TCREUR_Public/131010.mbx         T R O U B L E D   C O M P A N Y   R E P O R T E R

                           E U R O P E

           Thursday, October 10, 2013, Vol. 14, No. 201

                            Headlines

C Y P R U S

* CYPRUS: Banks Still Face Risks Despite Recapitalizations


D E N M A R K

DANISH MIDCO: Moody's Assigns 'Ba3' CFR; Outlook Stable


F R A N C E

MAISONS DU MONDE: S&P Assigns 'B' CCR; Outlook Stable


G E R M A N Y

FAENZA ACQUISITION: S&P Assigns 'B' CCR; Outlook Stable


I R E L A N D

A-WEAR: Enters Examinership; More Than 350 Jobs at Risk
IRISH BANK: Compensated Overcharged Customers, Liquidators Say


I T A L Y

ALITALIA SPA: In Crisis Talks; Eni Threatens to Cut Off Fuel
BUZZI UNICEM: S&P Affirms 'BB+' CCR; Outlook Negative
LANCHESTER SA: Moody's Assigns 'B1' CFR; Outlook Stable
RHIAG INTER: S&P Assigns Preliminary 'B' CCR; Outlook Stable
TELECOM ITALIA: Moody's Lowers All Debt Ratings to 'Ba1'

* ITALY: IMF Not in Favor of 'Bad Bank' Option


L U X E M B O U R G

GATEWAY IV: S&P Raises Rating on Class E Notes to 'BB'


M O N T E N E G R O

KOMBINAT ALUMINIJUMA: To Be Declared Bankrupt; Asset Sale Looms


N E T H E R L A N D S

PANGAEA ABS 2007-1: Fitch Affirms 'C' Ratings on 4 Note Classes


R U S S I A

CREDIT BANK: S&P Raises LT Counterparty Credit Rating to 'BB-'
OTP BANK: Moody's Changes Outlook on 'D-' BFSR to Negative
SOVCOMBANK: Moody's Alters Outlook on B2 Deposit Ratings to Neg
VENTRELT HOLDINGS: Fitch Affirms 'BB' Issuer Default Rating


S E R B I A

* SERBIA: Unveils Austerity Measures Amid Bankruptcy Threat


U K R A I N E

* Fitch: Ukraine's External Finances Key Weakness for Rating


U N I T E D   K I N G D O M

ALPSTAR CLO: Moody's Affirms 'B1' Rating on EUR13.5MM Cl. E Notes
CO-OPERATIVE BANK: Overhauls Board; To Address Deficit
INEOS GROUP: Grangemouth Plant's Future Uncertain on High Costs


X X X X X X X X

* Moody's Changes Outlook on European Retail Sector to Stable
* Upcoming Meetings, Conferences and Seminars


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C Y P R U S
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* CYPRUS: Banks Still Face Risks Despite Recapitalizations
----------------------------------------------------------
The completion of the recapitalization and restructuring process
for the Cypriot banks should improve confidence and contribute to
funding stability in the system, Fitch Ratings says. However, the
banks will remain vulnerable to funding and liquidity risks and
exposed to intense asset quality and profitability pressures in
the recession, so ratings are likely to stay deeply speculative
grade for some time.

"We expect Cyprus' GDP to contract by 8.9% in 2013 and a further
4.9% in 2014. A much deeper and longer recession could aggravate
already poor asset quality and profitability and renew pressures
on capitalization. This may put further pressure on funding and
liquidity profiles. We see this as the major risk for Cypriot
banks," Fitch says.

The banks' recapitalizations and restructurings, due to be
completed by end-2013, are milestones on the roadmap for the full
lifting of capital and deposit restrictions first introduced in
March 2013. The completion should reactivate capital flows and
help mitigate liquidity risks, especially at Bank of Cyprus
(BoC) -- the largest bank, which was exposed to the greatest
losses.

"Although the process has begun, individual banks are at
different stages. The two largest banks -- BoC and Hellenic
Bank -- have had Long-Term IDRs at 'RD' since March and April,
respectively. We expect to upgrade the ratings of Hellenic Bank
shortly after it is recapitalized. For BoC, which was
recapitalized at end-July, ratings will be revised when the
group's restructuring commitments and financial and credit
profiles are disclosed, so we can complete our analysis," Fitch
says.

"We believe it is likely that the banks' revised Long-Term IDRs
will be driven by their stand-alone intrinsic strength rather
than sovereign support, as the Cypriot authorities have limited
ability to support the banks. This is reflected in Cyprus' weak
credit profile (Foreign Currency IDR 'B-') and the EUR10 billion
IMF/EU bail-out package it received."

Capital controls are likely to remain in place for some time, to
help the stabilization of the Cypriot economy and banking sector.
But this will not prevent us from upgrading the banks' ratings.

BoC's pro forma core capital ratio stands at 11.8% following the
recapitalization, which forced losses onto junior and senior
creditors, including a 47.5% deposit-to-equity conversion of
uninsured deposits (exceeding EUR100,000). However, funding and
liquidity remains affected by continuous deposit withdrawals. BoC
remains reliant on central bank funding, largely through the
Emergency Liquidity Assistance mechanism, despite regaining its
counterparty status with the ECB. It has most to gain if
confidence for the sector improves.

Hellenic Bank has until end-October to meet the regulatory
minimum 9% core capital ratio by private means. If unsuccessful,
the bank will receive state aid without forcing losses onto
senior creditors. Its funding and liquidity may be more
resilient. Despite the crisis, loans/deposits were close to 80%
at end-H113, partly supported by the capital controls and the
bank does not rely on ECB funding.

Finally, the credit cooperative banks, which represent the bulk
of the remainder of the system, will be recapitalized with a
EUR1.5 billion capital injection directly from the Cypriot state
under the IMF/EU support package. They will also be significantly
restructured.



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D E N M A R K
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DANISH MIDCO: Moody's Assigns 'Ba3' CFR; Outlook Stable
-------------------------------------------------------
Moody's Investors Service has assigned a Ba3 corporate family
rating (CFR) and a B1-PD probability of default rating (PDR) to
Danish Midco 2 (Scandlines or SDC). The outlook on all ratings is
stable. This is the first time Moody's has assigned ratings to
SDC.

Concurrently, Moody's has also assigned a provisional (P)Ba3
senior secured bank rating to the EUR875 senior facilities
granted by a pool of banks to Danish Bidco, a 100% controlled SDC
subsidiary. Danish Bidco will use these facilities to finance (1)
A refinancing of Scandlines group debt (the refinancing); and (2)
part of the acquisition costs for the 48.72% stake of the
Scandlines group, currently held by Allianz Capital Partners
(ACP). Please refer to the end of this press release for a list
of the affected ratings, including those assigned to the
components of the senior facilities.

Moody's issues provisional ratings in advance of the final sale
of securities and these only reflect Moody's opinions regarding
the transaction. Upon the closing of the refinancing and the
acquisition of ACP's share in Scandlines group, but also after a
conclusive review of the final documentation, Moody's will
endeavor to assign definitive ratings to SDC. A definitive rating
may differ from a provisional rating.

All the ratings assume that the refinancing will be completed.

Ratings Rationale:

--- ASSIGNMENT OF Ba3 CFR

The CFR assigned to SDC is supported by (1) Scandlines's strong
market position; (2) barriers to entry, provided by its well-
established reputation and long-standing track record; and (3) a
good liquidity profile and the expectation that the group will
continue to generate positive free cash flow. However, the rating
is constrained by (1) increasingly higher competition risk; (2)
Scandlines's weak consolidated credit metrics because of its
leveraged capital structure (with debt/EBITDA that Moody's
expects to be around 4.8x on an adjusted basis as of end-December
2013); and (3) the possible competition from a new tunnel (the
Fehrman Belt Fixed Link) from 2021, which could affect the long-
term performance of SDC's current business model.

"SDC has a strong business profile given its "quasi-
infrastructure" nature and the limited number of alternatives to
its services," says Marco Vetulli, Moody's Vice President and
Lead Analyst for SDC.

In addition to limited competition, SDC's business profile is
strengthened by the fact that the company owns most of the ports
(Rodby, Puttgarden, Gedser and parts of Helsingor) from which it
operates, which provides benefits and high barriers to market
entry.

However, competition from a new tunnel, the Fehrman Belt Fixed
Link that is currently scheduled to open in 2021, may undermine
the competitive advantage of the company's main business line:
the Rodby-Puttgarden route, which represented approximately 40%
of SDC's total turnover and 60% of its EBITDA in 2012.

"The tunnel will substantially weaken SDC's business and credit
profile, given not only the importance of this route per se, but
also the effects that a reduction of transportation volumes on
the route will have on the other routes operated by SDC.
Therefore, competition risk is a key consideration in Moody's
assessment of SDC's CFR, although it will not materialize for a
number of years," concludes Mr. Vetulli.

  --- B1-PD PDR

As the bank facility will constitute the majority of the group's
capital structure, Moody's increases the family recovery rate to
65%, in line with its methodology for "all bank transactions". As
a result, the B1-PD PDR is one notch lower than the CFR.

  --- ASSIGNMENT OF (P)Ba3 RATINGS TO SENIOR SECURED LOAN

All the facilities granted to Danish Bidco are secured and will
constitute the main liability class in SDC's capital structure.
As a result of that, the (P)Ba3 rating and loss-given-default
(LGD)(LGD3/31.3%) assessment on the EUR875 million senior secured
facilities is in line with SDC's CFR Ba3.

The stable rating outlook reflects Moody's expectation that SDC
will maintain a stable credit profile with leverage of between
4.0x and 5.0x. The outlook also reflects Moody's expectation that
the group will maintain a conservative financial profile and
sound liquidity.

Upward rating pressure is currently limited but could arise if
SDC sustainably reduces its financial leverage (in terms of
debt/EBITDA) below 4.0x and the company's EBIT interest coverage
increases above its current level to 3.0x. On the contrary,
downward rating pressure could result if SDC's debt/EBITDA ratio
increases above 5.0x and EBIT interest coverage decreases from
the current level to below 1.5x.

List of Affected Ratings:

Moody's has assigned the following ratings:

  -- A Ba3 CFR to SDC

  -- A B1-PD PDR to SDC

  -- A (P)Ba3/LGD3,31.3% senior secured rating to the EUR265
     million term loan (tranche A), granted to Danish Bidco, and
     due in six years

  -- A (P)Ba3/LGD3,31.3% senior secured rating to EUR525 million
     term loan (tranche B), granted to Danish Bidco, and due in
     seven years

  -- A (P)Ba3/ LGD3,31.3% senior secured rating to EUR50 million
     term loan (capex facility), granted to Danish Bidco, and due
     in six years

  -- A (P)Ba3/LGD3,31.3% senior secured rating to EUR35 million
     revolving credit facility, granted to Danish Bidco, and due
     in six years

Headquartered in Copenhagen, Danish Midco 2 is substantially
owned by 3i Group plc and funds managed by 3i Investments Plc.
Danish Midco 2 has recently agreed to purchase ACP's stake
(48.72%) in Scandferries Holding GmbH (Scandferries). The
acquisition is expected to be completed by the end of 2013. 3i
Group Plc already owns 48.72% of Scandferries, with management
owning the remaining 2.56%. Scandferries is the flagship company
of Scandlines group, one of the main Baltic ferry operators that
operates three routes (Gedser-Rostock, Rodby-Puttgarden,
Helsingor-Helsinborg) that serve as essential connections to the
traffic corridors between Scandinavia and Continental Europe. The
network is operated with a fleet of 12 well-maintained vessels.
In 2012, Scandferries Holding GmbH generated consolidated
revenues of EUR502 million.



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F R A N C E
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MAISONS DU MONDE: S&P Assigns 'B' CCR; Outlook Stable
-----------------------------------------------------
Standard & Poor's Ratings Services said that it had assigned its
'B' long-term corporate credit rating to France-based decoration
and furniture retailer Magnolia (BC) S.A. (Maisons du Monde).
The outlook is stable.

At the same time, S&P assigned its 'B+' issue rating to Maisons
du Monde's EUR60 million super senior RCF, one notch higher than
the corporate credit rating on the company.  The recovery rating
on the revolving credit facility (RCF) is '2', indicating S&P's
expectation of substantial (70%-90%) recovery in the event of a
payment default.

S&P also assigned its 'B' issue rating to its EUR325 million
senior secured notes, in line with the corporate credit rating.
The recovery rating is '3', indicating S&P's expectation of
meaningful (50%-70%) recovery in the event of a payment default.

The ratings on Maisons du Monde reflect S&P's view of the
company's "highly leveraged" financial profile and "fair"
business profile.

Maisons du Monde's sizable debt and limited free operating cash
flow (FOCF) constrain our assessment of its financial risk
profile.  Pro forma for the refinancing, S&P expects the adjusted
debt-to-EBITDA and EBITDA-to-cash interest ratios to reach about
5.5x and 2.3x, respectively, at year-end 2013, or about 8x and
1.8x, if S&P includes the noncash interest paying instruments.
In S&P's view, reported FOCF should remain close to zero at least
over the next 12 months since the company is investing heavily.
S&P forecasts that the reported capital expenditure-to-revenue
ratio will reach about 10% in 2013, a level well above the
average of the retail sector.  S&P believes Standard & Poor's-
adjusted debt will be about EUR0.8 billion at year-end 2013, of
which EUR0.3 billion of notes, EUR0.2 billion of operating leases
(applying a discount rate of 8% to the operating lease schedule
provided by management), and EUR0.3 billion of noncash interest
paying instruments.

S&P's assessment of the business risk profile factors in S&P's
view that Maisons du Monde outperforms an industry pressurized by
adverse economic conditions.  S&P considers the French decoration
and furniture markets to be fragmented and sensitive to decline
in disposable income and real estate volumes.  While most players
struggle, Maisons du Monde exhibits strong revenue growth rates
and adjusted EBITDA margins fluctuating between 15% and 20%.  The
company has been steadily gaining market shares, which stood at
2.6% in France for 2012, thanks to an attractive offering, above-
average operating efficiency, and a good multichannel strategy.
S&P believes that Maisons du Monde's business model entails some
degree of fashion and inventory risks, but they have been well-
managed so far.

The stable outlook reflects S&P's view that Maisons du Monde's
future earnings growth, fuelled by market share gains in France
and successful international expansion, should enable the company
to gradually improve credit ratios over time, despite S&P's
expectation of weak free cash flow generation over the next 12
months and a challenging business environment for decoration and
furniture retailers in Europe.



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G E R M A N Y
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FAENZA ACQUISITION: S&P Assigns 'B' CCR; Outlook Stable
-------------------------------------------------------
Standard & Poor's Ratings Services said that it assigned its 'B'
long-term corporate credit rating to Faenza Acquisition GmbH, the
parent company of Germany-based Ceramtec, a manufacturer of high-
performance ceramics (collectively Ceramtec, or the group).  The
outlook is stable.

At the same time, S&P assigned its 'B' issue rating to Ceramtec's
EUR647 million-equivalent senior secured term loan and
EUR100 million revolving credit facility (RCF).  The recovery
rating is '3', indicating S&P's expectation of meaningful (50%-
70%) recovery in the event of a payment default.

S&P also assigned its 'CCC+' issue rating to Ceramtec's
EUR306.7 million unsecured notes issued by Faenza GmbH, a parent
company of Faenza Acquisition.  The recovery rating is '6',
indicating S&P's expectation of negligible (0%-10%) recovery in
the event of a payment default.

The ratings on Ceramtec reflect S&P's view of the group's
relatively aggressive capital structure following the leveraged
buyout by private equity group Cinven.  The buyout was completed
on Aug. 30, 2013.

"We assess Ceramtec's financial risk profile as "highly
leveraged" under our criteria.  Based on the financing that
Cinven has raised to finance the buyout, we estimate Ceramtec's
Standard & Poor's-adjusted net debt-to-EBITDA ratio will be about
11x by Dec. 31, 2013.  Our estimate includes financial debt of
about EUR1.05 billion (including a EUR100 million undrawn RCF);
about EUR462 million in the form of shareholder debt-like
instruments; and about EUR2.5 million and EUR43.0 million of
obligations under operating leases and pensions, respectively,"
S&P noted.

"Although we view the instruments provided by shareholders in the
form of preferred equity certificates (PECs) and preferred shares
(collectively, shareholder loans) as debt-like, we recognize
their cash-preserving function.  Excluding these debt-like
instruments, Ceramtec's financial risk profile would still remain
in line with our "highly leveraged" classification, with debt to
EBITDA of about 7x by Dec. 31, 2013.  However, we estimate that
the group should be able to generate free operating cash flow
(FOCF) of at least EUR30 million-EUR35 million per year and cover
comfortably zhe contracted debt service payments.  We believe
that the embedded cash flow sweep in the proposed capital
structure could lead to a gradual reduction of the cash-pay
debt," S&P added.

Under S&P's base-case credit scenario, it estimates Ceramtec will
achieve an adjusted EBITDA of about EUR140 million-EUR145 million
over the next two-to-three years.  This will cover annual cash
interest payments of about EUR55 million-EUR60 million by about
2.4x, supported by positive FOCF.  S&P understands that the group
will not be paying ongoing dividends to its owners or providing
any other cash compensation in respect of shareholder financing.
If this were not the case, it would take longer for Ceramtec to
deleverage and as such could have a negative effect on the
ratings.

S&P considers Ceramtec's business risk profile to be at the high
end of the "fair" category under its criteria.  In S&P's opinion,
the main factor constraining the business risk profile is
Ceramtec's dependency on its hip implant components product
group, which accounts for a meaningful portion of the group's
EBITDA and operating cash flow.  S&P anticipates a tough pricing
environment in the European and U.S. health care sectors for the
rest of 2013 and in 2014, mainly because of cuts in public
funding as a result of austerity measures.  Therefore, S&P
believes pricing pressure will persist.  This, coupled with
increases in input prices, will put pressure on Ceramtec's
ability to maintain its operating profitability, in our opinion.
The group's sensitivity to macroeconomic weakness is further
exacerbated by the fact that the auto sector--characterized by
its cyclicality and price pressure on component suppliers--
dominates Ceramtec's industrial segment end markets.

These weaknesses are partially offset, in S&P's view, by
Ceramtec's leading market position in the ceramic hip implant
components niche market, its presence in diversified industrial
markets, and a track record of solid profitability.

In S&P's opinion, Ceramtec's relatively strong operating margins
reflect its well-established brands and its status as the sole
supplier for a large number of its customers, which allows it to
charge premium prices.

The stable outlook reflects S&P's view that Ceramtec will sustain
positive underlying revenue growth of at least 3% annually, while
maintaining its operating profitability.  Such developments
should, in S&P's view, occur despite the potentially negative
effects of governments' public spending cuts to health care and
the difficult trading environment in the European auto industry.
In terms of credit metrics, S&P would view adjusted EBITDA cash
interest coverage of about 2x and positive cash flow generation
as commensurate with the 'B' rating.

S&P's could lower the rating if adjusted EBITDA interest coverage
drops to less than 2x, or if Ceramtec is not able to generate
positive FOCF.  This would most likely be caused by deteriorating
operating margins due to an inability to innovate and pass on
price increases, or by increases in interest rates that are
higher than S&P expects.

In S&P's opinion, an upgrade is unlikely over the next two years
due to Ceramtec's high adjusted leverage.  That said, S&P could
consider an upgrade if Ceramtec were to generate sufficient
EBITDA to sustainably cover the cash-pay interest expense by at
least 3x while maintaining positive FOCF.



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A-WEAR: Enters Examinership; More Than 350 Jobs at Risk
-------------------------------------------------------
Aodhan O'Faolain at The Irish Times reports that the High Court
has appointed a interim examiner to fashion retailer A-Wear.

The chain, which employs more than 350 people and operates 30
stores in Ireland and Northern Ireland, blames its current
difficulties on high rents and increased competition, The Irish
Times discloses.

The company hopes that the vast majority of those jobs can be
saved, The Irish Times notes.  On Tuesday, at the High Court,
Mr. Justice Peter Charleton appointed insolvency practitioner Ken
Fennell as interim examiner to Latzur Ltd., trading as A-Wear
after an independent accountants report said the company had a
reasonable prospect of survival if certain steps were taken, The
Irish Times relates.

These steps include the examiner putting together a scheme of
arrangement with the firm's creditors, which if approved by the
High Court would allow the company to continue to trade as a
going concern, The Irish Times states.

According to The Irish Times, the court heard that obtaining a
reduction in the rents the firm pays for its outlets will form an
important part in the firm's future.

On Tuesday, Bernard Dunleavy for the company said A-Wear, which
has traded for many years, said a business plan put together by
the company had identified which stores will need to close if
agreements cannot be reached in relation to rents, The Irish
Times recounts.  Mr. Dunleavy, as cited by The Irish Times, said
that the appointment of an independent person such as an examiner
would allow negotiations on rent agreements with landlords
commence.

According to The Irish Times, in appointing Mr. Fennell,
Mr. Justice Charleton said there were "strong reasons" why an
interim examiner should be appointed.  He agreed an examiner was
required to open negotiations with the landlords over rental
agreements, and ensure that vouchers are honored, The Irish Times
relays.

The judge added the firm's suppliers would also need to deal with
an examiner during the period of protection, The Irish Times
relates.  The matter was adjourned to a date later this month,
The Irish Times discloses.


IRISH BANK: Compensated Overcharged Customers, Liquidators Say
--------------------------------------------------------------
Dara Doyle at Bloomberg News reports that the liquidators of the
the Irish Bank Resolution Corporation, the former Anglo Irish
Bank Corp., said lender last year refunded and compensated
customers who had been overcharged.

According to Bloomberg, liquidator Kieran Wallace said in a
statement in connection with an ongoing court case in the U.S.
that the Dublin-based bank identified overcharging affecting the
majority of variable rate customer loan accounts in the Republic
of Ireland, the Isle of Man and the U.S. between Jan. 1, 1990 and
July 31, 2004.

The liquidator said that about 25% of variable rate customer loan
accounts in the U.K were overcharged from Sept. 1, 1991 to
June 30, 2005, Bloomberg relates.

"Allegations of overcharging of interest customer loan
accounts for subsequent periods have been examined by IBRC
internally prior to the special liquidation of the bank, and by
the special liquidators since their appointment," Bloomberg
quotes the liquidators as saying.  "The special liquidators are
satisfied that there is no evidence of deliberate, systematic
overcharging of interest to customer loan accounts in subsequent
periods, post 2004/2005."

                   About Irish Bank Resolution

Irish Bank Resolution Corp., the liquidation vehicle for what was
once one of Ireland's largest banks, filed a Chapter 15 petition
(Bankr. D. Del. Case No. 13-12159) on Aug. 26, 2013, to protect
U.S. assets of the former Anglo Irish Bank Corp. from being
seized by creditors.  Irish Bank Resolution sought assistance
from the U.S. court in liquidating Anglo Irish Bank Corp. and
Irish Nationwide Building Society.  The two banks failed and were
merged into IBRC in July 2011.  IBRC is tasked with winding them
down and liquidating their assets.  In February, when Irish
lawmakers adopted the Irish Bank Resolution Corp., IBRC was
placed into a special liquidation in the Irish High Court to
complete liquidation and distribution of the two banks' assets.

IBRC's principal asset as of June 2012 was a loan portfolio
valued at some EUR25 billion (US$33.5 billion). About 70 percent
of the loans were to Irish borrowers. Some 5 percent of the
portfolio was under U.S. law, according to a court filing.  Total
liabilities in June 2012 were about EUR50 billion, according
to a court filing.

Most assets in the U.S. have been sold already.  IBRC is involved
in lawsuits in the U.S.

The IRBC liquidators want the U.S. bankruptcy judge to rule that
Ireland is home to the so-called foreign main bankruptcy
proceeding.  If the judge agrees and determines that IBRC
otherwise qualifies, creditor actions in the U.S. will halt
automatically.



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ALITALIA SPA: In Crisis Talks; Eni Threatens to Cut Off Fuel
------------------------------------------------------------
Guy Dinmore and Giulia Segreti at The Financial Times report that
Alitalia SpA, Italy's lossmaking national carrier, slid deeper
into crisis on Tuesday when a key creditor threatened to cut off
fuel, while the government held further talks on keeping the
airline flying until a possible move by Air France-KLM to
increase its stake.

According to the FT, an industry source said comments made by
Paolo Scaroni, chief executive of Eni, Italy's state-controlled
energy group, were having a "devastating effect" on Alitalia's
ticket sales.

"We hope the situation will be resolved but we cannot renew our
trust in a company that does not provide certainties.  We cannot
keep it alive with our fuel," the FT quotes Mr. Scaroni as saying
in New York on Monday night.  Eni is already owed EUR30 million
by Alitalia and a credit line is due to expire this weekend
unless a strategic plan is agreed, the FT notes.

The FT relates that the industry source close to negotiations
over the company's future said Alitalia has sufficient cash to
get through the week but then has to find a new "solution".  "We
are absolutely confident that a solution will be found."

"We are working on it," Maurizio Lupi, transport minister, as
cited by the FT, said after a second day of ministerial meetings
on Alitalia, which is considered a national strategic asset. "

Alitalia has not reported a full-year net profit since 2002 and
recorded a net loss of EUR294 million in the first half of this
year, the FT notes.  Total liquidity at June 30 stood at
EUR128 million, while net debt reached EUR946 million, the FT
discloses.

Alitalia, its creditors and Italy's coalition government are
looking for a "bridging solution" that would find a new investor
ready to inject capital until a possible deal can be worked out
with Air France-KLM or another carrier, the FT says.

But proposals on the table are fraught with difficulties, the FT
states.  State intervention could also run into problems with the
European Commission, which has to approve any rescue, according
to the FT.

Alitalia's board was due to meet on Tuesday to review the
situation ahead of a scheduled shareholders meeting on Oct. 14,
which is to consider the board's call for a capital increase, the
FT relays.  Gabriele Del Torchio, chief executive, was reported
to have proposed last Friday that the capital increase should be
raised to EUR150 million from the EUR100 million approved by the
board on Sept. 26, the FT recounts.

                           Tug of War

BBC News reports that analysts say Air France KLM wants to buy
the rest of Alitalia.

But the French carrier is unlikely to want Alitalia's debt burden
and would probably want to make deep cost cuts, BBC notes.

"This is a tug of war over the price," BBC quotes Andrea
Giuricin, a transport analyst at Milan's Bicocca University, as
saying.  "Air France KLM would like to buy Alitalia as cheaply as
possible, preferably without having to take on its debt, while
the Italian shareholders want to get something out of this as
well."

According to BBC, reports say that Italy's civil aviation
authority ENAC will meet company executives this week to assess
whether Alitalia is a viable concern.

                         About Alitalia

Alitalia-Compagnia Aerea Italiana has navigated its way through
a successful restructuring.  After filing for bankruptcy
protection in 2008, Alitalia found additional investors, acquired
rival airline Air One, and re-emerged as Italy's leading airline
in early 2009.  Operating a fleet of about 150 aircraft, the
airline now serves more than 75 national and international
destinations from hubs in Fiumicino (Rome), Milan, Turin, Venice,
Naples, and Catania.  Alitalia extends its network as a member of
the SkyTeam code-sharing and marketing alliance, which also
includes Air France, Delta Air Lines, and KLM.  An Italian
investor group owns a majority of the company, while Air France-
KLM owns 25%.


BUZZI UNICEM: S&P Affirms 'BB+' CCR; Outlook Negative
-----------------------------------------------------
Standard & Poor's Ratings Services said it had affirmed its 'BB+'
long-term corporate credit ratings on Italian building materials
manufacturer Buzzi Unicem SpA and its core subsidiary Dyckerhoff
AG and removed them from CreditWatch with negative implications,
where we placed them on Aug. 8, 2013.  The outlook is negative.

S&P' also affirmed its 'BB+' issue ratings on the two
EUR350 million senior unsecured notes due 2016 and 2018 issued by
Buzzi, the US$200 million unsecured U.S. private placement (USPP)
debt due in 2016 issued by RC Lonestar Inc. (a fully owned
subsidiary of Buzzi), and the EUR150 million revolving credit
facility issued by Dyckerhoff, and removed them from CreditWatch
negative, where S&P placed them on Aug. 8, 2013.  The recovery
ratings on this debt remain unchanged at '3', indicating S&P's
expectation of meaningful (50%-70%) recovery for debtholders in
the event of payment default.

At the same time, S&P affirmed its 'B' short-term corporate
credit ratings on the two companies.

The rating actions reflect S&P's forecast that the Buzzi group's
profitability and cash generation will recover sufficiently in
the second half of 2013 and in 2014, and that S&P's key credit
metrics, funds from operations (FFO) to debt and debt to EBITDA,
will improve to 20%-22% and 3.3x-3.5x, respectively, by the end
of 2014.  Furthermore, S&P believes the new cost efficiency
measures the group plans to adopt in the remainder of 2013 and
2014 will help improve its margins, particularly in Italy.

In S&P's base-case scenario, it assumes:

   -- Group revenues to decline by 1%-3% in 2013 and increase by
      1.5%-3.5% in 2014;

   -- The adjusted EBITDA margin to decline to 15%-17% in 2013
      and recover to 16%-18% in 2014;

   -- FFO to debt to stand at 18%-19% in 2013 and 20%-22% in
      2014;

   -- Debt to EBITDA to stand at 3.6x-3.8x in 2013 and 3.3x-3.5x
      in 2014;

   -- Capital expenditures to stay at about EUR200 million in
      both 2013 and 2014;

   -- Free operating cash flow (FOCF) to weaken from 2012, and
      stay at an average of EUR90 million in 2013 and 2014; and

   -- Net financial debt to stand between EUR1.6 billion and
      EUR1.7 billion at the end of 2013, close to that in 2012.

However, S&P's base-case assumptions have downside risk, given
that the economic recovery S&P forecasts for Europe in 2014 is
rather limited and fragile, and the cement sector in the region
has several challenges to face.

Buzzi and its core subsidiary Dyckerhoff have "satisfactory"
business risk profiles and "significant" financial risk profiles,
as S&P's criteria define these terms.  S&P also considers the
Buzzi group to have "adequate" liquidity.

The negative outlook reflects the possibility that S&P would
lower the ratings by one notch if the group's credit metrics do
not recover steadily over the rest of 2013 and 2014, as S&P
expects, and stagnate below what it considers commensurate with
the current ratings.

Conversely, S&P could revise the outlook to stable if the group's
credit metrics recovered in the second half of 2013 and in 2014
on a sustainable basis in line with or above its base-case
scenario.


LANCHESTER SA: Moody's Assigns 'B1' CFR; Outlook Stable
-------------------------------------------------------
Moody's Investors Service has assigned a first-time corporate
family rating (CFR) of B1 and probability of default rating (PDR)
of B1-PD to Lanchester S.A., a holding company of the Rhiag
group. Concurrently, Moody's has assigned a provisional (P)Ba3
rating to the proposed EUR195 million Senior Secured Notes due
2020 to be issued by Rhiag-Inter Auto Parts Italia S.p.A. and
(P)B3 rating to EUR155 million PIK Toggle Notes due 2020 to be
issued by Lanchester S.A. The outlook on all ratings is stable.

The proceeds from the notes will be used to refinance the
existing loan facilities and make a dividend distribution to
Rhiag's private equity sponsors, Alpha Funds and Alpinvest
Partners, which acquired the group in 2007.

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.
A definitive rating may differ from a provisional rating.

Ratings Rationale:

The Corporate Family Rating (CFR) of B1 reflects (i) sensitivity
of automotive aftermarket to macroeconomic conditions and oil
price; (ii) the company's exposure to the economy of Italy
representing c. 49% and 63% of 2012 sales and EBITDA
respectively; (iii) intense competition in the sector leading to
price pressure; (iv) modest size of the company compared to some
of its suppliers potentially limiting its bargaining power; (v)
high proforma leverage following the proposed dividend
recapitalization; (vi) risks relating to potential M&A activity;
(vii) the extraction of the entire initial shareholder capital
through dividend distribution.

Positively, the ratings are supported by (i) an established
presence in the fragmented aftermarket, characterized by higher
customer loyalty and less cyclicality compared to the automotive
sector; (ii) relative size compared to other independent players,
manifesting itself in a dense distribution network and leading to
economies of scale; (iii) a presence in less mature Eastern
European markets, contributing to c. 45% of 2012 sales; (iv)a
fragmented customer base, consisting of local wholesalers and
independent garages; (v) Rhiag's track record of strong
operational performance and deleveraging in the recent years.

The Independent Automotive Aftermarket ("IAM") channel of the
automotive aftermarket within which Rhiag operates is focused on
the car park of 4+ years age, usually served by independent
garages and not covered by manufacturers' warranties. This
provides more stability to the sector compared to the Original
Equipment Suppliers ("OES") channel, which is closely linked to
new vehicle supply. The economic environment, such as diminished
spending power and the increasing age of the car park, as well as
European regulation currently favor the IAM channel, assisted by
the growing age of the car park and lower prices which
independent garages are able to offer to consumers.

However, the IAM channel is facing different challenges, such as
the increasing quality of cars and parts (partially offset by the
increased complexity and average price per spare part), exposure
to oil prices linked to a decrease in mileage and intense
competition leading to consolidation and M&A risk. The IAM
channel in Europe is very fragmented, with few larger players of
similar size compared to Rhiag. Although Rhiag is by far the
biggest player in its key markets Italy, the Czech Republic and
Slovakia, the atomization of the industry results in intensive
price competition, from local competitors as well as from OES
trying to capture a share of the aftermarket channels through the
extension of warranties. The company is however regarded by
Moody's as well positioned to compete thanks to its strong local
distribution coverage, client relationships, including more than
2,000 Rhiag affiliated garages in Italy and 800 in Eastern
Europe, broad product range and direct access to suppliers.

The company's highly fragmented customer base is supplemented by
the diversification of its suppliers, with the top supplier
contributing c. 5% of the company's total purchases. However the
bargaining power of the company with its top suppliers may be
limited, given its exposure to large international players, such
as Schaeffler and Valeo.

The company's business profile benefits from its established
presence in Eastern Europe, where the aftermarket is expected to
exhibit stronger growth due to a lower car density, whereas the
mature market of Italy is expected to return to positive growth
in 2014. Although almost half of Rhiag's sales comes from Italy,
the company demonstrated a notable resilience in the current
economic environment, with local sales and EBITDA staying largely
stable over 2010-2012 period.

The company experienced some margin pressure in 2012, evidenced
by the management EBITDA margin declining to 12.1% in 2012 from
12.9% in 2011. This trend is likely to continue, driven by
growing price competition in all markets as well as higher
personnel costs related to the opening of new branches to gain
market share in Eastern European countries. This is expected to
be offset by growth in the top line coming from market growth
(primarily in Eastern Europe), increasing market share and the
introduction of new products. Moody's views some of these top-
line expectations as challenging to achieve.

Free cash flow (as defined by Moody's) is expected to stay
positive year-on-year, despite higher interest payments under the
proposed capital structure, working capital cash outflow and
higher capex to support growth in Eastern Europe. With total
gross leverage (as defined by Moody's) at 4.7x at the end of 2013
based on management projections, the company's financial profile
is considered to be highly leveraged. Moody's does not anticipate
significant deleveraging given the absence of amortizing debt in
the capital structure and a slow growth in EBITDA.

Liquidity is considered to be adequate, supported by
approximately EUR21 million cash pro forma for transaction
closing and a EUR20 million unsecured revolving credit facility
(RCF), which is expected to be undrawn. The terms of the PIK
toggle notes require interest to be paid in cash ("pay if you
can") subject to a restricted payment basket build up and a
minimum of EUR30 million cash pro forma for the cash interest
payment, which may help to support liquidity should Rhiag's
operational performance deteriorate.

The proposed capital structure includes EUR155 million PIK Notes,
EUR195 million Senior Secured Notes and EUR20 million RCF. The
PIK Toggle Notes are structurally subordinated to the Senior
Secured Notes and are not guaranteed whereas the RCF is
subordinated to Senior Secured Notes due to the absence of opco
guarantees. The RCF is unsecured and benefits from a 3.0x net
senior secured leverage covenant. Security on the PIK Toggle
Notes and Senior Secured Notes is limited essentially to share
pledges as well as to pledges over receivables due under certain
intra-group funding loans in case of the Senior Secured Notes.
The (P)B3 rating on the PIK Toggle Notes reflects their
subordination to more senior debt in the capital structure while
the (P)Ba3 rating on the Senior Secured Notes is supported by the
presence of the junior debt. The B1-PD PDR rating assumes a
recovery rate of 50%, reflecting the presence of both bank debt
and notes in the structure.

Moody's understands that CPECs and a Vendor Loan currently
outstanding at Lanchester S.A. level will be repaid and the
shareholder contribution into Lanchester S.A. will be entirely in
the form of common equity pro forma for the transaction.

The company plans to use the proceeds from the PIK Toggle Notes
to make a EUR148 million distribution to shareholders. The amount
of the contemplated dividend payment is in excess of the initial
capital contribution made by the shareholders in 2007 to acquire
the company.

The stable rating outlook is based on Moody's expectation that
the company will continue to grow in its key markets and generate
positive cash flow despite ongoing margin pressure.

What Could Change the Rating Up/Down:

Positive pressure on the ratings could arise if Moody's adjusted
gross Debt/EBITDA ratio decreases below 4.0x and (EBITDA-Capex)
Interest ratio rises to 2.5x. Negative pressure could arise if
due to underperformance or PIK interest accretion Moody's
adjusted gross Debt/EBITDA ratio rises above 5.0x or (EBITDA --
Capex) / Interest ratio falls materially below 2.0x.

The principal methodology used in these ratings was the Global
Distribution & Supply Chain Services published in November 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.

Based in Italy, Rhiag Inter Auto Parts Italia S.p.A, is the
leading B2B distributor of spare parts primarily for passenger
cars as well as commercial vehicles in the independent Italian
aftermarket, and one of the largest players across Eastern
Europe. The company generated EUR673 million gross reported sales
in 2012 and employed more than 2,800 people in 8 countries as of
December 31, 2012.


RHIAG INTER: S&P Assigns Preliminary 'B' CCR; Outlook Stable
------------------------------------------------------------
Standard & Poor's Ratings Services said it assigned its 'B'
preliminary long-term corporate credit rating to Italy-
incorporated distributor of components for private and commercial
vehicles Rhiag Inter Auto Parts Italia SpA.  S&P also assigned
its 'B' preliminary long-term corporate rating to Rhiag's parent
Lanchester S.A.  The outlook is stable.

The final ratings will depend on S&P's receipt and satisfactory
review of all final transaction documentation.  Accordingly, the
preliminary ratings should not be construed as evidence of final
ratings.  If Standard & Poor's does not receive final
documentation within a reasonable time frame, or if final
documentation departs from materials reviewed, S&P reserves the
right to withdraw or revise its ratings.

The preliminary ratings are based on S&P's expectation that the
proposed refinancing transaction will be completed as presented
to S&P by Rhiag and its majority shareholder, European private
equity company Alpha Private Equity.  This private equity company
holds 72% of Rhiag, alongside private equity company AlpInvest
Partner's 24%.

Rhiag plans to issue a EUR195 million senior secured seven-year
bond to refinance its capital structure.  S&P understands that
the bond proceeds will be combined with cash held of about
EUR44 million to redeem existing outstanding bank debt of about
EUR233 million, cover transaction fees, and fund a cash position
of EUR19 million at the operating level.  The proposed
refinancing transaction also involves the issuance of EUR155
million payment-in-kind (PIK) toggle notes at holding company,
Lanchester, to refinance the existing EUR93 million convertible
preferred shares and a vendor loan of about EUR21 million; cover
fees and expenses; and fund a cash position at closing of
approximately EUR2 million. The remainder is to be distributed to
shareholders.  As part of its refinancing plan, Rhiag will also
benefit from the extension of a EUR20 million three-year
committed and undrawn revolving credit facility (RCF).

S&P's view of Rhiag's "highly leveraged" financial profile and
its "aggressive" financial policy mainly constrains the
preliminary ratings.  S&P's assessment takes into account the
company's acquisition through a leveraged buyout and the
shareholder payout disbursed as part of the proposed refinancing
transaction.

"We anticipate that financial leverage at the end of 2013 will
stand at about 5.1x, in line with our assessment of Rhiag's
financial risk profile as "highly leveraged."  We also project
funds from operations (FFO) to debt of about 9% in 2014 following
the full impact of the transaction's higher interest costs on the
company's accounts.  We adjust financial metrics for the PIK
notes to be issued by Lanchester and include scheduled interest
payments in our calculation of adjusted cash flows and interest.
Although the documentation of the senior secured notes contains
some restrictions with regard to dividend payments of Rhiag, our
base case includes our belief that the company will service cash
interest of the PIK toggle notes (about EUR15 million per year)
through a permitted payment basket.  Moreover, under our base
case, we anticipate that free operating cash flow generation will
remain positive, albeit low, leaving the company with limited
potential to deleverage," S&P said.

The "fair" business risk profile, in S&P's view, is constrained
by its operations in the highly fragmented and competitive
automotive aftermarket industry.  Rhiag competes against numerous
local and regional distributors.  Another constraint is what S&P
views as limited business and geographic diversification, where
the Italian automotive market still generates about half of
revenues.  S&P anticipates that economic growth prospects in the
Italian automotive aftermarket will remain subdued, limiting
overall growth prospects.

Rhiag's solid operating track record supports S&P's assessment of
its business risk profile.  It has consistent, steady revenue
growth and stable operating margins despite fairly rapid growth
through acquisitions.  Adjusted EBITDA margins have stayed
between 10% and 12% over the past five years.  S&P also considers
positive the company's good product and customer diversity, with
over 80,000 customers served and more than 100,000 stock keeping
units in individual markets.

Rhiag is a distributor of auto parts in the independent
aftermarket segment in Europe.  With annual net sales of about
EUR638 million in 2012, Rhiag is the market leader in Italy,
Czech Republic, and Slovakia.  The company also holds good market
positions in other European countries, such as Switzerland
(No.3), Hungary (No.3), Romania (No. 6), and Ukraine (No.6).  The
company distributes a wide range of vehicle or original equipment
supplier products -- like mechanical, electrical and other
replacement parts -- to local wholesalers, who in turn supply
these parts to auto garages, but Rhiag also sells directly to
garages (in Eastern Europe).

In S&P's base case, it assumes that Rhiag's revenue growth in
percentage terms will be in the mid-single digits in 2013 and
2014, on the back of moderate increments in consumer spending and
with increases from Rhiag's Eastern European operations.  Growth
prospects in Italy, however, will remain limited, in S&P's view.
S&P also assumes that adjusted EBITDA margins will stay robust,
but weaken from 2012 levels to about 11.0%-11.5%, owing to
intense price competition in a fragmented market and a gradual
shift in geographic mix.

S&P bases its stable outlook on its expectations that Rhiag will
continue to generate free operating cash flows over the coming
years.  S&P also factors in its assumption that the company will
continue its solid operating performance despite the difficult
economic outlook in its core Italian market.  S&P further
anticipates that Rhiag will effectively control capital
expenditures and working capital levels despite targeted
expansionary growth.  In S&P's view, rating-commensurate credit
measures include EBITDA interest coverage above 2x (including
interest on the PIK toggle notes) and FFO to debt of about 10%.

S&P could consider a negative rating action if the company were
to consider medium or large debt-financed acquisitions to further
enhance its market positions in existing markets or to enter into
new geographic markets.  S&P could also lower the rating should a
prolonged weakening in operating performance lead to a pronounced
increase in financial leverage, or if the company were to adopt a
more shareholder-friendly financial policy as a result of its
private equity ownership.

S&P could consider raising the ratings in the next 12 months if
Rhiag were to report an extended, sustainable strengthening of
its operating performance and stronger credit measures, such as
EBITDA interest coverage (including interest on the PIK toggle
notes) closer to 3x and FFO to debt of about 15%.


TELECOM ITALIA: Moody's Lowers All Debt Ratings to 'Ba1'
--------------------------------------------------------
Moody's Investors Service has downgraded the ratings of all debts
issued (or guaranteed) by Telecom Italia S.p.A., and all
supported debts within its family of issuers, including the
senior unsecured ratings to Ba1/(P)Ba1 from Baa3/(P)Baa3 and the
junior subordinated ratings to Ba3 from Ba2.

The rating action follows the company's failure to strengthen its
balance sheet and the accompanying announcement on 3 October of
the resignation of its Chairman and CEO, Mr. Bernabe.

"We are downgrading Telecom Italia's ratings primarily because
the recent resignation of the CEO has increased uncertainty
regarding the company's ability to strengthen its balance sheet
sufficiently to mitigate the declining trend in its domestic
revenues and EBITDA," says Carlos Winzer, a Moody's Senior Vice
President and lead analyst for Telecom Italia.

As part of rating action, the rating agency has assigned a Ba1
corporate family rating to Telecom Italia, in line with Moody's
policy for non-investment-grade ratings. Concurrently, Moody's
has assigned a Ba1-PD probability of default rating (PDR) to the
company. The outlook on the ratings is negative.

The rating action concludes the review for downgrade initiated by
Moody's on August 8, 2013.

Ratings Rationale:

Telecom Italia's ratings were placed on review for downgrade on 8
August, driven primarily by the deterioration in its domestic
revenues and EBITDA resulting from the worsening economy, higher
unemployment, adverse regulatory effects and more intense
competition in Italy. The review was also driven by Telecom
Italia's inability to meet its domestic and group EBITDA targets,
with a high likelihood of a downgrade if the company failed to
meet ambitious plans to reduce debt and improve financial metrics
by year-end 2013.

Rating action reflects the resignation of Telecom Italia's CEO,
which in Moody's view reflects a lack of support from
shareholders for a material capital increase to strengthen the
company's balance sheet. As a result, an improvement in Telecom
Italia's credit quality no longer appears likely. The remaining
options available to strengthen the credit, whether related to
capital or operating plans, regulation, financial strategy or
asset sales, will take time to implement, even if successful.
There will be uncertainty and implementation risk until the new
CEO has appraised its options, set out and started to deliver on
a new strategy, and this is reflected in the negative outlook.

In Moody's view, there is increased uncertainty regarding the
company's strategy and ability to reverse the declining trend in
its domestic revenues and EBITDA. This deterioration is a result
of the continued weakening of Italy's economy, higher
unemployment, adverse regulatory effects and more intense
competition in the country. Moreover, the downgrade reflects
Moody's expectation that Telecom Italia's domestic revenues and
EBITDA will deteriorate further and that the company will fail to
meet its domestic and group EBITDA targets for 2013.

Telecom Italia's business risk has increased as a result of the
expected further deterioration in the company's operating
performance, as well as the low visibility regarding when
management might be able to reverse the declining trend.

As a result, Telecom Italia is likely to struggle to achieve its
reported net financial position target of less than EUR27 billion
by year end.

In particular, Moody's notes that management is struggling to
offset the negative effect on the group of the tougher-than-
expected operating conditions for its domestic mobile business in
2013. This business has experienced intensified competitive
pressure and adverse regulation.

Moody's expects operating conditions in Italy to remain
challenging for some time, and recognizes the limited options
that Telecom Italia has to strengthen its balance sheet. Major
shareholders appear opposed to a material capital increase and
could prefer Telecom Italia to strengthen its balance sheet in
combination with carrying out an effective restructuring of its
domestic operations. Some of these measures will take time to
implement and imply substantial execution risk.

Therefore, management may find it difficult to meet its
deleveraging commitment of a reported net financial
position/EBITDA of below 2.0x in the next 24 months.

Moody's considers that Telecom Italia's Ba1 rating is supported
by the company's (1) scale; (2) integrated telecoms business
model, with strong market positions in both the fixed and mobile
segments; (3) geographical diversification, mainly as a result of
its presence in Brazil and Argentina; (4) continued commitment to
debt reduction and financial discipline; and (5) high operating
margins, ongoing operational expenditure (opex) reductions and
strong liquidity. The Ba1 rating also factors in the
deterioration in Telecom Italia's operating performance,
including an expected further decline in EBITDA this year, and
the challenges management is facing to offset the higher business
risk with a stronger financial profile.

Moody's considers Telecom Italia's liquidity to be adequate,
based on the company's free cash flow generation, available cash
resources and committed credit lines, as well as an extended debt
maturity profile. Telecom Italia's debt maturities are fairly
evenly spread out and back-loaded, with more than 50% of
liabilities due beyond 2016.

Moody's acknowledges the company's currently ample access to
liquidity due to its current cash position of more than EUR7.1
billion (after the recent bond issue of EUR1 billion on 19
September 2013) and around EUR6.7 billion in available bank
funding (EUR6.5 billion of long-term credit facilities), which
support its debt maturities through 2015. In addition, Moody's
takes comfort from Telecom Italia's diversified sources of
funding, including signed EUR4 billion and EUR3 billion forward
start facilities maturing May 2017 and March 2018 respectively,
as well as from the fact that a significant portion of its
committed lines are with international banks.

Moody's has now removed the equity credit assigned to the EUR750
million of hybrid bonds issued by Telecom Italia in March of this
year. This follows the publication of Moody's methodology for
assigning equity credit to hybrid bonds issued by speculative-
grade non-financial companies (Debt and Equity Treatment for
Hybrid Instruments of Speculative-Grade Non-financial Companies,
published in July 2013).

The negative outlook reflects Moody's expectation that Telecom
Italia will continue to face substantial challenges in 2013 and
2014, including management transition, the ongoing recession in
Italy, adverse regulation and rising levels of competition, all
of which have served to erode the company's domestic revenues and
EBITDA. In addition, Moody's questions the extent to which
Telecom Italia will be able to meet its commitments to reduce
group debt and maintain ratios within current rating limits,
given that operating cash flow will likely continue to
deteriorate at a faster-than-expected pace. Although the
company's international diversification partially mitigates the
domestic pressure on its revenues, limited cash up-streaming and
the expected lower growth rates at its Brazilian subsidiary
Telecom Italia Mobile (TIM) Brazil could challenge Telecom
Italia's ability to meet group financial guidance.

What Could Change the Rating Down/Up:

Further downward pressure on the rating could potentially result
if (1) the overall economic conditions in Italy continue to
negatively affect Telecom Italia's operating performance and
management is unable to offset this by strengthening the balance
sheet; and (2) the company's net adjusted debt/EBITDA ratio
deteriorates to above 3.2x with no prospect of improvement.

In view, Moody's does not currently anticipate upward rating
pressure. However, Moody's could consider stabilizing the outlook
if the company contained the deterioration in financial metrics
on the back of a coherent strategy and supportive macro and
operating conditions in Italy. Moody's could consider a rating
upgrade if, alongside the conditions for the stable outlook,
credit metrics improved, including a net adjusted debt/EBITDA
comfortably below 2.8x on a sustainable basis.

Downgrades:

Issuer: Olivetti Finance N.V.

Senior Unsecured Regular Bond/Debenture May 14, 2032, Downgraded
to Ba1 from Baa3

Senior Unsecured Regular Bond/Debenture Jan 24, 2033, Downgraded
to Ba1 from Baa3

Issuer: Telecom Italia Capital S.A.

Senior Unsecured Medium-Term Note Program, Downgraded to (P)Ba1
from (P)Baa3

Senior Unsecured Regular Bond/Debenture Oct 1, 2015, Downgraded
to Ba1 from Baa3

Senior Unsecured Regular Bond/Debenture Jun 4, 2018, Downgraded
to Ba1 from Baa3

Senior Unsecured Regular Bond/Debenture Jul 18, 2036, Downgraded
to Ba1 from Baa3

Senior Unsecured Regular Bond/Debenture Nov 15, 2013, Downgraded
to Ba1 from Baa3

Senior Unsecured Regular Bond/Debenture Nov 15, 2033, Downgraded
to Ba1 from Baa3

Senior Unsecured Regular Bond/Debenture Jun 4, 2038, Downgraded
to Ba1 from Baa3

Senior Unsecured Regular Bond/Debenture Sep 30, 2014, Downgraded
to Ba1 from Baa3

Senior Unsecured Regular Bond/Debenture Sep 30, 2034, Downgraded
to Ba1 from Baa3

Senior Unsecured Regular Bond/Debenture Jun 18, 2014, Downgraded
to Ba1 from Baa3

Senior Unsecured Regular Bond/Debenture Jun 18, 2019, Downgraded
to Ba1 from Baa3

Senior Unsecured Shelf, Downgraded to (P)Ba1 from (P)Baa3

Issuer: Telecom Italia Finance, S.A.

Senior Unsecured Medium-Term Note Program, Downgraded to (P)Ba1
from (P)Baa3

Senior Unsecured Regular Bond/Debenture Jan 24, 2033, Downgraded
to Ba1 from Baa3

Issuer: Telecom Italia S.p.A.

Junior Subordinated Regular Bond/Debenture Mar 20, 2073,
Downgraded to Ba3 from Ba2

Multiple Seniority Medium-Term Note Program, Downgraded to
(P)Ba1 from (P)Baa3

Senior Unsecured Medium-Term Note Program, Downgraded to (P)Ba1
from (P)Baa3

Senior Unsecured Regular Bond/Debenture, Downgraded to Ba1 from
Baa3

Senior Unsecured Regular Bond/Debenture Nov 23, 2015, Downgraded
to Ba1 from Baa3

Senior Unsecured Regular Bond/Debenture Jun 7, 2016, Downgraded
to Ba1 from Baa3

Senior Unsecured Regular Bond/Debenture Dec 15, 2017, Downgraded
to Ba1 from Baa3

Senior Unsecured Regular Bond/Debenture Jun 24, 2019, Downgraded
to Ba1 from Baa3

Senior Unsecured Regular Bond/Debenture May 19, 2023, Downgraded
to Ba1 from Baa3

Senior Unsecured Regular Bond/Debenture Dec 29, 2015, Downgraded
to Ba1 from Baa3

Senior Unsecured Regular Bond/Debenture Mar 17, 2055, Downgraded
to Ba1 from Baa3

Senior Unsecured Regular Bond/Debenture Jan 22, 2014, Downgraded
to Ba1 from Baa3

Senior Unsecured Regular Bond/Debenture Jan 25, 2016, Downgraded
to Ba1 from Baa3

Senior Unsecured Regular Bond/Debenture Sep 25, 2020, Downgraded
to Ba1 from Baa3

Senior Unsecured Regular Bond/Debenture May 25, 2018, Downgraded
to Ba1 from Baa3

Senior Unsecured Regular Bond/Debenture Jan 21, 2020, Downgraded
to Ba1 from Baa3

Senior Unsecured Regular Bond/Debenture Feb 10, 2022, Downgraded
to Ba1 from Baa3

Senior Unsecured Regular Bond/Debenture Sep 20, 2017, Downgraded
to Ba1 from Baa3

Senior Unsecured Regular Bond/Debenture May 19, 2014, Downgraded
to Ba1 from Baa3

Senior Unsecured Regular Bond/Debenture Jan 20, 2017, Downgraded
to Ba1 from Baa3

Senior Unsecured Regular Bond/Debenture Jan 29, 2019, Downgraded
to Ba1 from Baa3

Senior Unsecured Regular Bond/Debenture Dec 14, 2018, Downgraded
to Ba1 from Baa3

Senior Unsecured Regular Bond/Debenture Jun 15, 2015, Downgraded
to Ba1 from Baa3

Senior Unsecured Regular Bond/Debenture Mar 21, 2016, Downgraded
to Ba1 from Baa3

Issuer: Telecom Italia S.p.A. (old)

Senior Unsecured Bank Credit Facility, Downgraded to Ba1 from
Baa3

Assignments:

Issuer: Olivetti Finance N.V.

Senior Unsecured Regular Bond/Debenture May 14, 2032, Assigned a
range of LGD4, 50 %

Senior Unsecured Regular Bond/Debenture Jan 24, 2033, Assigned a
range of LGD4, 50 %

Issuer: Telecom Italia Capital S.A.

Senior Unsecured Regular Bond/Debenture Oct 1, 2015, Assigned a
range of LGD4, 50 %

Senior Unsecured Regular Bond/Debenture Jun 4, 2018, Assigned a
range of LGD4, 50 %

Senior Unsecured Regular Bond/Debenture Jul 18, 2036, Assigned a
range of LGD4, 50 %

Senior Unsecured Regular Bond/Debenture Nov 15, 2013, Assigned a
range of LGD4, 50 %

Senior Unsecured Regular Bond/Debenture Nov 15, 2033, Assigned a
range of LGD4, 50 %

Senior Unsecured Regular Bond/Debenture Jun 4, 2038, Assigned a
range of LGD4, 50 %

Senior Unsecured Regular Bond/Debenture Sep 30, 2014, Assigned a
range of LGD4, 50 %

Senior Unsecured Regular Bond/Debenture Sep 30, 2034, Assigned a
range of LGD4, 50 %

Senior Unsecured Regular Bond/Debenture Jun 18, 2014, Assigned a
range of LGD4, 50 %

Senior Unsecured Regular Bond/Debenture Jun 18, 2019, Assigned a
range of LGD4, 50 %

Issuer: Telecom Italia Finance, S.A.

Senior Unsecured Regular Bond/Debenture Jan 24, 2033, Assigned a
range of LGD4, 50 %

Issuer: Telecom Italia S.p.A.

Probability of Default Rating, Assigned Ba1-PD

Corporate Family Rating, Assigned Ba1

Junior Subordinated Regular Bond/Debenture Mar 20, 2073,
Assigned a range of LGD4, 50 %

Senior Unsecured Regular Bond/Debenture, Assigned a range of
LGD4, 50 %

Senior Unsecured Regular Bond/Debenture Nov 23, 2015, Assigned a
range of LGD4, 50 %

Senior Unsecured Regular Bond/Debenture Jun 7, 2016, Assigned a
range of LGD4, 50 %

Senior Unsecured Regular Bond/Debenture Mar 17, 2055, Assigned a
range of LGD4, 50 %

Senior Unsecured Regular Bond/Debenture Jan 22, 2014, Assigned a
range of LGD4, 50 %

Senior Unsecured Regular Bond/Debenture Dec 15, 2017, Assigned a
range of LGD4, 50 %

Senior Unsecured Regular Bond/Debenture Jan 25, 2016, Assigned a
range of LGD4, 50 %

Senior Unsecured Regular Bond/Debenture Sep 25, 2020, Assigned a
range of LGD4, 50 %

Senior Unsecured Regular Bond/Debenture May 25, 2018, Assigned a
range of LGD4, 50 %

Senior Unsecured Regular Bond/Debenture Jan 21, 2020, Assigned a
range of LGD4, 50 %

Senior Unsecured Regular Bond/Debenture Feb 10, 2022, Assigned a
range of LGD4, 50 %

Senior Unsecured Regular Bond/Debenture Sep 20, 2017, Assigned a
range of LGD4, 50 %

Senior Unsecured Regular Bond/Debenture Jun 24, 2019, Assigned a
range of LGD4, 50 %

Senior Unsecured Regular Bond/Debenture May 19, 2023, Assigned a
range of LGD4, 50 %

Senior Unsecured Regular Bond/Debenture May 19, 2014, Assigned a
range of LGD4, 50 %

Senior Unsecured Regular Bond/Debenture Jan 20, 2017, Assigned a
range of LGD4, 50 %

Senior Unsecured Regular Bond/Debenture Dec 29, 2015, Assigned a
range of LGD4, 50 %

Senior Unsecured Regular Bond/Debenture Jan 29, 2019, Assigned a
range of LGD4, 50 %

Senior Unsecured Regular Bond/Debenture Dec 14, 2018, Assigned a
range of LGD4, 50 %

Senior Unsecured Regular Bond/Debenture Jun 15, 2015, Assigned a
range of LGD4, 50 %

Senior Unsecured Regular Bond/Debenture Mar 21, 2016, Assigned a
range of LGD4, 50 %

Issuer: Telecom Italia S.p.A. (old)

Senior Unsecured Bank Credit Facility, Assigned a range of LGD4,
50 %

Outlook Actions:

Issuer: Olivetti Finance N.V.

Outlook, Changed To Negative From Rating Under Review

Issuer: Telecom Italia Capital S.A.

Outlook, Changed To Negative From Rating Under Review

Issuer: Telecom Italia Finance, S.A.

Outlook, Changed To Negative From Rating Under Review

Issuer: Telecom Italia S.p.A.

Outlook, Changed To Negative From Rating Under Review

Issuer: Telecom Italia S.p.A. (old)

Outlook, Changed To Negative From Rating Under Review


* ITALY: IMF Not in Favor of 'Bad Bank' Option
----------------------------------------------
Rachel Sanderson and Guy Dinmore at The Financial Times report
that a recent International Monetary Fund mission to Italy
discussed the possibility of setting up a so-called "bad bank" to
take on the non-performing loans of Italy's weaker banks.

However, Kenneth Kang, assistant director at the IMF's European
department, told reporters in a briefing this month that the
depth of the problem did not warrant such a solution, the FT
relates.

Overall, the IMF conducted solvency and liquidity stress tests on
banks accounting for 90%of Italian assets, or 32 top Italian
banking groups, the FT relays.  Its view was that while some of
the co-operative banks may need more capital if the economic
recovery does not fully materialize, the liquidity positions of
the system are seen as presenting a low risk even in a stressful
situation, the FT notes.

Instead, Mr. Kang, as cited by the FT, said, the IMF backed the
expansion of a private market for distressed debt that had
existed in the 1990s.

According to the FT, senior Italian bankers, among them
Alessandro Profumo, chairman of Monte dei Paschi di Siena have
been among those backing the relaunch of slicing and dicing
Italy's distressed debt as opposed to setting up a bad bank.
Another chief executive of one of Italy's largest lenders argues
that a bad bank is unnecessary with all signs pointing to Italy's
long recession ending this year, the FT discloses.

However, some analysts maintain Italy's failure to set up a rule
book on how to deal with weak banks is a source of worry, the FT
notes.  Alberto Gallo, senior credit analyst at Royal Bank of
Scotland, believes Italy could do with a bad bank worth about
EUR15 billion to EUR20 billion, half the size of that in Spain,
the FT relates.



===================
L U X E M B O U R G
===================


GATEWAY IV: S&P Raises Rating on Class E Notes to 'BB'
------------------------------------------------------
Standard & Poor's Ratings Services raised its credit ratings on
Gateway IV - Euro CLO S.A.'s class B to E notes and the class R
to T combination notes.  At the same time, S&P has affirmed its
ratings on the class A1 and A2 notes.

The rating actions follow S&P's review of the transaction's
performance using data from the latest available trustee report
(dated July 22, 2013).

S&P subjected the capital structure to a cash flow analysis to
determine the break-even default rate for each rated class at
each rating level.  In S&P's analysis, it used the reported
portfolio balance that it considers to be performing
(EUR343,896,546), the current and covenanted weighted-average
spread, and the weighted-average recovery rates that S&P
considered appropriate.  S&P incorporated various cash flow
stress scenarios using alternative default patterns in
conjunction with different interest stress scenarios.

S&P has observed that EUR2.08 million of the class A1 notes and
EUR3.52 million of the class E notes have paid down since S&P's
previous review on Jan. 6, 2012.  Since then, the
overcollateralization test results and the pool's credit quality
have improved, while credit enhancement has remained stable.
Over the same period, the weighted-average spread has increased
to 401 basis points (bps) from 331 bps.

Non-euro-denominated assets comprise 3.38% of the aggregate
collateral balance.  These assets are hedged under a cross-
currency swap agreement.  In S&P's cash flow analysis, it
considered scenarios where the hedge counterparty does not
perform and where the transaction is therefore exposed to changes
in currency rates.

In S&P's analysis, it has applied its non-sovereign ratings
criteria.  S&P has considered the transaction's exposure to
sovereign risk because some of the portfolio's assets -- equal to
12.73% of the transaction's total collateral balance -- are based
in Spain, Italy, and Ireland.  When applying stresses at a 'AAA'
rating level, S&P has given credit to 10% of the transaction's
collateral balance corresponding to assets based in these
sovereigns in its calculation of the aggregate collateral
balance.

In S&P's credit and cash flow analysis, it has taken into account
the transaction's exposure to currency exchange and sovereign
risk, which indicates that the available credit enhancement for
the class A1 and A2 notes is still commensurate with S&P's
currently assigned ratings on these notes.  S&P has therefore
affirmed its 'AAA (sf)' rating on the class A1 notes and its
'AA+ (sf)' rating on the class A2 notes.

S&P has raised its ratings on the class B, C, D, and E notes
because its credit and cash flow analysis indicated that the
available credit enhancement is commensurate with higher ratings
than previously assigned.

S&P has observed a significant decrease in the rated balances of
the class R-Combo, S-Combo, and T-Combo notes compared with the
principal balances of the rated components.  S&P has therefore
raised its ratings on these classes of notes.

None of S&P's ratings were constrained by the application of its
largest obligor default test -- a supplemental stress test S&P
introduced in its 2009 criteria update for corporate
collateralized debt obligations.

Gateway IV-Euro CLO is a cash flow collateralized loan obligation
(CLO) transaction that securitizes loans to primarily
speculative-grade corporate firms.  The transaction closed in
March 2007 and its reinvestment period ended in April 2013.
Pramerica Investment Management Ltd. has been the collateral
manager since January 2010.

          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
          To             From

Gateway IV - Euro CLO S.A.
EUR439 Million Floating-Rate Notes

Ratings Raised

B          AA (sf)        A+ (sf)
C          A (sf)         BBB+ (sf)
D          BBB- (sf)      BB+ (sf)
E          BB (sf)        B+ (sf)
R-Combo    A (sf)         BBB+ (sf)
S-Combo    BB (sf)        B (sf)
T-Combo    B+ (sf)        CCC+ (sf)

Ratings Affirmed

A1         AAA (sf)
A2         AA+ (sf)

Combo-Combination.



===================
M O N T E N E G R O
===================


KOMBINAT ALUMINIJUMA: To Be Declared Bankrupt; Asset Sale Looms
---------------------------------------------------------------
SeeNews, citing broadcaster RTCG, reports that Kombinat
Aluminijuma Podgorica is expected to be soon declared bankrupt
and its assets put up for sale.

According to SeeNews, Dragan Rakocevic, the president of the
country's commercial court, as quoted by RTCG, said that within
20 days after the evaluation of KAP's assets is completed, which
is expected to happen in the next few days, a tender for their
sale is to be called.

SeeNews relates that RTCG said KAP creditor claims total
EUR460 million (US$604.5 million).  The court appointed said that
of these, EUR360 million are undisputed, SeeNews notes.

Bankruptcy proceedings against KAP were launched in July,
SeeNews recounts.

KAP's net loss widened to EUR16.2 million in the first quarter of
2013 from EUR6.9 million a year earlier, SeeNews discloses.



=====================
N E T H E R L A N D S
=====================


PANGAEA ABS 2007-1: Fitch Affirms 'C' Ratings on 4 Note Classes
---------------------------------------------------------------
Fitch Ratings has upgraded Pangaea ABS 2007-1 B.V.'s notes class
A and B as follows:

  Class A (ISIN XS0287257280): upgraded to 'B-sf' from 'CCCsf';
  Outlook Stable

  Class B (ISIN XS0287266356): upgraded to 'CCCsf' from 'CCsf'

  Class C (ISIN XS0287267677): affirmed at 'CCsf'

  Class D (ISIN XS0287268642): affirmed at 'Csf'

  Class E (ISIN XS0287271604): affirmed at 'Csf'

  Class F (ISIN XS0287272164): affirmed at 'Csf'

  Class S1 (ISIN XS0289328394): affirmed at 'Csf'

Key Rating Drivers

The upgrade of the class A and B notes reflects the additional
credit enhancement available to the notes due to the deleveraging
of the transaction. The outstanding amount of the class A notes
was reduced by EUR19.9 million over the past four quarters
through a combination of principal and interest proceeds.

Fitch expects all proceeds available after paying interest on the
class A, B, and C notes to continue to be applied towards
repaying the class A notes. The reinvestment period ended in
June 2013 and the transaction documents currently prevent the
manager from reinvesting principal proceeds. All
overcollateralization tests have been breached since 2008 leading
to a diversion of excess spread and deferral of interest on
classes D, E, and F.

The portfolio performance deteriorated slightly since the
previous review in October 2012. The weighted-average rating
factor increased to 32.1 from 31.7.

The portfolio's credit quality is significantly barbelled.
Investment-grade assets account for 36.1% of the portfolio, up
from 33.2%, and are focused mainly in UK and Italian RMBS. The
share of assets rated 'CCCsf' or below decreased to 24.3% from
27.7% at the previous review as five assets defaulted over the
period. Distressed assets are largely concentrated in German
CMBS.

Rating Sensitivities

  A 25% increase in the expected obligor default probability
  would lead to a downgrade of between zero to one notch for the
  rated notes.

  A 25% reduction in the expected recovery rates would not lead
  to a downgrade for the rated notes.

Transaction Summary

The transaction is a managed cash arbitrage securitization of
structured finance assets, primarily mortgage-backed securities.
The collateral is actively managed by Investec Principal Finance.



===========
R U S S I A
===========


CREDIT BANK: S&P Raises LT Counterparty Credit Rating to 'BB-'
--------------------------------------------------------------
Standard & Poor's Ratings Services said that it has raised its
long-term counterparty credit rating on Russia-based Credit Bank
of Moscow (CBM) to 'BB-' from 'B+' and its Russia national scale
rating to 'ruAA-' from 'ruA+'.  The outlook is stable.  At the
same time, S&P affirmed the short-term counterparty credit rating
at 'B'.

In S&P's opinion, CBM has strengthened its market position over
recent years, demonstrating the stability of its core franchise,
good earnings capacity, and better asset quality indicators than
its closest peers.  S&P thinks that the bank has reached
sufficient scale to compete with larger players and build
sustainable relationships with large corporate clients with good
credit quality.  The bank's market shares in total loans and
retail deposits are close to 1%, which makes S&P believes that
there is a moderate likelihood of extraordinary support from the
government if the bank were to experience financial difficulties.
S&P therefore considers the bank to have "moderate" systemic
importance and incorporate one notch of uplift in the final
rating on this entity.  The bank's stand-alone credit profile
(SACP) remains at 'b+'.

S&P bases its ratings on CBM on its 'bb' anchor for banks
operating in Russia, as well as its view of CBM's "moderate"
business position, "adequate" capital and earnings, "moderate"
risk position, "average" funding, and "adequate" liquidity.

The stable outlook reflects S&P's expectations that the risks of
CBM's rapid growth will be counterbalanced by adequate
capitalization and profitability, and that the bank's asset
quality indicators will remain better than those of its Russian
peers.

The possibility of a positive rating action is currently remote.
However, S&P could consider an upgrade if it saw the bank's risk
appetite decrease substantially, proven by lower growth rates and
stabilization of the amount of nonperforming assets in absolute
terms and lower credit costs.

S&P might consider a downgrade if it saw that the bank's business
expansion resulted in a high amount of nonperforming loans, or if
the bank increased its risk appetite in new and unproven areas
where it has no expertise.  Deterioration in the bank's liquidity
position or a worsening of the funding profile might also lead to
a negative rating action.


OTP BANK: Moody's Changes Outlook on 'D-' BFSR to Negative
----------------------------------------------------------
Moody's Investors Service has affirmed OTP Bank (Russia) OJSC's
Ba2 long-term deposit with a negative outlook and Not-Prime
short-term ratings. Concurrently, the rating agency has affirmed
the bank's standalone D- bank financial strength rating (BFSR),
which is equivalent to a baseline credit assessment (BCA) of ba3.
The outlook on the BFSR has been changed to negative from stable.

Moody's assessment of the issuer's ratings is largely based on
OTP Bank (Russia)'s audited financial statements for 2012, its
unaudited financial statements for H1 2013, prepared under IFRS
as well as information received from the bank.

Ratings Rationale:

The change of the outlook on the standalone D- BFSR to negative
is prompted by Moody's expectations that the persistent increase
in credit risks in the consumer lending segment will exert
further negative pressure on OTP Bank (Russia)'s asset quality
and profitability (in addition to the reported deterioration in
profitability and asset quality in H1 2013).

At the same time, the affirmation of OTP Bank (Russia)'s deposit
ratings reflects: (1) the bank's ample loan loss absorption
cushion given its high levels of capital adequacy and pre-
provision income; (2) recently modest loan growth, compared to
the market average; and (3) lower credit costs, compared to the
market leaders.

The outlook change to negative on OTP Bank (Russia)'s standalone
BFSR primarily reflects (1) the persistent and rapid
deterioration of the bank's asset quality as the cost of credit
risk increased to 11.6% in H1 2013, from 8.4% in 2012; and (2)
the deterioration of the bank's profitability, as return on
average assets (ROAA) declined to 2% in H1 2013 from 5% reported
in 2012.

Moody's believes that these weaker asset quality and
profitability trends render OTP Bank (Russia)'s operations more
vulnerable, particularly given the increasing credit risks in the
Russian consumer lending segment.

At the same time, Moody's affirmation of OTP Bank (Russia)'s
deposit ratings is based on the bank's (1) healthy capital
buffers, with a Tier 1 ratio of 18.5% at end-June 2013; and (2)
still very high (albeit recently declining) pre-provision income-
to-average total assets ratio of close to 13% in H1 2013. In
addition, Moody's considers the bank's risk appetite to be lower
compared to its Russian consumer lending peers as reflected in
annual loan growth of 18% in H1 2013.

Moody's considers that the above-mentioned capital cushion, and
modest -- compared to peers -- credit risk appetite favourably
positions OTP Bank (Russia) to absorb possible credit losses,
amid the ongoing deterioration and tightening credit conditions
in the Russian consumer lending market.

What Could Move the Rating Up/Down:

The negative outlook indicates that there is currently no upward
pressure on the ratings.

  OTP Bank (Russia)'s ratings could be downgraded if (1) the
  rating of the parent -- Hungary's OTP Bank NyRt -- were
  downgraded; or (2) if the bank's risk profile, profitability or
  loss absorption capacity deteriorated.

The principal methodology used in this rating was Global Banks,
published in May 2013.

Headquartered in Moscow, Russia, OTP Bank (Russia) reported total
assets of RUB155.4 billion (US$4.8 billion) and net income of
RUB1.4 billion (US$43 million), according to unaudited IFRS at
end-H1 2013.


SOVCOMBANK: Moody's Alters Outlook on B2 Deposit Ratings to Neg
---------------------------------------------------------------
Moody's Investors Service has changed to negative from stable the
outlook on the B2 long-term local- and foreign-currency deposit
ratings of Sovcombank (Russia) and affirmed the aforementioned
ratings. The bank's standalone bank financial strength rating
(BFSR) of E+, equivalent to a baseline credit assessment (BCA) of
b2, was affirmed, with a stable outlook on the BFSR. The bank's
Not Prime short-term local- and foreign-currency deposit ratings
were also affirmed.

Moody's revision of the outlook on Sovcombank's ratings is
primarily based on the bank's financial statements for the first
half of 2013 prepared under IFRS and reviewed by the auditors.

Ratings Rationale:

According to the rating agency, the change of the outlook on
Sovcombank's deposit ratings reflects the bank's high credit risk
appetite, as demonstrated by its focus on unsecured consumer
lending and the rapid lending expansion in this segment. Moody's
says that Sovcombank's exposure to high-risk unsecured retail
lending (which accounted for 88% of the bank's total gross loans
at 30 June 2013) renders the bank's asset quality vulnerable to
deterioration, in line with the generally weakening trend in the
quality of retail portfolios of Russian banks (see Moody's
Special Comment "Rising Credit Risks Accelerate Asset Quality
Weaknesses") published in September 2013).

Moody's notes that the quality of Sovcombank's unsecured loan
portfolio has been deteriorating: the bank's cost of risk
increased to 11.53% (annualized) in H1 2013 from 8.06% in 2012,
and Moody's expects a further increase in this metric in 2014,
leading to higher loan loss provisions. Due to the increase in
the cost of risk, the bank's profitability has also been on a
declining trend, with return on average assets of 3.16% and
return on average equity of 32% in H1 2013 (both annualized)
compared to 4.62% and 44.71%, respectively, reported in 2012.

Sovcombank's B2 deposit ratings are underpinned by the bank's
relatively good capital buffer, with the regulatory capital
adequacy ratio (N1) of 13.65% reported at 1 September 2013.
Coupled with the still good profits generation, this buffer
appears to be sufficient, to date, for the bank to withstand
Moody's central scenario applying to Russian consumer-lending
institutions.

What Could Move the Rating Down/Up:

Sovcombank's ratings could be downgraded if the bank experiences
a further substantial deterioration of asset quality and
profitability metrics as a result of its exposure to the risky
unsecured retail lending segment, especially if these negative
factors are not addressed by a strengthening capital buffer.

The outlook on Sovcombank's ratings may be changed to stable from
negative if the bank decreases its credit risk appetite --
through reduced credit growth and stricter credit underwriting --
and preserves sustainable track-record of good financial
fundamentals amidst the deteriorating macroeconomic environment
in Russia and weakening financial standing of households.


VENTRELT HOLDINGS: Fitch Affirms 'BB' Issuer Default Rating
-----------------------------------------------------------
Fitch Ratings has affirmed Ventrelt Holdings Ltd's Long-term
foreign currency Issuer Default Rating (IDR) at 'BB-' with Stable
Outlook. A full list of rating actions follows at the end of this
release.

The ratings of Ventrelt Holdings Ltd., a leading water and waste
water operator in Russia, reflect the company's long-term leasing
and concession agreements with municipalities to provide
essential infrastructure services, its relatively moderate
leverage and existing funding structure. Ventrelt's ratings are
constrained by its limited size and diversification relative to
larger peers and 'BB' rated Russian companies, as well as
evolving regulatory framework pertaining to concession agreements
and tariff setting.

Key Rating Drivers

Limited Leverage Headroom

In order to better capture the operating performance of the
company, Fitch calculates net debt/connection fee adjusted EBITDA
leverage (deducting connection fees -- the capital element
included in EBITDA) that stayed at 3.7x at end-2012 which almost
approached Fitch's negative rating guidance of 4.0x. However,
Fitch expects leverage ratio to decrease to around 3.1x on
average in 2013-2016, as a result of higher EBITDA following the
signing of a 30-year concession agreement with Voronezh's city
municipalities in mid-2012. Failure by the company to demonstrate
the ability to refrain leverage below 4.0x could lead to a
negative rating action.

Optimization for Improved Performance

In March 2012 Ventrelt sold its loss-making Kaluga subsidiary and
in March it signed a 30-year concession agreement with the
Russian city of Voronezh that was consolidated in Ventrelt's
accounts from H212. While Fitch views these group changes as
positive, Ventrelt needs to demonstrate that it can effectively
manage the newly consolidated assets and can maintain and improve
its performance, profitability and working-capital management in
individual regions and overall. Some of the operating
subsidiaries include minority shareholders which results in cash
flow dilution through dividend payments.

Leading Private Water Utility

Ventrelt is Russia's leading private water and wastewater
operator that provides full range of services from operating
water and wastewater assets to engineering and construction of
water treatment facilities. It operates under the name of
Rosvodokanal and serves about 6m customers mainly in Russia,
operating about 23,000km of water and sewerage pipelines and
supplies over 450m cubic meters of water annually. Its strategy
envisages further expansion into Russian cities with at least
350,000 residents. It plans to enter about eight new cities by
2016, which Fitch considers to be an aggressive target given that
most Russian water utilities continue to be owned by
municipalities and may not be available for private operatorship
with positive profit margins yet.

Bond Benefits From Sureties

The RUB3 billion bonds issued by RVK-Finance LLC benefit from
sureties provided on a joint and several basis by several group's
subsidiaries including Kaluzhsky Oblastnoy Vodokanal LLC that
Ventrelt sold in May 2012. However, the company agreed with the
new owner that its surety will remain in place until 2015. In
turn, Barnaulskiy Vodokanal LLC, a fully-owned group subsidiary,
issued a surety to Kaluzhsky Oblastnoy Vodokanal LLC covering all
potential obligations.

Uncertain Regulatory Environment

Water and sewage tariffs in Russian cities are negotiated
annually between a water utility and a local tariff regulator and
represent a cost-plus mechanism, covering operating expenditure
and planned capex. From 2012, annual utility tariff increases
were moved to July 1 from January 1, thus reducing revenue growth
for all utility companies in Russia. The changes in concession
legislation introduced in 2010 provide for long-term tariffs that
should increase earnings visibility in the sector and improve the
legal status and protection of concessionaires; however,
implementation of long-term water tariffs was postponed to 2016
from 2014. Fitch expects that water tariffs will likely fall
below the expected inflation level, given the recent regulatory
tightening in Russia towards utilities in general; however, Fitch
does not expect an outright tariff freeze currently discussed for
national monopolies.

Rating Sensitivities

Positive: Future developments that may, individually or
collectively, lead to positive rating action, include:

  -- Increased revenue and earnings visibility following the
     implementation of long-term tariffs and improved
     operational and financial performance by individual
     regional business.

  -- Further diversification by region with increase of
     Ventrelt's market share without deterioration of credit
     metrics or average profit margins.

  -- Significantly improved liquidity profile

Negative: Future developments that may, individually or
collectively, lead to negative rating action, include:

  -- An increase in leverage above 4x net debt/connection-fee
     adjusted EBITDA due to operational underperformance or to
     fund additional long term capital expenditure without long
     term tariff visibility or acquisitions.

  -- A sustained reduction in operating cash flow generation or
     significantly negative free cash flow through a worsening
     operating performance or deteriorating cash collection.

  -- Significant change of management strategy towards more
     aggressive debt-funded expansion programme (or asset
     rotation).

Liquidity and Debt Structure

Tight Liquidity

At end-H113, Ventrelt had short-term debt of RUB4 billion against
cash and cash equivalents of RUB1bn and unused credit facilities
of RUB2.6 billion, including RUB1.3 billion from Alfabank (rated
'BBB-'; Stable Outlook by Fitch), an entity under common control
with the group. However, Fitch notes that Ventrelt does not pay
commitment fees under majority of loan agreements. The major part
of short-term outstanding debt is represented by RUB3 billion 9%
bonds maturing in 2015 with a put option in November 2013. In its
rating case, Fitch assumes that the bonds will be put by
bondholders in 2013 and that Ventrelt will be able to refinance
it at a higher coast of debt. Fitch expects Ventrelt to continue
generating solid cash flows from operation, however free cash
flows are likely to remain negative in the foreseeable future due
to extensive capex.

Fitch affirms the following ratings:

Ventrelt Holdings Ltd.

   -- Long-term foreign currency IDR at 'BB-'; Stable Outlook;
   -- Long-term local currency IDR at 'BB-'; Stable Outlook;
   -- National Long-term rating at 'A+(rus)'; Stable Outlook.

RVK-Finance LLC (wholly-owned indirect subsidiary of Ventrelt
Holdings Ltd)

   -- Senior unsecured rating at 'BB-';
   -- Senior unsecured rating at 'A+(rus)'.



===========
S E R B I A
===========


* SERBIA: Unveils Austerity Measures Amid Bankruptcy Threat
-----------------------------------------------------------
BBC News reports that Serbia has announced plans to cut public
sector wages by as much as a quarter, as part of wide-ranging
austerity measures.

According to BBC, the reform package also includes raising taxes
and slashing subsidies for loss-making companies.

Finance Minister Lazar Krstic said Serbia would be bankrupt
within two years if it did not take action now, BBC relates.

The country is mired in a deep recession, with 25% of the
workforce unemployed, BBC discloses.

Mr. Krstic unveiled the measures during an open session of
government in Belgrade, BBC recounts.

"Even though these reforms, which some people would say are 20
years overdue -- I'd say they're at least 10 years overdue -- we
can carry them out in a responsible way," BBC quotes Mr. Krstic
as saying.

He said the measures should provide about EUR200 million (GBP169
million) annually, and a further EUR150 million would be
generated by reducing the so-called grey economy, smuggling and
illegal tobacco trafficking, BBC notes.



=============
U K R A I N E
=============


* Fitch: Ukraine's External Finances Key Weakness for Rating
------------------------------------------------------------
The continued pressure on Ukraine's FX reserves and a fall in the
price of its sovereign debt highlight the risk posed by its weak
external finances, Fitch Ratings says. Ukraine has one of the
lowest external liquidity ratios among 'B' rated sovereigns and
this is a key credit weakness.

"A re-pricing of Ukrainian sovereign risk that saw yields on 10-
year dollar-denominated bonds move above 10% at the end of
September will make rolling over external public sector borrowing
more difficult. The need to meet external debt repayments has
already contributed to another fall in reserves, which dropped by
US$1.1 billion in August, to US$21.7 billion, pushing them
further below three months of imports. In September, reserves
were relatively stable, at US$21.6 billion. The government
borrowed US$750 million in a two-year syndicated loan. However,
we expect gross international reserves to continue to fall,"
Fitch says.

"In June, we revised the Outlook on Ukraine's rating to Negative
from Stable, reflecting the sovereign's vulnerability to shifts
in market sentiment (the yield on Ukraine's 2020 Eurobond had
risen 300bp in the preceding month). Our expectation was that
borrowing and capital inflows would not be sufficient to finance
external debt repayments and a substantial current account
deficit in 2013 and 2014. This would lead to a fall in reserves
and the risk of sharp exchange-rate depreciation, to which
government solvency, bank balance sheets, and the overall economy
are vulnerable. The latest volatility suggests that Ukraine is
unlikely to regain international debt market access soon."

While this might spur the Ukrainian authorities to re-engage with
the IMF and reduce refinancing risk, significant barriers to an
agreement remain. These include the political sensitivities
around key IMF conditions such as cutting gas subsidies, and the
adoption of a law allowing the government to issue promissory
notes to pay budget arrears and repay VAT to exporters. Ukraine
has also proposed reintroducing a tax on foreign-exchange
transactions that was removed under its earlier IMF agreement. An
IMF mission will visit Ukraine later this month and will "assess
the macroeconomic situation and discuss a broad range of policy
issues and plans."

Ukraine has tapped the domestic market for foreign-currency
borrowing, but this has tended to be short-term borrowing, adding
to the refinancing need in the coming 24 months (repayments on FC
domestic debt are already close to US$1 billion in both 2014 and
2015). The country is also reportedly close to borrowing US$3
billion from the Export-Import Bank of China with a grace period
of five years, which would provide hard currency inflows.

By the end of November, Ukraine is set to make repayments and
interest payments to the IMF totaling US$1.7 billion, including
both National Bank of Ukraine and government obligations, with
further payments of US$4 billion in 2014. Sovereign FX-
denominated debt repayments are US$7.1 billion in 2014, according
to the draft 2014 budget. NBU repayments and interest to the IMF
total a further US$1.1 billion.

"As we said in June, a more rapid-than-forecast fall in
international reserves, whether caused by a shortfall in external
financing, a terms-of-trade shock or an upsurge in capital
outflows, would put negative pressure on the rating," Fitch adds.



===========================
U N I T E D   K I N G D O M
===========================


ALPSTAR CLO: Moody's Affirms 'B1' Rating on EUR13.5MM Cl. E Notes
-----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of the
following notes issued by Alpstar CLO 1 Plc:

Issuer: Alpstar CLO 1 Plc

EUR44.9M Class A2 Senior Secured Floating Rate Notes due 2022,
Upgraded to Aaa (sf); previously on Aug 26, 2011 Upgraded to Aa1
(sf)

EUR33.2M Class B Deferrable Senior Secured Floating Rate Notes
due 2022, Upgraded to A1 (sf); previously on Aug 26, 2011
Upgraded to A2 (sf)

EUR8.4M Class C-1 Deferrable Senior Secured Floating Rate Notes
due 2022, Upgraded to Baa2 (sf); previously on Aug 26, 2011
Upgraded to Baa3 (sf)

EUR6.8M Class C-2 Deferrable Senior Secured Fixed Rate Notes due
2022, Upgraded to Baa2 (sf); previously on Aug 26, 2011 Upgraded
to Baa3 (sf)

EUR10M (current amount outstanding EUR6.1M) Class P Combination
Notes due 2022, Upgraded to Baa1 (sf); previously on Aug 26,
2011 Upgraded to Baa2 (sf)

Moody's Investors Service announced that it has affirmed the
ratings of the following notes issued by Alpstar CLO 1 Plc:

EUR177M (current amount outstanding EUR 131.8M) Class A1 Senior
Secured Floating Rate Notes due 2022, Affirmed Aaa (sf);
previously on Apr 28, 2006 Assigned Aaa (sf)

EUR13.2M Class D Deferrable Senior Secured Floating Rate Notes
due 2022, Affirmed Ba2 (sf); previously on Aug 26, 2011 Upgraded
to Ba2 (sf)

EUR13.5M Class E Deferrable Senior Secured Floating Rate Notes
due 2022, Affirmed B1 (sf); previously on Aug 26, 2011 Upgraded
to B1 (sf)

Alpstar CLO 1 Plc, issued in April 2006, is a single currency
Collateralised Loan Obligation ("CLO") backed by a portfolio of
high yield European loans. The portfolio is managed by Alpstar
Management Jersey Limited. This transaction ended its
reinvestment period on 27 April 2012. It is predominantly
composed of senior secured loans.

Ratings Rationale:

According to Moody's, the upgrades of the ratings of Class A2, B
and C notes are primarily a result of significant deleveraging of
the Class A1 notes on the last payment date in April 2013. The
Class A1 notes were paid down by EUR24.8 million, reducing the
outstanding balance from EUR156.6 million to EUR 131.8m (74.5% of
the original notional amount).

As a result of the deleveraging the overcollateralization ("OC")
ratios have increased. As of the trustee report dated August
2013, the Class A, B, C, D and E overcollateralization ratios are
148.64%, 125.16%, 116.71%, 110.25% and 104.34%, respectively, as
compared to 142.15%, 122.04%, 114.62%, 108.87% and 103.55%,
respectively, in April 2013 just prior to the payment date.
Moody's notes that following its analysis, the latest trustee
report in September has become available. Moody's took into
consideration the latest report.

The rating of the Class P Combination Notes addresses the
repayment of the Rated Balance on or before the legal final
maturity. For Class P, which does not accrue interest, the 'Rated
Balance' is equal at any time to the principal amount of the
Combination Note on the Issue Date minus the aggregate of all
payments made from the Issue Date to such date, either through
interest or principal payments. The Rated Balance may not
necessarily correspond to the outstanding notional amount
reported by the trustee.

Moody's notes that the key model inputs used by Moody's in its
analysis, such as par, weighted average rating factor, diversity
score, and weighted average recovery rate, are based on its
published methodology and may be different from the trustee's
reported numbers. In its base case, Moody's analyzed the
underlying collateral pool to have a performing par and principal
proceeds balance of EUR 263.9 million, defaulted par of EUR
3.8million, a weighted average default probability of 21.13% over
4.2 years (consistent with a WARF of 3,031), a weighted average
recovery rate upon default of 48.32% for a Aaa liability target
rating, a diversity score of 29 and a weighted average spread of
3.83%.

The default probability is derived from the credit quality of the
collateral pool and Moody's expectation of the remaining life of
the collateral pool. The average recovery rate to be realized on
future defaults is based primarily on the seniority of the assets
in the collateral pool. For a Aaa liability target rating,
Moody's assumed that 95.2% of the portfolio exposed to senior
secured corporate assets would recover 50% upon default, while
the remainder non first-lien loan corporate assets would recover
15%.

In each case, historical and market performance trends and
collateral manager latitude for trading the collateral are also
relevant factors. These default and recovery properties of the
collateral pool are incorporated in cash flow model analysis
where they are subject to stresses as a function of the target
rating of each CLO liability being reviewed.

In addition to the base case analysis described above, Moody's
also performed sensitivity analyses on key parameters for the
rated notes, which includes deteriorating credit quality of
portfolio to address the refinancing and sovereign risks.
Approximately 11.32% of the portfolio is European corporate rated
B3 and below and maturing between 2014 and 2016, which may create
challenges for issuers to refinance and around 18.36% of the
portfolio is exposed to obligors located in Greece, Ireland,
Spain and Italy. Moody's considered a model run where the base
case WARF was increased to 3,678 by forcing ratings on 25% of
refinancing and sovereign risk exposures to Ca. This run
generated model outputs that were within one notch from the base
case results.

Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, which could negatively impact the
ratings of the notes, as evidenced by 1) uncertainties of credit
conditions in the general economy especially as 18.36% of the
portfolio is exposed to obligors allocated in Greece, Ireland,
Spain and Italy and 2) the large concentration of lowly rated
debt maturing between 2014 and 2016 which may create challenges
for issuers to refinance. CLO notes' performance may also be
impacted either positively or negatively by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.

Sources of additional performance uncertainties are described
below:

1) Portfolio amortization: The main source of uncertainty in this
transaction is the pace of amortization of the underlying
portfolio. Pace of amortization could vary significantly subject
to market conditions and this may have a significant impact on
the notes' ratings. In particular, amortization could accelerate
as a consequence of high levels of prepayments in the loan market
or collateral sales by the Collateral Manager or be delayed by
rising loan amend-and-extend restructurings. Fast amortization
would usually benefit the ratings of the senior notes but may
negatively impact the mezzanine and junior notes.

2) Moody's also notes that around 45% of the collateral pool
consists of debt obligations whose credit quality has been
assessed through Moody's credit estimates. Further information
regarding specific risks and stresses associated with credit
estimates are available in the report titled "Updated Approach to
the Usage of Credit Estimates in Rated Transactions" published in
October 2009.

3) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to be
defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus sell defaulted
assets create additional uncertainties. Moody's analyzed
defaulted recoveries assuming the lower of the market price and
the recovery rate in order to account for potential volatility in
market prices. Realization of higher than expected recoveries
would positively impact the ratings of the notes.

The principal methodology used in this rating was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
May 2013.

Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's Global
Approach to Rating Collateralized Loan Obligations" rating
methodology published in May 2013.

Under this methodology, Moody's used its Binomial Expansion
Technique, whereby the pool is represented by independent
identical assets, the number of which is being determined by the
diversity score of the portfolio. The default and recovery
properties of the collateral pool are incorporated in a cash flow
model where the default probabilities are subject to stresses as
a function of the target rating of each CLO liability being
reviewed. The default probability range is derived from the
credit quality of the collateral pool, and Moody's expectation of
the remaining life of the collateral pool. The average recovery
rate to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool.

The cash flow model used for this transaction, whose description
can be found in the methodology listed above, is Moody's EMEA CLO
Cash-Flow model.

This model was used to represent the cash flows and determine the
loss for each tranche. The cash flow model evaluates all default
scenarios that are then weighted considering the probabilities of
the binomial distribution assumed for the portfolio default rate.
In each default scenario, the corresponding loss for each class
of notes is calculated given the incoming cash flows from the
assets and the outgoing payments to third parties and
noteholders. Therefore, the expected loss or EL for each tranche
is the sum product of (i) the probability of occurrence of each
default scenario; and (ii) the loss derived from the cash flow
model in each default scenario for each tranche.

As such, Moody's analysis encompasses the assessment of stressed
scenarios.

In addition to the quantitative factors that are explicitly
modeled, qualitative factors are part of the rating committee
considerations. These qualitative factors include the structural
protections in each transaction, the recent deal performance in
the current market environment, the legal environment, specific
documentation features, the collateral manager's track record,
and the potential for selection bias in the portfolio. All
information available to rating committees, including
macroeconomic forecasts, input from other Moody's analytical
groups, market factors, and judgments regarding the nature and
severity of credit stress on the transactions, may influence the
final rating decision.

On August 14, 2013, Moody's released a report, which describes
how Moody's propose to incorporate/assess the additional credit
risk of exposures domiciled in countries with country ceilings
that are single A or lower when rating CLO tranches that carry
ratings higher than those ceilings. See Request for Comment:
"Moody's Approach to Capturing Country Risk in CLOs" published in
August 2013, Once the updated methodology is implemented, given
the limited exposure to these countries in Alpstar 1 CLO Plc, the
ratings of the notes affected should not be impacted.


CO-OPERATIVE BANK: Overhauls Board; To Address Deficit
------------------------------------------------------
Gareth Mackie at The Scotsman reports that Co-operative Bank was
set to overhauling its board yesterday in a bid to increase the
mutual lender's independence from its parent company.

According to The Scotsman, the firm, which is putting the
finishing touches to plans aimed at addressing a GBP1.5 billion
capital shortfall, said Duncan Bowdler, Peter Harvey, Bob Newton
and Len Wardle were set to step down as non-executives yesterday,
but will continue to serve on the board of Co-operative Banking
Group.

Following their departures, the Co-op Bank board will comprise
chairman Richard Pym, chief executive Niall Booker and his deputy
Rod Bulmer, along with four independent non-executives and two
shareholder representatives from Co-operative Group, including
its Scots-born chief executive Euan Sutherland, The Scotsman
discloses.

The bank, as cited by The Scotsman, said: "The board is currently
recruiting three further independent non-executive directors and
there will be one further Co-operative representative."

Co-op Bank -- part of the mutually owned food-to-funerals
conglomerate Co-operative Group -- traces its history back to
1872.  The bank gained prominence for specializing in ethical
investment.  It refuses to lend to companies that test their
products on animals, and its headquarters in Manchester is
powered by rapeseed oil grown on Co-operative Group farms.

Founded in 1863, the Co-op Group has more than six million
members, employs more than 100,000 people, and has turnover of
more than GBP13 billion.

                           *     *     *

As reported by the Troubled Company Reporter-Europe on May 13,
2013, Moody's Investors Service downgraded the deposit and senior
debt ratings of Co-operative Bank plc to Ba3/Not Prime from
A3/Prime 2, following its lowering of the bank's baseline credit
assessment (BCA) to b1 from baa1.  The equivalent standalone bank
financial strength rating (BFSR) is now E+ from C- previously.


INEOS GROUP: Grangemouth Plant's Future Uncertain on High Costs
---------------------------------------------------------------
Terry Murden and Dominic Jeff at The Scotsman report that the
future of Scotland's biggest manufacturing plant was thrown into
further doubt after Ineos revealed that its high costs had forced
the closure of a business it supplies.

According to The Scotsman, chemicals giant Ineos said one of its
divisions, a paint and glue factory in Hull, had been taking up
to 20% of Grangemouth's ethylene but it could no longer compete
with lower-cost raw materials being imported from the United
States and Saudi Arabia.

The company said the loss of the contract highlights the
precarious position of the petrochemicals plant at Grangemouth,
which employs about 800 workers, The Scotsman relates.

In a statement issued on Friday, the company, as cited by The
Scotsman, said it was writing down the value of the
petrochemicals plant from GBP400 million to zero.  Calum MacLean,
chairman of the petrochemicals business, described the business
as "worthless" and repeated earlier messages that it would close
by 2017 unless the union agreed to cost-cutting and the company
received government support for a bank loan, The Scotsman relays.

The refinery and the petrochemicals businesses together have lost
GBP150 million a year in each of the last four years and the
pension scheme has a GBP200 million deficit, The Scotsman
discloses.  The company wants to switch from a final salary
pension to a cheaper money purchase scheme, the Scotsman says.

Mr. MacLean, as cited by the Scotsman, said the refinery is safe
but the petrochemicals operation is threatened by the decline in
available gas used in the process.  The company wants to build a
terminal at the site to import US shale gas, the Scotsman says.

According to the Scotsman, Mr. MacLean said that a GBP300 million
investment in the petrochemicals business would return it to
profitability.  Of that sum, Ineos would provide GBP291 million
in direct funding and a government-guaranteed loan from the bank,
the Scotmsan states.  The GBP9 million balance would be in the
form of a regional selective assistance grant, the Scotsman
notes.

                          Union Strike

In a separate report, Brian Grooms at The Financial Times relates
that Ineos has accused unions at its closure-threatened
Grangemouth oil refinery and petrochemical plant in Scotland of
"fiddling while Rome burns" by starting an overtime ban and work-
to-rule.

Unions are calling for an emergency meeting with politicians and
management in an attempt to prevent the dispute at the site,
Scotland's only oil refinery, from escalating into strikes in
support of Unite convener Stevie Deans, the FT discloses.

Mr. Deans was suspended, then reinstated, by the company over
allegations linked to his involvement in the dispute over the
selection of a Labor candidate in Falkirk, where he is chairman
of the local constituency party, the FT relates.

Unite accused Ineos of trying to "provoke" a strike, which it
warned would be "hugely damaging" to the UK economy, the FT
relays.

According to the FT, Ineos has warned the Grangemouth facility
will close by 2017 if it does not find savings and fresh
investment.

John Swinney, finance secretary, said the Scottish government
would make all efforts to bring both sides together to help
resolve the dispute, and get to a position of financial
sustainability for the plant, according to the FT.  He suggested
that the government could invest to support the plant's
development, but only if there was a viable business proposition,
the FT notes.

A previous three-day stoppage in 2008 was said to have cost
hundreds of millions of pounds in lost production and led to
panic buying at petrol pumps as supplies dwindled, the FT states.

Ineos has put forward a survival plan and has asked the Scottish
and UK governments for grants and loan guarantees totaling GBP150
million, the FT discloses.

INEOS Group is the world's third largest chemical company
consisting of some 15 businesses.  Product lines include ethylene
oxide-based specialty and intermediate chemicals, fluorochemicals
used as refrigerants and propellants, and phenol and acetate
products. INEOS Chlor makes chlor-alkali chemicals.  INEOS Group
was formed in 1998 after CEO Jim Ratcliffe, who controls the
group, led a management buyout.  It now operates more than 60
manufacturing facilities in 13 countries worldwide.  Ratcliffe
has placed INEOS among the world's top chemical companies (with
ExxonMobil, Dow, and BASF) through his many and varied
acquisitions.



===============
X X X X X X X X
===============


* Moody's Changes Outlook on European Retail Sector to Stable
-------------------------------------------------------------
The likelihood of modestly higher GDP growth and retail sales in
the UK and the euro area in 2014, combined with some easing in
commodity prices in recent quarters, has resulted in a change of
outlook for the European retail sector to stable from negative,
says Moody's Investors Service in an update on the sector
published. The outlook, which had been negative since February
2012, reflects Moody's view of the fundamental business
conditions for the industry over the next 12-18 months.

"We currently expect modest GDP growth of up to 1% in the euro
area in 2014 versus negative 0.5% in 2012; in the UK growth in
the range of 1.0%-2.0% is expected, versus 0.2% in 2012. The
slight improvement should help sustain consumer confidence, and
potentially, retail spending," says Richard Morawetz, a Vice
President -- Senior Credit Officer in Moody's Corporate Finance
Group and author of the Industry Outlook update.

Euro area economic growth was positive for the first time in
almost two years in the second quarter of this year. Moody's
expects GDP growth to pick up slowly in the UK, Germany and
France but it will continue to lag in Spain, Italy and Greece.
This will continue to pressure retailers with operations in those
countries such as Carrefour SA ((P)Baa2 stable) and Dixons Retail
plc (B1 stable).

Economic growth remains stronger in emerging markets like China,
Russia, India and Brazil -- albeit with a modest slowdown in
China as credit conditions are tightened -- and is likely to
support retail sales growth in these countries. Over the longer
term, Moody's expects larger retailers with operations or plans
for expansion in these countries such as Carrefour, Metro AG
(Baa3 stable), Kingfisher plc (Baa2 stable) and Marks & Spencer
plc (Baa3 stable) to benefit from this growth and from
diversification. However, increased wage inflation, as already
reported in China and Argentina, may continue to dent profits.

Moody's also expects that the recent easing commodity prices will
relieve pressure on both food and non-food retailers. Cotton,
sugar and wheat prices have fallen from high levels in the past
two years; while oil prices have remained high but fairly stable.
Moody's stable industry outlook assumes that commodity prices
will remain relatively stable. The rating agency expects lower
cotton prices to alleviate margin pressure for clothing retailers
such as Missouri TopCo Ltd (Matalan, B3 stable) and New Look (B3
stable). While food sales are largely inelastic, lower food
prices could help boost consumer spending on non-food items by
reducing the overall spend on food.


* Upcoming Meetings, Conferences and Seminars
---------------------------------------------
Nov. 1, 2013
   AMERICAN BANKRUPTCY INSTITUTE
      NCBJ/ABI Educational Program
         Atlanta Marriott Marquis, Atlanta, Ga.
            Contact:   1-703-739-0800; http://www.abiworld.org/

Dec. 2, 2013
   BEARD GROUP, INC.
      19th Annual Distressed Investing Conference
          The Helmsley Park Lane Hotel, New York, N.Y.
          Contact:   240-629-3300 or http://bankrupt.com/

Dec. 5-7, 2013
   AMERICAN BANKRUPTCY INSTITUTE
      Winter Leadership Conference
         Terranea Resort, Rancho Palos Verdes, Calif.
            Contact:   1-703-739-0800; http://www.abiworld.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., 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 * * *