/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/131127.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Wednesday, November 27, 2013, Vol. 14, No. 235 Headlines A L B A N I A BELLE AIR: Temporarily Suspends Flights Due to Financial Woes A U S T R I A BEE FIRST: Fitch Rates EUR6.6MM Class D Notes 'BB+(EXP)sf' F I N L A N D TALVIVAARA MINING: Espoo Court Postpones Ruling on Restructuring F R A N C E LUMENEO SAS: EV Maker in Liquidation Due to Low Sales I R E L A N D IRISH BANK: US Court Hears New Submission in Flynn Case I T A L Y ASTALDI SPA: S&P Assigns Preliminary 'B+' CCR; Outlook Stable BANCA MONTE: Four Banks to Underwrite EUR3-Bil. Stock Sale K A Z A K H S T A N CONDENSATE JSC: Fitch Affirms 'B-' Long-term IDR; Outlook Stable MANGISTAU ELECTRICITY: Fitch Affirms 'BB+' Issuer Default Rating P O R T U G A L PORTO CITY: Fitch Affirms 'BB+/B' Long-Term Currency Ratings R O M A N I A OLTCHIM RAMNICU: Two Chinese Firms Sign Letter Of Intent R U S S I A ISR TRANS: Moody's Assigns B3 Corp. Family Rating; Outlook Stable MECHEL OAO: Enters Agreement with Banks on Covenant Holiday S E R B I A SERBIA: Fitch Rates US$1BB Eurobond Due December 2018 'BB-' S P A I N PYMES SANTANDER 7: Moody's Assigns 'Ca' Rating to Serie C Notes PYME VALENCIA 1: Fitch Affirms 'Csf' Rating on Class E Notes U N I T E D K I N G D O M 2K MANUFACTURING: Goes Into Administration ARCH CRU: Fund Investors Seek Better Payout CAPERFLY: Studio Enters Liquidation LINPOP: Quickline Acquires Firm Out of Administration LLOYDS SYNDICATE: Moody's Gives Neg. Outlook to 'B-' Opinion MARSTON AGRICULTURAL: In Administration, Cuts 20 Jobs RIVERMILL FOODS: Bakery Placed Into Liquidation YALES LEISURE: In Administration, Remains Open for Business X X X X X X X X EUROPE: Moody's Says Prospects Improving for B2B Companies ********* ============= A L B A N I A ============= BELLE AIR: Temporarily Suspends Flights Due to Financial Woes ------------------------------------------------------------- Top Channel reports that Belle Air has temporarily suspended all flights due to financial problems, while hundreds of travelers were blocked in Italian airports. "After eight years of successful operations from Albania to European destinations, Belle Air has been obliged to suspend its flights temporarily. The reasons that brought this are the general economic situation, the dropping of the buying power, recession in the markets where we operate and the blockage of all bank accounts for more than 18 days," Top Channel quotes the company as saying. According to Top Channel, 200 people who were blocked in Verona, Italy, obliged to pass the night in a hotel. Many of them cannot buy tickets to other lines for returning to Albania, Top Channel discloses. Top Channel contacted with passengers, who said that they had not been notified about the canceling. Belle Air Sh.p.k. is a privately owned low-cost airline, founded in 2005, with its head office in Tirana, Albania. ============= A U S T R I A ============= BEE FIRST: Fitch Rates EUR6.6MM Class D Notes 'BB+(EXP)sf' ---------------------------------------------------------- Fitch Ratings has assigned Bee First Finance S.A. - Compartment Edelweiss 2013-1 (Edelweiss)'s notes the following expected ratings: EUR230.5m Class A notes, due December 2021: 'AAA(EXP)sf'; Outlook Stable EUR18.3m Class B notes, due December 2021: 'A(EXP)sf'; Outlook Stable EUR9.3m Class C notes, due December 2021: 'BBB(EXP)sf'; Outlook Stable EUR6.6m Class D notes, due December 2021: 'BB+(EXP)sf'; Outlook Stable The final ratings are contingent upon the receipt of final documents conforming to the information already received and on a satisfactory review of final legal opinions to support the agency's analytical approach. The transaction is a one-year revolving securitization of vehicle lease receivables originated in Austria by EBV Leasing GmbH & Co. KG (EBV), ultimately owned by Erste Bank Group AG (Erste Bank, A/Stable/F1). Key Rating Drivers: Lessee defaults Fitch has assumed a base case default rate of 2.8% and applied default multiples of 6.8x in a 'AAAsf' scenario, 4x in 'Asf', 2.9x in 'BBBsf' and 1.8x in 'BB+sf', reflecting primarily the presence of balloon risk, the revolving nature of the pool and a concentration towards employees of Erste Bank and Vienna Insurance Group (VIG). Fitch set its recovery base case at 67.7%, applying haircuts of up to 45% in 'AAAsf'. Revolving Period Additional Risk The transaction envisages a one-year revolving period. Fitch considers that the early amortization triggers, along with the eligibility criteria and available credit enhancement, mitigate the risk added by the revolving period. The agency analyzed potential changes in the pool composition during this period and assumed a shift towards a more risky -- considering Fitch's loss assumptions -- composition. Limited Residual Value Risk The lessee's right to return the vehicles at maturity, in lieu of settling balloon payments, exposes the issuer to residual value (RV) risk; however, these rights are restricted under the lease contracts. Additionally, if a lessee exercises such rights, they remain liable for 75% of any RV loss incurred. In Fitch's opinion, the RV risk therefore lies largely with the lessees, exposing the transaction to balloon risk when obligors are faced with stressed economic circumstances and limited re-financing options. Stable Asset Outlook Fitch expects the repayment abilities of Austrian consumers to remain stable, based on flat unemployment rates (4.7% expected throughout 2014), an improvement in GDP growth (1.4% forecasted for 2014, up from 0.4% in 2013) and stable interest rates. Transaction Characteristics: Key Counterparties EBV, the originator will continue to service the portfolio. EBV belongs to the Erste Bank Group and Erste Bank will act as back- up servicer from closing. Additionally, PwC Transaction Services is appointed as servicer facilitator, in case Erste Group Bank is unable to take over the servicing activity upon servicer termination. HSBC Bank plc (AA-/Stable/F1+) will provide an amortizing liquidity facility (LF) sized at 1.6% of the collateral balance. The LF will cover senior expenses and interest payments on all the classes of notes. The issuer will enter into a fixed-floating interest rate swap with Erste Bank to hedge the interest rate mismatch between the fixed-rate assets in the portfolio (16.2% of the initial portfolio) and the floating-rate notes. Portfolio Features As of September 2013, the securitized portfolio included 21,884 variable- (83.8%) and fixed-rate (16.2%) monthly-paying lease receivables originated by EBV to Austrian private (42.4%) and commercial (57.6%) obligors for the purchase of new (64.3%) and used/demo vehicles (35.7%). The weighted-average (WA) seasoning of the pool and the WA remaining term were 25 and 34 months, respectively. The lease claims will be purchased by the issuer at their net present value, which is the sum of all scheduled principal payments over the lease term discounted at the contractual yield on the lease minus a security deposit ('Kaution'). Credit Enhancement (CE) The transaction features a principal deficiency ledger mechanism (PDL) for each class of notes, according to which certain interest funds will be allocated to the principal waterfall in an amount implicitly equal to the receivables classified as defaulted in a given period, with debiting starting from the class D PDL. Hence, excess spread provides the first layer of protection against losses, with a minimum weighted-average margin of 2.45% over the three-month Euribor (or the swap rate for fixed-rate loans) being guaranteed during the revolving period. The class A, class B, class C and class D notes will be redeemed sequentially. This mechanism ensures that potential losses will be first allocated to the junior notes, providing CE to the more senior ones. Additionally, a static cash reserve, funded at closing by the originator through a subordinated loan, equal to 1.25% of the portfolio balance, will provide CE by covering for any unpaid PDL. Initial CE is thus 14.15% for the Class A, 7.25% for the Class B, 3.75% for the class C, and 1.25% for the class D. Rating Sensitivities: The rating of the Class D notes cannot exceed the Issuer Default Rating of Erste Group Bank. This is due to the exposure of up to 5% of the portfolio to Erste Bank's employees (see Default Risk below). In addition, Fitch has used the contractual servicing /back-up servicing fee of 20bp in its modelling for the lower rating categories (instead of its normal servicing fee assumption of 70bp) as in such scenarios the agency assumes that Erste Bank will perform its obligations. For those reasons, significant changes to Erste Bank's IDR may lead to changes to the ratings of the class D notes. Unexpected increases in the default rate and loss severity on defaulted loans could produce loss levels higher than the base case and could result in potential rating actions on the notes. Rating Sensitivity to Increased Default Rate Assumptions Class A / Class B / Class C / Class D Current default base case: 'AAAsf' / 'Asf' / 'BBBsf' / 'BB+sf' Increase in default rate base case by 10%: 'AA+sf' / 'Asf' / 'BBB-sf' / 'BB+sf' Increase in default rate base case by 25%: 'AAsf' / 'A-sf' / 'BBB-sf' / 'BBsf' Increase in default rate base case by 50%: 'AA-sf' / 'BBB+sf' / 'BBB-sf' / 'BBsf' Rating Sensitivity to Reduced Recovery Rate Assumptions Class A / Class B / Class C / Class D Current recovery rate (RR) base case: 'AAAsf' / 'Asf' / 'BBBsf' / 'BB+sf' Reduce RR base case by 10%: 'AA+sf' / 'Asf' / 'BBB-sf' / 'BBsf' Reduce RR base case by 25%: 'AA+sf' / 'A-sf' / 'BBB-sf' / 'BB-sf' Reduce RR base case by 50%: 'AAsf' / 'BBB+sf' / 'BBB-sf' / 'Bsf' Rating Sensitivity to Multiple Factors Class A / Class B / Class C / Class D Current base case assumptions: 'AAAsf' / 'Asf' / 'BBBsf' / 'BB+sf' Mild stress: Increase in default rate by 10%, reduce recovery rate by 10%: 'AA+sf' / 'A-sf' / 'BBB-sf' / 'BBsf' Moderate stress: Increase in default rate by 25%, reduce recovery rate by 25%: 'AA-sf' / 'BBB+sf' / 'BBB-sf' / 'Bsf' Severe stress: Increase in default rate by 50%, reduce recovery rate by 50%: 'Asf' / 'BBB-sf' / 'BBsf' / 'CCC to D' ============= F I N L A N D ============= TALVIVAARA MINING: Espoo Court Postpones Ruling on Restructuring ---------------------------------------------------------------- Kati Pohjanpalo at Bloomberg News reports that the district court of Espoo postponed ruling on Talvivaara Mining Co.'s application for corporate restructuring from Nov. 26 after one creditor withdrew support. According to Bloomberg, Talvivaara has until 4:15 p.m. on Nov. 29 to provide further information. Bankruptcy Threat As reported by the Troubled Company Reporter-Europe on Nov. 25, 2013, Reuters related that Talvivaara edged closer to bankruptcy on Nov. 21 after saying unnamed stakeholders had balked at providing additional funds to help restructure debt of more than EUR300 million (US$404 million). According to Reuters, Talvivaara, hurt by falling nickel prices and production problems, said it was assessing other funding options and could use its own cash to help it through the overhaul process. It said it had enough cash to last through the first quarter of 2014, but admitted bankruptcy was a possibility, Reuters noted. In a statement on Nov. 21, the company said it had sought EUR40 million to help restructure its debt but the stakeholders in question had turned this down, Reuters recounted. The group has around EUR333 million in outstanding bonds, Reuters disclosed. It also has EUR130 million of general purpose loans maturing next year, Reuters noted. Including loans and upfront payments from Belgium's Nyrstar and Canada-based uranium miner Cameco Corp, it ended the third quarter with EUR865.6 million in total liabilities, Reuters said. Talvivaara Mining Co. Ltd. is a Finnish nickel producer. =========== F R A N C E =========== LUMENEO SAS: EV Maker in Liquidation Due to Low Sales ----------------------------------------------------- InsideEVs reports that Lumeneo, a small French manufacturer of electric vehicles established in 2006, is now in liquidation. Struggling with low sales, Lumeneo missed its target of 500 units in 2013 by almost 500, InsideEVs says. Production since mid-2012 did not even exceed 10 units (including three Neoma). InsideEVs relates that Lumeneo was selling two models -- the Smera a two-seater (in tandem) and Neoma four-seat city car presented at the 2012 Paris Motor Show. Bosch Car Service was contracted to service these vehicles. Neoma starts from EUR21,700 or EUR14,700 after a EUR7,000 incentive and this excludes the battery pack, which must be rented, InsideEVs discloses. ============= I R E L A N D ============= IRISH BANK: US Court Hears New Submission in Flynn Case ------------------------------------------------------- John Mulligan at Independent.ie reports that lawyers for US-based Irish developer John Flynn have argued that recognising Irish Bank Resolution Corporation's liquidation in Ireland for the purpose of granting it bankruptcy protection in the United States would be "manifestly contrary" to the rights of US citizens and a host of the country's public policy interests. Independent.ie relates that Mr. Flynn's lawyers, seeking to prevent IBRC being granted the bankruptcy protection, told a Delaware court in documents filed on November 12 that the direction of IBRC's liquidation was "completely unknown in advance" and that Mr. Flynn and others risk being "deprived of their right to due process". The submission to the court was made following hearings earlier this month in the US, where lawyers for IBRC, formerly Anglo Irish Bank, urged a judge to offer the institution bankruptcy protection there, Independent.ie notes. According to Independent.ie, Mr. Flynn, who is also a US citizen, and two US firms owned by Switzerland-based Irish developer John McCann -- Castleway and Walnut-Rittenhouse -- have sought to prevent IBRC being granted court protection in the United States. Following the hearings, the judge presiding over the case, Christopher Sontchi, asked both side to submit so-called proposed findings of fact and conclusions of law as he makes his deliberations, the report relays. Those documents were submitted on November 12 in the US and the judge has said he will make a quick ruling on the case due to its nature, Independent.ie reports. Mr. Flynn's lawyers have insisted that the special liquidation of IBRC in Ireland is not a court proceeding, the report adds. 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 IBRC 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. ========= I T A L Y ========= ASTALDI SPA: S&P Assigns Preliminary 'B+' CCR; Outlook Stable ------------------------------------------------------------- Standard & Poor's Ratings Services said that it has assigned its 'B+' preliminary long-term corporate credit rating to Astaldi SpA, the parent company of Italy-incorporated civil engineering and construction group Astaldi. The outlook is stable. At the same time, S&P assigned its preliminary 'B+' issue rating to Astaldi's proposed EUR400 million senior unsecured bond, with a preliminary '4' recovery rating, indicating S&P's expectation of average (30%-50%) recovery in the event of a payment default. Astaldi is planning to issue EUR400 million of senior unsecured seven-year bonds to redeem existing outstanding banking debt for the same amount. 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. Potential changes include, but are not limited to, utilization of bond proceeds, maturity, size and conditions of the bonds, financial and other covenants, security and ranking. The ratings are based on S&P's expectation that the proposed refinancing will be completed as presented to us by Astaldi. Astaldi plans to issue a EUR400 million senior unsecured seven- year bond to refinance its capital structure. Bond proceeds will be used in full to redeem existing outstanding banking debt, restore capacity to draw up to EUR305 million under its EUR325 million revolving credit facility, and generally extend its maturity profile. The ratings on Astaldi reflect S&P's view that the company's business risk profile is at the upper-end of "fair" and that its financial risk profile is "highly leveraged," as S&P's criteria define these terms. The stable outlook reflects S&P's view that Astaldi's credit ratios in the coming 12 months should remain commensurate with the rating, such as adjusted FFO to debt above 10% and debt to EBITDA below 6.0x. The existing backlog and generally solid market positions in transportation infrastructure, including outside Italy, should enable the company's profit measures to remain resilient this year and next. S&P also expects the company to report limited negative free operating cash flow over 2013-2014, despite an increase in capital expenditures, and to maintain "adequate" liquidity. S&P could raise the rating if Astaldi achieved stronger credit metrics on a sustainable basis -- such as adjusted FFO to debt in the 12%-20% range and debt to EBITDA below 5.0x -- reduced its absolute amount of adjusted debt, and showed continuing moderation in terms of external growth and shareholder distributions. S&P could lower the rating if Astaldi's credit ratios deteriorated, including adjusted debt to EBITDA exceeding 6x and adjusted FFO to debt materially below 10%. Substantially negative discretionary cash flow -- in excess of EUR100 million per year -- or an inability to consistently maintain adequate liquidity under S&P's criteria could also put downward pressure on the rating. BANCA MONTE: Four Banks to Underwrite EUR3-Bil. Stock Sale ----------------------------------------------------------- Elisa Martinuzzi and Ruth David at Bloomberg News report that Citigroup Inc., Goldman Sachs Group Inc., Mediobanca SpA and UBS AG will underwrite Banca Monte dei Paschi di Siena SpA's EUR3 billion (US$4 billion) stock sale. According to Bloomberg, two people with direct knowledge of the transaction said the four banks will lead at least nine firms in an underwriting group that Monte Paschi was set to review at a board meeting on Nov. 25. Monte Paschi, engulfed by investigations into alleged misconduct by its former managers, plans to tap shareholders in a rights offer as soon as January to repay part of the EUR4.1 billion it received in state aid, Bloomberg relates. European Union authorities demanded the repayment in 2014 after the bank restated accounts to reflect losses hidden by previous management in 2008 and 2009 and first revealed by Bloomberg News in January. Banca Monte dei Paschi di Siena SpA -- http://www.mps.it/-- is an Italy-based company engaged in the banking sector. It provides traditional banking services, asset management and private banking, including life insurance, pension funds and investment trusts. In addition, it offers investment banking, including project finance, merchant banking and financial advisory services. The Company comprises more than 3,000 branches, and a structure of channels of distribution. Banca Monte dei Paschi di Siena Group has subsidiaries located throughout Italy, Europe, America, Asia and North Africa. It has numerous subsidiaries, including Mps Sim SpA, MPS Capital Services Banca per le Imprese SpA, MPS Banca Personale SpA, Banca Toscana SpA, Monte Paschi Ireland Ltd. and Banca MP Belgio SpA. * * * As reported by the Troubled Company Reporter-Europe on Sept. 18, 2013, Fitch downgraded MPS's Viability Rating (VR) to 'ccc' from 'b' and removed it from Rating Watch Negative (RWN). As reported by the Troubled Company Reporter-Europe on June 19, 2013, Standard & Poor's Ratings Services said that it lowered its long-term counterparty credit rating on Italy-based Banca Monte dei Paschi di Siena SpA (MPS) to 'B' from 'BB', and affirmed the 'B' short-term rating. S&P also lowered its rating on MPS' Lower Tier 2 subordinated notes to 'CCC-' from 'CCC+'. S&P affirmed the ratings on MPS' junior subordinated debt at 'CCC-' and on its preferred stock at 'C'. At the same time, S&P removed the ratings from CreditWatch, where it placed them with negative implications on Dec. 5, 2012. =================== K A Z A K H S T A N =================== CONDENSATE JSC: Fitch Affirms 'B-' Long-term IDR; Outlook Stable ---------------------------------------------------------------- Fitch Ratings has affirmed JSC Condensate Long-term foreign currency Issuer Default Rating (IDR) at 'B-'. The Outlook is Stable. The ratings reflect Condensate's small scale, off-taker risks and expected high debt levels. It currently does not have any debt, but plans to borrow up to US$150 million for a refinery upgrade program. Fitch expects that after the planned debt-funded capex Condensate's gross funds from operations (FFO)-adjusted leverage will peak at 5x in 2015 before falling below 4x when the upgrade project is complete. Key Rating Drivers: -- Small Single-Site Operations Condensate's ratings are capped in the 'B' rating category because of its small size and single site operations in north- west Kazakhstan. Its refinery has an annual refining capacity of 600,000 tons of gas condensate, which mainly produces heavy distilled liquid fuel and straight-run gas oil fraction. Its actual refining throughput in 2012 was lower due to the use of crude oil as the primary feedstock and a short-term interruption in outbound logistics at the beginning of 2012. In 2012, Condensate generated revenues of KZT32.1 billion (US$251 million) and EBITDA of KZT3.9 billion (US$26 million). -- Off-Taker Risks Remain Condensate's high reliance on a single off-taker remains a risk as it sells its products on credit. In 2011-2012, Condensate sold almost all its finished products to Great Eastern Oil Limited (UK). At end-2012 the trade receivables from Great Eastern Oil Limited amounted to KZT5 billion (US$33 million), implying an average receivable collection period of 55 days. On March 1, 2013, Condensate began selling its products to Occidental Energy Logistics Ltd., also a UK-registered company, and terminated relationships with Great Eastern Oil Limited. The new sales contract with Occidental Energy Logistics Ltd. is valid for one year until February 28, 2014. From March 1 to September 30, 2013, Occidental Energy Logistics Ltd. accounted for 90% of Condensate's sales. On November 1, 2013, the accounts receivable balance due from Occidental Energy Logistics Ltd. to Condensate reached US$60.4 million, up from US$45 million on September 30, 2013. Fitch expects that Condensate's customer base will become more diversified once it starts to produce high-octane gasoline in 4Q15. -- Ambitious Upgrade Program Condensate plans to upgrade its refinery to produce Euro-5 quality gasoline, which entails installation of pre-fabricated US-made equipment. The upgrade would allow the company to improve profitability by increasing sales of higher value-added products and to diversify its customer base. Condensate estimates that the project will be completed in 4Q15 and will require capital investments of around US$200 million, of which the company has already spent around US$30 million of its own funds. -- Debt-Funded Capex To finance the refinery upgrade Condensate plans to raise US$150 million in loans from local banks and/or on the bond market. Fitch expects that after the planned debt-funded transactions Condensate's gross FFO adjusted leverage will peak at 5x in 2015 before falling below 4x when the upgrade project is complete. FFO interest coverage will fluctuate around 3x until end-2015. These metrics imply a fairly high debt load relative to other Russian and Kazakh oil and gas peers but are, nonetheless, commensurate with the 'B' category ratings. -- Competitive Location; Rising Competition Condensate's location in the north-west of Kazakhstan, near the Russian border and more than 500km away from the closest domestic Atyrau refinery by car (over 1,000km by railroad), will be an important competitive advantage once the company starts to produce gasoline at end-2015. The company has preliminary agreements with traders and retailers to sell all its gasoline produced after the modernization. In Fitch view, the main threat is a surplus of motor fuels in Kazakhstan and Russia after a number of refineries complete their modernization programs by 2016, which may put downward pressure on gasoline prices. -- Volatile Earnings Condensate's refining margins (EBITDA to barrels refined) ranged from US$11/bbl in 2012 to US$24/bbl in 2011, illustrating the company's high earnings volatility exacerbated by the company's lack of its own raw material base. Refining margins in both Kazakhstan and Russia, where the company may potentially sell its gasoline, are driven by industry-specific taxes and movements of regional supply and demand. Fitch base case scenario is for Condensate's refining margins to average US$9-US$10/bbl over the medium term. Rating Sensitivities: Positive: Future developments that could lead to positive rating actions include: -- A successful completion of the refinery upgrade program in 2015. Fitch expects that post-upgrade Condensate will generate additional revenues and margins from sales of higher value-added oil products -- Diversification of the customer base Negative: Future developments that could lead to negative rating action include: -- Failure to complete or significant delays in completion of the refinery upgrade, leading to an erosion of its financial profile -- FFO gross adjusted leverage above 4x on sustained basis -- Liquidity problems such as Condensate's failure to secure and maintain credit facilities to complete the refinery upgrade program Liquidity & Debt Structure: Currently, Condensate does not have any debt outstanding. Its liquidity at September 30, 2013 was made up of cash balances and short-term deposits totaling KZT5.9 billion (US$39 million), which were mostly kept at the company's accounts with Kazakh subsidiary Bank Sberbank of Russia OJSC (BBB-/Stable) and Bank Centercredit (B+/Stable). For the upgrade project, Halyk Bank of Kazakhstan (BB-/Rating Watch On) agreed to provide Condensate with a long-term US$130 million credit line. The company expects to finance its refinery upgrade project either by a bank loan or by domestic bond/ eurobond issue. The rating actions are as follows: JSC Condensate Long-term foreign currency Issuer Default Rating (IDR): affirmed at 'B-', Stable Outlook Short-term foreign currency IDR: affirmed at 'B' Long-term local currency IDR: affirmed at 'B-', Stable Outlook National Long-term rating: affirmed at 'B+(kaz)', Stable Outlook Local currency senior unsecured rating: affirmed at 'B-' National senior unsecured rating: affirmed at 'B+(kaz)' MANGISTAU ELECTRICITY: Fitch Affirms 'BB+' Issuer Default Rating ---------------------------------------------------------------- Fitch Ratings has affirmed Kazakhstan-based Mangistau Electricity Distribution Company JSC's (MEDNC) Long-term Issuer Default Rating (IDR) at 'BB+'. The Outlook is Stable. The affirmation reflects the unchanged strength of the links between MEDNC and its ultimate parent, Kazakhstan (BBB+/Stable). Key Rating Drivers: -- Three Notches below Sovereign MEDNC's ratings are notched down from those of Kazakhstan by three levels, reflecting the moderate strength of the links between the company and ultimate parent. MEDNC's direct parent, indirectly fully state-owned JSC Samruk-Energo (S-E), has not provided tangible financial assistance to MEDNC since Fitch widened the notching from the sovereign rating to three levels from two in 2011. S-E does not view MEDNC as strategic; however, it is not actively pursuing a reduction of its stake in the company. The ratings are based on the assumption that S-E will retain at least majority ownership of MEDNC over the rating horizon and Fitch does not expect significant changes to the relationship in the near-term. Fitch views MEDNC's standalone profile as commensurate with a 'BB-' rating. -- Near-Monopoly Position in the Region MEDNC's credit profile is supported by its near-monopoly position in electricity transmission and distribution in the Region of Mangistau, one of Kazakhstan's strategic oil and gas regions. It is also underpinned by prospects for economic development and expansion in the region, in relation to both oil and gas and transportation, and by favourable three-year tariffs. MEDNC further benefits from limited foreign-exchange risks and from the absence of interest-rate risks. -- Small Scale, Concentrated Customer Base The ratings are constrained by MEDNC's small scale of operations limiting its cash flow generation capacity, by its high exposure to a single industry (oil and gas) and, within that, by high customer concentration (the top-four customers represented over 67% of 2012 revenue). The latter is somewhat mitigated by the state ownership of some customers, and by prepayment terms under transmission and distribution agreements. -- Favorable Tariffs Between 2012 and 9M13 MEDNC's revenue growth was mainly driven by a transmission and distribution tariff increase to KZT3.1 per kWh in 2013 from KZT2.39 in 2012 and from KZT1.95 in 2011. Further tariff increases have been approved at about 5% on average for 2014 and 2015. The tariff increase in 2012 was partly driven by an increase of MAEK-Kazatomprom's electricity prices. From 2013 onwards MEDNC's tariffs are approved by Kazakstan's Agency on Regulating Natural Monopolies and Competition Protection (AREM) for a three-year period, rather than the one-year period previously, in conjunction with the capex program. MEDNC expects its 2016 tariffs to be approved by end- November 2013. Fitch positively views the switch to medium-term tariff approval. The tariff system for transmission and distribution segments, which is predominantly based on benchmarking with the intention to increase the company's efficiency, should result in favorable tariffs for MEDNC. -- CAPEX to Increase Leverage MEDNC's ratings are constrained by its large prospective investment program relative to the small scale of its operations. At end-2012 MEDNC reported funds flow from operations (FFO) adjusted leverage of 1.5x, down from 2.2x at end-2011. The company's ambitious capex program of about KZT27.8 billion over 2013-2017 will likely result in negative free cash flow over the same period and require significant debt funding. Fitch expects that it may result in FFO-adjusted leverage increasing to around 3x by end-2015 and towards 4x by end-2016 under the agency's conservative assumptions. The capex will be spent on the construction of two new electricity transmission lines at the cost of KZT13.5 billion, on the reconstruction of current transmission lines and substations for KZT4.6 billion and on some other projects. The currently approved capex program amounts to KZT12 billion for 2013-2015. At end-2012 FFO interest cover slightly improved to around 4x from 3.6x at end-2011 and Fitch expects that it will remain in the single digits over 2013-2016. -- Stable CFO, Negative FCF Expected Fitch expects MEDNC to continue generating solid and stable cash flow from operations (CFO) over 2013-2016. However, free cash flows are likely to turn negative in 2013 and onwards, mainly driven by substantial capex plans. For 2013, Fitch estimates MEDNC's CFO at KZT2.2 billion, before capex (KZT3.4 billion) and dividends (KZT250 million). Fitch expects MEDNC to rely on new borrowings to finance cash shortfalls. -- Elevated Dividend Payout Fitch notes that for 2012 MEDNC's dividend payout ratio was increased to 75% (or KZT250 million) from 50% (or KZT88 million) for 2011; however, management expects it to decrease to around 50% over the medium term. If dividends remain elevated at a time of increasing capex Fitch may view it as a sign of weakening links with the ultimate parent and may revise its rating approach to one of bottom-up from one of top-down. Rating Sensitivities: The Stable Outlook reflects Fitch's assessment that upside and downside risks to the rating are currently balanced. The main factors that may individually or collectively lead to rating action are as follows: Positive: -- A positive change to Kazakhstan's ratings provided the links between MEDNC and the sovereign do not weaken. -- Stronger links with the ultimate parent. -- Enhancement of the business profile, such as diversification and scale with only modest increase in leverage would be positive for the standalone profile. Negative: -- A negative change to Kazakhstan's ratings. -- Weaker links with the ultimate parent, such as a reduction of S-E's stake in MEDNC to less than 50% or an elevated dividend payout, insufficient tariffs and increased capex contributing to weaker credit metrics. This may result in Fitch reconsidering its rating approach to one of bottom-up from the top-down that is being currently applied. -- Deterioration in MEDNC's FFO adjusted leverage to 4x or above and FFO interest cover to 2.0x or below on a sustained basis would be negative for the standalone profile. Liquidity and Debt Structure: Fitch views MEDNC's liquidity as manageable, comprising solely cash as the company does not have any available credit lines. At end-3Q13, MEDNC's cash balance of KZT2.9 billion was sufficient to cover short-term maturities of KZT962 million. Cash balances are mostly held in local currency with domestic banks including Halyk Bank of Kazakhstan (BB-/Rating Watch Evolving) and Nurbank, which is a risk. At end-3Q13, most of MEDNC's debt was represented by two unsecured fixed-rate bonds of KZT812 million and KZT1.7 billion maturing in 2014 and in 2023, respectively. The rest of the debt is represented by interest-free loans with maturity up to 2036 from MEDNC's customers to co-finance new network connections. MENDC's ambitious capex program will likely require additional debt funding over the medium term. MEDNC has proven access to the domestic bond market. During 2013 MEDNC issued KZT1.7 billion of bonds to partly finance its substantial capex need (KZT3.4 billion) for the year. The remainder is expected to be financed by MEDNC's own funds. Full List of Mednc's Ratings: Long-term foreign currency IDR affirmed at 'BB+', Outlook Stable Long-term local currency IDR affirmed at 'BBB-', Outlook Stable National Long-term rating affirmed at 'AA(kaz)', Outlook Stable Short-term foreign currency IDR affirmed at 'B' Foreign currency senior unsecured rating affirmed at 'BB+' Local currency senior unsecured rating, including that on KZT1.7bn and KZT800m bonds, affirmed at 'BBB-' =============== P O R T U G A L =============== PORTO CITY: Fitch Affirms 'BB+/B' Long-Term Currency Ratings ------------------------------------------------------------ Fitch Ratings has affirmed the City of Porto's Long-term foreign and local currency ratings at 'BB+' and Short-term foreign currency rating at 'B'. The Outlooks on the Long-term ratings are Negative. Key Rating Drivers: Porto's ratings reflect the supportive institutional framework, the ability to post a healthy operating margin, the moderate debt level as well as the comfortable debt repayment schedule. The Negative Outlook reflects that on Portugal's ratings. Operating revenues dropped again in 2012, principally due to negative development of several taxes reflecting the downturn of the Portuguese economy in the past few years and also a small decline on current transfers from the central government. Operating revenue dropped EUR11 million or 7% y.o.y. Despite this adverse context, Porto was able to improve its operating balance. This was primarily the result of reducing civil servants' salaries and lower transfers and subsidies. Porto posted a sound operating margin of 20.4% in 2012. Debt with financial institutions continued to decrease in 2012, to reach EUR102 million, while it was above EUR145 million in 2008. Fitch expects the debt to remain stable in the medium term. The amount of debt in relation with the current balance generated is very good at 3.1 years. Porto has traditionally had a favorable debt repayment calendar, and its operating balance has always coved (1.6x) its debt service requirements since 2006. Rating Sensitivities: If the sovereign ratings were downgraded, Porto's rating would also be downgraded. Porto could also be downgraded in case of drastic deterioration of budgetary performance which Fitch considers unlikely in the medium term. An upgrade of the sovereign would likely lead to an upgrade of Porto, provided that the city's fundamentals remain sound. ============= R O M A N I A ============= OLTCHIM RAMNICU: Two Chinese Firms Sign Letter Of Intent ------------------------------------------------------- Ecaterina Craciun at Ziarul Financiar reports that the legal administrators of Romanian insolvent chemical plant Oltchim Ramnicu Valcea on Nov. 25 signed a letter of intent with Chinese companies Baota Petrochemical Group and Junlun Petroleum, which have expressed interest in participating in Oltchim's planned privatization. As reported by the Troubled Company Reporter-Europe on May 10, 2013, Romania-Insider.com said Oltchim is currently functional at only 27% of its capacity, and the company has been under insolvency procedures since January 2013. Oltchim is a Romanian chemical producer. =========== R U S S I A =========== ISR TRANS: Moody's Assigns B3 Corp. Family Rating; Outlook Stable ----------------------------------------------------------------- Moody's Investors Service has assigned a B3 corporate family rating (CFR) and B3-PD probability of default rating (PDR) to ISR Trans LLC. The outlook on all ratings is stable. This is the first time Moody's has assigned a rating to ISR Trans. Ratings Rationale: The B3 rating reflects ISR Trans's (1) small size on a global scale, reflected by revenue of US$703 million for the last 12 months to June 2013; (2) high industry and customer concentration, with the company's two largest customers representing a 75% portion of its revenue for 2012, which renders ISR Trans's business dependent on its continuing relationships with these customers; (3) highly concentrated ownership, which creates the risk of rapid changes in the company's strategy and development plans, along with the risk of a revision of its financial policy and an increase in shareholder distributions; (4) high key person risk, as one of ISR Trans's ultimate owners, Mr. Rakhman Khalilov, is its CEO and is directly involved in its operating management; and (5) the company's history of material related-party transactions, which in Moody's view lack transparency. The rating also takes into account (6) the fairly high average age of the company's own tank car fleet (17 years); (7) high leverage, reflected by debt/EBITDA of 4.7x (Moody's-adjusted) as of June 2013, with limited potential for a reduction in the near term, as the company intends to finance its substantial investment program largely with debt; (8) weak liquidity and significant foreign currency risk, as 62% of the company's debt owed to unrelated parties is denominated in the US dollar, while only 10%-20% of its revenues are linked to it; and (9) the company's overall exposure to an emerging market operating environment with a less developed regulatory, political and legal framework. More positively, the rating factors in (1) Moody's expectation that ISR Trans will be able to improve its financial metrics in the medium term; (2) the company's fairly large fleet of more than 19,000 tank cars in operation as of year-end 2012 (of which nearly 8,000 units were in operating leasing) and its substantial share in the Russian oil and oil products rail transportation market in terms of cargo volumes (around 6%); (3) its seven-year history of relationships with key customers; (4) its robust operating margin of above 15%; and (5) its balanced debt maturity profile. Rationale for Stable Outlook: The stable outlook on the rating reflects Moody's expectation that ISR Trans will (1) deleverage to 4.0x debt/EBITDA or below and maintain its EBIT interest coverage around 2.0x or above on a sustainable basis (all metrics are as adjusted by Moody's); and (2) adequately manage its liquidity and maintain robust operating performance. What Could Change the Rating Up/Down: Moody's could consider ISR Trans's rating for an upgrade if the company reduces its debt/EBITDA to below 3.5x (Moody's-adjusted) on a sustainable basis, while (1) improving customer diversification; (2) maintaining adequate liquidity; and (3) demonstrating strong operating performance. Conversely, negative pressure could be exerted on the rating if (1) debt/EBITDA increases above 5.0x on a sustained basis; (2) EBIT interest coverage declines below 1.5x on a sustained basis (all metrics are Moody's-adjusted); or (3) there is a material deterioration in ISR Trans's liquidity, market position or operating performance, including operational disruptions or termination of its contracts with key customers. Established in 1997, ISR Trans is one of the largest private tank car operators in Russia, with a fleet of more than 19,000 tank cars in operation as of year-end 2012. The company is controlled by three members of the Khalilov family, each owning equal non- controlling shares of 33%. In the last 12 months to June 2013, ISR Trans generated revenues of US$703 million, of which 91% was derived from freight rail transportation and other related services. MECHEL OAO: Enters Agreement with Banks on Covenant Holiday ----------------------------------------------------------- Courtney Weaver at The Financial Times reports that Mechel has reached agreement with a syndicate of foreign banks on a covenant holiday until the end of 2014, alleviating pressure on the highly indebted Russian coal miner. The company said international creditors including ING, Societe Generale, UniCredit, Commerzbank, Raiffeisen and Russia's VTB had granted it a waiver on its US$1 billion syndicated loan, just two weeks after a collapse in Mechel's share price, the FT relates. The FT notes that while Mechel said the stock's 40% intraday fall on Nov. 13 had been speculative and did not reflect the state of the group's negotiations with creditors, concerns had been building over how it would go about reducing its US$9.6 billion debt burden with little hope of a recovery in coal or steel prices in the near future. Russian Prime Minister Dmitry Medvedev offered support to Mechel and indebted peers, including Rusal and Evraz, at a meeting on Monday with the companies' owners, the FT relays. Mechel's international loans account for slightly more than 20% of its debt burden, with 60% of its debt due to Russian state lenders Sberbank, VTB and Gazprombank, and the remainder to holders of Mechel bonds, the FT states. The company, the FT says, is in negotiations with the Russian creditors on covenant holidays for US$2.5 billion in debt due next year. According to the FT, in a statement, Mechel's chief financial officer Stanislav Ploschenko said the company hoped to reach agreements on "the finalization of the financial covenant holidays" in the coming weeks. Mechel OAO is a Russian mining and metals company. Its business includes four segments: mining, steel, ferroalloy and power. Mechel unites producers of coal, iron ore concentrate, nickel, ferrochrome, ferrosilicon, steel, rolled products, hardware, heat and electric power. Mechel products are marketed domestically and internationally. =========== S E R B I A =========== SERBIA: Fitch Rates US$1BB Eurobond Due December 2018 'BB-' ----------------------------------------------------------- Fitch Ratings has assigned Serbia's US$1 billion Eurobond, due December 3, 2018, a 'BB-' rating. The Eurobond has a coupon rate of 5.875%. The rating is in line with Serbia's Long-term foreign currency Issuer Default Rating, which has a Negative Outlook. ========= S P A I N ========= PYMES SANTANDER 7: Moody's Assigns 'Ca' Rating to Serie C Notes --------------------------------------------------------------- Moody's Investors Service has assigned the following definitive ratings to the debts to be issued by Fondo de Titulizacion de Activos PYMES Santander 7 (the Fondo): EUR1,360M Serie A Notes, Definitive Rating Assigned A3 (sf) EUR340M Serie B Notes, Definitive Rating Assigned Ba1 (sf) EUR340M Serie C Notes, Definitive Rating Assigned Ca (sf) FTA PYMES SANTANDER 7 is a securitization of standard loans and credit lines granted by Banco Santander S.A. (Spain) (Baa2/P-2; Negative Outlook) to small and medium-sized enterprises (SMEs) and self-employed individuals. At closing, the Fondo -- a newly formed limited-liability entity incorporated under the laws of Spain -- will issue three series of rated notes. Banco Santander S.A. (Spain) will act as servicer of the loans and credit lines for the Fondo, while Santander de Titulizacion, S.G.F.T., S.A. will be the management company (Gestora) of the Fondo. Ratings Rationale: As of October 2013, the audited provisional asset pool of underlying assets was composed of a portfolio of 25,958 contracts granted to SMEs and self-employed individuals located in Spain. In terms of outstanding amounts, around 45.4% corresponds to standard loans and 54.6% to credit lines. The assets were originated mainly between 2011 and 2013 and have a weighted average seasoning of 2.8 years and a weighted average remaining term of 2.3 years. Around 2.8% of the portfolio is secured by first-lien mortgage guarantees. Geographically, the pool is concentrated mostly in Catalonia (22.3%), Madrid (19.9%) and Andalusia (11.3%). At closing, any loans in arrears and exceeded credit lines will be excluded from the final pool. In Moody's view, the strong credit positive features of this deal include, among others: (i) a relatively short weighted average life of around 1.5 years; (ii) a granular pool (the effective number of obligors over 600); and (iii) a geographically well- diversified portfolio. However, the transaction has several challenging features: (i) a strong linkage to Banco Santander S.A. (Spain) related to its originator, servicer, accounts holder and liquidity line provider roles; (ii) no interest rate hedge mechanism in place; and (iii) a complex mechanism that allows the Fondo to compensate (daily) the increase on the disposed amount of certain credit lines with the decrease of the disposed amount from other lines, and/or the amortization of the standard loans. These characteristics were reflected in Moody's analysis and definitive ratings, where several simulations tested the available credit enhancement and 20% reserve fund to cover potential shortfalls in interest or principal envisioned in the transaction structure. The ratings are primarily based on the credit quality of the portfolio, its diversity, the structural features of the transaction and its legal integrity. In its quantitative assessment, Moody's assumed a mean default rate of 9.1%, with a coefficient of variation of 70% and a recovery rate of 35.0%. Moody's also tested other set of assumptions under its Parameter Sensitivities analysis. For instance, if the assumed default probability of 9.1% used in determining the initial rating was changed to 11.83% and the recovery rate of 35% was changed to 25%, the model-indicated rating for Serie A, Serie B and Serie C of A3(sf), Ba1(sf) and Ca(sf) would be Baa2(sf), Ba3(sf) and Ca(sf) respectively. For more details, please refer to the full Parameter Sensitivity analysis to be included in the New Issue Report of this transaction. The global V Score for this transaction is Medium/High, which is in line with the score assigned for the Spanish SME sector and representative of the volatility and uncertainty in the Spanish SME sector. V-Scores are a relative assessment of the quality of available credit information and of the degree of dependence on various assumptions used in determining the rating. The main source of uncertainty in the analysis relate to the Transaction Complexity. This element has been assigned a Medium/High V-Score, as opposed to Medium assignment for the sector V-Score. For more information, the V-Score has been assigned according to the report "V Scores and Parameter Sensitivities in the EMEA Small- to-Medium Enterprise ABS Sector" published in June 2009. In rating this transaction, Moody's used ABSROM to model the cash flows and determine the loss for each tranche. The cash flow model evaluates all default scenarios that are then weighted considering the probabilities of the Inverse Normal distribution assumed for the portfolio default rate. On the recovery side Moody's assumes a stochastic (normal) recovery distribution which is correlated to the default distribution. 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. Therefore, Moody's analysis encompasses the assessment of stress scenarios. PYME VALENCIA 1: Fitch Affirms 'Csf' Rating on Class E Notes ------------------------------------------------------------ Fitch Ratings has upgraded PYME Valencia 1, FTA's class A2 notes and revised the Outlook on the class B notes to Stable, as follows: EUR59.8m Class A2 (ISIN ES0372241010): upgraded to 'AA-sf' from 'Asf'; Outlook Stable EUR47.6m Class B (ISIN ES0372241028): affirmed at 'BBsf'; Outlook revised to Stable from Negative EUR34.0m Class C (ISIN ES0372241036): affirmed at 'CCsf'; RE 25% EUR13.6m Class D (ISIN ES0372241044): affirmed at 'CCsf'; RE 0% EUR15.3m Class E (ISIN ES0372241051): affirmed at 'Csf'; RE 0% Key Rating Drivers: The upgrade of the senior class A2 notes reflects the increasing credit enhancement (CE) due to regular amortization. Despite the deterioration in the portfolio's performance, the CE of 53.5% is sufficient to withstand the agency's 'AA-sf' rating stress scenario. The affirmation of the class B notes reflects the CE of 16.5%, which enables them to withstand Fitch's 'BBsf' rating stress scenario. The revision of the Outlook is a result of an increased cushion on Fitch's 'BBsf' stress due to the protection offered by the financial swap. The swap guarantees interest payment on the class A2 to D notes and provides 65bps of excess spread even if the performing balance of the portfolio is lower than the aggregate outstanding notional of these notes. The 'CCsf' rating on the class C and D notes reflects the low CE available to the notes and their subordinated position in the capital structure. CE for the class C and D notes is insufficient to pass Fitch's base case expected loss rate and their repayment is solely dependent on the recoveries realised on defaulted assets. The 'Csf' rating on the class E notes indicates that a default appears inevitable. The notional of the reserve fund (RF) will be applied to redeem the notes. Fitch considers it unlikely that the RF, which has been fully depleted since September 2009, will be replenished to its required amount of EUR13.5 million before the notes' maturity. During 2013, Banco de Valencia merged with CaixaBank S.A., which continues to maintain a dynamic commingling reserve (CR), held at Barclays Plc (A/Stable/F1), which will be utilized to redeem the items in the priority of payments in case of a commingling loss or a servicer's disruption event. The CR is updated monthly and it is sized for 1.5 times the expected collections' notional at 10% prepayment rate. As of October 2013, the CR's notional was EUR6.2 million. Current defaults and loans more than 90 days in arrears account for 25.1% and 6.1% of the outstanding portfolio balance, respectively. The principal deficiency ledger balance has increased to EUR26.3 million from EUR16.4 million at the last review. Additionally, Fitch views as additional risks the increased obligor concentration due to the portfolio's deleveraging and the high portfolio exposure to the troubled Spanish real estate sector. As of October 2013, the top 20 obligors accounted for 31.6% of the outstanding balance, while loans to the real estate and building & materials sectors accounted for 46.4% of the outstanding portfolio. PYME Valencia 1, F.T.A. is a cash-flow securitization of loans granted to Spanish small and medium enterprises (SMEs) by Banco de Valencia (BB-/RWP/B). The transaction is substantially collateralized with 92% of the loans secured by real estate properties. Rating Sensitivities: Applying a 1.25x default rate multiplier to all assets in the portfolio would not result in a downgrade of any of the notes. Applying a 0.75x recovery rate multiplier to all assets in the portfolio would not result in a downgrade of any of the notes. =========================== U N I T E D K I N G D O M =========================== 2K MANUFACTURING: Goes Into Administration ------------------------------------------ StockMarketWire.com reports that Environmental Recycling Technologies' UK licensee 2K Manufacturing has gone into administration. ERT announced in November 2012 that it had clawed back the international license for its powder impression molding process from 2K Manufacturing and restructured the debt owed to it by 2K Manufacturing, according to StockMarketWire.com. The report relates that ERT said that since then, it has received an immaterial level of license income from 2K. ERT adds that it made a full provision for outstanding payment due from 2K Manufacturing of GBP1.61 million in its interim results for the period to June 30, 2013, the report relays. ERT said it is closely monitoring the situation and will work with the administrators to facilitate a solution that is in the best interest of its shareholders and to maintain the production of Ecosheet, the report says. In the year to December 31, 2012, ERT estimates that 2K Manufacturing sold less than 30,000 units of Ecosheet, the report adds. 2K Manufacturing manufactures Ecosheet under license from Environmental Recycling Technologies. ARCH CRU: Fund Investors Seek Better Payout ------------------------------------------- James Charles at The Sunday Times reports that victims of an investment scandal are mounting a fight for better compensation. About 20,000 investors had GBP363 million in the Arch Cru funds when they were suspended in 2009 after a warning by the Financial Services Authority, then the regulator, that the funds were insolvent, the report discloses. The Sunday Times says the open-ended investment companies, listed in London and rated "cautiously managed" by the Investment Management Association, a trade body, invested in sub-funds listed on the Channel Islands stock exchange. These put the money into a huge range of risky investments. The value of assets in the funds crashed by 40% after their suspension, the report notes. Capita Financial Managers, part of the outsourcing group Capita, administered the funds and was responsible for oversight under City rules. The report recalls that in 2011, Capita, with HSBC and BNY Mellon, the depositary banks for the funds, agreed to provide GBP54 million compensation. However, about 650 investors have signed up to a potential action to recover larger compensation, the report says. CAPERFLY: Studio Enters Liquidation ----------------------------------- Craig Chapple at develop-online.net reports that UK developer Caperfly, set up by former Codemasters Studios boss Gavin Cheshire, has entered liquidation. Earlier this year, the Leamington-Spa based studio had received a slice of Creative England's GBP1 million funding initiative, which offered interest-free loans matched by company funds, the report relays. At the time, CEO Gavin Cheshire said the studio would use the investment co develop apps based around real-world situations and to improve its Consequences apps, according to develop-online. Caperfly was formed in 2012, and developed services such as its data aggregation platform Consequences. The studio had housed around 21 staff. LINPOP: Quickline Acquires Firm Out of Administration ----------------------------------------------------- The Lincolnite reports that Linpop will be taken over by wireless internet service provider Quickline after the local firm went into administration last month. The deal has been made for an undisclosed sum, and under the Quickline brand, new jobs have been offered to current Linpop employees, according to The Lincolnite. The report notes that Quickline will be taking over the servicing of the customer base of Linpop and the firm said it will provide a 'cohesive service' rather than competing in the same market. Linpop, based at Hemswell Cliff, provided wireless internet connectivity and coverage for parts rural Lincolnshire which do not have access to fast enough broadband connections. LLOYDS SYNDICATE: Moody's Gives Neg. Outlook to 'B-' Opinion ----------------------------------------------------------- Moody's Analytics assigned a negative outlook to the B- (Below Average), previously under review for possible downgrade, Continuity Opinion of Lloyd's syndicate 0260(Canopius Managing Agents Limited)in light of continuing losses being forecast / budgeted by the syndicate in what remains a very competitive Motor market. The syndicate, 92% backed by Canopius Group Ltd and with a 2013 capacity of GBP70 million, writes a specialist Motoraccount. In a recently released auction announcement, Canopius stated that Lloyd's had confirmed its approval for the syndicate to trade for the 2014 year of account but that Lloyd's was currently not minded to agree to the syndicate trading for 2015, absent a demonstrable, material and sustainable improvement in performance. Canopius also stated that should syndicate 260 not trade beyond 2014, it was their intention to seek Lloyd's consent to transfer the business into syndicates 958 and 4444, as they regarded the business as an important part of their UK retail strategy/ product offering and believed that it could operate more successfully within a larger syndicate. Canopius acquired the operation in June 2010 and have been re- underwriting the account, although the open year, 3-year account forecasts for the 2011 and 2012 accounts are currently forecast to be loss-making, with mid-point losses of respectively 8% and 5% of capacity currently forecast. The current 2014 proposed SBF is also for a loss of 5% of capacity. In terms of reported annual results since the Canopius acquisition, the syndicate recorded a loss of 7% NPE on an annually accounted basis for 2012 on a combined ratio of 112% (including forex) at 31.12.12, having recorded a loss of 23% NPE for 2011 on a combined ratio of 123%, with 2-year average results currently being in line with C+ / B- continuity opinion benchmark returns in terms of indicative average annual returns on capital. Canopius had sought to acquire the remaining capacity on the syndicate earlier this year and had intended to merge syndicate 260's business into Canopius managed syndicates 958 and 4444, which write business in parallel, subject to Lloyd's approval. However, with the offer not being accepted by some of the third party members, the syndicate is to trade forward as a stand-alone syndicate for 2014. With Canopius supporting 92% of the business and having affirmed its commitment to syndicate 260's business, Moody's commented that in terms of continuity of business relationships, it currently considered the likelihood of the business being placed into run-off at the end of 2014 as limited, with it more likely that the syndicate would be merged into syndicates 958 and 4444. Moody's continued, however, that with the syndicate's losses continuing and the Motor market remaining very competitive amid a changing legal landscape, the business faced some material headwinds. With regard to potential future returns for investors participating on syndicate 260, Moody's stated that, should the syndicate be merged into syndicates 958 and 4444, it expected that a risk premium in terms of syndicate 260's RITC was likely to apply, with the potential for returns for investors to be more in line with benchmarks for the C+ (Below Average) peer group, albeit that any such risk premium was likely to be significantly less than might apply were the syndicate's business be placed into run-off. However, overall in terms of continuity of business relationships, with Canopius having affirmed its commitment to syndicate 260's business, improvement in the syndicate's returns since the Canopius acquisition and with more recent results more in line with B- (Below Average) benchmarks, but with the syndicate continuing to be unprofitable and facing a very competitive market, Moody's has therefore affirmed syndicate 260's B-(Below Average) Continuity Opinion and assigned a negative outlook to the Opinion, reflecting Moody's view of relative continuity prospects for the syndicate over the insurance cycle. The last action was in October 2013 when the syndicate's B-(Below Average), stable outlook, Continuity Opinion was placed under review for possible downgrade. Canopius Syndicate 260 is a Motor syndicate, backed 92% by Canopius Group Ltd, which operates within the Lloyds of London insurance market. MARSTON AGRICULTURAL: In Administration, Cuts 20 Jobs ----------------------------------------------------- Grantham Journal reports that twenty employees have been made redundant at Marston Agricultural Services after it went into administration. The receivers said the Marston company has most recently been hit by challenging economic conditions which have had a significant impact on trading, according to Grantham Journal. Tyrone Courtman -- tyronec@cooperparry.com -- and Nick Edwards -- nicke@cooperparry.com -- of accountants and business advisory firm Cooper Parry have been appointed as joint administrators to the company. The report notes that Tyrone Courtman, partner and Head of Cooper Parry's Restructuring team said: "Unfortunately it has been necessary for Marston's Directors to place the company into administration which has resulted in a number of redundancies. Our absolute focus now is on seeking a buyer for the firm and I remain optimistic about this having already received expressions of interest. I would urge anybody interested in acquiring the business and assets as a going concern to contact me immediately." Marston Agricultural Services is a family-owned business which manufactures agricultural trailers has been trading from Marston for more than 60 years. The company was started by Ernest Green in the 1950s and since then has designed and developed agricultural trailers. The firm has an in-house design team and although focused on the UK market, had been trading further afield including in Africa, Asia and New Zealand RIVERMILL FOODS: Bakery Placed Into Liquidation ----------------------------------------------- Cliff Sanderson at dissolve.com.au reports that Rivermill Foods, a Hexham bakery, has been placed into liquidation just months after it was purchased out of administration. dissolve.com.au relates that a creditor's meeting took place on November 18. During the meeting, Quantuma Restructuring was appointed as liquidator. In January, Rivermill purchased the bakery which traded as Nichol & Laidlow. Rivermill Foods is a supplier of cereal bars and cakes to retailers and coffee shops. The company also produces products for brands like The National Trust and Wild Trail. YALES LEISURE: In Administration, Remains Open for Business ----------------------------------------------------------- News North Wales reports that Yales Leisure Limited has gone into administration, but remains open for business. Chris Pole -- chris.pole@kpmg.co.uk -- and Mark Orton -- mark.orton@kpmg.co.uk -- from KPMG have been appointed joint administrators to Yales Leisure Limited. A license to occupy has been granted to a prospective purchaser, allowing continued operation of the business while a sale of the properties is finalized, according to News North Wales. The report notes that Mr. Pole said the economic downturn had proved to be a big factor in administrators being appointed. "The business suffered significant losses in the wake of the recession which was exacerbated by the general challenging conditions facing the licensed trade," the report quoted Mr. Pole as saying. "We are pleased to have been able to secure a deal to ensure trading continues from the premises, and hope to complete a sale of the properties within the next 28 days," Mr. Pole added, the report relates. A statement for KPMG said: "Following appointment, all employees were made redundant. However it is understood the new occupier of the property has subsequently taken on all of the staff in the continuing business," the report discloses. Yales Leisure Limited is a popular town centre cafe bar and live music venue. =============== X X X X X X X X =============== EUROPE: Moody's Says Prospects Improving for B2B Companies ---------------------------------------------------------- The 2014 outlook is becoming more positive for certain business- to-business (B2B) companies as an uptick in operating performance in Europe has been visible across the board from foodservice companies to business travel, supported by a modest macroeconomic improvement, says Moody's Investors Service in a Special Comment report published. Some B2B companies, whose financial performance is tied to the evolution of GDP and subsequent activity at their corporate clients, are increasingly reporting a return to organic growth or a deceleration of sales declines for their European operations. Moody's expects the European operations of several companies, including Adecco S.A. (Baa3 stable) and ISS A/S (B1 positive), to report positive organic growth by year end. "Compared with the downturn in 2008-09, European B2B services companies have been able to protect profitability," says Knut Slatten, an Assistant Vice President in Moody's Corporate Finance Group and author of the report. "Some, such as Carlson Wagonlit B.V. (B1 stable) and Adecco, have restructured their European operations and now have a leaner structure. La Financiere Atalian S.A (B2 stable), Compass Group Plc (Baa1 positive) and Adecco have favored profitability over revenues by giving up loss-making contracts." Pressure on organic growth persists in France -- a key market for a number of rated B2B services companies -- but the effect on profit will be mitigated by the new French tax credit measure (CICE ). France is among the largest markets for many of the services companies. Whilst the operating environment remains challenging, profitability will be helped by the recently introduced tax credit; benefitting companies with a high number of low-to-medium salaried employees such as Adecco, La Financiere Atalian S.A. and Holdelis (B2 stable). A return to economic growth would particularly benefit companies with high operating leverage. European services companies tend to have substantial fixed costs because of their greater proportion of personnel expenses. Moody's expects that companies engaged in high-volume activities, such as Adecco and CWT, will grow EBITDA more quickly than revenues as they should be able to accommodate faster growth rates without significantly adding to costs. Restructuring costs should abate in 2014. Credit metrics for 2013 is likely to have been affected by restructuring costs as Compass, ISS and CWT have all taken on restructuring costs to address their European operations. However Moody's expects restructuring costs to abate in 2014. Moody's notes that current economic weakness has not led to a significant deterioration of credit quality. There has been very limited downward rating pressure on European services companies over the past 12-15 months as balance sheets have remained largely intact. ********* 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 * * *