010, the Troubled Company Reporter-Europe reported that JSC BTA Bank was granted relief in the U.S. under Chapter 15 when the bankruptcy judge in New York recognized the Kazakh proceeding as the "foreign main proceeding." Consequently, creditor actions in the U.S. were permanently halted, forcing creditors to prosecute their claims and receive distributions in Kazakhstan. In the U.S., the Foreign Representative is represented by Evan C. Hollander, Esq., Douglas P. Baumstein, Esq., and Richard A. Graham, Esq. -- rgraham@whitecase.com -- at White & Case LLP in New York City. The Specialized Financial Court of Almaty approved BTA Bank's debt restructuring on Aug. 31, 2010, trimming its obligations from US$16.7 billion to US$4.2 billion, and extending its longest maturity dates to 20 year from eight. Creditors who hold 92 percent of BTA's debt approved the restructuring plan in May. BTA reportedly distributed US$945 million in cash to creditors and new debt securities including US$5.2 billion of recovery units (representing an 18.5% equity stake) and US$2.3 billion of senior notes on Sept. 1, 2010. BTA forecasts profit of slightly more than US$100 million in 2011, Chief Executive Officer Anvar Saidenov told reporters in Almaty. KASPI BANK: Moody's Assigns 'Ba2' National Scale Rating ------------------------------------------------------- Moody's Investors Service has assigned a Ba2.kz National scale rating (NSR) to Kaspi Bank. The NSR carries no specific outlook. Ratings Rationale According to Moody's, Kaspi Bank's Ba2.kz NSR is derived from the bank's B1 long-term global local currency deposit rating and reflects the relative standing of the bank's creditworthiness within its domicile country -- Kazakhstan. The assignment of a Ba2.kz NSR reflects Kaspi Bank's established retail lending franchise in Kazakhstan (approximately 14% market share of retail loans, excluding mortgages, as at mid-2012), which, according to Moody's, could strengthen further. The NSR also reflects the bank's strong financial profile, including solid internal revenue generation capacity (return on average equity rose to 31% in the first three quarters of 2012, from 19% at year-end 2011 and 5% at year-end 2010), as well as adequate asset quality and capital cushion (as at end-September 2012, total capital adequacy ratios amounted to 19.7% according to the Basel I approach, and 15.9% under local regulatory standards). At the same time, Moody's notes that Kaspi Bank's NSR is constrained by the relatively short-term record of its operations in the retail segment and high depositor concentration, albeit recently declining to current moderate levels: as at end- September 2012, funds of the 20 largest depositors accounted for 30% of total liabilities (YE2011: 36%), with the two largest creditors accounting for 16% (YE2011: 27%). What Could Move The Ratings Up/Down An upgrade of Kaspi Bank's ratings will be contingent on the bank's ability to further develop its franchise and improve capital adequacy in line with its strategy to grow its more risky retail business, whilst also maintaining adequate asset quality and further reducing borrower and depositor concentrations. Any material adverse changes in Kaspi Bank's risk profile -- particularly any significant weakening of the bank's liquidity position or deterioration of its asset quality together with an inability to maintain its capital base -- would exert negative pressure on the bank's ratings. Principal Methodologies The principal methodology used in this rating was Moody's Consolidated Global Bank Rating Methodology, published in June 2012, and Mapping Moody's National Scale Ratings to Global Scale Ratings, published in August 2010. Headquartered in Almaty, Kazakhstan, Kaspi Bank reported total audited IFRS assets of US$2.9 billion and net income of US$58 million as at YE2011. Moody's National Scale Ratings (NSRs) are intended as relative measures of creditworthiness among debt issues and issuers within a country, enabling market participants to better differentiate relative risks. NSRs differ from Moody's global scale ratings in that they are not globally comparable with the full universe of Moody's rated entities, but only with NSRs for other rated debt issues and issuers within the same country. NSRs are designated by a ".nn" country modifier signifying the relevant country, as in ".mx" for Mexico. For further information on Moody's approach to national scale ratings, please refer to Moody's Rating Methodology published in October 2012 entitled "Mapping Moody's National Scale Ratings to Global Scale Ratings". =================== L U X E M B O U R G =================== ARCELORMITTAL: Moody's Cuts Sr. Unsecured Note Ratings to 'Ba1' --------------------------------------------------------------- Moody's Investors Service downgraded ArcelorMittal's senior unsecured note ratings to Ba1 (LGD3, 49%) from Baa3. The rating action includes the senior unsecured notes and Euro MTNs of ArcelorMittal and the senior unsecured notes of ArcelorMittal Finance and ArcelorMittal USA. The rating for the parent's subordinated perpetual capital security was lowered to Ba3 (LGD6, 97%) from Ba2 and its commercial paper rating was lowered to NP from P-3. A corporate family (CFR) and probability of default rating (PDR) of Ba1 was assigned to ArcelorMittal. The rating outlook remains negative for all three debt issuers. Ratings Rationale The downgrade reflects the deterioration in global steel markets over the last six months, as evidenced by ArcelorMittal's third quarter 2012 performance, its worst quarter since 2Q09. Steel shipments were down 8.3% from 2Q12, ArcelorMittal had an operating loss and free cash flow was negative US$1.9 billion, causing an increase in the company's gross debt. "We see challenging conditions continuing for ArcelorMittal over several quarters with its operating environment more likely to get worse before it gets better. As a result, the amount of debt reduction the company must realize in order to hold a Baa3 rating is so large as to be unachievable or, if attempted through asset disposals, will materially impact the core operations and earnings of the company," says Steve Oman, senior vice president and lead analyst for the EMEA steel industry at Moody's. The execution of asset sales or other credit enhancing measures is also uncertain in this environment and the receipt of the cash proceeds will take place further out in 2013 than a Baa3 rating can accommodate. Also weighing on the rating and the outlook is the potential for a covenant breach (the company's revolving credit facilities require net debt to EBITDA to be less than 3.5x), although the company's planned debt reduction should relieve these concerns. The announced actions taken by the company thus far to preserve cash and reduce leverage have been modest. The dividend cut announced last week will not impact cash flow until 2013 and the US$650 million subordinated perpetual capital security issued in September only resulted in a US$325 million reduction in debt, which was more than offset by the 3Q12 debt increase that funded operating losses and capex. Nevertheless, Moody's expects that the company will pursue steps to materially reduce debt over the next few quarters. At the Ba1 rating, Moody's now includes the full amount of ArcelorMittal's pension underfunding as debt resulting in another US$840 million of adjusted debt. This makes the company's adjusted gross debt US$34 billion at September 30, 2012, while LTM adjusted EBITDA was US$7.2 million, yielding a 4.6 debt/EBITDA ratio. ArcelorMittal has access to approximately US$10 billion of credit facilities (currently unused) and had US$3.4 billion of cash at September 30. This compares to US$4.8 billion of debt maturities between now and March 2014. However, using Moody's EBITDA projections, a credit facility covenant violation may occur in June 2013 unless the company repays a considerable amount of debt or receives an amendment from its lenders, as it did in 2009. Outlook The current environment and ArcelorMittal's weak credit metrics argue for maintaining a negative outlook until Moody's sees (1) that the global economy and steel markets have improved, (2) the company has carried out more of its asset disposals and other credit enhancing actions, and (3) it is comfortably in compliance with its financial covenants. What Could Change The Ratings Up/Down The Ba1 rating could be lowered if it appears debt to EBITDA leverage will remain above 4.0x and retained cash flow (RCF) to debt is less than 14%, or if liquidity is seen as being constrained by covenants or other factors. The rating could be raised if steel market conditions improve significantly and ArcelorMittal's leverage is expected to be approaching 3.0x EBITDA, RCF to debt is above 18% and its liquidity profile is secure. The principal methodology used in rating ArcelorMittal was the Global Steel Industry Methodology published in October 2012. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. ArcelorMittal is the world's largest steel company. It operates approximately 65 integrated and minimill steel-making facilities in over 20 countries, which have a production capacity of around 125 million tonnes of crude steel per year. The company also has sizable captive supplies of iron ore and coal and a trading and distribution network. Over the last 12 months, the company shipped 84 million tonnes of steel and had sales of US$87 billion. ===================== N E T H E R L A N D S ===================== GRUPO EMBOTELLADOR: Fitch Affirms 'BB+' Issuer Default Ratings -------------------------------------------------------------- Fitch Ratings has affirmed the 'BB+' foreign and local currency Issuer Default Ratings (IDRs) of Grupo Embotellador Atic S.L. (Atic). In conjunction with this rating acting, Fitch has affirmed the 'BB+' rating of Ajecorp B.V.'s (Ajecorp) US$300 million notes due in 2022. The company has announced the reopening of the 2022 notes and expects to raise an additional amount up to US$150 million. The reopening will carry the same rating as the original deal at 'BB+.' Proceeds from the reopening are expected to be used for general corporate purposes, primarily capital expenditures and the repayment of some debt. Ajecorp's notes have been directly linked to that of its parent company, Atic, through Fitch's parent and subsidiary methodology. Ajecorp is a wholly owned subsidiary of Atic and is incorporated in the Netherlands as a limited liability company. The 2022 notes of Ajecorp are unconditionally guaranteed by substantially all of Atic's key operating subsidiaries. A guarantee from Atic is expected to be put in place after Atic changes its type of incorporation from a limited liability company (Sociedad Limitada) to a Corporation (Sociedad Anonima). Atic's Thailand subsidiaries are also expected to provide guarantees once government approval is granted. The Rating Outlook for Atic is Stable. Atic's 'BB+' ratings are supported by the geographic diversification of its operations within Latin America and Thailand, the defensive nature of the beverage industry and the strong free cash flow characteristics of the industry. The company's sound positions within the 'B' brand segments of most of the markets in which it operates, as well as its moderate levels of leverage, also support the ratings. Strong competition within the beverage industry and the volatility of raw material costs are among the factors that limit Atic's ratings to 'BB+'. The company's corporate structure is also considered a credit weakness. Atic's controlling shareholders, the Ananos family, directly own the formulas for the beverages produced by the company, which results in the transfer of some operating profits to the shareholders in the form of royalty payments. The controlling shareholders also own another beverage company, Callpa Limited, which produces and sells beverages in several Asian countries. The shareholders may have to support the nascent operations of Callpa Limited, which could indirectly impact the credit quality of Atic. Strong Geographic Diversification During the first half of 2012 (1H'12), Peru represented 32% of Atic's consolidated adjusted EBITDA. The Peruvian market is strong for the company, as historically it has been a non-cola market, which benefits 'B' brand producers, as they rely heavily upon non-cola products. Atic's next most important markets in terms of EBITDA contribution are Colombia (33%), Thailand (18%), Central America (16%) Venezuela (8%, and Mexico (7%). Atic's geographic diversification should increase in the future due to the company's recent entrance into the Brazilian market. The high level of geographic diversification mitigates to a degree the company's exposure to markets such as Venezuela, where economic and political uncertainty is high. Target Markets Have Price Sensitive Consumers Atic has a relatively small presence in each country with market shares below 20%. Its key brands are 'Big Cola' and 'Kola Real'. The company faces strong competition from Coca-Cola and Pepsi in each market it operates. Atic prices its products approximately 30% to 40% lower than the Coca-Cola's products and competes directly against other producers of non-branded products in the 'B' brand segment of the market. The company's targeted customers are price sensitive consumers in the lower economic classes. Atic's distribution model varies across countries. In Peru and Thailand, Atic primarily operates its own distribution network. In Colombia, Central America and Venezuela, the company relies more heavily on third parties. Nearly 90% of its consolidated sales occur at mom-and-pop stores. Improving Results During 1H'12, Atic generated US$87 million consolidated EBITDA, an increase from US$61 million during the same period of 2011. Average prices increased near 8% and volumes increased 9% reaching 1.8 hectoliters during this time period, while EBITDA margins expanded to 12.4% from 10.3%. The improvement in EBITDA and margins is primarily due higher soft drink consumption levels in its main markets; the introduction of new product categories; the expansion of commercial coverage; and the introduction of new formats with higher value added. Colombia, Central America, Peru and Thailand were key drivers of EBITDA improvement, while improvement of profitability of Mexican and Brazilian operations continues to be challenging. During the last 12 months ended on June 30, 2012, Atic generated US$126 million consolidated EBITDA. Bond Issuance During May Extended Debt Maturity Profile As of June 30, 2012, Atic has EUR302million (US4380 million) of consolidated debt, up from EUR240 million (US$309 million) as of December 2011, and EUR66 million (US$83 million) of cash and marketable securities. This increase is in line with the US$300 million unsecured bond debt issued by the end of May by Ajecorp. Out of total consolidated debt, EUR278 million (US$350 million) is classified as long-term. About 80% of consolidated debt is U.S. dollar denominated. The proposed US$150 million bond issuance should increase debt to approximately US$480 million, as proceeds will primarily be used to finance its capital expenditures. Net Leverage Improved During 1H'12 Atic's net debt-to-EBITDA ratio was 2.3 times (x), while its total debt-to-EBITDA ratio was 3.0x, as of June 30, 2012. In terms of net leverage, these credit metrics show an improvement with respect to Dec. 31, 2011, but are weaker than the average ratios maintained by the company during the prior three years of 2.0x and 1.8x, respectively. Management's financial strategy targets a total debt-to-EBITDA ratio of between 2.0x and 2.5x, which Fitch believes will be difficult to achieve in the near term absent a turnaround of its Mexican operations and Brazilian operations. High investments should also preclude a return to lower levels of leverage. During 2013 Atic expects to invest US$150 million and during 2014 about US$90 million. These investments are intended to expand capacity in categories such as water and juices in existing markets, as well as invest in PET and cups production lines. Looking forward, Fitch expects that Atic's net debt-to-EBITDA ratio should remain around 3.0x. HARBOURMASTER CLO: Fitch Affirms 'B-' Rating on Class E Notes ------------------------------------------------------------- Fitch Ratings has affirmed Harbourmaster CLO 9 B.V.'s notes, as follows: -- Class A1-T floating-rate notes (XS0296310856): affirmed at 'AAAsf'; Outlook Stable -- Class A1-VF floating-rate notes: affirmed at 'AAAsf'; Outlook Stable -- Class A2 floating-rate notes (XS0296311581): affirmed at 'AAsf'; Outlook Stable -- Class B floating-rate notes (XS0296312126): affirmed at 'A- sf'; Outlook Negative -- Class C floating-rate notes (XS0296312639): affirmed at 'BBB-sf'; Outlook Negative -- Class D floating-rate notes (XS0296313017): affirmed at 'BB- sf'; Outlook Negative -- Class E floating-rate notes (XS0296313108): affirmed at 'B- sf'; Outlook Negative The affirmations reflect the stable performance of the transaction since the last review in October 2011 as well as available levels of credit enhancement for the notes. There are currently no defaults in the portfolio. As per trustee reports, the 'CCC' and below bucket has declined slightly over the year to 7.5%. The over-collateralization (OC) tests have fluctuated with OC cushions dropping during the year but returning to October 2011 levels. During the year, there was a notable shift in the portfolio's maturity profile, with the proportion of assets maturing in 2013 and 2014 declining to 10.5% from 30% in October 2011. The 2017 bucket increased to 27% from 12% in the same period. The weighted average spread increased to 3.66% from 3.25%, indicating that margin increases are being provided for loans amending in return for maturity extensions. However, it is possible that this additional spread will not be utilized efficiently given that the process of clarifying the defaulted assets definition for Harbourmaster CLO 9 is still ongoing. The agency has no visibility on a potential outcome. The issuer may invest up to 40% of the portfolio notional into non-euro obligations. These assets will either be asset swapped, or naturally hedged if denominated in GBP or USD by a corresponding drawing in the same currency on the multi-currency Class A1-VF notes. However, in certain situations, this natural hedge will not fully cover the FX risk and the residual currency risk will be absorbed by the structure through FX loss and utilization of excess spread. The Negative Outlooks on the mezzanine and junior notes reflect their vulnerability to a clustering of defaults and negative rating migration in the European leveraged loan market due to the approaching refinancing wall. NEW WORLD: Moody's Changes Outlook on 'B1' CFR to Stable -------------------------------------------------------- Moody's Investors Service has changed the outlook to stable from positive on the B1 Corporate Family Rating (CFR) and the B1 Probability of Default (PDR) of New World Resources N.V. (NWR). The outlook on the B3 rated EUR300 million notes issued by NWR (EUR258 million outstanding) due in 2015 and on the Ba3 rated EUR500 million notes due in 2018 is now also stable. Ratings Rationale "The decision to stabilize the outlook on NWR's ratings reflects Moody's expectation that the company's metrics at fiscal year-end (FYE) December 2012 will be below the level forecasted at the beginning of the year. An additional factor informing Moody's decision is its forecast that demand in the steel and automotive sectors will remain soft during fiscal year 2013, thereby limiting NWR's strengthening potential," says Paolo Leschiutta, a Moody's Vice President - Senior Credit Officer and lead analyst for NWR. The announcement follows the release of NWR's Q4 2012 trading update, in which the company confirmed its production and sales targets for the year, but indicated that the prices of coking coal and coke had declined by 20% and 8%, respectively, in comparison to Q3 2012. NWR's coal and coke prices declined already in Q2 in comparison to Q1 and remained relatively flat at Q2 levels during Q3. A degree of decline during 2012 was anticipated already at the beginning of the year and built into the positive outlook. The drop in Q4, however, was higher than anticipated and is likely to result in credit metrics deviating from Moody's original expectations, reducing significantly the upside potential on NWR's rating over the short term. Hence, Moody's changed the outlook to stable. Although steel demand in the region is likely to decline over the coming months, resulting in lower prices and potentially lower demand for NWR's key products, Moody's expects the company to maintain adequate credit metrics for its rating category and to maintain its strong cash generation. The current stable outlook on NWR's B1 rating reflects the company's current relatively solid credit metrics for the rating category and the expectation that it will be able to contain deterioration during 2013. While Moody's recognizes the progress that NWR has achieved in recent years in improving cost efficiency and safety through its modernization programs, the rating agency nevertheless notes that NWR's current degree of business diversification cannot fully mitigate risks for market shocks. Overall, NWR's B1 CFR reflects (1) the expected ongoing volatility in the steel production market, which represents the key revenue driver for NWR's most profitable coking coal and coke businesses; (2) the high degree of customer and business concentrations; and (3) NWR's significant operating risks in view of the depth of its mines. These negative credit considerations are offset by: (1) the company's strategic position as a major player in its sector in Central Europe, a region that benefits from close proximity to key customers and an ample reserve base; (2) the progress NWR has achieved in improving cost efficiency and safety through its modernization programs; and (3) the company's relatively strong cash generation and adequate liquidity profile. What Could Move The Rating Up/Down The ratings could be upgraded if NWR demonstrated an ability to weather potential cyclicality in the market and sustain a robust financial profile, with financial leverage remaining below 3x and CFO-dividends/debt in the high teens on an ongoing basis. Conversely, negative pressure could arise in the event that CFO- dividends/debt diminished towards the low teens or if financial leverage increased above 4x for a prolonged period of time. Ratings could also be downgraded in case of (1) strong deterioration in market conditions; (2) deterioration in NWR's liquidity profile; or (3) large debt-funded acquisitions. Principal Methodology The principal methodology used in rating NWR was the "Global Mining Industry" rating methodology, published in May 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. Headquartered in the Netherlands, NWR is the largest hard coal mining group in the Czech Republic and operates through its main subsidiary OKD, a.s. The company reported revenues of EUR1.6 billion and EBITDA of EUR454 million during FYE December 2011. The company exploits the Upper Silesian basin in the north- eastern part of the Czech Republic and is expanding its activity in Poland. PALLAS CDO II: Fitch Affirms 'CCsf' Ratings on Two Note Classes --------------------------------------------------------------- Fitch Ratings has affirmed Pallas CDO II B.V. and revised the Outlooks to Negative, as follows: -- Class A-1-a (XS0268818209): affirmed at 'BBB-sf', Outlook revised to Negative from Stable -- Class A-1-d (XS0271520669): affirmed at 'BBB-sf', Outlook revised to Negative from Stable -- Class A-2 (XS0268904546): affirmed at 'B+sf', Outlook revised to Negative from Stable -- Class B (XS0268818548): affirmed at 'B-sf', Outlook revised to Negative from Stable -- Class C (XS0268818894): affirmed at 'CCCsf' -- Class D-1-a (XS0268819199): affirmed at 'CCsf' -- Class D-1-b (XS0268819272): affirmed at 'CCsf' The affirmation reflects the transaction's stable performance since the last review in December 2011. Since then, the transaction has deleveraged due to natural amortization, as well as interest diversion by breaching of over-collateralization tests. Class A-1-a and A-1-d have paid down further and are now 74% and 88% of their original outstanding balance, respectively. The revision of the Outlook to Negative reflects the portfolio's 45% exposure to peripheral eurozone countries, such as Greece, Italy, Portugal and Spain. Despite the relevant assets being mainly investment grade rated RMBS, substantial negative rating migration throughout the last year driven by sovereign rating migration, presents additional risk to the transaction. An additional event of default is triggered if the Class A over- collateralization test falls below 100%, which may introduce additional risk to the transaction. Currently, the agency's calculation of the protective cushion indicates no immediate risk at the current rating levels. However, it has decreased to 13% from 14% of the total portfolio since the last review. The Issuer Report Grade has been revised to two stars due to the lack of counterparty information in the reports. Pallas CDO II is a cash flow securitization of structured finance assets, mainly from the RMBS and CMBS sectors. Germany, Spain and the UK each contribute to roughly a quarter of the portfolio. =========== R U S S I A =========== EUROPLAN 03: Fitch Assigns 'BB-' Rating to Senior Unsecured Bonds ----------------------------------------------------------------- Fitch Ratings has assigned Europlan's Series 03 RUB3.5 billion five-year issue of senior unsecured bonds, due October 31, 2017, a final Long-term local currency rating of 'BB-' and a National Long-term rating of 'A+(rus)'. The bonds have a put option in two years on November 4, 2014. The bonds have a maturity of five years and semi-annual coupons. The interest rate on the first four coupons is 11.25%. Europlan has a Long-term Issuer Default Rating (IDR) of 'BB-' with a Stable Outlook, Short-term IDR of 'B', and a National Long-term rating of 'A+(rus)' with Stable Outlook. If material, the share of assets pledged against Europlan's bank funding could limit recoveries for the company's other senior creditors in a hypothetical default scenario. The share of pledged net investments in leases was 60% at end-2011, according to the company's IFRS accounts. Any future large increase in the proportion of encumbered assets could lead to a downward revision of the rating of senior unsecured bonds and, according to Fitch's methodology, a notching down of the Long-term rating of the notes from the company's Long-term IDR. Europlan is a one of the leaders of automotive leasing in Russia. It is majority-owned (62%) by Baring Vostok Private Equity Fund. The business model targets small and medium-sized enterprises (83% of the lease book), with the lease book comprising mostly foreign economy and medium-class passenger cars, trucks (including minivans) and other equipment (mostly specialized vehicles). Europlan operates a nationwide network of 74 offices (at end-2011) with over 600 sales staff in total. Its leasing portfolio (at end-2011) includes around 15,000 lessees and 30,000 vehicles rented. ========= S P A I N ========= BBVA EMPRESAS 1: S&P Lowers Rating on Class C Notes to 'CCC+' ------------------------------------------------------------- Standard & Poor's Ratings Services took various credit rating actions on all classes of notes in five small and midsize enterprise (SME) collateralized loan obligation (CLO) transactions originated by Banco Bilbao Vizcaya Argentaria S.A. (BBVA; BBB-/Negative/A-3): BBVA Empresas 1, Fondo de Titulizacion de Activos (BBVA Empresas 1); BBVA-4 PYME Fondo de Titulizacion de Activos (BBVA-4 PYME); BBVA-5 FTPYME Fondo de Titulizacion de Activos (BBVA-5 FTPYME); BBVA-7 FTGENCAT Fondo de Titulizacion de Activos (BBVA-7 FTGENCAT); and BBVA-8 FTPYME Fondo de Titulizacion de Activos (BBVA-8 FTPYME). "The rating actions follow our assessment of the transactions' performance since our previous full reviews of each capital structure in 2010. We have also applied our criteria for rating European SME securitizations, our 2012 counterparty criteria, and our nonsovereign ratings criteria," S&P said. CREDIT AND CASH FLOW ANALYSIS "While we have been closely monitoring the credit quality evolution and structural features of these five transactions as part of our surveillance, the rating actions follow our credit and cash flow analysis using the latest available trustee reports at the time of our analysis (September 2012 for BBVA Empresas 1 and August 2012 for the four remaining transactions). We subjected the capital structures to our cash flow analysis, based on the methodology and assumptions outlined in our criteria. We used the reported portfolio balances that we considered to be performing, the reserve fund balances, and the current weighted- average margins of the collateral pools," S&P said. "We also updated our default and recovery rate forecasts that we considered to be appropriate at each rating level in our cash flow models. These rates are based on the past performance of the transactions and our forecasts of future credit quality evolution for each portfolio. Here, we considered Spain's difficult economic conditions that would affect the creditworthiness of the underlying obligors in these deals, and our observations on similar SME pools in terms of obligor type and loan specific features. Our credit and cash flow analysis also considered event risk that could arise if some of the largest obligors in the pool do not perform. Here, we incorporated various cash flow stress scenarios using various default patterns, interest rate scenarios, and recovery timings. Our analysis evaluated prepayments, 90+ days delinquencies and cumulative defaults, and recovery information," S&P said. S&P said the current outstanding balance of loans as a percentage of each pool at origination represents: -- 15.85% in BBVA Empresas 1; -- 6.29% in BBVA-4 PYME; -- 11.67% in BBVA-5 FTPYME; -- 23.39% in BBVA-7 FTGENCAT; and -- 28.47% in BBVA-8 FTPYME. "All the transactions are amortizing on a sequential basis and to the seasoning of each deal, such deleveraging contributed to higher subordination for all classes of notes (where applicable)," S&P said. "There has been no reserve fund available in BBVA-5 FTPYME since the March 2010 interest payment date, which means that there is no available credit enhancement for the class C notes (the most junior in the capital structure). The insufficient proceeds now account for a negative EUR10.5 million balance, which has increased from EUR5 million in November 2010. BBVA-7 FTGENCAT's reserve fund has been further drawn and now accounts for 10.8% of the required balance specified under the transaction documents. BBVA Empresas 1's reserve fund is 70.80% of its required balance; BBVA-4 PYME's reserve fund is 8.06% of the required balance, and BBVA-8 FTPYME's reserve fund is 24.77% of the required balance," S&P said. "Due to the high seasoning of these transactions and their significant pool amortization, obligor concentration risk has increased in each transaction since our previous reviews. The top 10 obligors now represent more than 35% of BBVA Empresas 1's pool. The top 10 obligors in BBVA-4 PYME now represent more than 25% of the pool. The top 10 obligors in BBVA-7 FTGENCAT now represent 30.53% of the performing pool balance. This transaction doesn't benefit from any regional diversification as all the obligors are concentrated in the Catalonian region. For BBVA-5 FTPYME and BBVA-8 FTPYME, the top 10 obligors now account for 13.05% and 13.24% of the performing pool balance. As the obligor concentration is significantly high in these transactions and could potentially affect the stability of our ratings, we have factored the default of these top obligors with low recoveries into our analysis," S&P said. S&P said the level of cumulative defaults (assets being delinquent for more than 12 months or classified as such at the trustee's discretion) have been steadily increasing in each transaction since its last review and now account for (as a percentage of the original pool balance): BBVA Empresas 1: More than 1.80% of the pool; BBVA-4 PYME: More than 1.70% of the pool; BBVA-5 FTPYME: More than 3.80% of the pool; BBVA-7 FTGENCAT: 5.37% of the pool; and BBVA-8 FTPYME: More than 5.00% of the pool. "For some of these transactions, these observed cumulative defaults are lower than those in other similar Spanish SME transactions that we rate, however, while the default increase may have slowed, we also note that defaults could surge if any of the top largest obligors fall under this bucket during the remaining weighted-average life of each transaction, therefore potentially affecting the stability of our ratings," S&P said. "We believe the available credit enhancement for the most junior classes of notes (class C) in BBVA Empresas 1 and in BBVA-4 PYME is no longer commensurate with their current rating levels. We have therefore lowered to 'CCC+ (sf)' from 'B+ (sf)' our rating on BBVA Empresas 1's class C notes, and to 'B (sf)' from 'BB- (sf)' our rating on BBVA-4 PYME's class C notes. These downgrades take into account the increased concentration risk, higher long- term delinquencies and defaults, and lower recoveries that we have observed in each transaction," S&P said. "In our view, BBVA-7 FTGENCAT's deteriorating performance, i.e., increased obligor, sector, and geographic concentration risk in the pool, as well as increased delinquencies, defaults, and lower recoveries, has meant that the available credit enhancement for the class B and C notes is no longer commensurate with their current rating levels. We have therefore lowered our ratings on these notes," S&P said. "Considering the significant increase in BBVA-8 FTPYME's long- term delinquencies and defaults, combined with the increased obligor, sector, and geographic concentration risk in the pool, we believe the available credit enhancement for the class C notes is no longer commensurate with the current rating level. We have therefore lowered to 'B- (sf)' from 'BB- (sf)' our rating on this class of notes. We consider that the available credit enhancement for the class B notes is sufficient to cover both concentration- related event risk, as well as the results of our cash flow stresses. Based on these factors, we have affirmed our 'BBB (sf)' rating on this class of notes," S&P said. "In the case of BBVA Empresas 1's and BBVA-5 FTPYME's class B notes, we onsider that the increased credit enhancement is sufficient to cover both concentration-related event risk, as well as the results of our cash flow stresses. In both cases, the notes benefit from subordination from the junior class of notes. Based on these factors, we have raised to 'A+ (sf)' from 'BBB+ (sf)' our rating on BBVA Empresas 1's class B notes. In BBVA-5 FTPYME, the available credit enhancement is now more than 30% of the capital structure. We have therefore raised to 'A-(sf)' from 'BBB+ (sf)' our rating on the class B notes," S&P said. COUNTERPARTY ANALYSIS "We have also reviewed counterparty risk in the transactions, and considered remedy actions taken (if any). We concluded that the counterparty risk is currently sufficiently mitigated in accordance with our criteria, so as to not affect 's rating actions, with the exception of BBVA-7 FTGENCAT. For BBVA-7 FTGENCAT, the rating on the class A2(G) notes is constrained by the long-term issuer credit rating (ICR) on BBVA as bank account provider," S&P said. "BBVA is currently rated 'BBB-/Negative/A-3'. On April 30, 2012, we lowered our short-term ICR on BBVA to 'BBB+/Negative/A-2' from 'A/Negative/A-1', which is below the level required by the transaction documents. Because more than 60 days have elapsed since we lowered our short-term ICR on BBVA, and the issuer has not yet taken any remedy actions, we have lowered to 'BBB- (sf)' from 'AA-(sf)' our rating on BBVA-7 FTGENCAT's class A2(G) notes," S&P said. APPLICATION OF NONSOVEREIGN RATINGS CRITERIA "On Oct. 10, 2012, we lowered our long- and short-term sovereign ratings on the Kingdom of Spain to 'BBB-/Negative/A-3' from 'BBB+/Negative/A-2'. Under our nonsovereign ratings criteria, the highest rating we would assign to a structured finance transaction is six notches above the investment-grade rating on the country in which the securitized assets are located," S&P said. "Consequently, on Oct. 11, 2012, we lowered and kept on CreditWatch negative our ratings on senior classes of notes in the transactions that we are taking rating action on. The rating actions resolve these CreditWatch placements," S&P said. Although its credit and cash flow analysis suggests higher ratings for the class A2 and A3 notes in BBVA Empresas 1, S&P has affirmed its 'AA- (sf) ratings on these classes of notes based on the maximum ratings that could be assigned under its criteria. For the same reason, S&P: -- affirmed at 'AA- (sf) and removed from CreditWatch negative its rating on BBVA-4 PYME's class A2 notes, and raised to 'AA- (sf)' from 'A+ (sf)' its rating on the class B notes; -- affirmed at 'AA- (sf)' and removed from CreditWatch negative its ratings on BBVA-5 FTPYME's class A1, A2, and A3(G) notes; and -- affirmed at 'AA- (sf)' its rating on BBVA-8 FTPYME's A2(G) notes. EFFECT OF GUARANTEES ON RATING ACTIONS "In BBVA-5 FTPYME, the class C notes benefit from a guarantee provided by the European Investment Fund (EIF; AAA/Stable/A-1+), which can be used either for interest due on each interest payment date or for principal repayment at the legal final maturity of the notes. The reimbursement of the portion drawn under the EIF guarantee and the payment of the EIF commission is fully subordinated to the class C notes in the priority of payments. As the rating on the class C notes is linked to the rating on EIF, we have affirmed our 'AAA (sf)' rating on this class," S&P said. KEY RATING FACTORS "Overall, we have observed a significant increase in the concentration risk by obligor, region, and sector in each transaction, with BBVA Empresas 1 having the highest obligor concentration risk. The amortization of the transactions makes their structures more sensitive to obligor delinquency and default risk in the underlying collateral pools. To address this concentration risk, our analysis focused significantly on associated event risk in the transactions, i.e., we assessed whether a tranche has sufficient credit enhancement to withstand specified combinations of largest obligor defaults in our credit and cash flow analysis," S&P said. "We have taken the rating actions as we believe that although credit enhancement in the transactions is higher than what we observed in our previous review--mainly due to deleveraging--this is not sufficient to address certain event risks at each rating category," 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 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 BBVA Empresas 1, Fondo de Titulizacion de Activos EUR1.45 Billion Floating-Rate Notes Rating Raised B A+ (sf) BBB+ (sf) Rating Lowered C CCC+ (sf) B+ (sf) Ratings Affirmed A2 AA- (sf) A3 AA- (sf) BBVA-4 PYME Fondo de Titulizacion de Activos EUR1.25 Billion Mortgage-Backed Floating-Rate Notes Rating Raised B AA- (sf) A+ (sf) Rating Lowered C B (sf) BB- (sf) Rating Affirmed and Removed From CreditWatch Negative A2 AA- (sf) AA- (sf)/Watch Neg BBVA-5 FTPYME Fondo de Titulizacion de Activos EUR1.9 Billion Floating-Rate Notes Rating Raised B A- (sf) BBB+ (sf) Ratings Affirmed and Removed From CreditWatch Negative A1 AA- (sf) AA- (sf)/Watch Neg A2 AA- (sf) AA- (sf)/Watch Neg A3(G) AA- (sf) AA- (sf)/Watch Neg Rating Affirmed C AAA (sf) BBVA-7 FTGENCAT Fondo de Titulizacion de Activos EUR250 Million Floating-Rate Notes Ratings Lowered A2(G) BBB- (sf) AA- (sf) B BB (sf) BB+ (sf) C CCC- (sf) B- (sf) BBVA-8 FTPYME Fondo de Titulizacion de Activos EUR1.1 Billion Floating-Rate Notes Rating Lowered C B- (sf) BB- (sf) Ratings Affirmed A2(G) AA- (sf) B BBB (sf) COLATERALES GLOBAL: S&P Retains 'BB' Rating on Class D Notes ------------------------------------------------------------ Standard & Poor's Rating Services took several credit rating actions in three Spanish residential mortgage-backed securities (RMBS) transactions. Specifically, S&P has: -- placed its ratings on all classes on notes issued by AyT Caja Murcia Hipotecario II Fondo de Titulizacion de Activos on CreditWatch negative. -- downgraded the class A and B notes issued by AyT Colaterales Global Hipotecario FTA Series AyT Colaterales Global Hipotecario Caja Espana I. -- placed on CreditWatch negative its ratings on the class A and B notes issued by AyT CajaGranada Hipotecario I Fondo de Titulizacion de Activos. All other classes of notes in these transactions are unaffected. "Confederacion Espanola de Cajas de Ahorros (CECA; BBB-/Watch Neg/A-3) acts as either bank account provider, swap provider, or both for the listed transactions," S&P said. "The rating actions reflect the application of the 2012 counterparty criteria. They do not reflect the performance of the listed transactions," S&P said. "Transaction documents usually provide for a range of potential remedies to be taken if we lower our ratings on counterparties below the documented triggers. These remedies may include the replacement of the counterparty, the posting of collateral, or provision of additional guarantees. The transaction documents also give a time frame within which any remedy of the breach should take place; typically it ranges from 10 to 60 days. The transaction documents may also allow the counterparty to take other actions that are not specifically listed in the documents," S&P said. "We have placed our ratings on the classes in AyT Caja Murcia Hipotecario II and AyT CajaGranada Hipotecario I on CreditWatch negative because the documented remedy periods have expired, the issuer has taken no action to remedy the documented trigger, and no definitive plan to remedy the breach has been presented to us. CECA acts as swap counterparty in both transactions. We will resolve the CreditWatch placements once we have analyzed the transactions without giving benefit to the swap, and will measure the impact that this has on the ratings," S&P said. AYT CAJA MURCIA HIPOTECARIO II FONDO DE TITULIZACION DE ACTIVOS "According to the transaction documents, when the swap counterparty, CECA, was downgraded in March 2012, it became ineligible as a swap provider and had to take remedial actions within a certain period. The remedy period has elapsed and CECA has not remedied the breach. Therefore, we have placed all classes of notes issued by AyT Caja Murcia Hipotecario II on CreditWatch negative until we have analyzed the transaction without the benefit of the swap and measured the impact that this has on the ratings," S&P said. AYT COLATERALES GLOBAL HIPOTECARIO CAJA ESPANA I "According to the transaction documents, when the bank account provider and swap counterparty, CECA, was downgraded in March 2012, it became ineligible to act in these roles and had to take remedial action within a certain period. The remedy period has elapsed and CECA has not remedied the breach. Therefore, we have linked the ratings on the class A and B notes to the long-term 'BBB-' issuer credit rating (ICR) on CECA. Our ratings on the class C and D notes are unaffected; both are rated as equal to or below the rating on CECA," S&P said. AYT CAJAGRANADA HIPOTECARIO I FONDO DE TITULIZACION DE ACTIVOS "According to the transaction documents, when the swap counterparty, CECA, was downgraded in March 2012, it became ineligible as a swap provider, and had to take remedial actions within a certain period. The remedy period has elapsed and CECA has not remedied the breach. Therefore, we have placed the class A and B notes on CreditWatch negative until we have analyzed the transaction without the benefit of the swap and measured the impact that this has on the ratings. Our ratings on the class D and C notes remain unaffected as these classes are rated below the ICR on CECA," S&P said. "The collateral in all these transactions consists of residential mortgages granted to individuals in Spain. Most of the loans were extended to enable the borrowers to purchase their first residence," 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 Rating To From AyT Caja Murcia Hipotecario II Fondo de Titulizacion de Activos EUR315 Million Mortgage-Backed Floating-Rate Notes Ratings Placed On CreditWatch Negative A A (sf)/Watch Neg A (sf) B A (sf)/Watch Neg A (sf) C BBB (sf)/Watch Neg BBB (sf) AyT Colaterales Global Hipotecario FTA Series AyT Colaterales Global Hipotecario Caja Espana I EUR500 Million Asset-Backed Floating-Rate Notes Ratings Lowered A BBB- (sf) AA- (sf) B BBB- (sf) BBB (sf) Ratings Unaffected C BBB- (sf) D BB (sf) AyT CajaGranada Hipotecario I Fondo de Titulizacion de Activos EUR400 Million Floating-Rate Notes Ratings Placed On CreditWatch Negative A AA- (sf)/Watch Neg AA- (sf) B A (sf)/Watch Neg A (sf) Ratings Unaffected C BBB- (sf) D BB- (sf) ORIZONIA: Expects to Complete Debt Restructuring by November ------------------------------------------------------------ Isabell Witt at Reuters reports that Orizonia is restructuring around EUR640 million (US$818 million) of loans. According to Reuters, a senior investor said that Orizonia, formerly known as Iberostar, has a cash hole in its finances after revenues slumped as the euro zone crisis intensified. The company, Reuters says, is expected to complete a debt restructuring by the end of November. Reuters relates that people close to talks said the company's largest lenders have already approved a debt for equity swap, which will result in substantial losses for senior and junior lenders. Orizonia is a Spanish tour operator. The company is owned by The Carlyle Group and Vista Capital. TREE INVERSIONES: Moody's Confirms 'B1' Rating on EUR112MM Loan --------------------------------------------------------------- Moody's Investors Service has confirmed the following commercial real estate loans advanced to Tree Inversiones Inmobiliarias, S.A. (the "Borrower"): EUR1,139M Senior Loan maturing in September 2017, Confirmed at Ba2; previously on Aug 23, 2012 Downgraded to Ba2 and Remained On Review for Possible Downgrade EUR112M Mezzanine Loan maturing in May 2017, Confirmed at B1; previously on Aug 23, 2012 Downgraded to B1 and Remained On Review for Possible Downgrade Both Loans were originally placed on review for possible downgrade on March 13, 2012. The action concludes Moody's review of the transaction. Ratings Rationale The confirmation follows the recent confirmation of Banco Bilbao Vizcaya Argentaria, S.A. ("BBVA") at Baa3. BBVA's current rating was fully reflected in the five notch downgrade for both loans on 23 August 2012. The term risk of both loans is linked to the credit strength of BBVA due to its role as lease guarantor. However further stress was applied because (i) no SPV structure is in place whereby the borrower is bankruptcy remote and (ii) any adverse credit events occurring beyond Moody's current expectations given the complex legal/tax structure. To illustrate this risk, the Spanish Government recently introduced tax measures that created a new liability for the borrower resulting in a reduction of the interest coverage ratio on the loans from 1.44x to 1.31x. There are no financial covenants in place for either loan. However, an LTV test will be triggered upon a downgrade of BBVA to Ba2 or lower, with a breach resulting in a partial prepayment or deposit made by the borrower (by selling properties and repaying the senior loan or by sponsors injecting equity). A failure to prepay or deposit will result in a loan event of default. A downgrade of BBVA's rating in the near future is now less likely since its removal from Review for Possible Downgrade. Nonetheless, BBVA's rating outlook remains negative reflecting the challenges that Spanish banks still face and additionally the diminished, but still-present downside risks to the Spanish sovereign's creditworthiness. There was no cash flow analysis undertaken for the Mezzanine Loan since its rating is linked to its recovery expectations given its ranking and the credit strength of BBVA (but stressed because of the factors previously mentioned). The Mezzanine Loan is expected to fully amortize by its maturity date in May 2017, assuming funds are not switched off due to a Senior Loan non-payment. The key parameters in Moody's analysis are the default probability of the loans (both during the term and at maturity) as well as Moody's value assessment for the properties securing these loans. Moody's derives from those parameters a loss expectation. 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 fueled by fiscal consolidation efforts, household and banking sector deleveraging and persistently high unemployment levels. Moody's expects a mild recession in the Euro area. 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. 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. Other factors used in this rating are described in European CMBS: 2012 Central Scenarios published in February 2012. The updated assessment is a result of Moody's on-going surveillance of commercial mortgage backed securities (CMBS) transactions. Moody's prior assessment is summarized in a press release dated August 23, 2012. The last Performance Overview for this transaction was published on September 26, 2012. In rating this transaction, Moody's used both MoRE Portfolio and MoRE Cash Flow to model the cash-flows and determine the loss for each tranche. MoRE Portfolio evaluates a loss distribution by simulating the defaults and recoveries of the underlying portfolio of loans using a Monte Carlo simulation. This portfolio loss distribution, in conjunction with the loss timing calculated in MoRE Portfolio is then used in MoRE Cash Flow, where for each loss scenario on the assets, the corresponding loss for each class of notes is calculated taking into account the structural features of the notes. As such, Moody's analysis encompasses the assessment of stressed scenarios. Moody's ratings are determined by a committee process that considers both quantitative and qualitative factors. Therefore, the rating outcome may differ from the model output. * SPAIN: Prime Minister Rajoy Not in Hurry to Seek Bailout ---------------------------------------------------------- Jonathan House and David Roman at Dow Jones Newswires report that Prime Minister Mariano Rajoy signalled Tuesday that he is in no hurry to ask for a financial rescue, saying he wants to be certain that activating the euro zone's new bailout mechanism would bring a significant improvement in Spain's borrowing costs. Though most analysts believe Spain will need assistance as it overhauls its ailing economy, the European Central Bank's recent promise of massive government bond purchases for countries seeking bailouts has brought down borrowing costs for Spain and other struggling euro-zone countries, Dow Jones notes. In recent weeks, Spanish officials had indicated a readiness to apply for a rescue and become the country first to test the ECB bond-buying program, a cornerstone of European efforts to shore up the common currency, Dow Jones relates. According to Dow Jones, Monday's remarks by Mr. Rajoy, in a radio interview, were the clearest yet that he will take his time deciding. The Spanish leader, wary of the uncertainties involved in implementing a bailout, noted that financial pressure on the government had eased enough that it can cover nearly all its funding requirements for the rest of the year, Dow Jones discloses. Mr. Rajoy acknowledged that Spanish financing costs remain high, especially for the country's companies -- an incentive for Spain to explore a possible bailout request, Dow Jones notes. =========== S W E D E N =========== NOBINA AB: Moody's Raises Corp. Family Rating to 'Caa1' ------------------------------------------------------- Moody's Investors Service has upgraded the corporate family rating (CFR) of Nobina AB to Caa1 from Caa3. Concurrently, Moody's has also upgraded Nobina's probability of default rating (PDR) to Caa1/LD from Ca/LD. This concludes the rating review for upgrade that was initiated by Moody's on October 1, 2012. The outlook on all ratings is stable. The rating action was prompted by Nobina's announcement on October 25, 2012 that it has completed the refinancing of its EUR85 million (approximately SEK711 million) of senior secured notes with a debt-to-equity swap. Previously, the EUR85 million of senior secured notes, which are not rated by Moody's, were temporarily deferred until October 31, 2012. Moody's deems the debt-to-equity swap a distressed exchange, which is an event of default under the rating agency's default definition. Moody's will remove the LD (limited default) designation after three days and change the PDR to Caa1 from Caa1/LD. In line with previous indications, approximately 25% (SEK180 million) of the principal of the EUR85 million of notes was converted into equity, corresponding to a 95% stake in Nobina, and the remaining 75% (SEK550 million) was converted into new senior secured notes maturing in five years and paying an annual coupon of 11%. The SEK550 million (around EUR64 million) of senior secured notes will be issued by Nobina Europe AB. Noteholders will be granted a put option at December 31, 2013, conditional on certain levels of cash build-up at Nobina Europe AB. Moody's does not rate the SEK550 million of new senior secured notes. Upgrades: Issuer: Nobina AB Probability of Default Rating, Upgraded to Caa1/LD from Ca/LD Corporate Family Rating, Upgraded to Caa1 from Caa3 Outlook Actions: Issuer: Nobina AB Outlook, Changed To Stable From Rating Under Review Ratings Rationale "The rating upgrade of Nobina's CFR to Caa1 reflects the company's successful completion of the debt-to-equity swap, which has eliminated a substantial upcoming maturity and the risk of a near-term default," says Kathrin Heitmann, Moody's lead analyst for Nobina. "As a result, Nobina has a more relaxed debt maturity profile and increased equity, which will improve the company's near-term financial flexibility." However, the Caa1 CFR remains constrained by the company's weak liquidity profile. The executed debt-to-equity swap has not improved Nobina's current low unrestricted cash balance of SEK150 million at August 31, 2012 and will result in only a modest reduction in the company's annual interest expense of around SEK7 million. The ratings incorporate Moody's expectation that Nobina's profitability levels will remain stable or slightly improve and that the company's free cash flow will be positive, albeit modest compared with its total debt outstanding. Nobina uses free cash flow to service and repay its short-term lease contracts, but swings in the company's working capital can be significant. Expected free cash flow generation and unrestricted cash on the balance sheet remain insufficient to cover the company's short- term portion of long term financial leasing liabilities of SEK450 million at August 31, 2012 and day-to-day needs estimated at 3% of annual revenues. Nobina has access to a SEK50 million short-term committed credit line and to a SEK300 million 364-day accounts receivable financing arrangement. Moody's considers neither the factoring facility nor the short-term bank line in its liquidity analysis given their short-term nature. In addition, Moody's notes the relatively small reduction in Nobina's financial debt of SEK180 million following the distressed exchange, which is likely to only marginally reduce the company's financial leverage. At August 31, 2012, Nobina's adjusted total debt amounted to SEK5.78 billion. Consequently, Moody's expects Nobina's debt/EBITDA to remain above 6.0x in fiscal year 2012-13 (ending February 28), a level the rating agency views as substantial given the company's relatively narrow business focus. Other factors that Moody's considered in evaluating Nobina's creditworthiness are (1) the company's position as the largest Nordic bus transportation group, with a significant proportion of business with local Scandinavian communities that have relatively high revenue visibility and predictability as a result of limited transportation volume exposure; (2) its limited scale, with revenues and profit generation being concentrated on the Swedish market; and (3) the compression in the company's credit metrics in fiscal year 2011-12, with first signs of improvement in its profit margins in H1 2012-13 (a reported operating margin of 4.2% in H1 2012-13 compared with 3.6% in H1 2011-12). The stable outlook on the ratings reflects Moody's expectation that Nobina's profitability levels will remain stable or slightly improve and that the company's free cash flow will be positive but used to cover short-term financial leasing obligations. What Could Change The Rating Up/Down Upward rating pressure would require (1) sustained improvements in Nobina's weak liquidity profile, with readily available cash on the balance sheet and available long-term credit lines (currently not available) sufficient to cover the company's interest payments, short-term financial leasing liabilities and seasonal swings in working capital and capital investments; and (2) an improved capital structure driven by a reduction in reported indebtedness. Negative rating pressure could arise if there were a heightened risk of Nobina defaulting in the near term as a result of a depletion of its available cash sources. Nobina 's ratings were assigned by evaluating factors that Moody's considers relevant to the credit profile of the issuer, such as the company's (i) business risk and competitive position compared with others within the industry; (ii) capital structure and financial risk; (iii) projected performance over the near to intermediate term; and (iv) management's track record and tolerance for risk. Moody's compared these attributes against other issuers both within and outside Nobina's core industry and believes Nobina's ratings are comparable to those of other issuers with similar credit risk. Nobina AB is the largest Nordic bus transportation company, operating in Sweden, Norway, Finland and Denmark. Its revenues for fiscal year 2011-12 (ending February 29) totalled SEK7.1 billion and were mostly generated from public bus services in Sweden. This reflects the more advanced stage of the deregulation in this country, where almost all local and regional bus services have been tendered since 1989, in contrast to the situation in Norway and Finland, where less than 50% of the traffic has been tendered so far. In Sweden, the public bus transportation needs of Contractual Public Transportation Associations (CPTAs) are put up for tender via a competitive bidding process and the tenor of such contracts is typically five to eight years. The majority of contracts are priced with cost indexation levels adjusted on a monthly (Denmark), quarterly (Sweden, Finland) or annual basis (Norway). NOBINA AB: S&P Raises Corp. Credit Rating to 'B'; Outlook Stable ---------------------------------------------------------------- Standard & Poor's Ratings Services raised its long-term corporate credit rating on Sweden-based bus services provider Nobina AB and its subordinated holding company Nobina Europe Holding AB (collectively Nobina) to 'B' from 'SD' (selective default). The outlook is stable. "The upgrade follows Nobina's announcement outlining the final terms of the refinancing of its EUR85 million senior secured notes. The refinancing involves a debt-to-equity swap, with about Swedish krona (SEK) 180 million (25%) of the old senior secured notes being converted into shares in Nobina. The remaining amount of about SEK550 million was primarily refinanced through a new Swedish krona-denominated bond that Nobina issued in the Nordic market. The annual coupon on the bond is 11% and its duration is five years, but it includes an option for Nobina to redeem it throughout that time," S&P said. "We believe that the transaction has marginally improved the company's leverage, and enhanced its liquidity profile and financial flexibility, eliminating any major bond debt maturities until 2017. The transactions will also eliminate Nobina's exposure to exchange-rate fluctuations on the senior secured notes, and reduce its annual interest payments, albeit by a small amount, due to a lower bond amount," S&P said. "Although we believe that the transactions have improved Nobina's financial risk profile, it nevertheless remains 'highly leveraged' according to our classifications. Our base-case scenario envisages that Nobina's cash flow credit measures will improve gradually over the medium term, primarily through an increase in cash flows due to enhanced profitability and to a lesser extent, a lower interest burden. We forecast that, in the 12 months to Feb. 28, 2013, credit ratios pro forma for the transactions will strengthen to a Standard & Poor's-adjusted ratio of funds from operations (FFO) to debt of 13.0% from 10.4% in the previous year. However, we anticipate key leverage measures will deteriorate due to anticipated increases in financial leases. As such, we anticipate that adjusted debt to EBITDA will increase to 6.5x compared with about 5.8x in the previous year," S&P said. "The rating on Nobina continues to be constrained by our view of the group's highly leveraged financial risk profile and 'aggressive' financial policy, 'less than adequate' liquidity, as well as its 'weak' business risk profile. In our view, the main factors constraining the rating are Nobina's high financial leverage and its relatively low profit margin, which partly reflects its participation in competitive tenders in the regulated Nordic bus markets," S&P said. "These constraints are mitigated to a degree by Nobina's predictable revenue-generating activities and competitive position as the leading provider of contractual passenger bus transportation in the Nordic region. Nobina generates about 90% of its revenues from regulated bus operations, underpinned by medium-term contracts granted directly by public authorities," S&P said. "In the first half of financial 2013 (ended Aug. 31, 2012), Nobina reported relatively stable sales of SEK3.54 billion (about EUR400 million), compared with SEK3.55 billion a year earlier. We note that positive price and volume growth was offset by a net reduction in revenues from new and ended contracts," S&P said. "Operating profit in the first half of financial 2013 increased 16% to SEK148 million from SEK127 million a year earlier. Of the 16%, operating profit from total regional traffic increased 13% to SEK151 million from SEK133 million, while that from inter- regional traffic remained stable at SEK13 million. The improved performance of the regional traffic division resulted primarily from strong growth in the Swedish and Finnish operations, while cash flows from the inter-regional division were constrained by shorter journeys and price pressure," S&P said. "In the first half of financial 2013, Nobina's reported cash flow from operations (after interest paid) increased to SEK315 million, from SEK104 million a year earlier, primarily because of enhanced earnings and positive working capital inflows," S&P said. "The stable outlook reflects our view that Nobina's improved bond repayment profile will support its debt service and ongoing operational needs in the near to medium term. The outlook also reflects our view of Nobina's anticipated operational and financial performance, and the resilience of its contractual cash flows. We consider ratios of FFO to adjusted debt of more than 10% and adjusted debt to EBITDA of less than 7x to be commensurate with the rating," S&P said. "We could take a negative rating action if the group's trading performance deteriorates, liquidity position weakens, or if credit ratios soften to below the levels we consider commensurate for the current ratings," S&P said. "Conversely, we could take a positive rating action if Nobina improves its profitability and cash generation, and consequently, its credit ratios. We typically consider a sustained ratio of FFO to adjusted debt in excess of 15%, debt to EBITDA of less than 5x, and adequate liquidity to be commensurate with a 'B+' rating," S&P said. ===================== S W I T Z E R L A N D ===================== MATTERHORN MIDCO: Moody's Assigns Definitive 'Caa1' LGD Rating -------------------------------------------------------------- Moody's Investors Service has assigned a definitive Caa1 rating and loss-given-default (LGD) assessment of LGD6 to the EUR155 million (CHF188 million equivalent) senior unsecured notes due 2020 issued by Matterhorn Midco & Cy S.C.A. ("Matterhorn Midco"), the holding company of Orange Communications S.A. ("Orange Switzerland" or "OCH"). The following ratings of different group entities remain unchanged: Matterhorn Midco & Cy S.C.A.: - Corporate family rating (CFR): B2 - Probability of default rating (PDR): B1 Matterhorn Mobile Holdings S.A. ("MMH"): - EUR225 million (CHF272 million) of senior notes due February 2020: B3/LGD6 Matterhorn Mobile S.A.: - EUR330 million (CHF400 million) of senior secured floating- rate notes (FRNs) due May 2019: B1/LGD4 - CH450 million of senior secured fixed-rate notes due May 2019: B1/LGD4 - CHF180 million of senior secured FRNs due 2019: B1/LGD4 The outlook on all the ratings is stable. Ratings Rationale Moody's definitive rating on this debt obligation is in line with the provisional rating assigned on September 24, 2012. The Caa1 rating on the notes issued by Matterhorn Midco is two notches below the company's B2 CFR and one notch below the B3 rating on the senior unsecured notes issued by MMH. This notching differential reflects these notes' subordinated position relative to the other debt instruments in the group's capital structure. The notes issued by Matterhorn Midco have substantially the same terms and conditions as the existing senior unsecured notes issued by MMH. However, the new notes benefit from a senior guarantee from MMH, but not from the other companies that guarantee the revolving credit facility, the senior secured notes issued by Matterhorn Mobile S.A., or the senior unsecured notes issued by MMH. Matterhorn Midco has used the majority of the net proceeds from the offering to pay an extraordinary distribution to its shareholders worth CHF181 million (EUR150 million). Due to the high initial leverage and the substantial amount of secured notes and senior unsecured notes that effectively rank ahead of Matterhorn Midco's notes in case of enforcement, Moody's expects that the amount of residual collateral value available to the noteholders in a recovery scenario would be very limited. Matterhorn Midco's B2 CFR reflects its leveraged capital structure following the acquisition of Orange Switzerland by funds advised by Apax Partners LLP. Matterhorn Midco's high business risk reflects its small size, lack of fixed-line business, and the strategic challenges ahead linked to the company's separation from its previous owner, the France Telecom group. The rating also reflects the track record of aggressive financial policies implemented to date by the shareholders, as well as Moody's expectation that the shareholders are likely to make use of the financial flexibility that Matterhorn Midco will develop over time as it progressively deleverages. The stable outlook reflects Moody's expectation that Matterhorn Midco's adjusted debt/EBITDA will remain in the 4.0x-4.5x range on a sustained basis and that the company can broadly achieve its objectives in terms of operational metrics. What Could Change The Rating Up/Down Upward pressure on the rating could develop if Matterhorn Midco's financial profile improves, such that the company's (1) adjusted debt/EBITDA ratio decreases to 4.0x-3.5x on a sustained basis; and (2) RCF/adjusted debt ratio increases well above 15%. Upward pressure on the rating would require a track record of deleveraging, with indications of a more conservative financial strategy to be implemented by the shareholders. Conversely, downward pressure could be exerted on the rating if Matterhorn Midco's operating performance weakens such that the company's adjusted debt/EBITDA trends towards 5.0x and its RCF/adjusted debt falls below 10% on a sustained basis. In addition, downward pressure could be exerted on the rating if Moody's becomes concerned about the company's liquidity -- including, but not limited to, a reduction in covenant headroom. Principal Methodology The principal methodology used in rating Matterhorn Midco & Cy S.C.A., Matterhorn Mobile Holdings S.A. and Matterhorn Mobile S.A. was the Global Telecommunications Industry Methodology published in December 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. Orange Communications S.A. ("OCH") is the number three mobile network operator in Switzerland, with a reported mobile revenue market share of around 20% and a subscriber market share of around 17% for the six months ended June 2012. The company has more than 1.6 million customers. For the 12 months ended June 2012, the group reported revenues of CHF1.3 billion (EUR1.06 billion) and adjusted EBITDA of CHF372.5 million (EUR310 million). PETROPLUS HOLDINGS: Netoil Submits Revised Offer for French Unit ---------------------------------------------------------------- Nidaa Bakhsh at Bloomberg News reports that Netoil Inc., a Dubai- based company, has submitted a revised offer for insolvent Petroplus Holdings AG's Petit-Couronne refinery in Normandy, France, teaming up with BP Plc. According to Bloomberg, Roger Tamraz, Netoil's chairman, said Netoil expects to pay EUR60 million (US$77 million) for inventories on site and EUR100 million for liabilities, without identifying his creditors. The 154,000 barrel-a-day facility faced liquidation last month after bids from Netoil and Alafandi Petroleum Group were rejected, Bloomberg recounts. Laurent Patinier, an official for the CFDT union at the site, said that a local court was scheduled to meet on Monday to discuss the new offers, Bloomberg notes. Arnaud Montebourg, the country's industry minister, said on Monday on RTL radio more time was needed to examine Libyan interest in the refinery after being contacted by the nation's sovereign wealth fund, Bloomberg relates. Petroplus on Monday said the court will either give a new date for a decision or extend the deadline for bids, according to Bloomberg. Petroplus filed for insolvency in January after lenders froze credit lines, Bloomberg recounts. Bloomberg notes that union officials have said the plant has been running since June under a so-called tolling deal with Royal Dutch Shell Plc, and may shut later this month if a credible buyer or plan isn't approved by the court. Based in Zug, Switzerland, Petroplus Holdings AG is one of Europe's largest independent oil refiners. =========== T U R K E Y =========== EKSPO FAKTORING: Moody's Assigns 'Ba3' CFR; Outlook Stable ---------------------------------------------------------- Moody's Investors Service has affirmed the local and foreign- currency Ba3 issuer ratings and the Baa1.tr National Scale Rating (NSR) of Ekspo Faktoring A.S. At the same time, Moody's has assigned a corporate family rating (CFR) of Ba3 to Ekspo Faktoring, following Moody's implementation of its revised global rating methodology for finance companies. All ratings carries a stable outlook. Ratings Rationale -- Ratings Affirmation Moody's says that the Ba3 rating is supported by Ekspo's robust profitability, its sound asset quality and strong capitalization metrics. Since its inception in 2001, Ekspo has ranked 10th by total factoring volume amongst factoring companies in Turkey and it is one of the largest non-bank-affiliated factoring companies in the market. Moody's notes that the ratings are constrained by Ekspo's modest size, its considerable loan-portfolio concentrations, and high dependence on domestic short-term wholesale funding. Furthermore, the uncertainty regarding the sustainability of the currently high profitability trends in the Turkish factoring industry -- which is in its early stages of development -- is an additional constraint on the rating. Moreover, Ekspo's Ba3 rating does not benefit from either uplift from possible support from its shareholders, or from the Turkish sovereign. The Baa1.tr NSR is derived directly from the Ba3 local-currency issuer rating. The stable outlook on the firm's ratings reflects the rating agency's expectation that Ekspo Faktoring continues its gradual franchise expansion thereby maintaining its healthy financial profile against the headwinds of slowing economic growth in Turkey and competitive margin pressures in the banking and broader financial services industry. -- Assignment of Corporate Family Rating The assignment of the CFR follows the implementation of Moody's revised global rating methodology for finance companies, which stipulates the key operational, financial and environmental factors Moody's considers when rating these companies. The CFRs incorporate the affected finance companies' standalone credit profiles, as well as any parental or affiliate support. In contrast to these finance companies' issuer ratings, which represent Moody's opinion of credit risk equivalent to the companies' senior unsecured debt obligations, the CFRs represent the rating agency's opinion of the companies' consolidated credit risk, equivalent to the weighted average of all debt classes within the companies' capital structure. Using the CFR as a reference point, the methodology codifies Moody's framework for assigning ratings to the various classes of debt issued by non-investment-grade finance companies on the basis of expected differences in loss-given-default. This framework considers the proportionality, seniority and level of asset protection associated with various debt classes, both nominally and in relation to each other. What Could Move The Ratings Up/Down Currently, there is no upwards pressure on the ratings, reflected by the stable outlook. Upwards rating pressure could develop following (1) continuing material diversification and strengthening of Ekspo's funding profile; (2) further considerable strengthening and expansion of its franchise; and (3) further institutionalization of corporate-governance practices. Downwards rating pressure could develop if (1) there is evidence that Ekspo has increased its risk appetite; (2) credit risk in Turkey generates losses that puts Ekspo's solvency at risk and jeopardizes its current business model; (3) financial leverage significantly increases, without simultaneously raising matched funding; or (4) Ekspo's franchise weakens. Principal Methodologies The principal methodology used in this rating was Finance Company Global Rating Methodology, published on March 2012. Moody's National Scale Ratings (NSRs) are intended as relative measures of creditworthiness among debt issues and issuers within a country, enabling market participants to better differentiate relative risks. NSRs differ from Moody's global scale ratings in that they are not globally comparable with the full universe of Moody's rated entities, but only with NSRs for other rated debt issues and issuers within the same country. NSRs are designated by a ".nn" country modifier signifying the relevant country, as in ".mx" for Mexico. For further information on Moody's approach to national scale ratings, please refer to Moody's Rating Methodology published in October 2012 entitled "Mapping Moody's National Scale Ratings to Global Scale Ratings". * REPUBLIC OF TURKEY: Fitch Upgrades Long-Term IDR From 'BB+' ------------------------------------------------------------- Fitch Ratings has upgraded the Republic of Turkey's Long-term foreign currency Issuer Default Rating (IDR) to 'BBB-' from 'BB+' and the Long-term local currency IDR to 'BBB' from 'BB+'. The Outlooks on the Long-term ratings are Stable. The agency has also upgraded Turkey's Short-term foreign currency IDR to 'F3' from 'B' and the Country Ceiling to 'BBB' from 'BBB-'. Rating Rationale The upgrade to investment grade reflects a combination of an easing in near-term macro-financial risks as the economy heads for a soft landing and underlying credit strengths including a moderate and declining government debt burden, a sound banking system, favorable medium-term growth prospects and a relatively wealthy and diverse economy. Fitch believes that the Turkish economy is on track to return to a sustainable growth rate, having narrowed the current account deficit (CAD) and lowered inflation after overheating in 2011. The agency forecasts GDP growth of 3% in 2012, 3.8% in 2013 and 4.5% in 2014. Achieving such a rebalancing without a recession - helped by a strong trade performance, while unemployment is at an 11-year low - points to enhanced economic flexibility and resilience. Fitch expects the economy to remain more volatile than investment grade peers, but believes sovereign creditworthiness has become more resilient to shocks. At some point, an external financing shock and a recession are likely. However, the agency believes the country's strong sovereign, bank and household balance sheets, and economic and exchange rate flexibility provide important buffers against shocks spreading into a wider financial crisis. Turkey's public finances are a key rating strength. Government debt dynamics are favorable due to a low general government budget deficit, which Fitch forecasts at 1.9% of GDP in 2012 (not counting privatization receipts) and trend GDP growth above the real interest rate. Fitch estimates the general government debt/GDP ratio will be 37% at end-2012, down 9pp since end-2009, while it projects the 'BBB' range median at 41% of GDP, up 7pp since 2009. The government extended the average maturity of debt to 4.5 years in mid-2012 from 3.5 years in 2009, while reducing the FX share to less than 30%. Lower budget deficits and debt maturities have reduced Turkey's gross fiscal financing requirement to a projected 9% of GDP in 2012 from 17% in 2010. A relatively deep local capital market supports financing flexibility. Turkey's sound banking system underpins the rating. It has a capital adequacy ratio of 16.3%, is moderate in size and has a low non-performing loan ratio of 2.8%. However, credit growth has been brisk in recent years (although it slowed to 14% in September 2012), raising the loan/deposit ratio to above 100%. Household debt is low at only 18% of GDP. Favorable growth prospects support the credit profile. Turkey's potential growth rate of 4%-5% is boosted by demographic trends, an entrepreneurial culture and financial deepening. It improved its ranking to 43rd (out of 144) in the World Economic Forum's latest competitiveness league table, up from 59th in 2011/12. GDP per capita is above the 'BBB' median. Turkey also outperforms the peer median on four out of six of the World Bank's governance indicators. Nevertheless, Turkey's external finances remain a key rating weakness. Fitch forecasts the CAD at US$58 billion (7.3% of GDP) in 2012, albeit down from US$77 billion (10%) in 2011. The agency forecasts it to remain at US$63 billion (7.2%) in 2013 which, together with maturing external debt payments, exposes the country to shocks to global liquidity. Nonetheless, foreign exchange reserves (including gold) have increased by USD24bn year to date to US$112 billion and Turkey did not suffer a sudden stop to capital inflows during the Lehman or eurozone crisis stress tests. Turkey's net external debt/GDP ratio is likely to trend up gradually over the forecast horizon. Turkey also has a track record of volatile inflation and GDP growth, reflecting its low savings rate and dependence on external financing, as well as domestic policy management. Fitch forecasts inflation to decline to 7.4% at end-2012 and 6.5% at end-2013, from 10.5% at end-2011, but still well above the central bank's inflation target of 5%. Although the new policy framework has traction and has helped to rebalance the economy under challenging conditions, it has failed to hit the inflation target and has been relatively discretionary and unpredictable. The two-notch upgrade of the local currency IDR to 'BBB' opens up a one-notch uplift above the foreign currency IDR to reflect the sovereign's somewhat greater capacity to finance itself in Turkish lira than in foreign currency, due to its power of taxation, the strong banking system and deep local capital market. The lengthening in maturity of local currency debt has further reduced its financing risks. The country's relatively weak external finances also weigh less heavily on the local currency rating. Rating Outlook - Stable The main factors that could lead to positive rating action, individually or collectively, are: -- A material and durable reduction in the CAD, though Fitch does not anticipate this in the near term. -- A track record of lower and more stable inflation. The main risk factors that could lead to negative rating action, individually or collectively, are: -- A 'balance-of-payments crisis' triggered by an external shock or a domestic policy mistake. -- A worse-than-expected increase in external debt ratios over the medium term, for example related to rapid credit growth and larger CADs. -- A major political shock with a material adverse impact on the economic and fiscal outlook. Key Assumptions and Sensitivities The ratings and Outlooks are sensitive to a number of assumptions. -- Fitch's economic and fiscal projections are based on the assumption that budget outcomes are broadly in line with the Turkish government's Medium-Term Program 2013-2015, consistent with a declining government debt/GDP ratio. -- Fitch assumes that the eurozone remains intact and that there is no materialization of severe tail risks to global financial stability that could trigger a sudden stop to capital inflows to countries like Turkey with large CADs and net external debtor positions. Such a scenario would likely trigger a downgrade. -- Some escalation in regional instability cannot be discounted and is within the tolerance of the rating. However, Fitch does not expect the civil war in Syria to draw Turkey into a full-scale military conflict. If such an event took place and had a significant economic and fiscal impact it could lead to a downgrade. -- Fitch assumes that Turkey's membership of the Financial Action Task Force (FATF) is not suspended in February 2013 (as FATF threatened in October 2012 if Turkey failed to "adopts legislation to remedy deficiencies in its terrorist financing offence" and "establishes a legal framework for identifying and freezing terrorist assets consistent with the FATF Recommendations"); or if it is suspended, that does not precipitate countermeasures that materially adversely affect the capacity of Turkish entities to access international financing. If such a downside risk materialized it could lead to a downgrade. ============= U K R A I N E ============= * CITY OF KYIV: S&P Assigns 'B-' Rating to Sr. Unsecured Bond ------------------------------------------------------------- Standard & Poor's Ratings Services assigned a 'B-' debt rating with a recovery rating of '4' to the City of Kyiv's proposed amortizing senior unsecured bond of up to Ukranian hryvnia 2 billion (about US$250 million). "At the same time, we placed the rating on CreditWatch with negative implications," S&P said. "According to our criteria, we equalize the issue rating on bonds with a '4' recovery rating with the issuer credit rating (ICR). The rating on the proposed bond is therefore in line with the ICR on the City of Kyiv (B-/Watch Neg/--), which is on CreditWatch Negative owing to the city's slow progress in securing refinancing for US$250 million of loan participation notes due in November this year. The '4' recovery rating indicates our expectation of average (30%-50%) recovery in the event of a payment default," S&P said. "The city is expected to issue the UAH2 billion bond, to be due in late 2015, by year-end 2012. The bond will have fixed coupon payments that the city targets to not exceed 15.25%. We understand the proceeds from the bond will be used to refinance the city's bank loans (promissory notes) totaling UAH2 billion, which Kyiv obtained in 2010 to cover energy payables. This will not change the size of Kyiv's tax-supported debt as envisaged by our base-case scenario," S&P said. "The rating on Kyiv reflects our view of Ukraine's institutional framework as volatile and underfunded, constraining the city's financial flexibility. It also reflects Kyiv's high debt service, very negative liquidity, and material debt burden, with associated foreign-exchange risks. However, the city's importance as the administrative and economic center of Ukraine, and its fairly diversified economy, with wealth exceeding the national average severalfold, support the rating," S&P said. =========================== U N I T E D K I N G D O M =========================== AEROSPACE MACHINING: Placed in Liquidation; 70 Jobs Lost -------------------------------------------------------- news.scotsman.com reports that around 70 jobs at Aerospace Machining Technology are to be lost after the company announced a shock liquidation. news.scotsman.com relates that bosses at the company are believed to have made the decision due to cuts in the UK defense budget, and significant reductions in order levels. Employees at the precision engineering company have been working in the defense industry for more than 50 years, the report says. The company is now being put forward for acquisition by appointed joint provision liquidators KPMG, the report notes. "AMT's liquidation has come as a total shock to our members," the report quotes Unite regional officer Gillian McKay as saying. "There was no warning from management and absolutely no consultation with the trade union or any indication from them to suggest this would happen. Aerospace Machining Technology is an Edinburgh-based defense manufacturer. CLARIS LIMITED: Moody's Cuts Ratings on Two Tranches to 'B1' ------------------------------------------------------------ Moody's Investors Service announced the following rating actions on the notes issued by Claris Limited: Issuer: Claris Limited EUR15M Series 95/2007 Tranche 1 EUR 15,000,000 Sonoma Valley 2007-2 Synthetic CDO of CMBS Variable Notes due 2046, Downgraded to B1 (sf); previously on May 25, 2010 Downgraded to A2 (sf) EUR40M Series 95/2007 Tranche II EUR 40,000,000 Sonoma Valley 2007-2 Synthetic CDO of CMBS Variable Notes due 2046, Downgraded to B1 (sf); previously on May 25, 2010 Downgraded to A2 (sf) Ratings Rationale According to Moody's, the rating downgrade is the result of the deterioration of the credit quality of the reference assets. In particular one asset in the pool, J.P. Morgan Chase Commercial Mortgage Securities Corp. Series 2006-CIBC17 Cl. A-M, was recently downgraded by 6 notches to Ba1. The pool consists of 29 equally weighted US CMBS assets. The 10-year weighted average rating factor (WARF) of the pool is 65, equivalent to A1. This compares to a 10-year WARF of 4 from the previous rating action. The rated tranche is highly sensitive to the credit quality of the worst rated assets in the pool because of the thin credit enhancement and lumpiness of the pool. Moody's also ran sensitivity analysis assuming various credit quality evolution of the reference assets in the pool. In one scenario, the worst rated asset was assumed to be rated in the B range and the model output was within four notches of the assigned rating. In another scenario, all Aa3 rated assets (17% of the pool) were assumed to have been downgraded by 3 notches and the model output was in line with the assigned rating. The principal methodology used in this rating was "Moody's Approach to Rating SF CDOs" published in May 2012. In rating this transaction, Moody's used CDOROM(TM) to model the cash flows and determine the loss for each tranche. The Moody's CDOROM(TM) is a Monte Carlo simulation which takes the Moody's default probabilities as input. Each corporate reference entity is modelled individually with a standard multi-factor model incorporating intra- and inter-industry correlation. The correlation structure is based on a Gaussian copula. In each Monte Carlo scenario, defaults are simulated. Losses on the portfolio are then derived, and allocated to the notes in reverse order of priority to derive the loss on the notes issued by the Issuer. By repeating this process and averaging over the number of simulations, an estimate of the expected loss borne by the notes is derived. As such, Moody's analysis encompasses the assessment of stressed scenarios. Moody's notes that in arriving at its ratings of SF CDOs, there exist a number of sources of uncertainty, operating both on a macro level and on a transaction-specific level. Primary sources of assumption uncertainty are the extent of the slowdown in growth in the current macroeconomic environment and the commercial and residential real estate property markets. While commercial real estate property markets are gaining momentum, a consistent upward trend will not be evident until the volume of transactions increases, distressed properties are cleared from the pipeline and job creation rebounds. Among the uncertainties in the residential real estate property market are those surrounding future housing prices, pace of residential mortgage foreclosures, loan modification and refinancing, unemployment rate and interest rates. An additional source of performance uncertainty includes portfolio non-granularity. The performance of the portfolio depends on the credit conditions of a small number of obligors that are equally weighted. Each obligor is 3.45% of the pool which currently covers the entire subordination and most of the rated tranche. If one experiences a jump to default, depending on recoveries, the tranche could suffer a loss. 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. COMET: Dixons Retail to Help Save Jobs -------------------------------------- The Telegraph reports that Dixons Retail's chief executive has pledged to try to save some of the staff facing job cuts at Comet. Almost 7,000 jobs are at risk following the collapse of the company, which was placed into administration after the American investors behind OpCapita decided to cut financial support, the Telegraph notes. According to the Telegraph, Sebastian James, chief executive of rival chain, Dixons, told The Sun that he wants to hire as many workers as possible for his PC World and Currys stores. Dixons is recruiting 3,000 Christmas staff, including 2,000 at its stores, the Telegraph discloses. Dixons has delayed its recruitment process by a week to allow Comet staff to apply for positions, the Telegraph says. Mr. James, as cited by the Telegraph, said there could be no guarantees over how many Comet staff he would take on. There was positive news for customers on Tuesday when administrators Deloitte said they would accept gift vouchers, the Telegraph relates. Deloitte halted vouchers on Friday after Comet called in administrators, sparking uproar, the Telegraph recounts. But, the administrators said they have now been able to assess the financial position of the company and collate information about the "quantity, value and nature" of gift cards in circulation, the Telegraph notes. Comet is an electricals chain. NORTH YORKSHIRE: Court Taps Chantrey Vellacott as Liquidators ------------------------------------------------------------- Corporate restructuring specialists from national accountancy firm Chantrey Vellacott DFK have been appointed liquidators of North Yorkshire Credit Union (NYCU). NYCU was placed into liquidation following an order of the High Court on Wednesday, October 31, with Kevin Murphy and Richard Toone from Chantrey Vellacott DFK appointed liquidators. Mr. Murphy has stressed that all savers will be compensated in full. "Every member of the North Yorkshire Credit Union will get their money back in full within the next week, as they are protected by the Financial Services Compensation Scheme (FSCS)," Mr. Murphy said in a statement. "The FSCS has confirmed this process is automatic, so members do not need to act to get their money back. People with less than GBP1,000 will receive a letter to get cash over the counter at the Post Office, while anyone with more than GBP1,000 will receive a cheque. "The collapse of North Yorkshire Credit Union is due to a combination of factors. This includes bad debt provisions in respect to loans to members of over �400,000 due to inadequate credit referencing and credit control, and also inadequate cost control, which is partly due to the resources required to service the large North Yorkshire region. "Under the terms of appointment as liquidators we are in the process of reviewing all of NYCU's assets and winding up the organisation." North Yorkshire Credit Union (NYCU) is a not-for-profit financial co-operative. It had its offices on Holgate Road, York. NYCU was initially formed in 2006 and was open to anyone who lives, studies or volunteers on a regular basis in York or in the county of North Yorkshire. It was owned and controlled by approximately 5,000 members with investments totalling around GBP1.9 million. PERSEUS 22: S&P Retains 'D' Ratings on 2 Note Classes ----------------------------------------------------- Standard & Poor's Ratings Services withdrew its credit ratings on Perseus (European Loan Conduit No.22) PLC's class A2 and A3 notes. S&P ratings on the class B, C, and D notes remain unaffected by the rating actions. "The withdrawals follow the cash manager's confirmation that the class A2 and A3 notes (scheduled to mature in July 2014) prepaid in full on the October 2012 interest payment date," S&P said. Perseus (European Loan Conduit No. 22) is a commercial mortgage- backed securities (CMBS) transaction that closed in December 2005. The transaction is secured by a portfolio of U.K. commercial real estate loans. 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 therefore 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 Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATINGS LIST Class Rating Rating To From Perseus (European Loan Conduit No. 22) PLC EUR514.538 Million Commercial Mortgage-Backed Floating-Rate Notes Ratings Withdrawn A2 NR A (sf) A3 NR A (sf) Ratings Unaffected B BBB (sf) C D (sf) D D (sf) NR - Not rated. =============== X X X X X X X X =============== * Moody's Sees Negative Outlook for Unregulated EMEA Utilities -------------------------------------------------------------- Unregulated electric and gas utilities in EMEA face pressure from weak market conditions and rising euro area risks, says Moody's Investors Service in an Industry Outlook report published on Nov. 6. As a result, Moody's outlook for the unregulated utilities sector over the next 12-18 months is negative. Conversely, Moody's expects that fundamentals for regulated utilities will be stable overall. The new report is entitled "EMEA Electric and Gas Utilities: Negative outlook for unregulated utilities on weak market conditions and rising euro area risks". "The negative outlook for unregulated utilities is based on weak underlying market conditions, which are squeezing earnings from generation and mid-stream gas; and declining sovereign credit quality, which will continue to drag on economic conditions," says Niel Bisset, a Moody's Senior Vice President and author of the report. "In addition, the outlook reflects political intervention risk, which remains high as governments try to reconcile huge investment costs with affordability, as well as the limited financial flexibility of unregulated utilities despite their efforts to cut debt," adds Mr. Bisset. In Moody's view, generators' profits are declining because of weak demand, reducing power prices and narrow clean spark spreads. Growing output from renewables is reducing thermal generation load factors and squeezing the spread between peak and 'normal' prices. Progress on contract renegotiations should see a reduction in losses on wholesale gas imports under oil-linked contracts. Moody's notes that sovereign pressure on ratings has intensified as the euro area crisis moves from the periphery towards its core. Utilities in affected countries have reacted by conserving cash, attracting new equity and tapping capital markets when conditions are favorable. Most have strengthened their liquidity position and have more than 24 months' liquidity. Moody's also notes that government intervention in the energy sector is reducing utilities' profitability and creating wholesale market uncertainty. This includes interference in tariff setting to help consumers, one-off taxes and wide-reaching energy market overhauls. As governments struggle to shield consumers from rising energy bills, reduce budget deficits and attract the investment needed to deliver environmental targets, such intervention is likely to continue. The higher risk to returns and uncertainty around the future shape of markets deters investment. Utilities companies continue to take steps to underpin earnings and strengthen balance sheets by cost cutting, reducing capital expenditure (capex), selling assets and raising equity. Despite these efforts, debt remains stubbornly high and credit ratios are at the lower end of Moody's guidance for ratings, which the rating agency has been tightening to factor in the sector's weakening business risk profile. Moody's expects that fundamentals for regulated utilities will be stable overall. However, significant investment to support long- term climate objectives and upgrade ageing networks will require adequate regulatory returns and higher tariffs. Networks are, therefore, not immune to political and sovereign risks. * EUROPE: Moody's Says Renewable Power to Hit Thermal Generators ---------------------------------------------------------------- Further expected increases in renewable energy will continue to erode the credit quality of European thermal generation companies in the near to medium term, says Moody's Investors Service in a Special Comment published on Nov. 6. The new report, entitled "European Utilities: Wind and Solar Power Will Continue to Erode Thermal Generators' Credit Quality", 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. "Large increases in renewables have had a profound negative impact on power prices and the competitiveness of thermal generation companies in Europe," says Scott Phillips, an Assistant Vice President - Analyst in Moody's Infrastructure Finance Group. "What were once considered stable companies have seen their business models severely disrupted and we expect steadily rising levels of renewable energy output to further affect European utilities' creditworthiness." Moody's notes that many European countries are considering the introduction of capacity payments to incentivize thermal generators to remain online. Utilities argue that the intermittent nature of renewables makes these mechanisms essential to address security-of-supply concerns, although politicians will be cautious about burdening the consumer with additional costs. Capacity mechanisms would be credit positive for Moody's rated utilities, although their timing and structure remains uncertain. The European Commission continues to address the potential balancing and stability problems by promoting interconnection. The 'Third Package' aims to remove some of the barriers but its development is still subject to regulatory, political and financial hurdles. The preference for a fully regulated model, with tariffs underpinned by consumers, could prove a sticking point given the impact on tariffs, and the impact on power prices in lower priced regions could prove a further political barrier. If realised, price increases in regions such as the Nord Pool would be credit positive for Fortum Oyj (A2 stable), Dong Energy A/S (Baa1 stable), Vattenfall AB (A2 negative) and Statkraft AS (Baa1 stable), while price decreases for high priced regions (such as the UK) would be credit negative. Some European utilities are considering electricity storage as a means to manage the impact of further increases in renewable energy. In Italy, Terna - Rete Elettrica Nazionale S.p.A. (Baa1 negative) has earmarked EUR1.0 billion to invest in batteries and E.ON AG (A3 stable) has commenced construction of a 2 megawatt hydrogen electrolysis plant in Germany. While these emerging technologies are currently small-scale and prohibitively expensive, Moody's cautions that storage does have the potential to further negatively affect peak power prices and would increase the competitiveness of renewables -- a credit negative for thermal generators. European utilities can hope for favorable new policies such as capacity payments but these may be difficult to achieve in the context of affordability. Ultimately, renewable companies, utilities and network operators may be forced into a three-way lobbying battle to secure a share of the total revenue pot. Utilities must therefore adapt to this new paradigm or risk being squeezed out. * EUROPE: Moody's Says Investment Requirements Pressure TSOs ------------------------------------------------------------ Rising investment requirements will place increased downward pressure on the credit profiles of European transmission system operators (TSOs), says Moody's Investors Service in a Special Comment report published on Nov. 6. Moreover, weakening sovereign ratings will place constraints on the ratings of TSOs, which have relatively stronger financial profiles. The new report is entitled "EU Transmission System Operators: Pressured by Capex Needs and Sovereign Volatility". "Despite the sizeable investment plans, we do not anticipate a major downward rating migration across the portfolio of rated TSOs, as the ratings of the majority of TSOs already incorporate the anticipated adverse impact from high investment needs on their financial profiles," says Richard Miratsky, a Moody's Vice President-Senior Analyst and author of the report. "However, we do expect the generally low business risk profile of TSOs to increase, as mounting investments pose significant execution risk and could test TSOs' technical capacity." Moody's rates 12 European national TSOs (out of 38), which together plan to invest almost EUR40 billion in their networks in the next five years, an amount almost equal to their combined fixed asset size at the end of 2011. Although the well-established regulatory regimes, with a significant track record of consistent tariff decisions (e.g., UK, Finland, Norway or Italy) have historically enabled their respective TSOs (National Grid Electricity Transmission (NGET), Fingrid, Statnett, Terna - Rete Elettrica Nazionale (Terna)) to recover the increased investment costs in a timely way, Moody's expects the political interference with regulatory regimes throughout Europe to intensify, as evidenced by recent developments in Spain and Italy. The majority of the negative outlooks on TSO's ratings reflect the adverse macroeconomic climate in the countries where the TSOs are based (e.g., Portugal, Spain and Italy). The ratings of the respective TSOs (Redes Energeticas Nacionais (REN), Red Electrica de Espana (REE) and Terna) have been constrained by the sovereign ratings of their respective governments. * 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 * * *