/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/140212.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, February 12, 2014, Vol. 15, No. 30 Headlines A U S T R I A HYPO ALPE-ADRIA: Austria Scraps "Bad Bank" Plan G E R M A N Y COMMERZBANK AG: Fitch Hikes Lower Tier 2 Debt Rating From 'BB+' G R E E C E DRYSHIPS INC: Ocean Rig Enters Into Amendment of Term Loan I R E L A N D BROOKLANDS 2004-1: Fitch Lowers Rating on Class D Notes to Dsf ELVERYS SPORTS: Sports Direct Welcomes News of Examiner MOUNT CARMEL HOSPITAL: Centric Health Makes Fresh Bid I T A L Y * ITALY: Banks May Face Capital Shortfall of Up to EUR15 Bil. P O R T U G A L PORTUGAL TELECOM: S&P Retains 'BB' CCR on CreditWatch Developing R U S S I A ALLIANCE OIL: S&P Lowers Corp. Credit Rating to 'B-' PERESVET BANK: S&P Assigns B+ Counterparty Rating; Outlook Stable S P A I N PESCANOVA SA: Enters Into Crucial Talks with Creditor Banks S W E D E N STENA AB: S&P Assigns 'BB+' Rating to Proposed Sr. Secured Loan U K R A I N E FERREXPO PLC: S&P Cuts Corp. Credit Rating to 'B-'; Outlook Neg. U N I T E D K I N G D O M CONSOLIDATED MINERALS: S&P Raises CCR to 'B+'; Outlook Stable DECO 6: Fitch Affirms 'Csf' Rating on 3 Note Classes GRAHAM WOOD: Seeks Court Protection From Creditors LINENHALL PROPERTY: Collapses Into Administration MAYO SEVEN: Brady Sullivan Steps in Acquire Center At Keene PUNCH TAVERNS: Publicans Could Face Cash Crisis if Pub Calls Time ROSEMARY CONLEY FOOD: Goes Into Administration, Cuts 6 Jobs * UK: Administration Rescued Fewer Stores in 2013 ********* ============= A U S T R I A ============= HYPO ALPE-ADRIA: Austria Scraps "Bad Bank" Plan ----------------------------------------------- Michael Shields at Reuters reports that officials said Austria scrapped its plan to have healthy commercial lenders back a "bad bank" for toxic assets at nationalized Hypo Alpe-Adria International AG and will look now at creating its own wind-down vehicle, which would increase state debt. According to Reuters, Finance Minister Michael Spindelegger said after a high-level meeting at the chancellery on Monday resistance from other banks and problems with setting up a bad bank in a way that would keep its debt off state books under European rules scuppered the plan. He told reporters that letting Hypo go bust remained an option if all else failed, Reuters relates. The central bank and FMA markets watchdog vehemently rejected that move, saying it posed too great a risk of sweeping Austria itself up in the contagion, Reuters relays. The least bad option now is considered the creation of a state vehicle absorbing up to EUR19 billion (US$26 billion) in assets from Hypo, Reuters states. That would relieve the bank's chronic need for capital, which is a drain on state finances, Reuters says. Just how much a state bad bank would cost was not immediately clear, Reuters notes. Mr. Spindelegger refused to exclude an insolvency, the threat of which boosts Austria's leverage in negotiations with former owner BayernLB over who should pay to clean up the mess at the Klagenfurt-based lender, Reuters recounts. About Hypo Alpe-Adria Hypo Alpe-Adria International AG is a subsidiary of BayernLB. It is active in banking and leasing. In banking, HGAA serves both corporate and retail customers and offers services ranging from traditional lending through savings and deposits to complex investment products and asset management services. Hypo Alpe has received EUR1.75 billion in aid in emergency capital from the Austrian government. European Union Competition Commissioner Joaquin Almunia said in March 2013 that Hypo faced possible closure for failing to adequately restructure. The European Commission approved Hypo's recapitalization in December 2013, but made it conditional on the management presenting a thorough plan to overhaul the group. The Austrian finance ministry, which effectively runs Hypo Alpe, submitted a restructuring plan to the Commission on Feb. 5. ============= G E R M A N Y ============= COMMERZBANK AG: Fitch Hikes Lower Tier 2 Debt Rating From 'BB+' --------------------------------------------------------------- Fitch Ratings has affirmed Commerzbank AG's (CBK) Long-term Issuer Default Rating (IDR) at 'A+' and Hypothekenbank Frankfurt AG's (HF) at 'A-'. The Outlooks are Stable. At the same time, Fitch has upgraded CBK's Viability Rating (VR) and hybrid and subordinated debt ratings. KEY RATING DRIVERS - IDRs, SUPPORT RATINGS, SUPPORT RATING FLOORS AND SENIOR DEBT CBK's Long- and Short-term IDR, Support Rating (SR), and senior debt ratings reflect Fitch's view that its status as a large universal bank in Germany results in an extremely high probability of state support, as indicated by a Support Rating Floor (SRF) of 'A+'. After the capital increase in 2013, the German government keeps its ownership in CBK through the Financial Market Stabilisation Fund (SoFFin) at around 17%. HF's support-driven ratings are at their SRF and reflect Fitch's view of the high likelihood of support from the Federal Republic of Germany (AAA/Stable), particularly in view of HFs large size and outstanding issuance in the Pfandbrief market. Fitch expects that state support, if needed, would be forthcoming via CBK. Fitch's view of the likelihood of state support reflects HF's interconnectivity with its ultimate parent's creditworthiness and its large volume of issued German Pfandbriefe. HF has a letter of backing (Patronatserklaerung) from CBK and a domination and profit and loss transfer agreement is in place with its direct owner, Commerzbank Inlandsbanken Holding GmbH (not rated), a wholly-owned subsidiary of CBK. The Stable Outlooks reflects Fitch's expectation that the German government will continue to support large German banks, including CBK, as long as the tools for dealing with resolution of large international banks are not fully developed. RATING SENSITIVITIES - IDRs, SUPPORT RATINGS, SUPPORT RATING FLOORS AND SENIOR DEBT Fitch's view on support is sensitive to developments within the regulatory and legal framework, particularly emanating from the European Commission with regard to bank support, bail-ins, centralized regulatory oversight and adjustments to deposit insurance schemes, and the developing attitude of the German authorities towards using these tools. Fitch understands that there is broad political will in Germany, supported by all major parties, to move towards reducing the implicit state support of systemically important banks in the country at some point. In addition, the European Union discussion on the Bank Recovery and Resolution Directive and the Single Resolution Mechanism aspect of Banking Union are drawing to a close, with European Parliament votes scheduled for 1Q14 and representing important steps to curb systemic risks posed by the banking industry (see 'Fitch Outlines Approach for Addressing Support in Bank Ratings', 'Bank Support: Likely Rating Paths', 'The Evolving Dynamics of Support for Banks' and 'Sovereign Support for Banks Update on Position Outlined In 3Q13' at www.fitchratings.com). This follows Germany's implementation of a Restructuring Act in 2011. Although Fitch does not expect to immediately remove support incorporated into some EU bank ratings, these developments highlight potential risks for CBK's IDR and senior debt ratings. CBK's SRF would be revised down and its SR, IDRs and senior debt ratings downgraded if Fitch concludes that potential sovereign support has weakened relative to its previous assessment. Given CBK's VR is 'bbb', any support-driven downgrade of the bank's Long-term IDR and senior debt ratings would be limited to four notches. KEY RATING DRIVERS AND SENSITIVITIES - VRs The upgrade of CBK's VR by one notch reflects the bank's progress with its extensive restructuring plans as well as Fitch's expectation that the profitability of CBK's core businesses should mildly improve. Fitch views CBK's profitability and asset quality and its risk appetite as important rating drivers. Fitch believes that the operating profit of the Private Customers segment should improve in 2014 from low levels, reflecting CBK's growth in mortgage lending and a benign environment for investment products. In addition, the upgrade is based on the assumption that CBK can stabilize the operating profit in its Mittelstandsbank segment, which caters for its medium-sized corporate customers. In Fitch's view, CBK is now better positioned to protect its franchise in a competitive domestic market. However, its non-core assets (NCA) still pose downside risks. CBK's performance has been helped by the favorable German economy and notably the low number of corporate insolvencies in Germany. However, CBK is still exposed to concentration risks and troubled European markets, which have absorbed a substantial share of its profits in recent years. The VR is most sensitive to downside risks from non-core commercial real estate, especially in Spain, and its shipping portfolio, for which 2014 will be another difficult year. Fitch expects that CBK would be able to absorb a potential deterioration of the asset quality in its core businesses. Fitch notes that further successful deleveraging of its NCA, specifically of its exposure in southern Europe and shipping loans, or a broader and structural recovery of the Southern European countries would further underpin CBK's higher VR. If the improvement of CBK's core businesses is delayed or fails, most likely in the form of falling revenues coupled with higher loan impairment charges, which are currently relatively low in the core businesses, Fitch could reverse its view on CBK's VR. In this context, Fitch expects that the ECB's comprehensive assessment of large European banks' assets in 2014, including an extensive risk assessment, asset quality review and stress test, will not result in a material capital shortfall at CBK. Although only limited details of the actual test have been reported, Fitch has conducted some stress testing of CBK's phase in Basel III CT1 ratio, including assumptions about continued deleveraging of NCA, and concludes that it would take severe stressing, for example of CBK's shipping portfolio, to push the CT1 ratio below 8%. Fitch believes that such a scenario cannot be fully excluded but is not likely. Fitch expects CBK's capitalization and funding franchise to remain stable. These are moderately important rating drivers at this stage as CBK has made considerable progress in both areas over the past few years compared with its lagging performance in restoring profitability. KEY RATING DRIVERS AND RATING SENSITIVITIES - SUBORDINATED DEBT AND OTHER HYBRID SECURITIES Fitch has upgraded CBK's and HF's Tier 1 and Tier 2 securities as a result of the upgrade of CBK's VR which is the anchor rating for these instruments. Subordinated debt and other hybrid capital issued by CBK are all notched down from CBK's VR in accordance with Fitch's assessment of each instrument's respective non- performance and relative loss severity risk profiles, which vary considerably. Because HF is in run down and has no VR, Fitch views CBK's 'bbb' VR as the initial source of anchor for HF's junior debt ratings, given Patronatserklaerung and the existence of a profit and loss transfer agreement. The Tier 1 instruments issued by Commerzbank Capital Funding Trust II have been upgraded to 'BBB-', one notch below CBK's new VR, because on 16 January 2014, CBK reported that it was complying with a court ruling which forced it to elevate the trust preferred securities to the same Lower Tier II capital class as the silent partnership certificates of Dresdner Funding Trust IV (Dresdner IV), to give them the same senior liquidation preference as the Dresdner IV securities and remove the profit- dependent trigger while maintaining the securities' accrual of capital payments. Similar to Dresdner IV the new Commerzbank Capital Funding Trust II instruments reflect minimal incremental non-performance risk characteristics relative to CBK's VR (zero notches) plus one notch for loss severity. The Tier 1 securities, including HT1 Funding Capital, which have a distributable profit trigger, are rated four notches below CBK's VRs, two notches each for high loss severity and high non- performance risks. Dresdner Funding Trust I, Tier 1 securities which have a regulatory capital ratio trigger, have been upgraded to 'BB', three notches below CBK's new VR, two notches for loss severity and now only one notch for performance risk. In Fitch's view, the fact that Dresdner Funding Trust I has always paid its coupon whereas Tier 1 instruments with a distributable profit trigger have not are reflected in a notch difference. UT2 Funding plc securities are upper Tier 2 instruments and notching for loss severity (one notch) is lower than for the bank's Tier 1 securities (two notches). However, they have higher non-performance risk (three notches) compared with Tier 1 debt (two notches) because coupon payments are dependent on profits in the profit and loss account. Lower Tier 2 securities issued by CBK are rated one notch below CBK's VR in order to reflect higher loss severity compared to senior unsecured debt instruments (one notch). Subordinated debt and other hybrid capital issued by CBK and associated SPVs are primarily sensitive to any change in CBK's VR. In addition, CBK's Capital Funding Trust I securities would be upgraded if CBK decides to restructure the instruments and change the documentation to mirror the documentation of CBK's Capital Funding Trust II securities. Fitch views CBK's 'bbb' VR as the initial source of support for HF's subordinated debt. The degree of notching relative to CBK's VR reflects Fitch's opinion that there is greater non-performance risk on HF's sub debt than there is on CBK's own subordinated debt (rated 'BBB-'). This is because HF is in wind down and its large size relative to CBK means a situation could arise where additional support for HF ultimately needs to be channelled from federal sources. Under such circumstances, support for subordinated debt cannot be assumed, given the precedent in the EU for subordinated debt burden sharing. The rating of the subordinated debt is therefore sensitive to an increase in the likelihood of such an event occurring. Fitch also notes that in 2012 CBK decided not to divest its subsidiary Eurohypo, now HF, but to run the company down. As a bank in wind-down, HF is not a viable entity. EUROHYPO Capital Funding Trust I and EUROHYPO Capital Funding Trust II were upgraded in December 2013 to reflect that the trustee has made forgone capital payments to the holders of the trust preferred securities for the years 2009-2012 in line with HF's agreement and that the trigger for coupon payments of the trust preferred securities has stopped being dependent on sufficient distributable profit in HF's unconsolidated German GAAP accounts but essentially "must"-payments as long as the profit and loss transfer agreement exists. In January, HF announced EUROHYPO Capital Funding Trust LLC's intention to redeem the Company Class B Preferred Securities in whole on 24 February 2014. EUROHYPO Capital Funding Trust I and II's ratings are sensitive to the termination of the profit and loss transfer agreement and to changes of Commerzbank's VR. SUBSIDIARY AND AFFILIATED COMPANY RATING DRIVERS AND SENSITIVITIES Commerzbank U.S. Finance Inc is a wholly owned subsidiary of CBK. The Short-term rating of its Commercial Paper Programme is equalized with CBK's IDR and reflects the likelihood of systemic support. The Short-term rating of the commercial paper program is sensitive to the same factors that might drive a change in CBK's IDR. HF's subsidiary Hypothekenbank Frankfurt International S.A.'s (HFI) ratings are in line with its 100% parent HF as the subsidiary benefits indirectly from the support provided to the parent, as well as having a Patronatserklaerung from HF. As a result the ratings sensitivities for HFI are the same as those for HF. The ratings actions are as follows: Commerzbank AG Long-term IDR: affirmed at 'A+'; Outlook Stable Short-term IDR: affirmed at 'F1+' Viability Rating: upgraded to 'bbb' from 'bbb-'upport Rating: affirmed at '1' Support Rating Floor: affirmed at 'A+' Commercial paper and Certificates of Deposits: affirmed at 'F1+' Senior unsecured debt: affirmed at 'A+' Market-linked securities: affirmed at 'A+emr' Subordinated debt (Lower Tier 2): upgraded to 'BBB-' from 'BB+' Subordinated debt (Dresdner Funding Trust IV (XS0126779791): upgraded to 'BBB-' from 'BB+' Commerzbank U.S. Finance, Inc.'s Short-term rating: affirmed at 'F1+' Hybrid capital instruments issued by Commerzbank: Dresdner Funding Trust I's dated silent participation certificates (XS0097772965): upgraded to 'BB' from 'B+'. Commerzbank Capital Funding Trust II (XS0248611047): upgraded to 'BBB-' from 'B+' Commerzbank Capital Funding Trust I (DE000A0GPYR7): upgraded to 'BB-' from 'B+' UT2 Funding plc upper Tier 2 securities (DE000A0GVS76): upgraded to 'BB-' from 'B+' HT1 Funding GmbH Tier 1 Securities (DE000A0KAAA7): upgraded to 'BB-' from 'B+' HF: Long-term IDR: affirmed at 'A-', Outlook Stable Short-term IDR: affirmed at 'F1' Support Rating: affirmed at '1' Support Rating Floor: affirmed at 'A-' Senior unsecured debt: affirmed at 'A-' Subordinated debt: upgraded to 'BB-' from 'B+' HFI: Long-term IDR: affirmed at 'A-', Outlook Stable Short-term IDR: affirmed at 'F1' Support Rating: affirmed at '1' EUROHYPO Capital Funding Trust I/II preferred stock (XS0169058012, DE000A0DZJZ7): upgraded to 'BB-' from 'B+' =========== G R E E C E =========== DRYSHIPS INC: Ocean Rig Enters Into Amendment of Term Loan ---------------------------------------------------------- DryShips Inc., an international provider of marine transportation services for drybulk and petroleum cargoes, and through its majority owned subsidiary, Ocean Rig UDW Inc., of offshore deepwater drilling services, on Feb. 7 disclosed that Ocean Rig, and its wholly owned subsidiaries, Drillships Financing Holding Inc., and Drillships Projects Inc., have entered into an Amendment and Restatement Agreement to the Credit Agreement dated as of July 12, 2013, as amended, among Ocean Rig, DFHI, Drillships Projects, the lenders from time to time party thereto and Deutsche Bank AG New York Branch, as administrative and collateral agent which originally comprised of tranche B-1 term loans in an aggregate principal amount equal to US$1.075 billion and tranche B-2 term loans in an aggregate principal amount equal to US$825.0 million. Pursuant to the Amendment and Restatement Agreement, the existing Tranche B-2 Terms Loans have been refinanced with additional new Tranche B-1 Term Loans the result of which is that DFHI currently has approximately US$1.9 Billion of Tranche B-1 Term Loans outstanding. All Tranche B-1 Term Loans remain guaranteed by Ocean Rig and by certain existing and future subsidiaries of DFHI and are secured by certain assets, and by a pledge of the stock of DFHI and each subsidiary guarantor. George Economou, Chairman and Chief Executive Officer of the Company, commented: "We are pleased with the successful closing of this important transaction which extends Ocean Rig's debt maturities. We effectively refinanced the short-term tranche of the Term Loan B Facility with a fungible add-on to the long-term tranche. Post transaction, the entire US$1.9 billion facility will mature not earlier than the third quarter of 2020." About DryShips Inc. Headquartered in Athens, Greece, DryShips Inc. (NASDAQ: DRYS) is an owner of drybulk carriers and tankers that operate worldwide. Through its majority owned subsidiary, Ocean Rig UDW Inc., DryShips owns and operates 10 offshore ultra deepwater drilling units, comprising of 2 ultra deepwater semisubmersible drilling rigs and 8 ultra deepwater drillships, 3 of which remain to be delivered to Ocean Rig during 2013 and 1 is scheduled for delivery during 2015. DryShips owns a fleet of 46 drybulk carriers (including newbuildings), comprising of 12 Capesize, 28 Panamax, 2 Supramax and 4 Very Large Ore Carriers (VLOC) with a combined deadweight tonnage of about 5.1 million tons, and 10 tankers, comprising 4 Suezmax and 6 Aframax, with a combined deadweight tonnage of over 1.3 million tons. The Company reported a net loss of US$288.6 million on US$1.210 billion of revenues in 2012, compared with a net loss of US$47.3 million on US$1.078 billion of revenues in 2011. The Company's balance sheet at Dec. 31, 2012, showed US$8.878 billion in total assets, US$5.010 billion in total liabilities, and shareholders' equity of US$3.868 billion. Going Concern Doubt Ernst & Young (Hellas), in Athens, Greece, expressed substantial doubt about DryShips Inc.'s ability to continue as a going concern, citing the Company's working capital deficit of US$670 million at Dec. 31, 2012, and in addition, the non- compliance by the shipping segment with certain covenants of its loan agreements with banks. As of Dec. 31, 2012, the shipping segment was not in compliance with certain loan-to-value ratios contained in certain of its loan agreements. In addition, as of Dec. 31, 2012, the shipping segment was in breach of certain financial covenants, mainly the interest coverage ratio, contained in the Company's loan agreements relating to US$769,098,000 of the Company's debt. As a result of this non-compliance and of the cross default provisions contained in all bank loan agreements of the shipping segment and in accordance with guidance related to the classification of obligations that are callable by the creditor, the Company has classified all of its shipping segment's bank loans in breach amounting to US$941,339,000 as current at Dec. 31, 2012. ============= I R E L A N D ============= BROOKLANDS 2004-1: Fitch Lowers Rating on Class D Notes to Dsf -------------------------------------------------------------- Fitch Ratings has downgraded Euro Reference-Linked Notes 2004-1 Limited (Brooklands 2004-1)'s class D notes and affirmed the others, as follows: Class A2 (ISIN XS0193141891) affirmed at 'CCsf' Class B (ISIN XS0193142436) affirmed at 'Csf' Class C-E (ISIN XS0193142782) affirmed at 'Csf' Class C-Y (ISIN XS0193142865) affirmed at 'Csf' Class D (ISIN XS0193143590) downgraded to 'Dsf' from 'Csf' Class E (ISIN XS0193143913) affirmed at 'Dsf' Key Rating Drivers The class D notes have been downgraded as EUR11.3 million has been written off their notional as part of credit protection payments made on the reference pool. Furthermore the entire notional balance (EUR13.5 million) of the class E notes has now been written off as part of the same series of payments. The affirmation of the class A2 to C-Y and class E notes reflects the notes' levels of credit enhancement relative to the reference portfolio credit quality. Fitch considers it unlikely that principal will be repaid at maturity. The reference pool currently consists of 47.8% (EUR279 million) sub-investment grade assets and 7% (EUR41 million) assets rated 'CCC' or below. Credit protection payments were made on two assets Deco 6-UK2X C and Deco 6-UK2X D, which were classified as defaulted in November 2012. The payment amount for the two assets was determined on the last auction date at EUR14.9 million. There are now no credit protection payments outstanding. Seven credit protection payments have been made over the lifetime of the deal for a total EUR47.5 million on EUR47.8 million of assets. The issuer, Brooklands, is a special purpose vehicle incorporated with limited liability under the laws of the Cayman Islands. Brooklands provides protection to UBS AG, London Branch on a portfolio of reference credits with an initial notional value of EUR750 million. The class A to E notes' ratings address the full and timely payment of interest and ultimate payment of principal by the final maturity. The class A1-b notes were redeemed in full in June 2013. The scheduled maturity date for the remaining notes is in June 2014 and the legal final maturity date is in 2054. The margins for any notes still outstanding after the scheduled maturity date are to increase. Rating Sensitivities All the outstanding notes are at distressed rating levels and as such are unlikely to be affected by any further deterioration in the respective underlying asset portfolios. ELVERYS SPORTS: Sports Direct Welcomes News of Examiner ------------------------------------------------------- Irish Times reports that UK sport retailer Sports Direct has welcomed the news that a temporary examiner has been appointed to troubled chain Elverys Sports. "We hope that a permanent appointment over the next week will lead to a fair and transparent process over the future ownership of the Elverys sports chain," the report quoted Sports Direct Chief Executive Dave Forsey as saying. Irish Times notes that the group, which is owned by UK billionaire Mike Ashley, sought to be allowed into the bidding process for Elverys, which was the subject of a EUR10 million management buyout. National Asset Management Agency (NAMA) took the decision to seek the appointment of the examiner amid fears that Sports Direct or Stafford Group-owned Lifestyle Sports could mount a legal challenge to the so-called "pre-pack" receivership arranged to sell the business to management, the report notes. The report discloses that Mr. Ashley said the company was prepared to pay a 25 per cent premium for Elverys, with Mr. Forsey describing the firm as "an excellent strategic fit" for Sports Direct in Ireland. The deal would give the company, which has a stake in the Heatons retail chain, access to the replica rugby kit market, the report relays. MOUNT CARMEL HOSPITAL: Centric Health Makes Fresh Bid ----------------------------------------------------- Tom Lyons at The Irish Times reports that Centric Health has made a fresh approach to buy Mount Carmel Hospital in south Dublin, which went into liquidation in January. It follows RAS Medical Group, the owner of the Park West Clinic in Dublin 12 and other health businesses, indicating its interest last week to the hospital's liquidator RSM Farrell Grant Sparks, The Irish Times discloses. According to The Irish Times, under any new owner, Mount Carmel will almost certainly not be a maternity hospital but will focus instead on offering other facilities to patients. The Centric plan is understood to envisage the hospital exiting maternity services and providing various other medical services, including its speciality and diagnostic services, as well as offering suites to consultants in St James's Hospital in Dublin where they can meet private clients, The Irish Times notes. Centric previously made an offer to acquire Mount Carmel before Christmas from the National Asset Management Agency, The Irish Times recounts. Initially, this was accepted but, after due diligence, Centric reduced its price, The Irish Times states. Ultimately NAMA did not secure a bid it found satisfactory, causing it to put the hospital into liquidation, The Irish Times relays. Prospective buyers prior to the liquidation were concerned about the cost of funding redundancies among the hospital's 300 staff and about the expense of investing in the hospital to upgrade it and reorient its offering away from maternity services, The Irish Times says. This caused buyers to fall away after 49 different parties initially expressed an interest in buying the hospital, which was founded in 1949, The Irish Times notes. According to The Irish Times, as the hospital is now in liquidation and its 300 staff have been made redundant, the economics of keeping Mount Carmel open as a medical facility have changed fundamentally, making it more attractive to prospective bidders. Mount Carmel Medical (South Dublin Ltd.) operates the Mount Carmel Hospital in Churchtown, Dublin. ========= I T A L Y ========= * ITALY: Banks May Face Capital Shortfall of Up to EUR15 Bil. ------------------------------------------------------------- Sonia Sirletti and Flavia Rotondi at Bloomberg News report that Italian banks, which have raised money, sold assets and cut costs to boost capital, may face a shortfall of as much as EUR15 billion (US$20 billion) as regulators scrutinize their balance sheets this year. "We are confident that the Italian banks will pass the stress test exercise without major problems," Bloomberg quotes Giovanni Sabatini, general manager of the Italian banking association, as saying in an interview in Rome. He agrees with an estimate made by the Bank of Italy of a potential capital shortfall of EUR10 billion to EUR15 billion, Bloomberg notes. Assets of 15 Italian lenders, including UniCredit SpA (UCG) and Intesa Sanpaolo SpA (ISP), are being reviewed by the European Central Bank as part of a comprehensive assessment before it takes over banking supervision for the euro area in November, Bloomberg discloses. "There are several options for lenders to fill the eventual capital gap found during the scrutiny and most will depend on the timing imposed by the ECB," Mr. Sabatini, as cited by Bloomberg, said. He said that those alternatives may include share sales, disposals and additional deleverage, Bloomberg relates. The stress test is the third and final stage of the ECB's Comprehensive Assessment, an evaluation of whether lenders can survive a downturn, Bloomberg notes. =============== P O R T U G A L =============== PORTUGAL TELECOM: S&P Retains 'BB' CCR on CreditWatch Developing ---------------------------------------------------------------- Standard & Poor's Ratings Services said that its 'BB' long-term corporate credit ratings on Portuguese telecommunications provider Portugal Telecom SGPS S.A. (PT) and its wholly owned finance subsidiary Portugal Telecom International Finance B.V. (PTIF) remain on CreditWatch with developing implications. S&P placed the ratings on CreditWatch developing on Oct. 4, 2013. At the same time, S&P affirmed the 'B' short-term corporate credit ratings on PT and PTIF. The CreditWatch developing status indicates that S&P could raise, lower, or affirm the ratings. It reflects, on the one hand, the likely benefits for PT of the proposed merger between PT and Brazilian telecom company Oi to form a new Brazilian listed entity, and, on the other, S&P's view of continued downgrade risk for PT if the merger were to fail. PT has announced a number of liability management initiatives for which it seeks creditors' approval, this being a condition to completing the merger. S&P continues to understand that the merger plan intends to offer adequate protection to creditors of PT and PTIF and exposure to the enlarged Oi group. Should the announced merger with Oi complete successfully, S&P might lift the long-term rating on PT and its related outstanding issues to reflect the likely higher credit quality of the new combined entity, assuming the guarantees then in place were in line with S&P's guarantee criteria. Conversely, should the merger fail, S&P could lower the rating on PT by one notch, given the relentless pressures on PT's domestic EBITDA and S&P's expectation of weakening credit metrics. S&P aims to resolve the CreditWatch status when the transaction outcome is known, which S&P understands could be by June 2014. =========== R U S S I A =========== ALLIANCE OIL: S&P Lowers Corp. Credit Rating to 'B-' ---------------------------------------------------- Standard & Poor's Ratings Services lowered its long-term corporate credit rating on Russia-based Alliance Oil Co. to 'B-' from 'B'. S&P also lowered its Russia national scale rating on the company to 'ruBBB' from 'ruA-'. At the same time, S&P lowered its issue rating on the company's senior unsecured debt to 'B-' from 'B'. The '4' recovery rating on this debt remains unchanged. S&P also changed the CreditWatch implications for the issue, issuer, and Russia national scale ratings to negative from developing. S&P had originally placed these ratings on CreditWatch developing on Nov. 6, 2013. The downgrade reflects S&P's expectation of a significant increase in Alliance Oil's leverage (debt to EBITDA) and its potentially more aggressive financial policy. S&P understands from management that the US$1.2 billion in debt raised by parent Alliance Group to purchase all outstanding stock in Alliance Oil in December 2013 will effectively become Alliance Oil's liability. As a result, S&P expects Alliance Oil's ratio of adjusted debt to EBITDA to increase to more than 5x in 2014, from 3.4x in the 12 months ended Sept. 30, 2013. The ratio of funds from operations (FFO) to adjusted debt will likely decrease to about 10% or lower, from 19% over the same period. S&P also believes that Alliance Oil's financial policy, particularly regarding investments and shareholder distributions, may become more aggressive. Alliance Group is privately owned by Russia's Bazhaev family of businessmen, who S&P understand aim to maintain Alliance Oil separate from other family assets. Therefore, we do not foresee any potential for parental support to Alliance Oil in the future. S&P changed the implications of our CreditWatch listing to negative from developing because of the potential squeeze S&P foresees on Alliance Oil's liquidity owing to the US$1.2 billion in additional debt. S&P derives its rating on Alliance Oil from its 'b-' anchor, reflecting the company's "weak" business risk and "highly leveraged" financial risk profiles. In S&P's assessment of Alliance Oil's business risk, it factors in the company's position as a small private player in the Russian oil industry. It benefits from a natural hedge through taxes and foreign exchange. However, its earnings are more volatile than local peers' because of its large downstream segment, and because tax holidays on some of its large fields increase profitability but reduce the hedging effect in the upstream segment. S&P's assessment of Alliance Oil's financial risk incorporates its expectation of a substantial increase in the company's leverage following Alliance Group's full ownership, and owing to negative free operating cash flow (FOCF). Alliance Oil has a large investment program aiming to increase production and modernize its key refinery. In addition, S&P thinks Alliance Oil will adopt a more aggressive financial policy under the new shareholding structure, which may also push up the company's leverage. In S&P's base case, it assumes the following: -- It now includes Alliance Group's $1.2 billion in Alliance Oil's debt, as it believes that the company will repay this debt through its cash flows over time. -- S&P thinks the company's heavy capital expenditures will continue as it modernizes its refinery. -- S&P's Brent oil price assumption is $105 per barrel (/bbl) in 2014, $100/bbl in 2015, and $95/bbl thereafter. -- S&P don't net any cash from Alliance Oil's adjusted debt under its criteria because of the company's weak business risk profile. Based on these assumptions, S&P arrives at the following credit measures at year-end 2014: -- Strongly negative FOCF. -- Debt to EBITDA exceeding 5x. -- FFO to debt at about 10%. The CreditWatch reflects the potential squeeze S&P foresees on Alliance Oil's liquidity, owing to its US$1.2 billion in additional debt. S&P plans to resolve its CreditWatch within 90 days or once it has clarification on the implications of this additional debt for the company and S&P is able to assess its progress in addressing potential liquidity issues. S&P could lower the ratings if the US$1.2 billion in debt created any tightening in Alliance Oil's liquidity, namely short-term debt maturities or covenant breaches. S&P would likely affirm the ratings on Alliance Oil if its debt maturity profile stayed manageable and it continued to comply with covenants. PERESVET BANK: S&P Assigns B+ Counterparty Rating; Outlook Stable ----------------------------------------------------------------- Standard & Poor's Ratings Services said it had assigned its 'B+' long-term and 'B' short-term counterparty credit ratings to Russia-based JSCB Peresvet Bank. The outlook is stable. At the same time, S&P assigned its 'ruA+' Russia national scale rating to the bank. The ratings on Peresvet Bank factor in the inherent economic and industry risks faced by a commercial bank operating in Russia, reflected in S&P's 'bb' anchor. The ratings also reflect S&P's view of the bank's "moderate" business position, "moderate" capital and earnings, "moderate" risk position, "average" funding, and "adequate" liquidity, as S&P's criteria define these terms. The stand-alone credit profile (SACP) is 'b+'. S&P considers Peresvet Bank's business position to be "moderate." This balances the bank's limited pricing power and franchise and its business concentrations with its access to fairly lucrative clients and proven track record of strong operational performance. With assets of Russian ruble (RUB) 91.3 billion (about US$2.78 billion) according to International Financial Reporting Standards as of June 30, 2013, Peresvet Bank is a midsize Russian bank with a unique ownership structure that includes the Russian Orthodox Church (which controls 48% of common shares) and the Chamber of Commerce and Industry of the Russian Federation (24.5%). S&P believes this ownership structure, in particular the link with the Russian Orthodox Church, partly explains the bank's track record of strong operating performance, because it ensures sustainability of business flows amid different economic cycles and amid margin pressure, and strengthens borrowers' willingness to pay their debt. The bank primarily focuses on servicing corporate clients, which it typically attracts through the shareholders. The bank has a substantial focus on government-related entities, which made up about 50% of corporate deposits as of June 30, 2013, and stemmed from state-owned companies or their direct subsidiaries. This focus, however, makes Peresvet Bank subject to tight competition from state-owned and large private banks. The bank's regional concentration is fairly high, given that 60%-70% of business comes from the Moscow Oblast. "We assess Peresvet Bank's capital and earnings as "moderate," reflecting our projection that the risk-adjusted capital (RAC) ratio before adjustments for concentration and diversification for the bank will gradually improve to about 6% in 2014-2015 from 5.4% at the end of 2012," S&P said. In S&P's view, Peresvet Bank's overall risk position is "moderate." S&P believes that the bank's loan portfolio is concentrated compared with that of both local and global peers. S&P considers Peresvet Bank's funding to be "average." The bank is primarily funded by customer deposits, typically corporate, which constituted 74% of the funding base as of July 1, 2013. The funding base is well-spread by maturity, leading to a relatively good stable funding ratio of 108%. Peresvet Bank's liquidity is "adequate," and it has a liquidity cushion of about 25% of the balance sheet. Nevertheless, the bank's coverage of short-term deposits by liquid assets is weaker than that of its peers, leaving the bank vulnerable to deposit outflows. The stable outlook reflects S&P's anticipation that the bank will maintain credit losses and problem loans lower than the system average, despite economic slowdown in Russia. S&P expects the bank will generate sufficient earnings while expanding its activities, in order to avoid erosion of its capital ratios and to gradually improve the granularity of its funding base. ========= S P A I N ========= PESCANOVA SA: Enters Into Crucial Talks with Creditor Banks ----------------------------------------------------------- Tobias Buck at The Financial Times reports that Spain's Pescanova has entered make-or-break talks with more than 100 creditor banks to try to save stricken frozen fish group Pescanova SA from liquidation and prevent the biggest industrial collapse since the start of the Spanish economic crisis. The Pescanova board wants banks to accept a cut of 70-80% on loans worth a total of EUR1.8 billion, but says its proposals have been rebuffed, the FT discloses. It is now striving to meet a March 3 deadline, the last day on which proposals to resolve the debt stand-off can be tabled to the bankruptcy court, the FT says. According to the FT, the parties then have another month to finalize a deal. If no solution is found by April 3, the group will be liquidated, putting at risk 2,000 jobs in Spain and another 12,000 at factories and fish farms in the rest of the world, the FT states. Juan Manuel Urgoiti, who was appointed chairman of the board last September, said the group remained a "viable business" as long as its debt problems could be resolved, and warned that the consequences of letting Pescanova fail would be "brutal" for the Spanish economy, the FT relates. About Pescanova SA Pescanova SA is a Galicia-based fishing company. The company catches, processes, and packages fish on factory ships. It is one of the world's largest fishing groups. Pescanova filed for insolvency on April 15, 2013, on at least EUR1.5 billion (US$2 billion) of debt run up to fuel expansion before economic crisis hit its earnings. The Pontevedra mercantile court in northwestern Galicia accepted Pescanova's insolvency petition on April 25. The court ordered the board of directors to step down and proposed Deloitte as the firm's administrator. =========== S W E D E N =========== STENA AB: S&P Assigns 'BB+' Rating to Proposed Sr. Secured Loan --------------------------------------------------------------- Standard & Poor's Ratings Services said that it assigned its 'BB+' issue rating to the proposed senior secured term loan and proposed senior secured notes, with an anticipated aggregate principal amount of approximately US$1.1 billion, to be issued by Sweden-based conglomerate Stena AB. At the same time, S&P assigned a recovery rating of '2' to the proposed term loan and senior secured notes, indicating its expectation of substantial (70%-90%) recovery for creditors in the event of a payment default. In addition, S&P affirmed its 'BB' issue ratings on the EUR102 million, EUR300 million, EUR200 million, and US$600 million senior unsecured notes issued by Stena. The recovery ratings on these existing senior unsecured notes remain unchanged at '4', indicating S&P's expectation of average (30%-50%) recovery for creditors in the event of payment default. S&P notes that due to a reduction in amortization payments on the path to default as a result of the proposed transaction, the recovery prospects for the unsecured notes have reduced, but remain within the 30%-50% range. S&P understands that Stena will use the proceeds of the proposed term loan and senior secured notes to repay in full US$698 million of existing senior secured ship loans, and US$402 million of outstanding drawings under a Swedish krona (SEK) 6.6 billion senior unsecured revolving credit facility (RCF). S&P understands that as part of the proposed transaction, the limit on Stena's US$1 billion senior secured RCF will be permanently reduced to US$500 million. RECOVERY ANALYSIS The proposed term loan and senior secured notes are to share the same first-priority liens over Stena's DrillMax and Stena Carron drill ships. S&P understands that the proposed term loan and notes are to rank pari passu and will be guaranteed by Stena and all of its wholly owned domestic subsidiaries. The term loan does not benefit from any financial maintenance covenants. However, S&P understands that the terms in the documentation governing both the term loan and notes are identical and include a suite of nonfinancial covenants and incurrence covenants, including a restriction on raising additional debt when the consolidated fixed-charge coverage ratio is less than 2x. The recovery rating on the proposed term loan and senior secured notes is underpinned by Stena's significant asset value in the form of vessels and real estate. However, the recovery rating also reflects the risk of Stena's exposure to multiple jurisdictions in the event of a default because of the global distribution of its assets. In S&P's simulated default scenario, it believes that a payment default would most likely result from deteriorating operating and financial performance in Stena's ferry and drilling operations following a period of unfavorable economic and industry conditions. This results in refinancing risk in 2019. S&P believes that the Stena group is likely to retain its value as a going concern in the event of bankruptcy, thanks to its diverse business activities and stable real estate earnings, as well as the contract-based nature of its drilling business. At the same time, S&P believes that the main value available to unsecured creditors in any reorganization would be that of the group's vessels and real estate. For this reason, S&P uses a discrete asset valuation approach in determining Stena's debt recoveries. S&P believes that freight rates and vessel prices are likely to be depressed in a default scenario. Consequently, S&P's estimates of the value of these assets at default (including committed investments) incorporate discounts of 50%-60% of the current market values. Regarding the properties, S&P assumes a realization value of about 70% of the current market value. In addition, S&P assumes that account receivables would yield 75% of their book value, and S&P discounts the current value of the inventory by about 50%. On the basis of these considerations, S&P estimates the group's stressed enterprise value on emergence from bankruptcy at about $7 billion. Although S&P expects recoveries for the proposed senior secured debt to be 100%, it caps the recovery rating at '2' (70%-90% recovery), owing to the unknown future location of the vessels, and likely multijurisdictional uncertain. ============= U K R A I N E ============= FERREXPO PLC: S&P Cuts Corp. Credit Rating to 'B-'; Outlook Neg. ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its long-term local currency corporate credit rating on Ukraine-based iron ore pellet producer Ferrexpo PLC to 'B-' from 'B' and affirmed the long-term foreign currency corporate credit rating at 'B-'. The outlook is negative. At the same time, S&P affirmed the 'B' short-term corporate credit ratings on Ferrexpo and the 'B-' issue rating on the $500 million senior unsecured notes issued by Ferrexpo Finance PLC. The recovery rating on the notes is unchanged at '3', indicating S&P's expectation of meaningful (50%-70%) recovery in the event of a payment default. The rating action follows S&P's downgrade of Ukraine and the lowering of its transfer and convertibility (T&C) assessment to 'CCC+', given that Ferrexpo's core assets are concentrated in Ukraine. In the increased political turmoil in Ukraine, S&P sees a higher risk for adverse government interaction and potential operational and bank support interruptions. S&P has consequently revised Ferrexpo's liquidity assessment to "less than adequate." S&P understands from Ferrexpo's management that its iron ore mining operations and exports have not been negatively impacted to date. At the same time, S&P rates Ferrexpo one notch above its foreign currency long-term sovereign rating on Ukraine, because S&P believes there is a material likelihood that Ferrexpo could withstand a potential sovereign foreign currency default. This is because the bulk of Ferrexpo's cash flows are derived from profitable iron ore exports and because Ferrexpo holds meaningful cash balances offshore. "We continue to assess Ferrexpo's business risk profile as "vulnerable." The assessment reflects our view of very high country risk, combined with the volatile and cyclical nature of iron ore mining, for which we anticipate prices to fall over 2014 owing to significant new capacity. Our assessment of Ferrexpo's competitive position as "weak" is because Ferrexpo is a relatively small player in the global iron ore and iron ore products industry. However, thanks to a premium of iron ore pellets over the benchmark, Ferrexpo benefits from above-average profitability (about 29% EBITDA margin)," S&P said. "We continue to assess Ferrexpo's financial profile as "aggressive." In our base case, which assumes a drop in iron ore prices from US$110/metric ton (mt) in 2014 to US$100/metric ton (mt) in 2015, we expect the company's capital expenditures to cause some negative free operating cash flow in the coming years, although we also understand that management may adjust capital expenditures to market conditions, operating cash flow, and availability of funding. Ferrexpo has moderate debt and strong ratios for the ratings, and we expect the company to report adjusted debt to EBITDA at below 2.5x for 2013," S&P added. The negative outlook on Ferrexpo reflects S&P's negative outlook on Ukraine. If S&P lowers the sovereign rating and T&C assessment on Ukraine further, it may lower the rating on Ferrexpo in the absence of clear evidence that the impact of T&C restrictions on the company will be limited. S&P may also lower the rating if there is a threat to the continuity of Ferrexpo's business stemming from unrest in Ukraine, a further material increase in VAT receivables, or in case of declining offshore cash balances, notably if the lenders' commitment weakens. A revision of the outlook to stable, or any rating upside, would be closely related to improved country risks and positive rating actions on the sovereign. =========================== U N I T E D K I N G D O M =========================== CONSOLIDATED MINERALS: S&P Raises CCR to 'B+'; Outlook Stable ------------------------------------------------------------- Standard & Poor's Ratings Services said it raised its long term corporate credit rating on Jersey-incorporated manganese ore producer Consolidated Minerals Ltd (Jersey) (ConsMin) to 'B+' from 'B'. The outlook remains stable. At the same time, S&P raised its issue rating on the group's senior secured notes to 'B+' from 'B'. The recovery rating on these notes remains at '3'. The upgrade reflects ConsMin's stronger-than-expected profit and free cash flow generation in 2013 and S&P's anticipation of its continued good performance in 2014. These results have led to a significant reduction in the group's financial leverage and therefore a revision of S&P's assessment of its financial risk profile to "significant" from "aggressive." S&P now thinks ConsMin will report EBITDA of about US$280 million for 2013, and expect about US$230 million-US$250 million in 2014, with an adjusted debt-to-EBITDA ratio below 2x. The stronger performance was supported by improved industry conditions -- benchmark manganese CIF prices rising to an average US$5.63 per dry metric tonne unit (dmtu) in 2013 compared with US$5.07 per dmtu in 2012. The other key factor was the significant reduction in cash costs at ConsMin's Australian and Ghana operations, which S&P expects to be largely sustainable in 2014. This was mostly owing to the transition to owner-operator mining in Australia, with ConsMin now handling all load and haul mining operations itself, but also to the group's focus on lower strip ratio and higher grade pits. The group's overall cash costs have been falling to an estimated average of US$2.57 per dmtu in 2013 from US$3.28 per dmtu in 2012. ConsMin increased production in Ghana to 1.8 million tons in 2013 after it signed a major offtake agreement with Ningxia Tianyuan Manganese Industry (TMI), China's biggest electrolytic manganese producer. ConsMin also achieved substantial deleveraging through continued positive free cash flow generation throughout 2013 because of moderate capital expenditure (capex). The group used some of the cash accumulated to repay about US$130 million of its US$405 million notes throughout 2013, bringing gross debt to about US$300 million by end 2013, adjusted for operating leases and provisions for rehabilitation. Given S&P's estimate of cash balances of about US$220 million at the end of the year, it estimates that net debt was close to zero. In December 2013, ConsMin launched an offer to buy back more notes, but only $10 million was taken up. S&P has therefore revised its assessment of ConsMin's financial risk profile to significant based on the adjusted debt-to-EBITDA ratio of below 2.0x in 2013 and 2014 under S&P's base case. S&P views this ratio as strong for the category, but in its analysis S&P factors in the very high swings in the group's ratios due to volatile manganese prices, lack of product diversity and the fairly high, though improved, cost position in Australia. "We continue to assess ConsMin's business risk profile as "weak," reflecting its cost position in Australia, the lower ore content of its Ghanaian assets, and its limited scale and scope within the context of the global mining industry. The business risk profile is also constrained by the group's concentrated asset base, with significant country risk exposure related to its Ghana operations and its focus on single-product manganese ore, which we view as one of the most volatile commodities in the mining industry. We also see Consmin's concentrated customer base as a risk factor, because the contract with China's TMI accounts for about 75% of Consmin's Ghana output," S&P said. S&P applies a downward adjustment of one notch to ConsMin's 'bb-' anchor, reflecting its view that the group's business risk profile is positioned at the low end of the weak category, mainly because of the historic very high volatility of manganese prices. S&P's base case assumes: -- Benchmark manganese price of about US$5.3/dmtu (CIF 45.5% Manganese) in 2014, but lower average price premiums than in 2013. -- Production volumes of 2 million tons in Ghana and about 1.6 million tons in Australia, of stable average grades compared with 2013. -- Broadly stable cash costs supported by the weaker Australian dollar. -- Limited capex of US$70 million. -- No significant shareholder distributions. Based on these assumptions, S&P expects positive free operating cash flow and adjusted debt to EBITDA below 2x in 2013 and 2014. The stable outlook reflects S&P's view that ConsMin will continue to generate positive free cash flow in 2014, after a very strong performance in 2013. Under current supportive prices of US$5.3/dmtu (CIF 45.5% Mn), S&P would view adjusted debt to EBITDA of about 2.0x as commensurate with the rating. S&P expects industry conditions to remain broadly in line with 2013's. Given the current strong credit metrics for the rating, some leeway exists in case of lower-than-anticipated EBITDA. Rating upside is limited given ConsMin's exposure to highly volatile manganese prices, high exposure to country risk in Ghana, and asset and customer concentration. Rating downside is remote at this stage given the benefits of the cash cost reduction implemented in 2013, and low debt. However, S&P might consider a negative rating action if manganese prices dropped and remained well below its base case of US$5.3/dmtu for a prolonged time, leading to sustained negative free operating cash flow. A change in the group's financial policy leading to high shareholder distributions or releveraging could also lead S&P to consider a negative rating action. DECO 6: Fitch Affirms 'Csf' Rating on 3 Note Classes ---------------------------------------------------- Fitch Ratings has affirmed DECO 6-UK Large Loan 2 plc's notes, as follows: GBP117.9m class A2 due July 2017 (XS0235683223) affirmed at 'CCsf'; Recovery Estimate (RE) revised to 75% from 60% GBP34.4m class B due July 2017 (XS0235683736) affirmed at 'Csf'; RE 0% GBP39.3m class C due July 2017 (XS0235684114) affirmed at 'Csf'; RE 0% GBP24.1m class D due July 2017 (XS0235684544) affirmed at 'Csf'; RE 0% DECO 6-UK Large Loan 2 plc was originally the securitization of four commercial loans originated by Deutsche Bank (A/Stable/F1), which closed in December 2005. Two of the loans have since repaid in full which led to the full repayment of the class A1 notes in 1Q12. The remaining two loans, both in default, are secured by UK retail and office assets. Key Rating Drivers The affirmations reflect Fitch's unchanged view that there will be significant losses on the remaining loans -- the GBP115 million Mapeley and GBP99.9 million Brunel loans -- both of which have defaulted and are in administration. Although the overall picture remains bleak for noteholders, Fitch has revised the RE on the class A2 to 75% (from 60%) in light of higher-than- expected sales proceeds achieved from Mapeley collateral disposed of since the last rating action. Mapeley is now secured by only nine commercial assets in England and one in Scotland having had repayment of GBP55 million from ten properties sold over the past 12 months. The aggregate gross sales price achieved was GBP64.3 million, which surpassed their valuation of GBP44.3 million by a 45% premium -largely due to a lease extension on one asset and repositioning of another, whose combined sale price of GBP31.5 million exceeded their valuation of GBP15 million. Although clearly positive, the degree of overleveraging and the higher vacancy in the remaining assets has meant that the loan is unable to meet any of its interest obligations from rental receipts given holding costs on vacant properties. Interest on the loan is now completely serviced by a cash reserve held by the issuer (funded from a cash trap introduced in 2009), which should be at least sufficient to see out the term remaining until interest rate swap expiry/loan maturity in April 2015. The remaining assets are largely vacant and/or with tenants on short leases, making them illiquid and subject to vacant possession valuations. Fitch does not expect the positive trend to continue, and projects loan losses in the region of GBP80 million. The Brunel loan is secured by the 490,113 sq ft Brunel shopping centre in Swindon town centre. The asset was last valued at GBP87 million in late 2011 following its transfer to special servicing, which was due to persistent breaches in the loan debt service coverage ratio covenant resulting from high tenant arrears and weakening occupational demand. Debt service is now in excess of 3x following the expiry of the interest rate swap in April 2012 (loan maturity). While still underperforming, held back by an inefficient layout, net operating income from the shopping centre has stabilized, with tenant arrears and physical vacancy (now at 7% by area) both having reduced while the loan has been in special servicing. Restoring footfall, and paving the way for a reduction in economic vacancy (close to 20%), would likely require significant capital expenditure. As this redevelopment is not plausible until the loan is resolved, recovery proceeds will remain depressed, with Fitch estimating recoveries of GBP55 million-GBP65 million (and losses of GBP35 million-GBP45 million). Rating Sensitivities The weak characteristics of both loans will continue to constrain the ratings of all classes of notes within the distressed categories, although REs may be adjusted over time. Fitch estimated 'Bsf' recoveries sum to GBP89 million. GRAHAM WOOD: Seeks Court Protection From Creditors -------------------------------------------------- Barry O'Halloran at The Irish Times reports that Graham Wood Structural is seeking court protection from its creditors. According to The Irish Times, the company has filed notice of its intention to appoint administrators. Such a move means that it will get protection from any legal action by creditors seeking to recover their debts from the company, The Irish Times notes. The business lost GBP1.5 million in 2011 and GBP1.2 million in 2012, The Irish Times discloses. West Sussex-based Graham Wood is an English subsidiary of troubled building group Siac. The company specializes in complex structural steel projects. It employs 75 people. LINENHALL PROPERTY: Collapses Into Administration ------------------------------------------------- Insolvency News reports that two Liverpool-based property companies have gone into administration reflecting the state of the market. Linenhall Property Investments Ltd and its subsidiary, Moorfields Property Ltd, were owned by Merseyside solicitor Paul Rooney, founder of the Paul Rooney Partnership, according to Insolvency News. The companies owned a number of property assets in Liverpool, Chester and Bootle and did not employ any staff, the report notes. Kerry Bailey and Graham Newton of BDO have been appointed joint administrators to the two firms on January 21, 2014. "The joint administrators are seeking buyers for the assets of the company, and are working to maximize value for the benefit of the creditors," the report quoted Kerry Bailey, BDO business restructuring partner, as saying. The report notes that both companies filed accounts to Companies House for the year ending March 31, 2013, showing a decrease in market value of the properties, a drop in occupancy levels and the breach of bank covenants. The report relates that posted towards the beginning of January, the accounts for Linenhall Property Investments were prepared representing the company as other than a going concern. According to the accounts, Linenhall and Moorfields owe bank loans worth GBP500,000 and GBP9.3 million respectively, both due within one year, the report notes. There are mortgages over the properties and in relation to the bank loans, Rooney had provided a personal guarantee of GBP755,000, the report relates. MAYO SEVEN: Brady Sullivan Steps in Acquire Center At Keene ----------------------------------------------------------- Meghan Pierce at Union Leader reports that the historic Colony Mill Marketplace and adjacent shopping center The Center at Keene are set to be revitalized as a new owner is ready to step in. Manchester-based Brady Sullivan Properties plans to purchase and revitalize the two struggling shopping centers, according to Union Leader. The report relates that Brady Sullivan Properties principal partner Arthur Sullivan said Monday the company hopes to close on the properties. The adjacent shopping centers have been struggling to maintain tenants since being placed in receivership four years ago after the previous owner Mayo Seven LLC defaulted on its mortgage payments, the report notes. Because a court-appointed property firm was handling the building since it went into receivership, tenants have not been getting the attention they need from management, Mr. Sullivan said, the report notes. Mr. Sullivan, the report relates, said he has already been contacted by former tenants of the Colony Mill that want to return after Brady Sullivan purchase the property. The Colony Mill was originally built in 1775 as a saw and grist mill. The mill was converted into retail space in the 1980s. The city currently assesses the property at $4.6 million. The Center at Keene was built in the late 1980s and is assessed at $5.1 million. PUNCH TAVERNS: Publicans Could Face Cash Crisis if Pub Calls Time ----------------------------------------------------------------- Metro News reports that Publicans across the country could lose thousands of pounds each if Punch Taverns is forced into administration. Tenants tied to Punch Taverns, which has 4,100 pubs in Britain, are required to lodge a security deposit with the company -- in some cases more than GBP20,000, according to Metro News. The report relates that the value of these deposits is thought to total about GBP22.6 million. Landlords fear the money could be lost if Punch Taverns fails in its fourth attempt to restructure its debts on Valentine's Day, when bond holders are set to vote on the latest proposals, the report notes. "My concern is, when they go into administration, the company will get chopped up into small units, 200 pubs say, and sold on. I fear I'll be trying to get my money back from Punch and have to find a new deposit for the new owners," the report quoted Chris Lindesay, the landlord of the Sun Inn, Dunsfold, Surrey, as saying. The report notes that Punch Taverns has spent 14 months trying to restructure GBP2.3 billion of debts, created by its over- ambitious expansion. The security deposits could be used for other purposes if the company defaults as they are not protected separately under trust arrangements, the report relates. The report discloses that major creditors indicated they were likely to oppose the restructuring despite Punch Chairman Stephen Billingham saying failure to agree 'will lead to a much worse outcome with considerable uncertainty for the business.' A spokesman for Punch said: "An end to uncertainty is critical for Punch Taverns and its tenants," the report adds. About Punch Taverns Punch Taverns plc is a United Kingdom-based pub company. The Company is engaged in the operation of public houses under either the leased model or as directly managed by the Company. The Company operates in two business segments: punch partnerships, a leased estate and punch pub company, a managed estate. As reported in the Troubled Company Reporter-Europe on Feb. 10, 2014, Nathalie Thomas at The Telegraph said that lenders to Punch Taverns are working on a rival plan to restructure the pub group's GBP2.3 billion debt pile. According to The Telegraph, it is understood that advisers to several groups of creditors are putting together an alternative solution to the company's debt woes ahead of a crunch vote. ROSEMARY CONLEY FOOD: Goes Into Administration, Cuts 6 Jobs ----------------------------------------------------------- BBC News reports that two companies headed by health guru Rosemary Conley have gone into administration. Leicestershire-based Rosemary Conley Food and Fitness Ltd and its sister business Quorn House Publishing Ltd were put into administration, according to BBC News. The report relates that six staff have been made redundant, but Rosemary Conley Classes are not affected, because they are run as independent franchises. The report relays that Mrs. Conley said it had been a "difficult decision" to make. "It is business as usual for all the classes around the country. But for the core business the board and I have had to make this difficult decision," the report quoted Mrs. Conley as saying. Mrs. Conley, the report notes, added that she had invested a lot of her own money into the business and had not drawn a salary for several months. Mark Hopkins of Elwell, Watchorn and Saxton has been appointed joint administrator. Rosemary Conley Food and Fitness Ltd is the businesswoman's lifestyle company, and sells slimming and health products, as well as fitness regimes. Quorn House Publishing Ltd makes the Rosemary Conley magazine. * UK: Administration Rescued Fewer Stores in 2013 ------------------------------------------------- CITY A.M. News reports that the number of stores surviving when major retailers fall into administration dropped significantly in 2013 in the United Kingdom, despite interest rates being held at historically low levels. Restructuring and insolvency firm FRP Advisory, the proportion of shops staying open when big retail chains go into administration has dropped, from 50 per cent in 2012 to only 35 per cent during last year, according to CITY A.M. News. The report notes that in 2013, only 700 of the 2,000 stores affected managed to stay open, while 11,000 jobs were lost out of 21,100 at the high street stores that were restructured. "The economy will no longer support anyone with a broken model. For many of the retailers which entered administration last year there were fundamental questions to address concerning their offering and the market they were chasing, rather than just questions of financial structures," the report quoted Glyn Mummery, partner at FRP Advisory, as saying. Contrary to the troubling climate for some high street outlets, new data released today by the British Retail Consortium (BRC) show triple-digit increases in online searches for UK retailers from export markets like Germany and Russia, showing the strength of the internet as a medium for retail, CITY A.M. News relates. ********* 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. 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 * * *