/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/140110.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 Friday, January 10, 2014, Vol. 15, No. 7 Headlines F I N L A N D TALVIVAARA MINING: To Lay Off Nearly Half of Staff at Nickel Mine F R A N C E CREDIT AGRICOLE: Fitch Rates Subordinated Notes 'BB+(EXP)' CREDIT AGRICOLE: S&P Rates Add'l Tier 1 Subordinated Notes 'BB+' G E R M A N Y VOLKSWERFT: Scandlines Makes Offer for Two Vessels G R E E C E NEWLEAD HOLDINGS: Regains Compliance with $1-Bid-Price Rule I R E L A N D * Number of Corporate Insolvencies Fall 18% in 2013 I T A L Y ENEL SPA: S&P Assigns 'BB+' Rating to Jr. Subordinated Securities N E T H E R L A N D S HARBOURMASTER CLO 8: Fitch Affirms 'Bsf' Rating on Class E Notes R U S S I A SPARTAK NALCHIK: Out of League Following Financial Woes S P A I N CAJAMAR EMPRESAS 4: Fitch Affirms CCC Rating on Class B Notes U N I T E D K I N G D O M MOTHERCARE PLC: Profit Warning Casts Doubt on Turnround Plan RSA INSURANCE: Sacks Two Executives Following Financial Probe WOLVERHAMPTON CITY: Immediate Action Needed to Avoid Bankruptcy X X X X X X X X * EUROPE: Bailouts Avert Disorderly Default, EU Commission Says * BOOK REVIEW: Creating Value through Corporate Restructuring ********* ============= F I N L A N D ============= TALVIVAARA MINING: To Lay Off Nearly Half of Staff at Nickel Mine ----------------------------------------------------------------- Michael Kavanagh at The Financial Times reports that Talvivaara is to lay off nearly half of its staff at its nickel mine in Finland as refinancing talks continue aimed at staving off bankruptcy. According to the FT, the London-listed company, which also has a secondary listing on Oslo's stock exchange, confirmed on Wednesday that it was letting go of 246 employees out of a total of 530 amid a suspension of ore production at its Sotkamo site in central Finland. The company warned in November of the danger of bankruptcy if it failed to secure additional financing, just six months after its last fundraising, the FT recounts. Though the company is halving its staffing levels following the suspension of ore production, remaining staff are being retained as bioheap leaching and ore processing continues at the site, the FT relates. The Finnish government is Talvivaara's main shareholder through its Solidum investment fund, the FT notes. In December, a Finnish court backed the appointment of local administrators to lead a restructuring of Talvivaara following agreement among creditors, the FT relays. The lossmaking company ended its third quarter with net debt of about EUR460 million, of which more than half is scheduled to mature in 2015, the FT discloses. Talvivaara Mining Co. Ltd. is a Finnish nickel producer. =========== F R A N C E =========== CREDIT AGRICOLE: Fitch Rates Subordinated Notes 'BB+(EXP)' ---------------------------------------------------------- Fitch Ratings has assigned Credit Agricole S.A.'s (A/Stable/F1) expected undated deeply subordinated notes a 'BB+(EXP)' expected rating. The final rating is contingent upon final documents conforming to information already received. Key Rating Drivers The notes are structured to qualify as additional Tier 1 Capital instruments with fully discretionary coupon payment and are subject to write-down on breach of Credit Agricole's (A/Stable/F1/a) consolidated 7% common equity Tier 1 (CET1) ratio, or on breach of Credit Agricole S.A.'s CET1 of 5.125%. Credit Agricole is not a single entity, but a cooperative banking group. Its 39 regional banks (caisses regionales) and central body (Credit Agricole S.A.) benefit from a cross-support mechanism. Accordingly, Credit Agricole and Credit Agricole S.A.'s Issuer Default Ratings are at the same level. The notes will be rated five notches below Credit Agricole's 'a' Viability Rating (VR) in accordance with Fitch's criteria for rating bank subordinated and hybrid securities. The notes are notched twice for loss severity and three notches for non- performance risk to reflect the fully discretionary coupon and the incremental risk due to the 7% CET1 ratio trigger compared with the risk reflected in the bank's VR. Fitch has assigned 50% equity credit to the securities. This reflects that the notes are perpetual, subordinated to all creditors except common equity, with full coupon flexibility. However, the write down is not necessarily permanent. In case of "return to financial health" Credit Agricole S.A. may partially or fully write-back the notes. The equity credit assigned to the securities could be raised to 100% if Fitch revises its criteria in line with "Assessing and Rating Bank Subordinated and Hybrid Securities - Exposure Draft" dated November 27, 2013 at http://www.fitchratings.com. The criteria revision proposed in the exposure draft would eliminate the current requirement for the write down to be permanent in order for an issue to obtain 100% equity credit. Rating Sensitivities As the notes are notched from Credit Agricole's Viability Rating, their rating is primarily sensitive to any change in this rating. Headquartered in Montrouge, France, Credit Agricole S.A. -- http://www.credit-agricole.com/-- provides retail, corporate, and investment banking products and services worldwide. The company offers savings products, such as money market, bonds, and securities; lending products, including mortgage loans and consumer finance; life, property and casualty, and death and disability insurance; and payment, personal, and wealth management services. CREDIT AGRICOLE: S&P Rates Add'l Tier 1 Subordinated Notes 'BB+' ---------------------------------------------------------------- Standard & Poor's Ratings Services said that it assigned its 'BB+' long-term issue rating to the proposed additional Tier 1 undated deeply subordinated notes to be issued by France-based Credit Agricole S.A. (CASA; A/Negative/A-1). The rating is subject to S&P's review of the notes' final documentation. "Credit Agricole S.A. Group" (GCASA) refers to the individual parent company CASA and its consolidated subsidiaries and associates, as under the documentation for the notes. The larger Credit Agricole Group (GCA) refers to individual parent company CASA, the Credit Agricole Mutuel regional banks (caisses regionales de Credit Agricole Mutuel), the Credit Agricole Mutuel local credit cooperatives (caisses locales de Credit Agricole Mutuel) and their consolidated subsidiaries. In accordance with S&P's criteria for hybrid capital instruments, the 'BB+' rating reflects S&P's analysis of the proposed instrument and our assessment of GCA's stand-alone credit profile (SACP) of 'a-'. The 'BB+' issue rating stands four notches below the bank's SACP, incorporating: -- A deduction of two notches, which is the minimum downward notching from the SACP under our criteria for a bank hybrid capital instrument. -- A deduction of an additional notch to reflect S&P's view that reporting a loss in a particular accounting period while breaching Basel III equity buffers would prevent coupon payments, and that this could happen independently of the bank's collapse or non-viability. This risk may not otherwise be reflected in the SACP. Payments of the coupons can be limited to respect the "Relevant Maximum Distributable Amount" (RMDA), as the notes' documentation defines this term, which would take effect if GCA or GCASA do not meet their respective "combined buffer" requirements, as defined under the EU's Capital Requirements Directive IV. This RMDA means the lower of the "Maximum Distributable Amounts" for either GCA or GCASA, as calculated under the directive. This trigger hinges on the definition of the "combined buffer," which S&P understands will increase over time along with the expected regulatory phase-in of various regulatory buffers. If this earnings clause and trigger were to be activated, then CASA would not have the flexibility to use otherwise distributable reserves to make coupon payments. -- The deduction of a fourth notch to reflect that the notes feature a contingency clause leading to principal write- down. This clause would become effective if GCASA's "CET1 capital ratio," as the issue's terms and conditions define this ratio, was to fall below a 5.125% trigger, which S&P sees as a "non-viability contingency clause." "Furthermore, we believe that the notes can absorb losses on a going-concern basis. The issuer has placed a write-down trigger at 7% CET1 capital ratio for GCA. In line with our criteria, the assignment of the 'BB+' rating factors in our expectation that the CET1 capital ratio will remain at least 401 basis points (bps) above the 7% trigger in the next 18-24 months. Indeed, under this expectation, we assign a rating to the notes that is the lower of 'BB+' and of a 'BBB-' cap, which consequently does not affect the rating. Furthermore, under our criteria, if the CET1 capital ratio of GCA was to decrease in a range between 301 bps and 400 bps above the 7% trigger, we would apply a 'BB+' rating cap, but this still would not affect the rating," S&P said. S&P assigned "intermediate" equity content to the notes, reflecting its view that they will allow the absorption of losses on a "going-concern" basis, through coupon cancellation at the option of the issuer. S&P's assessment also reflects that the regulator confirmed granting of Tier 1 status and regulatory capital credit to the notes to GCASA and GCA, and that the instrument is perpetual and has no step-up clause. ============= G E R M A N Y ============= VOLKSWERFT: Scandlines Makes Offer for Two Vessels -------------------------------------------------- Tom Todd at The Motorship reports that Scandlines is talking to receivers at Germany's bankrupt Volkswerft and has made an offer for the two ferry newbuildings parked there since it cancelled them in 2012. Scandlines spokeswoman Anette Ustrup Svendsen in Copenhagen told The Motorship on Tuesday, "we have made an offer for the two vessels in Stralsund and are now waiting for feedback from the insolvency administrator". In Hamburg, a spokesman for receiver Berthold Brinkmann told The Motorship the talks with the German-Danish ferry operator had already begun with the approval of banks and local officials and that the outcome would be put to shareholders of the yard. Reports said an early result was hoped for, The Motorship notes. Scandlines cancelled the order for the two type SSF (short sea ferry) 1,600 lane-meter newbuildings after the P+S Werften Group went into administration in 2012, The Motorship recounts. The ferry operator, as cited by The Motorship, said the ships, one of which was nearly completed and the other half finished at the time, were too heavy and their draught was too great for the ports they would serve. It is understood that Scandlines is now offering EUR25 million for both ships, which were originally ordered for EUR184 million, The Motorship discloses. Local politicians are keen to see the issue resolved quickly but some are balking at the price being offered, The Motorship says. An improved price is hoped for at talks because, as observers pointed out, a new deal is now also in Scandlines' interest, according to The Motorship. The operator last year signed a letter of intent with STX Finland for two alternative newbuildings, but according to recent reports that yard has also lost the work because of financing problems and because the ships would not be ready for several years, The Motorship recounts. Volkswerft is a shipyard in the hanseatic city of Stralsund on the Strelasund. It is part of the German Hegemann-group. =========== G R E E C E =========== NEWLEAD HOLDINGS: Regains Compliance with $1-Bid-Price Rule ----------------------------------------------------------- NewLead Holdings Ltd. received written notification from the Listing Qualifications Staff of the NASDAQ Stock Market LLC indicating that the NASDAQ Listing Qualifications Panel determined the Company had regained compliance with the minimum bid price requirement of US$1.00 per share for continued listing on the NASDAQ Global Select Market. Under NASDAQ Listing Rule 5815 (d)(4)(a), the Panel will monitor the Company for a six-month period, ending June 30, 2014, to see if it experiences a closing bid price under US$1.00 for a period of 30 consecutive trading days. About NewLead Holdings Based in Athina, Greece, NewLead Holdings Ltd. -- http://www.newleadholdings.com/-- is an international, vertically integrated shipping company that owns and manages product tankers and dry bulk vessels. NewLead currently controls 22 vessels, including six double-hull product tankers and 16 dry bulk vessels of which two are newbuildings. NewLead's common shares are traded under the symbol "NEWL" on the NASDAQ Global Select Market. Newlead Holdings incurred a net loss of US$403.92 million on US$8.92 million of operating revenues for the year ended Dec. 31, 2012, as compared with a net loss of US$290.39 million on US$12.22 million of operating revenues for the year ended Dec. 31, 2011. The Company incurred a net loss of US$86.34 million on US$17.43 million of operating revenues in 2010. As of June 30, 2013, the Company had US$84.27 million in total assets, US$166.18 million in total liabilities and a US$81.91 million total shareholders' deficit. Going Concern Doubt PricewaterhouseCoopers S.A., in Athens, Greece, issued a "going concern" qualification on the consolidated financial statements for the year ended Dec. 31, 2012. The independent auditors noted that the Company has incurred a net loss, has negative cash flows from operations, negative working capital, an accumulated deficit and has defaulted under its credit facility agreements resulting in all of its debt being reclassified to current liabilities, all of which raise substantial doubt about its ability to continue as a going concern. ============= I R E L A N D ============= * Number of Corporate Insolvencies Fall 18% in 2013 --------------------------------------------------- Laura Slattery at The Irish Times reports that company insolvencies fell 18 per cent in 2013, with even the construction and property sectors recording fewer collapses than in 2012, figures from Vision-net show. The Irish Times says the business and credit risk analysis firm's data also points to a 10 per cent increase in the number of company start-ups this year. In the period to December 16, 1,523 companies were declared insolvent -- a rate of four per day, the report relays. Of these, 986 companies were liquidated, 502 entered receivership and 35 companies were granted court protection from their creditors under the examinership process, The Irish Times reports. "2013 can be characterised as a year of improvement for Irish business, as trading conditions recovered and consumer sentiment strengthened," the report quotes Vision-net managing director Christine Cullen as saying. However, Mr. Cullen warned that the hospitality, construction and IT sectors remain at high risk of collapse. The most vulnerable industry is hospitality, with two-thirds of hotels and restaurants classified as high risk by Vision-net, The Irish Times reports. The professional services and construction sectors were the worst performing industries in terms of insolvencies in 2013, accounting for 18.5 per cent and 18.2 per cent of company failures respectively, the report relays. The number of construction company insolvencies fell 1.1 per cent, while the number of property firms declared insolvent dropped 2.5 per cent, the report discloses. ========= I T A L Y ========= ENEL SPA: S&P Assigns 'BB+' Rating to Jr. Subordinated Securities ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BB+' long-term issue rating to the proposed long-dated, optionally deferrable, and subordinated hybrid capital securities to be issued by Enel SpA, Italy's integrated electricity utility (BBB/Stable/A-2). Under this transaction, Enel plans to issue two tranches, one denominated in euros, the other in British sterling. The amount of these tranches remains subject to market conditions. S&P considers the proposed securities to have intermediate equity content until their first call dates -- the euro-denominated tranche in 2020, the sterling tranche in 2021 -- because they meet S&P's hybrid capital criteria in terms of their subordination, permanence, and optional deferability during this period. S&P arrives at its 'BB+' issue rating on the proposed securities by notching down from its 'bbb' stand-alone credit profile (SACP) on Enel. The two-notch differential between the issue rating and the SACP reflects S&P's notching methodology, which calls for: -- A one-notch deduction for subordination because the corporate credit rating on Enel is investment grade (that is, 'BBB-' or above); and -- An additional one-notch deduction for payment flexibility, reflecting that the deferral of interest is optional. The notching of the proposed securities reflects S&P's view that there is a relatively low likelihood that the issuer will defer interest. Should S&P's view change, it may increase the number of downward notches that it applies to the issue rating. In addition, to reflect S&P's view of the intermediate equity content of the proposed securities, it allocates 50% of the related payments on these securities as a fixed charge and 50% as equivalent to a common dividend, in line with S&P's hybrid capital criteria. The 50% treatment of principal and accrued interest also applies to S&P's adjustment of debt. KEY FACTORS IN OUR ASSESSMENT OF THE INSTRUMENT'S PERMANENCE Although the proposed securities would mature no earlier than 2075 and 2076, respectively, for the euro and sterling- denominated tranches, they can be called at any time for tax, gross-up, rating, or accounting events. Furthermore, the issuer can redeem them for cash as of their first call dates, and every five years thereafter. If any of these events occur, the issuer intends, but is not obliged, to replace the instrument. In S&P's view, this statement of intent mitigates the issuer's ability to repurchase the notes on the open market. Furthermore, S&P sees the repurchase as unlikely due to Enel's commitment to deleveraging. S&P understands that the interest to be paid on the proposed securities will increase by 25 basis points no earlier than 10 years from issuance, and by a further 75 basis points 20 years after the respective first call dates. S&P considers the cumulative 100 basis points as a material step-up, which is currently unmitigated by any commitment to replace the respective instruments at that time. This step-up provides an incentive for the issuer to redeem the instruments on their respective first call dates. "Consequently, in accordance with our criteria, we will no longer recognize the instruments as having intermediate equity content after the respective first call dates for the different tranches because the remaining periods until their economic maturity would, by then, be less than 20 years. However, we classify the instrument's equity content as intermediate until its first call date, as long as we believe that the loss of the beneficial intermediate equity content treatment will not cause the issuer to call the instrument at that point. The issuer's willingness to maintain or replace the instrument in the event of a reclassification of equity content to minimal is underpinned by its statement of intent," S&P said. KEY FACTORS IN S&P'S ASSESSMENT OF THE INSTRUMENT'S DEFERABILITY "In our view, the issuer's option to defer payment on the proposed securities is discretionary. This means that the issuer may elect not to pay accrued interest on an interest payment date because it has no obligation to do so. However, any outstanding deferred interest payment will have to be settled in cash if Enel declares or pays an equity dividend or interest on equally ranking securities, and if Enel or its subsidiaries redeem or repurchase shares or equally ranking securities. We see this as a negative factor. That said, this condition remains acceptable under our methodology because once the issuer has settled the deferred amount, it can still choose to defer on the next interest payment date." S&P noted. The issuer retains the option to defer coupons throughout the instruments' life but S&P understands it intends to settle deferred interest after five years from the date of the first deferral. The deferred interest on the proposed securities is cash cumulative, and will ultimately be settled in cash. KEY FACTORS IN S&P'S ASSESSMENT OF THE INSTRUMENT'S SUBORDINATION The proposed securities (and coupons) are intended to constitute direct, unsecured, and subordinated obligations of the issuer and guarantor, ranking senior to their common shares. ===================== N E T H E R L A N D S ===================== HARBOURMASTER CLO 8: Fitch Affirms 'Bsf' Rating on Class E Notes ---------------------------------------------------------------- Fitch Ratings has affirmed Harbourmaster CLO 8 B.V.'s notes, as follows: -- EUR160.1 million Class A1 (ISIN XS0277545033): affirmed at 'AAAsf'; Outlook Stable -- EUR84 million Class A2 (ISIN XS0277549969): affirmed at 'AAsf'; Outlook Stable -- EUR20.5 million Class B (ISIN XS0277554886): affirmed at 'Asf'; Outlook revised to Stable from Negative -- EUR23.2 million Class C (ISIN XS0277555933): affirmed at 'BBBsf'; Outlook revised to Stable from Negative -- EUR21.1 million Class D (ISIN XS0277559174): affirmed at 'BBsf'; Outlook Negative -- EUR11.6 million Class E (ISIN XS0277559844): affirmed at 'Bsf'; Outlook Negative Harbourmaster CLO 8 B.V. is a securitization of senior secured loans primarily domiciled in Europe. Key Rating Drivers The affirmation reflects the transaction's stable performance over the past 12 months, and improved underlying credit quality after extended maturities lengthened the risk horizon. Between December 2012 and December 2013 the Fitch weighted average rating factor decreased to 28.6 from 29.2 and the proportion of assets in the portfolio rated 'CCC' or below declined to 3.7% from 8.5%. There is currently one defaulted asset in the portfolio which represents 2.5% of the outstanding balance compared with zero defaults in December 2012. The maturity of several assets in the portfolio was extended during 2013, causing the weighted average life of the portfolio to remain virtually unchanged at four years. This was accompanied by an increase in portfolio yield, with the weighted average spread rising to 3.95% from 3.7% in December 2012. As a result of the extension activity the portfolio's exposure to refinancing risk over the next 18 months has been reduced, resulting in the Outlooks on the class B and C notes being revised to Stable from Negative. The class D and E notes, however, remain on Negative Outlook due to their exposure to assets maturing in 2014 and 2015 and a possible concentration of asset maturities towards the legal maturity of the transaction in December 2022. Credit enhancement has increased significantly for the class A to C notes as the transaction continued deleveraging following the end of the reinvestment period in 2012. Credit enhancement for the class D notes increased marginally but declined for the class E notes. The transaction allows for reinvestment of unscheduled principal proceeds until March 2014, subject to certain conditions which are not being met. The portfolio manager is thus unable to reinvest any principal proceeds. Fitch therefore expects the transaction to continue to deleverage. None of the overcollateralization (OC) tests have been failed over the past 12 months and OC test results have been stable. The interest diversion test was briefly breached in April 2013 but has always been in compliance on payment dates. The interest coverage test has never been breached and currently has a higher cushion than in December 2012. Rating Sensitivities Fitch ran various rating sensitivity scenarios on the transaction to assess the impact on the notes' ratings if the key risk drivers -- default rates and recovery rates -- were stressed. Increasing the default probability of all the assets in the portfolio by 25% would likely result in a downgrade of up to two notches while applying a recovery rate haircut of 25% on all the assets would likely result in a downgrade of up to three notches on the notes. =========== R U S S I A =========== SPARTAK NALCHIK: Out of League Following Financial Woes ------------------------------------------------------- RIA Novosti reports that an official announced that Spartak Nalchik Football Club will cease to exist as a professional team amid financial and political problems in another blow to sport in the troubled North Caucasus. Nalchik finished sixth in the Russian top flight as recently as 2010, but was relegated two years later and has been plying their trade in the second tier, RIA Novosti discloses. So far this season, fellow North Caucasus club Anzhi Makhachkala have seen an exodus of star players and are now battling relegation from the top flight along with Chechnya's Terek Grozny, RIA Novosti relays. "With the situation that's come up, the club has no possibility of competing under the status of a professional club," RIA Novosti quotes Aslan Afaunov, the top state sports official in Nalchik's home region of Kabardino-Balkaria, as saying. Mr. Afaunov, as cited by RIA Novosti, said that the club's "debts to players, to clubs" are too high for the regional government to support. Politics appears to have played a role in the club's collapse, RIA Novosti states. The main sponsor, billionaire banker and politician Arsen Kanokov, pulled his financing last month after resigning as the head of the regional government following nine years in charge, RIA Novosti recounts. ========= S P A I N ========= CAJAMAR EMPRESAS 4: Fitch Affirms CCC Rating on Class B Notes ------------------------------------------------------------- Fitch Ratings has upgraded IM Cajamar Empresas 4 FTA's senior notes, as follows: -- Class A (ES0347454003): upgraded to 'A+sf' from 'A-sf''; Outlook Stable -- Class B (ES0347454011): affirmed at 'CCCsf'; revised Recovery Estimate to 95% from 50% -- Class C (ES0347454029): not rated IM Cajamar Empresas 4 is a static, cash flow securitization of a static portfolio of secured and unsecured loans granted to Spanish self-employed individuals and small-and medium-sized enterprises, granted by Cajamar Caja Rural, Sociedad Cooperativa de Credito (now part of Cajas Rurales Unidas, Sociedad Cooperativa de Credito). Key Rating Drivers The upgrade of the class A notes reflects a substantial increase in credit enhancement since closing in February 2012. This was due to the deleveraging of the portfolio to 65.1% of its initial balance, which compensated for deterioration in performance over the past year. Credit enhancement for the senior notes increased to 43.4% in October 2013 from 34% in January 2013. The account bank trigger of 'BBB+'/'F2' stated in the documentation constrains the maximum achievable rating of the senior notes at 'A+sf'. The credit enhancement available for the class B notes increased to 13.5% from 10.6% during the same period. However, these notes are currently deferring interest due to increased defaults. The payment the class A note principal is senior to the payment of the class B note interest and, since the June 2013 payment date, the available funds have been insufficient to pay the class B note interest after provisioning for defaults. Once the senior notes are fully repaid the cash reserve available will cover for interest shortfalls on the class B notes. In October 2013, the transaction reported 90 day+ delinquencies at 2.1% of the portfolio's balance, unchanged from levels in January but down from the peak of 2.5% in April 2013. Defaulted assets increased in 2013 to 2.8% of outstanding portfolio balance, the highest reported since closing. Fitch considers the fully funded cash reserve of EUR94.5 million sufficient to mitigate potential payment interruption risk that may arise from the transaction's exposure to a non-investment grade servicer, Cajas Rurales Unidas, Sociedad Cooperativa de Credito (BB/Stable/B). The cash reserve provides liquidity to cover for interest shortfalls on the class A notes until they are completely redeemed, and for the class B notes thereafter. Rating Sensitivities As part of its analysis Fitch tests the impact on the ratings of changes in the underlying assets' performance. The agency applied two separate stresses consisting of a 1.25x default rate multiplier to all assets in the portfolio and a 0.75x recovery rate multiplier to all assets. Neither of the two stresses would have negative impact on the ratings of the notes. =========================== U N I T E D K I N G D O M =========================== MOTHERCARE PLC: Profit Warning Casts Doubt on Turnround Plan ------------------------------------------------------------ Duncan Robinson and Emily Cadman at The Financial Times report that shares in Mothercare plunged almost 30% on Wednesday, Jan. 8, after a profit warning cast doubts on the viability of the company's turnround plan. Mothercare's aim of being profitable in the UK by 2016 was knocked off course after poor Christmas trading wiped 4% off the group's like-for-like sales for the 12 weeks to January 4, the FT discloses. Mothercare chief executive Simon Calver blamed "deep and heavy" discounting in the run-up to Christmas, as well as poor sales in the UK toy market, for the poor performance in the group's home market, the FT relates. Mothercare was forced into a scrap on price, the FT says. The performance triggered a flurry of downgrades across the City, the FT relays. According to the FT, analysts at Oriel said that a return to profit in the UK was "not now likely until 2018" and that Mothercare might have to put up with lower margins from now on. Hitherto rapid growth in Mothercare's international markets ground to a near halt, thanks to currency moves and unseasonal weather in some of its key markets, the FT discloses. A warm autumn in Russia, which is Mothercare's largest market outside the UK, helped push down total group sales, including international sales, by 6.1%, the FT states. But while management were confident that the international performance was a blip, investors were not -- shares in the group were down almost a third at one point on Wednesday, Jan. 8. Ms. O'Leary of Oriel, as cited by the FT, said that part of the poor performance abroad "may reflect some increased resistance to the premium prices that Mothercare charges overseas". Mothercare plc is a British retailer which specialises in products for expectant mothers and in general merchandise for children up to 8 years old. RSA INSURANCE: Sacks Two Executives Following Financial Probe ------------------------------------------------------------- Sarah Jones and Joe Brennan at Bloomberg News report that RSA Insurance Group Plc fired two executives in Ireland after a PricewaterhouseCoopers LLP probe found that inappropriate collaboration by managers at the division resulted in inaccurate financial reporting. According to Bloomberg, the London-based insurer said in a statement yesterday that RSA Ireland Chief Financial Officer Rory O'Connor and Claims Director Peter Burke were dismissed on Wednesday. The firings followed an investigation into the timing of reserve provisions for insurance claims and whether the unit reported the amount of premiums paid to the company earlier than it should have, Bloomberg relays. RSA Ireland Chief Executive Officer Philip Smith resigned in November, saying he was made a "fall guy", while group CEO Simon Lee quit last month, Bloomberg recounts. "Our investigations have confirmed that the claims irregularities in Ireland were, in large part, the result of deliberate collaboration between a small number of executives there," Bloomberg quotes RSA Executive Chairman Martin Scicluna as saying in the statement. "We acknowledge that there are lessons to be learnt and we are tightening elements of our control and financial framework in response to these events." RSA said an internal audit and testing from its newly appointed external auditor, KPMG, found the financial and claims irregularities were isolated to Ireland, Bloomberg relates. The insurer also reiterated its estimate that the total costs from the irregularities and reserve review will be GBP200 million (US$272 million), Bloomberg discloses. According to Bloomberg, Nicola Faulkner, a spokeswoman for Ireland's central bank in Dublin, said the bank's probe into the unit would continue for some months and it is unlikely to be in a position to comment further until that process is complete. PwC found evidence suggesting individuals intentionally circumvented parts of RSA's controls, including its large-claim reserving policy, according to the statement, Bloomberg says. As a result, the financial records didn't fully reflect the financial position of the business, and reports made to more senior management were "inaccurate and potentially misleading," RSA, as cited by Bloomberg, said. About GBP1.3 billion were wiped off the company's market value in 2013 after RSA issued three profit warnings in the fourth quarter, resulting in the resignation of Mr. Lee, Bloomberg recounts. RSA Insurance Group plc is a multinational general insurance company headquartered in London, United Kingdom. It has over 17 million customers in 140 countries across the World. WOLVERHAMPTON CITY: Immediate Action Needed to Avoid Bankruptcy --------------------------------------------------------------- BBC News reports that Wolverhampton City Council leaders said "immediate action" needs to be taken at the council to stop it "becoming insolvent." BBC News relates that the Labour-run council approved plans on January 8 to make GBP123 million cuts over the next five years with the loss of 1,400 jobs. It said the cuts were forced by a GBP147 million fall in government funding by 2016, BBC News relays. According to the report, the Conservative group said the council's financial problems had stemmed from overspending in the past. The report relates that the authority said it had originally drawn up plans to save GBP98 million by 2019 but it had now calculated the figure would be GBP123 million. Unless savings of GBP31 million could be made before 2015 it would be down to its last GBP 620,000 and "bankrupt shortly after", according to the authority. BBC News relates that the council said spending by all council departments for the rest of the financial year would be stopped unless it was "absolutely essential." A freeze on recruitment is also being introduced for the next three months, the report notes. Library opening hours will be cut, with the library in Whitmore Reans taking a cut in its hours of 51 a week down to just 15, the report adds. Wolverhampton is a city and metropolitan borough in the West Midlands, England. =============== X X X X X X X X =============== * EUROPE: Bailouts Avert Disorderly Default, EU Commission Says --------------------------------------------------------------- Bloomberg News reports that the European Commission said bailouts to Ireland, Greece, Portugal and Cyprus prevented disorderly default and the spread of bank-runs to other countries as it defended its response to the euro-area debt crisis. The European Union's executive body said in a report made public on Wednesday that the rescue programs, with commitments totaling EUR396 billion since Greece was first bailed out in May 2010, prevented negative economic, financial and social consequences and limited contagion to other nations, Bloomberg relates. "Economic assistance programs prevented the disorderly default of a member state, avoiding much more severe and abrupt social consequences," Bloomberg quotes the commission as saying in answers to a questionnaire from the European Parliament. Lawmakers from the 28-nation assembly are inquiring how the troika -- the commission, the International Monetary Fund and the European Central Bank -- conducted itself during work with the four bailout countries, Bloomberg discloses. That includes imposing privatizations and liberalization, and monitoring them, Bloomberg notes. According to Bloomberg, the commission said that the troika model "has proved to be very useful for dealing with the challenges facing euro-area program countries". European lawmakers have questioned whether the structure is transparent and accountable, Bloomberg notes. EU economic and monetary affairs commissioner Olli Rehn will appear before the parliament on January 13 to respond to questions, Bloomberg discloses. According to Bloomberg, former ECB president Jean-Claude Trichet will face lawmakers on January 14 and Klaus Regling, head of the European Stability Mechanism will participate on January 15. * BOOK REVIEW: Creating Value through Corporate Restructuring ------------------------------------------------------------- Author: Stuart C. Gilson Publisher: Wiley Hardcover: 516 pages List Price: $79.95 Review by David M. Henderson Most business books fall into two categories. The first is very important. It is like that stuff you have to drink before you have a colonoscopy. You keep telling yourself, this is very good for me, while you would rather be at the beach reading Liar's Poker or Barbarians at the Gate. Stuart Gilson, of the Harvard Business School, has managed to write a book important to everybody in the distressed market that is also quite enjoyable. His prose is fluid and succinct and a pleasure to read. But don't take my word for it. The dust jacket endorsements come from Jay Alix, Martin Fridson, Harvey Miller, Arthur Newman, and Sanford Sigoloff. At a collective gazillion dollars a billing hour, that's a lot of endorsement. Be advised that this is designed as a text book. The case study format might be off-putting to some. The effect can be jarring as you read the narrative history of the case and suddenly confront the financial statements without any further clue as to what to do, but this must be what it is like for the turnaround manager. Even after reading several of the cases, when I got to the financials I had that sinking feeling of, what do I do now? If you read carefully, clues to the solutions are in the introductions. The book is divided into three "modules", bizspeek for sections: Restructuring Creditors' Claims,. Restructuring Shareholders' Claims, and Restructuring Employees' Claims. The text covers 13 corporate restructurings focusing on debt workouts, vulture investing, equity spinoffs, tracking stock, assete divestitures, employee layoffs, corporate downsizing, M & A, HLTs, wage givebacks, employee stock buyouts, and the restructuring of employee benefit plans. That's a pretty comprehensive survey, wouldn't you say? Dr. Gilson's chapter on "Investing in Distressed Situations" is an excellent summary of the distressed market and a good touchstone even for seasoned vultures. Even in the two appendices on technical analysis, this book is marvelously free of those charts and graphs that purport to show some general ROI of distressed investing. Those are cute, aren't they? As Judy Mencher has famously said, "You can buy the paper at 50 thinking it's going to 70, but it can just as easily go to 30 if you are not willing to act on it." Therein lies the rub and the weakness, if inevitable, of this or any book on corporate restructurings. As Dr. Gilson notes, no two are alike, and the outcome is highly subjective, in our out of Court, but especially in Chapter 11. Is the Judge enthralled by Jack Butler as Debtor's Counsel or intimidated by Harvey Miller as Debtor's Counsel? Are you holding "secured" paper only to discover that when it was issued the bond counsel forgot to notify the Indenture Trustee of the most Senior debt? Is somebody holding Junior paper that you think is out of the money only to have Hugh Ray read the fine print and discover that the "Junior" paper is secured? This is the stuff of corporate reorganizations that is virtually impossible to codify into a textbook. That said, this is an especially valuable text for anybody working in the distressed market. As a Duke grad, I tend to be disdainful of all things Harvard, but having read Dr. Gilson's book, I am enticed to encamp by the dirty waters of the Charles long enough to take his course, appropriately entitled, "Creating Value Through Corporate Restructuring." ********* 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, and Peter A. Chapman, Editors. Copyright 2014. 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 * * *