/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/130612.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Wednesday, June 12, 2013, Vol. 14, No. 115 Headlines D E N M A R K DONG ENERGY: S&P Assigns 'BB+' Rating to Capital Securities F R A N C E VIRGIN MEGASTORE: Paris Court to Decide on Future on June 17 G E R M A N Y SAPPI PAPIER: S&P Affirms 'BB-' LT Corp. Credit Rating SGL CARBON: Moody's Revises Outlook on 'Ba2' CFR to Negative I R E L A N D ALLIED IRISH: Acting CFO Paul Stanley Quits * IRELAND: Fitch Says Significant Risks Remain in Banking System CORDUSIO RMBS 2007: Moody's Lowers Rating on Cl. E Notes to Caa1 N E T H E R L A N D S ICENTRE: Applies for Court Protection From Creditors R O M A N I A ONT CARPATI: Liquidator Fails to Sell 35% Societatea Stake R U S S I A EXILLON ENERGY: S&P Withdraws Preliminary 'B' Corp. Credit Rating S P A I N AVANZA SPAIN: Moody's Assigns 'B1' Rating to Sr. Secured Bonds * SPAIN: SAREB Sales Underscores Property Market Weakness S W E D E N SAAB AUTOMOBILE: Judge Dismisses Spyker Suit v. GM Over Sale U K R A I N E * UKRAINE: Simplifies Company Bankruptcy Procedures U N I T E D K I N G D O M CAITHNESS STONE: Severe Cash Flow Problems Prompt Administration COLLBIO: Gets More Than GBP250,000 Funding to Relaunch Business GODFREY DIY: Closes Two Remaining DIY Stores in Diss & Stowmarket IDH FINANCE: Moody's Assigns B2 Ratings to GBP325MM Notes INTERNATIONAL OPERA: Placed Into Liquidation MEDIAGROUND LTD: Goes Into Administration PUNCH TAVERNS: Restructuring Plan Fails to Win Investor Backing X X X X X X X X * EUROPE: Moody's Says Outlook for Steel Industry to Remain Neg. * Fitch Sees Modest Deterioration in Asset Quality for EM Banks ********* ============= D E N M A R K ============= DONG ENERGY: S&P Assigns 'BB+' Rating to Capital Securities ----------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BB+' long-term issue rating to the proposed two tranches of long-dated, optionally deferrable, and subordinated hybrid capital securities of the same series to be issued by Danish integrated power and gas company utility DONG Energy A/S (BBB+/Negative/A-2). The company will use the new securities to exchange and refinance the existing EUR700 million hybrid securities due 3010. The transaction volume is subject to acceptance of the exchange tender and market conditions. The issuance of the new securities does not affect S&P's view of the "intermediate" equity content of DONG Energy's existing EUR1.1 billion hybrid securities due 3005, of which about EUR600 million is outstanding. S&P considers the proposed securities to have "intermediate" equity content until their first call date in 2023 because they meet its hybrid capital criteria in terms of their subordination, permanence, and optional deferability during this period. S&P arrives at its 'BB+' issue rating on the proposed securities by notching down from its 'bbb' stand-alone credit profile (SACP) on DONG Energy. The two-notch differential between the issue rating and the SACP reflects S&P's notching methodology, which calls for: -- A one-notch deduction for subordination because the rating on DONG Energy is investment-grade (that is, 'BBB-' or above); and -- An additional one-notch deduction for payment flexibility to reflect that the deferral of interest is optional. The notching of the proposed securities reflects S&P's view that there is a relatively low likelihood that the issuer will defer interest. Should S&P's view changes, it may increase the number of downward notches that it applies to the issue rating. In addition, to reflect S&P's views of the intermediate equity content of the proposed securities, it allocates 50% of the related payments on these securities as a fixed charge and 50% as equivalent to a common dividend, in line with S&P's hybrid capital criteria. The 50% treatment of principal and accrued interest also applies to S&P's adjustment of debt. KEY FACTORS IN S&P'S ASSESSMENT OF THE INSTRUMENT'S PERMANENCE Although the proposed securities would mature in 3013, they can be called at any time for tax, rating, or accounting events. Furthermore, the issuer can redeem them for cash as of their first call date, and every five years thereafter. If any of these events occurs, S&P understands the issuer intends, but is not obliged, to replace the securities. In S&P's view, this statement of intent mitigates the issuer's ability to repurchase the notes on the open market. Furthermore, S&P sees the repurchase as unlikely owing to DONG Energy's commitment to deleveraging. S&P understands that the interest to be paid on the proposed securities will increase by 25 basis points 10 years from issuance, and by a further 75 basis points 20 years after the first call date. S&P considers the cumulative 100 basis points as a material step-up, which is currently unmitigated by any commitment to replace the instrument at that time. This step-up provides an incentive for the issuer to redeem the securities on their first call date. Consequently, in accordance with S&P's criteria, it will no longer recognize the securities as having intermediate equity content after the first call date, because the remaining period until the economic maturity would, by then, be less than 20 years. However, S&P classifies the securities' equity content as intermediate until its first call date, as long as it believes that the loss of the beneficial intermediate equity content treatment will not cause the issuer to call the securities at that point. The issuer's willingness to maintain or replace the securities in the event of a reclassification of equity content to minimal is underpinned by its statement of intent. KEY FACTORS IN S&P'S ASSESSMENT OF THE INSTRUMENT'S DEFERABILITY In S&P's view, the issuer's option to defer payment on the proposed securities is discretionary. This means that the issuer may elect not to pay accrued interest on an interest payment date because it has no obligation to do so. However, any outstanding deferred interest payment will have to be settled in cash if DONG Energy declares or pays an equity dividend or interest on equally ranking securities, or if DONG Energy or its subsidiaries redeem or repurchase shares or equally ranking securities. S&P sees this as a negative factor. That said, this condition remains acceptable under S&P's methodology because once the issuer has settled the deferred amount, it can still choose to defer on the next interest payment date. The issuer retains the option to defer coupons throughout the life of the securities. The deferred interest on the proposed securities is cash cumulative, and will ultimately be settled in cash. KEY FACTORS IN S&P'S ASSESSMENT OF THE INSTRUMENT'S SUBORDINATION The proposed securities (and coupons) are intended to constitute direct, unsecured, and subordinated obligations of the issuer, ranking senior to its common shares. They rank pari passu with the existing hybrid securities due 3005. RATINGS LIST New Rating DONG Energy A/S Junior Subordinated BB+ =========== F R A N C E =========== VIRGIN MEGASTORE: Paris Court to Decide on Future on June 17 ------------------------------------------------------------ The Bookseller reports that Virgin Megastore will almost certainly go into liquidation next week. The Paris commercial court on June 10 rejected the two remaining bids to take over some outlets and will meet next Monday, June 17, to decide on the next step for the 26-store group, the Bookseller relates. The last two of the five initial bids were from the Cultura chain of stores and ready-to-wear and shoe chain Vivarte, both of which got the thumbs down from the unions, the Bookseller discloses. The best hope had been the art supplies group Rougier et Pie, which promised to keep the brand by acquiring the license for 11 of the 26 stores and saving 285 of the group's 960 jobs, but it pulled out in mid-May, the Bookseller recounts. Virgin Megastore, which filed for bankruptcy in January, was founded in France in 1988 by Richard Branson with Patrick Zelnick, c.e.o. of music publisher Naive, at the helm, according to the Bookseller. The Lagardere group bought the chain in 2001 and sold 74% of its stake to French private equity firm Butler Capital Partners in 2008, the Bookseller relates. Like Fnac, the leading French cultural product chain, Virgin has suffered from a sharp drop in sales of CDs and DVDs as Amazon and the rise of competing e-tailers, the Bookseller notes. Virgin Megastore is a French books, music and movies chain. ============= G E R M A N Y ============= SAPPI PAPIER: S&P Affirms 'BB-' LT Corp. Credit Rating ------------------------------------------------------ Standard & Poor's Ratings Services said that it revised its outlook on South Africa-based forest products group Sappi Ltd. to negative from stable. At the same time, S&P affirmed its 'BB-' long-term corporate credit rating on the group. In addition, S&P affirmed its 'BB' issue ratings on the various rated senior secured debt instruments issued by Sappi's 100%- owned and guaranteed subsidiary Sappi Papier Holding GmbH (Sappi Papier). The recovery rating on the senior secured debt is unchanged at '2', indicating S&P's expectation of substantial (70%-90%) recovery for creditors in the event of a payment default. Finally, S&P affirmed its 'B' issue rating on Sappi Papier's $250 million senior unsecured notes. The recovery rating on the senior unsecured debt is unchanged at '6', indicating S&P's expectation of negligible (0%-10%) recovery in the event of a payment default. The outlook revision reflects S&P's view that Sappi's results for the second quarter of the financial year ending Sept. 30, 2013 (financial 2013), were weaker than S&P forecasts. This was due to challenging trading conditions in Europe and South Africa, and the group's heavy use of cash, because it invested in the conversion of two of its existing mills to produce chemical cellulose. In S&P's view, there is a risk that Sappi could experience weaker market conditions in Europe and South Africa than it currently forecasts in full-year 2013, which could place negative pressure on the group's credit metrics. The outlook revision also reflects S&P's view that there may be some operational risk associated with the start-up of the two chemical cellulose mills at Cloquet in the U.S. and at Ngodwana in South Africa. Once the new mills are up to optimum capacity and capital expenditure (capex) returns to normal levels, S&P believes that the group's credit metrics should recover to levels it views as firmly commensurate with a 'BB-' rating in financial 2014. However, Sappi's credit metrics could weaken to levels below those S&P views as commensurate with a 'BB-' rating if trading conditions are weaker than it currently assumes in its base case, or if there are any delays relating to the start-up of the two newly converted mills. To reflect the weakening in Sappi's results, S&P has lowered its forecast of the group's adjusted EBITDA margin for financial 2013 to just less than 10% from just less than 12% on Dec. 31, 2012. S&P projects that funds from operations (FFO) to debt will decline to slightly more than 13% in 2013, and improve to about 20% in 2014. S&P also incorporates into its forecasts its understanding that management will turn its attention to debt reduction as soon as this year's major capex projects are complete. Despite good progress on the conversion of two major chemical cellulose mills, S&P considers that weaker market conditions than it anticipates or start-up delays relating to the conversions could weaken Sappi's credit metrics to levels below those S&P considers commensurate with a 'BB-' rating. S&P could downgrade Sappi if the group's FFO to debt were to fall to less than 15%, or if adjusted debt to EBITDA were to rise to more than 4.5x, and remain there on a sustained basis with few indications of a swift reversal. S&P could revise the outlook to stable if Sappi generates FFO to debt of more than 15% or adjusted debt to EBITDA of less than 4.5x, provided that near- to medium-term macroeconomic and industry conditions support S&P's view that Sappi could sustain such improved levels. SGL CARBON: Moody's Revises Outlook on 'Ba2' CFR to Negative ------------------------------------------------------------ Moody's Investors Service has changed to negative from stable the outlook on the Ba2 corporate family rating (CFR) and the Ba2-PD probability of default rating (PDR) of SGL Carbon SE (SGL Carbon), as well as on the Ba1 rating on the company's existing EUR200 million of senior floating-rate notes due 2015. Concurrently, Moody's has affirmed these ratings. "We have changed the outlook on SGL Carbon's Ba2 ratings to negative from stable to reflect the manufacturer's weakened operating performance over the past 12 months, and our revised expectation that, due to an anticipated ongoing cyclical decline in the company's end markets, it will not be able to maintain appropriate profitability levels and credit protections for the Ba2 rating," says Anthony Hill, a Moody's Vice President -- Senior Analyst and lead analyst for SGL Carbon. Ratings Rationale: The rating action reflects SGL Carbon's waning performance to date and Moody's expectation of an ongoing cyclical decline in the company's end markets within the steel, chemical, automotive, solar, semiconductor, and LED (light-emitting diode) industries. Moody's expects this decline to be particularly notable in Europe, where SGL Carbon generated approximately 41% of its financial year-end 2012. At financial year end (FYE) December 31, 2011, SGL Carbon's EBITDA margin, retained cash flow (RCF)/net debt ratio, and net debt/EBITDA ratio were 17.2%, 26%, and 3.1x, respectively. As of the last-12-months ending March 31, 2013, each of these credit metrics had deteriorated to 10.4%, 10%, and 5.6x, respectively (all figures are on a Moody's-adjusted basis). A main driver of the decline in these metrics was SGL Carbon's reported EUR32.5 million revenue write-down in FYE 2012 associated with reductions in, and delays of, the company's long- term construction contracts to supply carbon fibre components for the Boeing 787 (Dreamliner). However, Moody's notes that profitability in SGL Carbon's graphite materials and systems division, which represents nearly 30% of the company's FYE 2012 sales, has been in cyclical decline. This division reported a 13% year-on-year decline in EBITDA in FYE 2012 versus FYE 2011, and a 65.5% decline in EBITDA for the first quarter ending March 31, 2013 versus the same period in the previous year. Moody's believes the declines in this division are primarily due an ongoing downturn in demand for SGL Carbon's graphite-based products and technologies from the cyclically challenged global chemical, automotive, solar, semiconductor, and LED industries. Moody's expects this demand to remain flat for the next 12 months globally, and to be in modest decline over the same period in Europe. Furthermore, Moody's expectation for SGL Carbon's performance products division, which represents 55% of the company's FYE 2012 sales, is negative. Primarily, this division sells graphite electrodes to the steel industry, which is SGL Carbon's core business. The market for graphite electrodes, particularly in Europe and North America, continues to grow only in line with the steel industry and overall economic growth. Moody's notes that global steel demand growth nearly stalled in 2012 and fell by 9% in Europe. Furthermore, while the rating agency expects global steel demand to grow by 2%-3% in 2013; this will be from a low base. Therefore, Moody's expects conditions to remain challenging in all steel markets, especially in Europe, where the rating agency forecasts that steel demand will fall by 2%-4%. Moody's believes that SGL Carbon's liquidity will comfortably cover its near-term requirements. The rating agency expects the company to exhibit an adjusted cash balance of approximately EUR185 million at FYE 2013. Internally generated cash flow and the currently undrawn EUR200 million revolving credit facility should readily cover the company's ongoing basic cash needs, such as debt service and amortization, working capital needs and expected capital expenditures. Using Moody's Loss Given Default (LGD) methodology, the PDR is equal to the CFR. This is based on a 50% recovery rate, as is typical for a debt capital structure that primarily consists of senior notes. SGL Carbon's senior floating-rate notes are rated one notch higher than the CFR due to the subordination created by the unsecured convertible notes present in the company's debt capital structure. What Could Change The Rating Up/Down Moody's does not expect any upward pressure on the rating over the coming quarters. However, it could stabilize the rating outlook if SGL Carbon were to (1) solidly, and consistently, generate positive free cash flow (FCF); (2) sustain RCF/net debt in the high teens in percentage terms; and (3) achieve and maintain a Moody's-adjusted debt/EBITDA ratio at around 4.0x. Conversely, Moody's would likely downgrade SGL Carbon if, over the coming quarters, a further deterioration in the company's operating performance were to result in the following, on a Moody's-adjusted and sustained basis: (1) negative free cash flow generation; (2) RCF/net debt in the mid- to low teens in percentage terms; and/or (3) a net debt/EBITDA ratio above 5.0x. Principal Methodology The principal methodology used in this rating was the Global Chemical Industry rating methodology, published in December 2009. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA, published in June 2009. Headquartered in Wiesbaden, Germany, SGL Carbon SE is one of the world's leading manufacturers of carbon- and graphite-based products. SGL generated revenues of EUR1.7 billion and Moody's- adjusted EBITDA of EUR202 million for FYE 2012. ============= I R E L A N D ============= ALLIED IRISH: Acting CFO Paul Stanley Quits ------------------------------------------- Paul Stanley, acting chief financial officer, has informed the Bank that he is to leave Allied Irish Bank to pursue other opportunities with effect from August 2013. Mr. Stanley joined AIB in 1980 and was appointed Acting Chief Financial Officer in May 2011. AIB CEO David Duffy said: "I would like to thank Paul for his commitment to AIB over many years and for the valuable role he played as Acting Chief Financial Officer in helping to stabilise the bank in such a challenging period in the company's history." AIB has commenced a process of identifying a permanent Chief Financial Officer and expects this process to conclude in the short term subject to relevant regulatory approvals. About Allied Irish Banks Allied Irish Banks, p.l.c. -- http://www.aibgroup.com/-- is a major commercial bank based in Ireland. It has an extensive branch network across the country, a head office in Dublin and a capital markets operation based in the International Financial Services Centre in Dublin. AIB also has retail and corporate businesses in the UK, offices in Europe and a subsidiary company in the Isle of Man and Jersey (Channel Islands). Since the onset of the global and Irish financial crisis, AIB's relationship with the Irish Government has changed significantly. As at Dec. 31, 2010, the Government, through the National Pension Reserve Fund Commission ("NPRFC"), held 49.9% of the ordinary shares of the Company (the share of the voting rights at shareholders' general meetings), 10,489,899,564 convertible non- voting ("CNV") shares and 3.5 billion 2009 Preference Shares. On April 8, 2011, the NPRFC converted the total outstanding amount of CNV shares into 10,489,899,564 ordinary shares of AIB, thereby increasing its holding to 92.8% of the ordinary share capital. In addition to its shareholders' interests, the Government's relationship with AIB is reflected through formal and informal oversight by the Minister and the Department of Finance and the Central Bank of Ireland, representation on the Board of Directors (three non-executive directors are Government nominees), participation in NAMA, and otherwise. The Company reported a loss of EUR2.29 billion in 2011, a loss of EUR10.16 billion in 2010, and a loss of EUR2.33 billion in 2009. Allied Irish's consolidated statement of financial position for the year ended Dec. 31, 2011, showed EUR136.65 billion in total assets, EUR122.18 billion in total liabilities and EUR14.46 billion in shareholders' equity. Allied Irish's balance sheet at June 30, 2012, showed EUR129.85 billion in total assets, EUR116.59 billion in total liabilities and EUR13.26 billion in total shareholders' equity. * IRELAND: Fitch Says Significant Risks Remain in Banking System ---------------------------------------------------------------- Fitch Ratings says in a newly-published special report that the Irish banks' Viability Ratings are constrained by the significant risks that remain in the Irish banking system. However, support remains an important rating driver and Fitch considers that the Irish authorities' propensity to support the 'pillar' banks, Bank of Ireland (BOI) and Allied Irish Banks, p.l.c. (AIB) remains undiminished, despite the withdrawal of the Irish Bank Eligible Liabilities Guarantee (ELG) in March 2013. Fitch believes that the pillar banks' performance will continue to track within the stress case scenario of the 2011 Prudential Capital Assessment Reviews (PCAR), however these tests were framed on a Basel II basis. Since then capital expectations of market participants have increased. The 2014 PCAR may revise the stress assumptions and requirements to align more closely with Basel III. "As Irish banks' capital ratios continue to be eroded and a return to profitability only appears feasible in the longer term, the banks may need to raise additional capital before they can contemplate a future independent of state support", says Denzil De Bie, a Director in Fitch's Financial Institutions Group. Irish banks' asset quality remains weak, with high NPLs and impairment charges, especially against commercial real estate and residential mortgage loans. Although the rate of deterioration slowed at BOI and AIB in 2012, Fitch believes impairment charges could increase during 2013 and 2014, with arrears reaching a peak in 2014, as the banks accelerate the resolution of mortgage arrears in line with new targets set by the Central Bank of Ireland in March 2013. Underlying pre-provision operating profitability is structurally very weak because of the long-term, very low-yielding mortgage loans in their books. Until rates rise, Fitch considers that a return to sustainability will only be possible as the various restructuring and cost control plans of the banks begin to yield results. Fitch expects a return to operating profitability to be delayed until at least 2015 because of the continued erosion of earnings from high but reducing impairment charges. The report, entitled "Peer Review: Irish Banks" is available at www.fitchratings.com or by clicking the link above. CORDUSIO RMBS 2007: Moody's Lowers Rating on Cl. E Notes to Caa1 ---------------------------------------------------------------- Moody's Investors Service has downgraded the ratings of ten junior and mezzanine notes in four Italian residential mortgage- backed securities (RMBS) transactions: Cordusio RMBS S.r.l., Cordusio RMBS - UCFin S.r.l., Cordusio RMBS Securitization S.r.l. - Series 2006 and Cordusio RMBS Securitization S.r.l. - Series 2007. At the same time, Moody's confirmed the rating of one senior note in Cordusio RMBS Securitization S.r.l. - Series 2007. Insufficiency of credit enhancement to address sovereign risk, counterparty exposure and revision of key collateral assumptions have prompted the downgrade. The rating action concludes the review of seven notes placed on review on August 2, 2012, following Moody's downgrade of Italian government bond ratings to Baa2 from A3 on July 13, 2012. This rating action also concludes the review of Class C notes in Cordusio RMBS S.r.l., placed on review on 22 May 2012, following Moody's downgrade of UniCredit SpA from A2 to A3 on 14 May 2012. This rating action also concludes the review of Class A notes in Cordusio RMBS Securitization S.r.l. - Series 2007, placed on review on 13 Mar 2013, due to the insufficiency of credit enhancement to address sovereign risk following the introduction of additional factors in Moody's analysis to better measure the impact of sovereign risk on structured finance transactions. This rating action also concludes the review of Class D and E notes in Cordusio RMBS S.r.l., placed on review on November 27, 2012, following Moody's review of collateral assumptions for the entire Italian RMBS market. Ratings Rationale: The rating action primarily reflects the insufficiency of credit enhancement to address sovereign risk, counterparty exposure and revision of key collateral assumptions. Moody's confirmed the ratings of securities whose credit enhancement and structural features provided enough protection against sovereign and counterparty risk. The determination of the applicable credit enhancement driving these rating actions reflects the introduction of additional factors in Moody's analysis to better measure the impact of sovereign risk on structured finance transactions. - Additional Factors Better Reflect Increased Sovereign Risk Moody's has supplemented its analysis to determine the loss distribution of securitized portfolios with two additional factors, the maximum achievable rating in a given country (the Local Currency Country Risk Ceiling) and the applicable portfolio credit enhancement for this rating. With the introduction of these additional factors, Moody's intends to better reflect increased sovereign risk in its quantitative analysis, in particular for mezzanine and junior tranches. The Italian country ceiling, and therefore the maximum rating that Moody's will assign to a domestic Italian issuer including structured finance transactions backed by Italian receivables, is A2. Moody's Individual Loan Analysis Credit Enhancement (MILAN CE) represents the required credit enhancement under the senior tranche for it to achieve the country ceiling. By lowering the maximum achievable rating for a given MILAN, the revised methodology alters the loss distribution curve and implies an increased probability of high loss scenarios. - Revision of Key Collateral Assumptions Moody's has revised its lifetime loss expectation (EL) assumption in Cordusio RMBS - UCFin S.r.l., Cordusio RMBS Securitization S.r.l. - Series 2006 and Cordusio RMBS Securitization S.r.l. - Series 2007 because of worse-than-expected collateral performance since the last review of the Italian RMBS sector in November 2012. In Cordusio RMBS - UCFin S.r.l., the share of 90d+ arrears currently stands at 1.9% of current pool balance, up from 1.4% as of the previous review while cumulative defaults increased from 3.5% of the original pool balance to 3.8%. In Cordusio RMBS Securitization S.r.l. - Series 2006 the share of 90d+ arrears currently stands at 1.3% of current pool balance, up from 1.0% as of the previous review while cumulative defaults increased from 1.3% of the original pool balance to 1.5%. In Cordusio RMBS Securitization S.r.l. - Series 2007 the share of 90d+ arrears currently stands at 1.7% of current pool balance, up from 1.5% as of the previous review while cumulative defaults increased from 2.7% of the original pool balance to 3.1%. Moody's have updated the EL assumption in these three deals to 3.5%, 1.7% and 3.0% of original pool balance respectively. Moody's has maintained its EL assumptions at 0.5% of the original pool balance in Cordusio RMBS S.r.l.. During its review, Moody's also reassessed the MILAN CE assumptions of the transactions underlying portfolios based on available loan-by-loan information. As a result, Moody's increased the MILAN CE assumption to 10.0% in Cordusio RMBS - UCFin S.r.l. and Cordusio RMBS Securitization S.r.l. - Series 2007, decreased the MILAN CE assumption to 8.5% in Cordusio RMBS S.r.l and maintained it at 8.5% in Cordusio RMBS Securitization S.r.l. - Series 2006. - Exposure to Counterparty Risk The downgrade of Class B notes in Cordusio RMBS - UCFin S.r.l. and Class B notes in Cordusio RMBS Securitization S.r.l. - Series 2006 also reflect the commingling and set-off risks due to exposure to UniCredit SpA (Baa2/P-2) acting as originator, collection account bank and issuer account bank. Moody's has assessed the probability and effect of a default UniCredit SpA on the ability of the issuers to meet their obligations under the transactions. The exposure to UniCredit SpA is factored in the downgrade of these notes. Other Developments May Negatively Affect The Notes In consideration of Moody's new adjustments, any further sovereign downgrade would negatively affect structured finance ratings through the application of the country ceiling or maximum achievable rating, as well as potentially increased portfolio credit enhancement requirements for a given rating. As the euro area crisis continues, the ratings of structured finance notes remain exposed to the uncertainties of credit conditions in the general economy. The deteriorating creditworthiness of euro area sovereigns as well as the weakening credit profile of the global banking sector could further negatively affect the ratings of the notes. The methodologies used in these ratings were Moody's Approach to Rating RMBS Using the MILAN Framework published in May 2013, and The Temporary Use of Cash in Structured Finance Transactions: Eligible Investment and Bank Guidelines published in March 2013. In reviewing these transactions, Moody's used ABSROM to model the cash flows and determine the loss for each tranche. The cash flow model evaluates all default scenarios that are then weighted considering the probabilities of the lognormal distribution assumed for the portfolio default rate. In each default scenario, the corresponding loss for each class of notes is calculated given the incoming cash flows from the assets and the outgoing payments to third parties and noteholders. Therefore, the expected loss or EL for each tranche is the sum product of (i) the probability of occurrence of each default scenario; and (ii) the loss derived from the cash flow model in each default scenario for each tranche." As such, Moody's analysis encompasses the assessment of stressed scenarios. In the context of the rating review, the transactions have been remodeled and some inputs have been adjusted to reflect the new approach. In addition, for Cordusio RMBS S.r.l. Moody's corrected the notes margin, in Cordusio RMBS - UCFin S.r.l. Moody's corrected modeling of the artificial write-off mechanism and interest deferral triggers and in Cordusio RMBS Securitization S.r.l. - Series 2006 Moody's corrected the modeling of the artificial write-off mechanism. List of Affected Ratings Issuer: Cordusio RMBS S.r.l. EUR119.2M C Notes, Downgraded to Baa3 (sf); previously on May 22, 2012 Baa1 (sf) Placed Under Review for Possible Downgrade Issuer: Cordusio RMBS - UCFin S.r.l. EUR75M B Notes, Downgraded to Baa2 (sf); previously on Aug 2, 2012 Downgraded to A2 (sf) and Placed Under Review for Possible Downgrade EUR25M C Notes, Downgraded to Baa3 (sf); previously on Aug 2, 2012 Downgraded to A2 (sf) and Placed Under Review for Possible Downgrade EUR48M D Notes, Downgraded to Ba2 (sf); previously on Aug 2, 2012 Baa2 (sf) Placed Under Review for Possible Downgrade Issuer: Cordusio RMBS Securitization S.r.l. - Series 2006 EUR45.7M B Notes, Downgraded to Baa1 (sf); previously on Aug 2, 2012 Downgraded to A2 (sf) and Placed Under Review for Possible Downgrade EUR96M C Notes, Downgraded to Ba3 (sf); previously on Aug 2, 2012 Baa2 (sf) Placed Under Review for Possible Downgrade Issuer: Cordusio RMBS Securitization S.r.l. - Series 2007 EUR738.6M A3 Notes, Confirmed at A2 (sf); previously on Mar 13, 2013 A2 (sf) Placed Under Review for Possible Downgrade EUR71.1M B Notes, Downgraded to Baa2 (sf); previously on Aug 2, 2012 Downgraded to A2 (sf) and Remained On Review for Possible Downgrade EUR43.8M C Notes, Downgraded to Baa3 (sf); previously on Aug 2, 2012 Downgraded to A2 (sf) and Remained On Review for Possible Downgrade EUR102M D Notes, Downgraded to B1 (sf); previously on Nov 27, 2012 Downgraded to Ba3 (sf) and Remained On Review for Possible Downgrade EUR19.5M E Notes, Downgraded to Caa1 (sf); previously on Nov 27, 2012 Downgraded to B3 (sf) and Remained On Review for Possible Downgrade ===================== N E T H E R L A N D S ===================== ICENTRE: Applies for Court Protection From Creditors ---------------------------------------------------- DutchNews.nl, citing tech website Tweakers.net, reports that iCentre has applied for court protection from creditors. iCentre has been owned by private equity company Antea since 2008, DutchNews.nl discloses. According to DutchNews.nl, Tweakers quoted a source as saying that iCentre is embroiled in a conflict with Apple and has been forced to import hardware via Media Markt in Germany for the past year. The arrival of the massive official Apple store in central Amsterdam may also have impacted on earnings, DutchNews.nl notes. In 2011, the company made a net profit of EUR3.1 million on turnover of EUR116 million, DutchNews.nl says, citing Chamber of Commerce figures. iCentre is a Dutch Apple reseller. The company has 34 branches nationwide. ============= R O M A N I A ============= ONT CARPATI: Liquidator Fails to Sell 35% Societatea Stake ---------------------------------------------------------- Iona Tudor at Ziarul Financiar reports that no investor bought the taskbook to participate in an auction for the sale of bankrupt firm ONT Carpati's 35% stake in Societatea Companiilor Hoteliere Grand, the owner of five-star hotel JW Marriott in Bucharest. VF Insolventa, the liquidator of ONT Carpati, put up the 35% stake for sale. ONT Carpati is a Romanian tourism agency. =========== R U S S I A =========== EXILLON ENERGY: S&P Withdraws Preliminary 'B' Corp. Credit Rating ----------------------------------------------------------------- Standard & Poor's Ratings Services withdrew its preliminary 'B' long-term corporate credit rating on the Russian independent oil company Exillon Energy Plc. At the same time, S&P withdrew its 'B' preliminary rating on Exillon's senior unsecured debt. S&P has withdrawn the ratings at Exillon's request and understand that the company is no longer pursuing its previously considered eurobond issue. The preliminary ratings were based on preliminary information and subject to a bond issue. ========= S P A I N ========= AVANZA SPAIN: Moody's Assigns 'B1' Rating to Sr. Secured Bonds -------------------------------------------------------------- Moody's Investors Service has assigned a definitive B1 rating and loss given default (LGD) assessment of LGD4 to Avanza Spain S.A.U.'s EUR315 million of senior secured fixed rate bonds due 2018 issued by AG Spring Finance Limited and a definitive B2 rating and LGD assessment of LGD6 to Avanza's EUR175 million of senior unsecured fixed rate bonds due 2019 issued by AG Spring Finance II Limited. Avanza's B1 corporate family rating (CFR) and Ba3-PD probability of default rating (PDR) remain unchanged. The outlook on all ratings is stable. The company used the proceeds of the Senior Secured Bonds and the Senior Unsecured Bonds to refinance existing senior facilities within Avanza, the ultimate holding company of the subsidiary guarantors to the group's senior credit facilities. The company has also raised a EUR50 million super senior revolving credit facility ("RCF") due 2017. As part of the refinancing, Avanza Spain S.A. and Avanza Interurbanos S.L. have been consolidated within Avanza, allowing the key assets of the group to be consolidated going forward. Ratings Rationale: Moody's definitive ratings of Avanza's debt obligations are in line with the provisional ratings assigned on 16 May 2013. "Avanza's B1 CFR reflects its small size, its high reliance on Spanish public authorities for timely settlement of invoices, and the company's high financial leverage albeit somewhat mitigated by the length and steady earnings profile of its regulated concessions" says Declan O' Brien, a Moody's Analyst and lead analyst for Avanza. The B1 CFR assigned to Avanza reflects the company's high financial leverage, which is 7.1x gross debt/EBITDA (on a Moody's-adjusted basis) and 6.5x net debt/EBITDA (on a Moody's- adjusted basis) for the financial year-end December 2012 on a pro forma basis. While the CFR is weakly positioned in the B1 rating category, the rating is based on Moody's expectation that the company will deliver on its business plan to reduce net debt/EBITDA to 6x by financial year-end December 2013 and to continue to decrease net debt thereafter. The high leverage is mitigated by the regulated nature of the long term and exclusive concessions which provides high stability and visibility to EBTIDA as approximately 75% of revenues are generated from concessions protected from cost increase risk and 85% of concessions, by revenues, are in the urban and suburban bus segments where lack of alternative is a significant factor in choosing the company's services; these lines of business have performed robustly through the financial crisis. Additionally, the company's weighted average concession life, by revenues, is 11.6 years as of March 2013 and the company has virtually a 100% renewal rate since 1885 providing additional visibility around medium to long-term earnings. Avanza's liquidity is good with a cash balance of EUR46.8 million for year-end 2012. Internally generated cashflow is adequate and the company is not forecast to draw under its EUR50 million RCF. The business capital expenditure can change substantially from year-to-year as requirements are dependent on the terms of their contracts but the average age of Avanza's fleet is young at 6.4 years, well below requirements under Spanish law. Moody's expects that the company's internally generated cashflow should cover the company's ongoing basic cash needs, such as debt service, working capital needs and expected capital expenditures. Avanza receives approximately 35% of its revenues in the form of subsidies from Spanish public authorities. Avanza had a negative working capital movement in 2011, partly due to a delayed settlement of invoices although this was largely reversed in 2012. Moody's views the timely receipt of subsidy payments as a key credit risk for the company going forward. The B1 CFR also reflects Moody's view that Avanza (1) is a leading company in its key markets of urban, suburban and long distance bus concessions; (2) has increased total revenues and EBITDA by 7.6% and 7.9%, respectively, for the period 2009-2012; (3) that 84% of its revenues are contracted beyond 2018; and (4) has regulated concessions with a long weighted average concession life and virtually 100% renewals since the 19th century. However, the CFR also reflects that the company (5) is highly leveraged with gross debt: EBITDA of 7x; (6) is exposed to unfavorable dynamics in the long-distance sector; and (7) has a financing structure which does not include any maintenance covenants. Given the lack of maintenance covenants under the bonds and the RCF, Moody's views Avanza's financial structure as covenant lite. Using Moody's Loss Given Default (LGD) methodology Moody's assumed a 35% recovery rate rather than the standard 50% rate due to the covenant lite nature of the financial structure. This results in a PDR of Ba3-PD, one notch higher than the CFR. Also in accordance with Moody's LGD methodology, the Senior Secured Bonds are rated B1 (LGD4), in line with the B1 CFR and the Senior Unsecured Bonds are rated B2 (LGD6), one notch below the CFR. Outlook The stable outlook on the rating reflects Moody's expectation that Avanza will (1) maintain its current performance and continue to generate positive free cash flow; and (2) reduce its net debt/EBITDA to below 6.0x. What Could Change The Rating Up/Down Positive pressure on the ratings could materialize if Avanza (1) maintains its current operating performance; (2) generates sustained positive free cash flow; and (3) improves its leverage profile such that its Moody's-adjusted net debt/EBITDA ratio is solidly below 5.0x. Conversely, negative pressure on the ratings would emerge if Avanza's liquidity profile and credit metrics deteriorate as a result of (1) weakening operational performance; (2) acquisitions; or (3) an aggressive change in its financial policy. Quantitatively, Moody's would also consider downgrading Avanza's ratings if (1) its adjusted net debt/EBITDA ratio remains above 6.0x for a prolonged period and if adjusted gross debt/EBITDA is trending towards 7.0x; or (2) the company reports negative free cash flow on a regular basis. These ratings were assigned by evaluating factors that Moody's considers relevant to the credit profile of the issuer, such as the company's (1) business risk and competitive position compared with others within the industry; (2) capital structure and financial risk; (3) projected performance over the near to intermediate term; and (4) management's track record and tolerance for risk. Moody's compared these attributes against other issuers both within and outside Avanza's core industry and believes Avanza's ratings are comparable to those of other issuers with similar credit risk. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Headquartered in Madrid, Avanza is a leading provider of bus transportation services in Spain. The company is 93% owned by Doughty Hanson, a private equity firm, while the management of the group indirectly own 7% of the ordinary shares of the company. Avanza has four principal lines of business: urban, suburban and long-distance bus services, and bus terminals, representing 40.4%, 44.4%, 10.9% and 4.3% of revenue in 2012, respectively. Avanza is the largest privately-owned bus transportation operator in the urban and suburban bus transportation markets in Spain and the second largest long- distance bus transportation operator in Spain, in each case in terms of fleet. * SPAIN: SAREB Sales Underscores Property Market Weakness --------------------------------------------------------- Fitch Ratings says the start of property sales by Spain's bad bank, SAREB, underscores its negative view on the Spanish residential property market. As the pace of disposals by SAREB speeds up, it will add to supply which may further depress prices. SAREB (Sociedad de Gestion de Activos Procedentes de la Reestructuracion Bancaria S.A., which is managing assets transferred from Spain's largest nationalized lenders) said last week it had closed sales of 550 homes in three months from late February. Taking into account the 800 more sales that SAREB said are pending and the further 2,200 preliminary offers it said have been made on properties, and the total could rise to 3,550. The figures also do not include the results of a sales campaign conducted at the recent Madrid International Real Estate Exhibition. Nevertheless, the rate of actual sales will have to be accelerated for SAREB to meet its target of selling 42,500 homes in the next five years given its 15-year deadline to liquidate the portfolio (SAREB's portfolio includes over 55,000 homes). This could prompt increased selling by banks, some of which have already begun lowering prices and accelerating disposals in anticipation of supply from SAREB depressing prices further. However, SAREB and the banks will want to find the right balance between speeding up the pace of asset sales and causing prices to fall, and it does not appear to be in the interest of either to trigger additional sharp property price declines by an overly aggressive sales approach. SAREB has a 15% annual return on equity target and its majority shareholders are the banks that it will compete with as a seller in the residential property market. It is not clear how long it will take SAREB to dispose of its property portfolio. "We think excess supply of property will continue while SAREB and lenders have such large portfolios to liquidate. Therefore, we do not expect Spanish house prices to trough before the end of 2014 at the earliest, although there may be earlier signs of stabilization in regions that experienced less dramatic pre-crisis housing booms," Fitch says. Overall, the imbalance between supply and demand means we think it will take several years to absorb the entire stock of properties that have to be sold by both SAREB and private lenders. Official sources suggest a stock of unsold new properties in Spain of around 700,000 units (these do not take into account the 620,000 properties built since 2004 under the cooperative system or self-construction, or unfinished developments). 2012 saw around 114,000 newly built properties sold. At that rate, it will take more than six years to clear the existing property overhang. Combined with the weak labor market and limited access to the capital markets for most of Spain's banks, this means the bottom of the residential market is unlikely to be reached soon. "In our RMBS criteria update published on 20 March, we increased the haircut for repossessed properties in light of property market dislocation. These forecasts took account of the likely impact of SAREB's sales on the market. Last year, we increased our forecast for Spanish foreclosures by 25% and said we expected house prices to bottom out at 40% below their 2008 peak," Fitch says. =========== S W E D E N =========== SAAB AUTOMOBILE: Judge Dismisses Spyker Suit v. GM Over Sale ------------------------------------------------------------ The Associated Press reports that a federal judge has dismissed a US$3 billion lawsuit filed by Dutch car maker Spyker against General Motors Co. Spyker sued GM last August, accusing it of unfairly blocking a deal to let a Chinese buyer take over Swedish carmaker Saab, the AP recounts. GM sold Saab to Spyker in 2010, the AP discloses. Saab filed for bankruptcy protection less than a year later after GM blocked its sale to a Chinese automaker, the AP relates. According to the AP, GM asked U.S. Judge Gershwin Drain to dismiss the suit, saying it had the right to protect its intellectual property. Spyker argued that the deals didn't involve GM's proprietary technology, the AP notes. Judge Drain sided with GM and dismissed the lawsuit Monday, the AP relates. About Saab Automobile AB and Saab Cars N.A. Saab Automobile AB is a Swedish car manufacturer owned by Dutch automobile manufacturer Swedish Automobile NV, formerly Spyker Cars NV. Saab halted production in March 2011 when it ran out of cash to pay its component providers. On Dec. 19, 2011, Saab Automobile AB, Saab Automobile Tools AB and Saab Powertain AB filed for bankruptcy after running out of cash. Some of Saab's assets were sold to National Electric Vehicle Sweden AB, a Chinese-Japanese backed start-up that plans to make an electric car using Saab Automobile's former factory, tools and designs. On Jan. 30, 2012, more than 40 U.S.-based Saab dealerships filed an involuntary Chapter 11 petition for Saab Cars North America, Inc. (Bankr. D. Del. Case No. 12-10344). The petitioners, represented by Wilk Auslander LLP, assert claims totaling US$1.2 million on account of "unpaid warranty and incentive reimbursement and related obligations" or "parts and warranty reimbursement." Leonard A. Bellavia, Esq., at Bellavia Gentile & Associates, in New York, signed the Chapter 11 petition on behalf of the dealers. The dealers want the vehicle inventory and the parts business to be sold, free of liens from Ally Financial Inc. and Caterpillar Inc., and "to have an appropriate forum to address the claims of the dealers," Leonard A. Bellavia said in an e-mail to Bloomberg News. Saab Cars N.A. is the U.S. sales and distribution unit of Swedish car maker Saab Automobile AB. Saab Cars N.A. named in December an outside administrator, McTevia & Associates, to run the company as part of a plan to avoid immediate liquidation following its parent company's bankruptcy filing. On Feb. 24, 2012, the Court granted Saab Cars NA relief under Chapter 11 of the Bankruptcy Code. Donlin, Recano & Company, Inc., was retained as claims and noticing agent to Saab Cars NA in the Chapter 11 case. On March 9, 2012, the U.S. Trustee formed an official Committee of Unsecured Creditors and appointed these members: Peter Mueller Inc., IFS Vehicle Distributors, Countryside Volkwagen, Saab of North Olmstead, Saab of Bedford, Whitcomb Motors Inc., and Delaware Motor Sales, Inc. The Committee tapped Wilk Auslander LLP as general bankruptcy counsel, and Polsinelli Shughart as its Delaware counsel. ============= U K R A I N E ============= * UKRAINE: Simplifies Company Bankruptcy Procedures --------------------------------------------------- Worldwide News Ukraine on June 10 disclosed that deregulation of business activity has become one of the reform priorities for Ukraine in 2012. It was conducted in four major areas -- simplifying procedures for opening and closing a business, simplifying property registration, lifting the tax burden, as well as reforming public services system and narrowing state control for businesses. The results and prospects of business deregulation were addressed by the President of Ukraine Viktor Yanukovych in his annual message to the parliament of the country http://president.gov.ua/docs/poslannia2013.pdf Ukraine reduced the number of license-restricted business activities, introduced beta version of the single state administrative services website http://poslugy.gov.ua,opened 114 regional centers for administrative services. The minimum authorized capital and the requirement to notarize business statutory documents have been dropped. The option of online business registration has made the process faster and cheaper. Some of the major conveniences for businesses are related to reporting. Companies no longer report opening a bank account to the state, the banks are doing the job instead. Medium and large companies in Ukraine are now able to conduct electronic filing and payment. Since 2013, businesses provide annual income reports, while previously the reports were submitted quarterly. Ukraine is also broadening the application of automatic VAT refunds. Currently, more than half of refunds is paid out automatically. The ongoing tax reform has led to income tax decrease to 19 percent in 2013. As part of the reform, Ukraine introduced a VAT relief for software operations, established income tax for companies working in this area at 5 percent, as well as decreased license fees for hydrocarbon producers. Additionally, Ukraine simplified bankruptcy procedures by limiting the maximum duration of liquidation (no longer than one year). The announcement on bankruptcy proceedings in a company will be published by the official website of the High Commercial Court of Ukraine. Aiming for further business deregulation, the Eastern European country aims to provide electronic registration of businesses, decrease paperwork by eliminating the need for businesses to place multiple inquiries to state bodies, and introduce the procedure of closing a business by declaration. Ukraine's improvement in starting a business, registering property, and paying taxes has been highlighted by Doing Business 2013 World Bank report. =========================== U N I T E D K I N G D O M =========================== CAITHNESS STONE: Severe Cash Flow Problems Prompt Administration ---------------------------------------------------------------- Gareth Mackie at The Scotsman reports that Caithness Stone Industries has called in the administrators after succumbing to increased costs and competition. According to the Scotsman, joint administrator Iain Fraser, of RSM Tenon, said heavy investment had landed it with "severe and unsustainable cash flow problems". "The company invested heavily in new technology in order to improve the efficiency of extraction and processing, and successfully diversified into new residential markets," the Scotsman quotes Mr. Fraser as saying. "We will now undertake a thorough review of Caithness Stone Industries, the results of which will determine the next steps for the administration." Founded in 1999, Caithness Stone Industries is a Spittal-based quarrying firm. The company generated a turnover of more than GBP3 million last year. COLLBIO: Gets More Than GBP250,000 Funding to Relaunch Business ---------------------------------------------------------------- Peter Ranscombe at The Scotsman reports that Collbio, which rose from the ashes of collapsed parent Angel Biotechnology, has secured more than GBP250,000 from private investors to relaunch its business. The company was created in March after Aim-quoted Angel fell into the arms of administrators a month earlier, following the termination of rescue talks with a group of overseas investors, the Scotsman recounts. Collbio, which is run by former Angel acting chief executive Stewart White and ex-operations manager Ross Andrews, took over the failed company's Glasgow facility, which Angel bought from sausage skin maker Devro last year for GBP200,000, the Scotsman relates. The site makes collagen, a material that is used to coat prosthetic implants like hip replacement joints, in wound dressings and as a "scaffold" to which cells can be attached during tissue-engineering, the Scotsman discloses. News of the funding deal comes a month after Collbio secured a contract to supply collagen to New York-listed Cardium Therapeutics, continuing a relationship with the Glasgow facility that began under Angel, according to the Scotsman. Collbio is a Glasgow-based life sciences firm. GODFREY DIY: Closes Two Remaining DIY Stores in Diss & Stowmarket ----------------------------------------------------------------- Shaun Lowthorpe at edp24.co.uk reports that retailer Barry Godfrey has pulled the plug on his remaining two DIY stores in Diss and Stowmarket to focus on a new online business. edp24.co.uk says it has been a tough year for Godfrey DIY Supermarkets Limited, which went into liquidation earlier this year with the closure of its Norwich branch and the loss of about 20 jobs. But with Mr. Godfrey's company, Harvey House Retail, buying part of the business out of liquidation in February, the Diss and Stowmarket stores remained trading with a reduced head count of 15 staff, the report notes. But following disappointing sales and a tough spring, those stores are now set to close, edp24.co.uk relays. "We have been unable to achieve the turnover we needed in the four months that we have traded and as anyone in this retail sector knows, it's the springtime, with its numerous bank holidays, that makes the DIY/garden business worthwhile. I did not want to trade beyond the spring into a period where turnover is likely to be weaker," the report quotes Mr. Godfrey as saying. "It was very difficult to win back customers after closure of Godfrey DIY, and of course, many of them changed their shopping habits in the light of the original closure." But he thanked staff for their support and said he would now focus on a new online business, edp24.co.uk adds. Godfrey DIY Supermarkets Limited was a DIY business which employed 50 people in Norfolk and Suffolk. The Company was put into liquidation in January 2013. IDH FINANCE: Moody's Assigns B2 Ratings to GBP325MM Notes --------------------------------------------------------- Moody's Investors Service has assigned definitive B2 ratings with a loss given default assessment of LGD4 (51%) to the GBP200 million senior secured fixed rate notes due 2018 and the GBP125 million senior secured floating rate notes due 2018 as well as a definitive Caa1 /LGD 6 (92%) rating to the GBP75 million second lien notes due 2019, all of which have been issued by IDH Finance plc, a subsidiary of Turnstone Midco 2 Limited. Moody's assigned a B2 corporate family rating and a B2-PD probability of default rating to Turnstone Midco 2 Limited on 20 May 2013 which remains unchanged. The rating outlook on all ratings is stable. Assignments: Issuer: IDH Finance plc Senior Secured Regular Bond/Debenture Dec 1, 2018, Assigned definitive ratings of B2 with a range of LGD4, 51% Senior Secured Regular Bond/Debenture Dec 1, 2018, Assigned definitive ratings of B2 with a range of LGD4, 51% Senior Secured Regular Bond/Debenture Jun 1, 2019, Assigned definitive ratings of Caa1 with a range of LGD6, 92% Ratings Rationale: Moody's definitive ratings on these debt obligations are in line with the provisional ratings assigned on 20 May 2013. Following the completed refinancing, the debt instruments in Turnstone MidCo 2's capital structure consist of a (1) GBP100 million super senior revolving credit facility due 2018, issued by Turnstone Bidco 1 limited, which is assumed to be undrawn at closing of the transaction (2) GBP200 million senior secured fixed rate notes due 2018 and GBP125 million senior secured floating rate notes due 2018 (together the senior secured notes) and (3) GBP75 million of second lien notes due 2019. All issued debt instruments will share the same guarantors and collateral package. However, in an enforcement scenario the senior secured notes will rank behind the GBP100 million senior revolving credit facility but ahead of the GBP75 million second lien notes. The senior secured notes and the second lien notes will benefit from guarantees by the parent company and certain subsidiaries representing more than 80% of the group's EBITDA. At March 31, 2013, the guarantors represented 86.6% of consolidated revenues and 83.1% of consolidated EBITDA. Moody's understands that shareholder funding into the top holding company of the restricted group, Turnstone MidCo2 Limited, will be in the form of common equity. Proceeds of the GBP400 million debt issuance were used to repay the borrower's senior credit facilities (GBP332.1 million including certain fees) and to redeem subordinated shareholder loans and pay accrued preference shares (GBP50 million). The B2 CFR reflects (1) the group's relatively small scale compared with that of similar Moody's-rated companies, with revenues of just GBP349 million in fiscal year 2013 (ending 31 March 2013); (2) its high financial leverage pro-forma the refinancing of around 7.1x (5.7x on a pro-forma EBITDA basis, considering the full year effect of acquisitions made during fiscal year 2013), with only modest interest coverage; and (3) the group's aggressive and largely debt-funded acquisition growth strategy, which will constrain future debt reduction and free cash flow generation after taking into account acquisition- related capital expenditure (capex). Nevertheless, the CFR recognizes the discretionary nature of IDH's acquisition strategy, which Moody's understands could be scaled back to preserve financial flexibility if needed, as well as the group's solid track record of integrating acquired dentistries. Positively, the B2 CFR also factors in (1) IDH's good, but still small, position in the fragmented UK dental healthcare market, with around 78% of revenues generated through evergreen UK NHS (National Health Service) contracts, which provide good revenue visibility; and (2) the group's ability to generate positive free cash flow after interest expenses as a result of low maintenance capex and working capital needs. Furthermore, the CFR incorporates the positive long-term industry trend in the UK dental care market, supported by the NHS's stated intention to increase access to dental care in the UK. Additional risk factors reflected in IDH's rating are regulatory and legal risks associated with the UK dental healthcare market, such as the risk of budget cuts, the risk of personnel expenses, which comprise the bulk of IDH's overall costs, rising more strongly than the adjustments in the NHS fees, or a change in the currently favorable terms of existing and future NHS contracts. The stable outlook considers Moody's expectation of revenue growth and EBITDA improvement mainly from newly acquired branches supporting a gradual reduction in leverage to 6.0x, measured by Moody's adjusted debt/EBITDA, over the next 12 months. What Could Change The Rating Up/Down The ratings could be downgraded in case of a deterioration in operating performance or increasingly aggressive financial policy that would result in Moody's adjusted debt/EBITDA not falling below 6.0x by year-end of fiscal year 2014, negative free cash flow and/or a depletion of its liquidity buffer. An upgrade of the ratings is unlikely over the near term due to the company's aggressive growth strategy which will constrain free cash flow and limit debt reduction, as well as the forward looking nature of the assigned ratings. The rating could be upgraded in case of revenue growth and EBITDA improvement from newly acquired branches supporting a sustained reduction in leverage to below 5.0x and positive free cash flow generation being sufficient to fund acquisitions. Principal Methodology The principal methodology used in this rating was the Global Healthcare Service Providers published in December 2011. Other methodologies used include Loss Given Default for Speculative- Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Headquartered in Manchester (UK), IDH provides dentistry services in England, Scotland and Wales employing 4,931 people and generated GBP349 million of sales in the fiscal year ending March 2013. IDH is owned by private equity firms The Carlyle Group and Palamon Capital Partners. INTERNATIONAL OPERA: Placed Into Liquidation -------------------------------------------- meetpie.com reports that some of London's largest corporates face losing a combined GBP300,000 after it was confirmed that International Opera Productions (IOP) was placed into liquidation. Ten staff were made redundant after IOP director Christopher Palmer-Jeffrey liquidated the firm which had been organising the London Opera Festival, set to be held at the Tower of London from September 9 to September 12, 2013, according to meetpie.com. According to the report, Neil Gibson, managing director of GIA Insolvency Limited, said creditors who had bought the corporate hospitality packages had "virtually no chance of getting their money back" as IOP's assets amounted to a small amount of office equipment and a small amount of cash in the bank. meetpie.com relates that Mr. Gibson said the festival, for which VIP tables for 10 people were being sold at up to GBP4,490, was unlikely to go ahead. Just 60 tables had been sold, which contributed little over a quarter of the expected break-even point of GBP1 million, the report relays. "Sales were a lot less than they were expecting. This is an expensive event and generally speaking, companies are spending less and less than they used to on corporate hospitality. I suspect it's a case of right idea at the wrong time," the report quotes Mr. Gibson as saying. meetpie.com says the Rostov State Opera, from Russia, was booked to perform Puccini's Madama Butterfly at the Festival, billed as 'one of the most prestigious corporate hospitality events for 2013'. Mr. Palmer-Jeffery, was a former director of European Events Ltd which went bust in February 2009 owing GBP1.6 million, the report discloses. Mr. Gibson said individuals who booked tickets through German ticketing services provider CTS Eventim are protected and will be reimbursed, meetpie.com adds. MEDIAGROUND LTD: Goes Into Administration ----------------------------------------- Aly Barchi at the CMW News reports that following news that the latter half of London's Playground Festival had been cancelled after less than great ticket sales - but leaving the July 7 listings still intact - the entire weekend event has since gone the same way, with the festival's seven year-old promoter Mediaground Ltd going into administration. CMW News relates that a basic explanation on the Playground site reads: "We are sad to say that after much of a battle here we have been left with no option but to cancel the entire festival. After poor ticket sales and an investor parting ways with us we weren't able to rectify the matter. Mediaground Ltd has been left with no option but to file for insolvency moving forward." The report discloses that in addition to granting immediate paybacks to ticketholders at point of purchase, The Playground is also staging a one-off live show at London's Koko on 13 Jul, info on which the promoter promises to share soon. PUNCH TAVERNS: Restructuring Plan Fails to Win Investor Backing --------------------------------------------------------------- Roland Gribben at The Telegraph reports that Punch Taverns has been plunged into a fresh crisis after indications that revised proposals to restructure its GBP2.4 billion of securitized debt had failed to win the support of key investors. According to the Telegraph, the company warned on Monday it could face administration without an agreement from senior bondholders. But sources said Punch had not gone far enough to win the backing of the investors, who are represented by a special committee set up by the Association of British Insurers, the Telegraph relates. Stephen Billingham, Punch executive chairman, plans further discussions with investors this week but, unless there are more concessions, the company could be facing the prospect of failing to meet debt covenants, the Telegraph notes. The group has been saddled with a debt mountain built up during an expensive series of acquisitions in the boom years which propelled it into the FTSE 100 and made a City star out of then- chief executive Giles Thorley, the Telegraph discloses. But the highly geared model was battered by the financial crisis and the group needs a considerable cash injection to avoid a default, the Telegraph states. The group now has around 5,000 pubs compared with more than 7,000 at its peak, the Telegraph says. Senior bondholders rejected a restructuring package in February and there was disappointment on Monday that Punch had gone no further than to tweak the earlier debt program, the Telegraph recounts. Restructuring Plan According to The Financial Times' Roger Blitz, unveiling the new plans, Punch said interest payments would fall to GBP32 million a year, which would also deleverage the group to about 1.8 times earnings before interest, tax, depreciation and amortization by 2018. The previous plan, rejected by shareholders in March to the frustration of the Punch board, envisaged a GBP463 million reduction in debt service payments, the FT notes. Punch, as cited by the FT, said that the new plan would reduce debt service repayments by GBP600 million over five years. The new deal benefits senior noteholders in the company's two securitized vehicles with an accelerated pre-payment of debt, and an option enabling them to sell their senior notes for cash, the FT says. Punch Taverns plc is a United Kingdom-based pub company. The Company is engaged in the operation of public houses under either the leased model or as directly managed by the Company. The Company operates in two business segments: punch partnerships, a leased estate and punch pub company, a managed estate. =============== X X X X X X X X =============== * EUROPE: Moody's Says Outlook for Steel Industry to Remain Neg. ---------------------------------------------------------------- The outlook for the European steel industry will remain negative over the next 12-18 months as a result of pressured steel prices, says Moody's Investors Service in a outlook update on the sector entitled "European Steel Outlook Remains Negative As Recovery May Take Longer To Materialise." "We expect weak demand, capacity utilization below 75%, and falling raw material prices to keep downward pressure on steel prices, not only for hot rolled coil but also for long carbon steel products used primarily in construction, high-strength steel used in transportation and engineered products, and stainless steel," says Steven Oman, a Moody's Senior Vice President and author of the outlook update. Depressed steel prices will pressure nearly all of Moody's European issuers, including ThyssenKrupp AG (Ba1 negative), Aperam SA (B1 negative) and Schmolz + Bickenbach AG (B3 under review), while ArcelorMittal (Ba1 negative) should benefit from its global footprint and expanding iron ore production. The prolonged weakness of the European economy has now affected every steel-using end market in Europe and is dampening demand in other regions, forcing Commonwealth of Independent States (CIS) producers, for example, to rely heavily on domestic sales. Moody's believes that steel demand within the 27 countries that make up the European Union will decline 2%-4% in 2013, on top of a 9.6% decline in 2012. GDP growth in the US, China and the rest of Asia has slowed, global Purchasing Manager Indices (PMIs) are hovering around 50, and structural issues are limiting government-sponsored stimulus measures. This limits European exports of cars and capital goods and exacerbates the steel supply-demand imbalance. Moody's would stabilize the European steel industry sector outlook if the European PMI rose to 49 and capacity utilization moved to a modest 75%. * Fitch Sees Modest Deterioration in Asset Quality for EM Banks --------------------------------------------------------------- Fitch Ratings says in a new special report that it continues to expect a moderate deterioration in bank asset quality across many emerging markets (EMs) as loan books season following recent credit growth. However, in most cases Fitch believes still solid economic performance will help to limit increases in non- performing loans (NPLs), and banks' profits and capital should comfortably absorb impairment charges. The most notable exception is China, although Negative Outlooks also remain in India, Slovenia, Argentina and Venezuela. Asset quality in China remains a concern given the magnitude and pace of credit growth. A rising share of new credit, particularly among mid-tier banks, is being booked off-balance sheet, complicating risk assessments. Loss-absorption capacity is under pressure, and is likely to be more of an issue as loans season. Most banks can absorb a rise in delinquencies to mid-single digits, after which government support may be required. Fitch expects Indian banks' NPL ratios to increase gradually over the next few quarters due to the economic slowdown and significant restructured, but currently performing, infrastructure loans. However, profits and reserves should absorb credit costs, and the authorities remain committed to supporting government banks' capital. Outlooks in other EM Asia banking sectors are stable due to only a moderate expected increase in credit costs, strong profit and sound capitalization. The sharper-than-expected deceleration of the Brazilian economy, following recent rapid credit expansion, is causing somewhat higher impairment in retail/SME portfolios, and the lower policy rate has put some pressure on margins. However, most banks' still comfortable capital and liquidity mitigate these concerns. Elsewhere in LatAm, Outlooks are Stable in Mexico, Chile, Peru and Colombia, but Negative on Argentine and Venezuelan banks due to potential macro rebalancing/volatility. Turkish banks' credit metrics have remained sound after recent rapid credit growth and the slowdown in 2012. Fitch expects only a moderate increase in NPLs as loan books season, with economic growth supporting credit quality. Further erosion of still sound capital and funding ratios should be limited, given expected loan growth of 15%-20%. In Russia, Fitch has concerns about rapid retail loan growth, legacy corporate asset quality problems, tighter capital and a slowing economy. Solid performance and capital at some banks mitigate these risks, while others are more vulnerable. Progress with loan book clean-ups in Kazakhstan and Ukraine remains limited. Slovenian banks need significant recapitalization due to increasing, and weakly reserved, NPLs. Elsewhere in central and eastern Europe, there are signs of NPLs stabilizing in some of the weaker markets, and parent banks remain supportive. Government stimulus, in particular through infrastructure spending, should support growth in the GCC, aiding banks' performance and asset quality, but legacy NPLs are significant in the UAE and Kuwait. Lower NPLs at South African banks have been driven in part by low interest rates, but consumer loan growth creates downside risks. 82% of EM bank IDRs had a Stable Outlook at end-Q113. 15% of ratings had a Negative Outlook/Watch, with concentrations in India, Slovenia, Venezuela and Argentina, but this was down from 18% at end-Q312 as South African and Belarusian banks' Outlooks were revised to Stable following sovereign credit profile changes. ********* 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., Washington, D.C., 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 2013. 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$775 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 215-945-7000 or Nina Novak at 202-241-8200. * * * End of Transmission * * *