/raid1/www/Hosts/bankrupt/TCREUR_Public/140227.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
E U R O P E
Thursday, February 27, 2014, Vol. 15, No. 41
Headlines
C Y P R U S
* CYPRUS: EU Commission Approves Co-op Sector Restructuring
F R A N C E
BANQUE PSA: Moody's Affirms 'D' Bank Financial Strength Rating
G E R M A N Y
HYPO ALPE ADRIA: Two Parties Back Review of Nationalization
KIRCH MEDIA: Deutsche Bank Agrees to Pay EUR775MM Settlement
LOEWE AG: Panthera Defends Contract Withdrawal
I T A L Y
BANCA MONTE: Financial Police Probes Criminal Association
SALINI IMPREGILO: Fitch Puts 'BB' IDR on Rating Watch Negative
* Italy's Garment Makers Fight to Survive in New Luxury Market
I R E L A N D
GSC EUROPEAN CDO: Moody's Affirms Ca Rating on Class Z Notes
P O L A N D
PBO ANIOLA: To File for Reorganization
R U S S I A
PETERSBURG SOCIAL: Moody's Affirms 'B2' Deposit Ratings
S P A I N
* Turnaround Fund Eyes Recovery Plays in Spain, Portugal
U K R A I N E
CRIMEA REPUBLIC: S&P Cuts ICR to 'CCC'; Outlook Negative
DNIPROPETROVSK CITY: S&P Lowers ICR to 'CCC'; Outlook Negative
IVANO-FRANKIVSK CITY: S&P Lowers ICR to 'CCC'; Outlook Negative
KYIV CITY: S&P Lowers ICR to 'CCC'; Outlook Negative
LVIV CITY: S&P Lowers ICR to 'CCC'; Outlook Negative
UKRAINE: Replaces Central Bank Chief Amid Default Threat
* Fitch Says Russian Banks' Ukraine Exposures Raise Risks
U N I T E D K I N G D O M
CENTAUR GLOBAL: Directors Banned For 8 Years
CITY EQUITIES: Claims Bar Date Set For March 21
CORNERSTONE TITAN 2005-2: S&P Withdraws BB- Rating on Cl. E Notes
DGT STRUCTURES: More Than 100 Jobs Axed as Firm Collapses
DIXONS RETAIL: Fitch Says CPW Merger Can Achieve BB-Range Rating
GOLDTRAIL TRAVEL: Was Insolvent Before Collapse, Court Told
HERO ACQUISITIONS: Moody's Assigns 'B2' Corporate Family Rating
PENDRAGON PLC: Moody's Raises CFR to 'B1', Outlook Stable
WOLVERHAMPTON CITY: To Cut More Jobs to Avoid Insolvency
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C Y P R U S
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* CYPRUS: EU Commission Approves Co-op Sector Restructuring
-----------------------------------------------------------
Cyprus Mail reports that The European Commission said on Monday
it had found recapitalization and restructuring aid measures in
favor of the cooperative banking sector in Cyprus to be in line
with EU state aid rules.
In a statement, the Commission said the measures would enable the
cooperative banking sector to become viable in the long term
without continued state support, while limiting the distortions
of competition created by the aid, Cyprus Mail relates.
Due to a high proportion of non-performing loans, caused by the
current recession and careless lending in the past, the Cypriot
banking sector needs to rebuild a solid capital buffer through a
recapitalization of EUR1.5 billion, Cyprus Mail discloses.
The restructuring plan approved on Monday represents a major
overhaul of the structure and commercial practices of the group,
Cyprus Mail relays. The number of cooperative credit
institutions will be reduced to 18 via mergers, Cyprus Mail says.
According to Cyprus Mail, they will be owned and controlled by
the cooperative central body, which will in turn be owned by its
new 99% shareholder, the State.
Adequate risk management, loan underwriting and claim management
policies will be developed, Cyprus Mail says.
This restructuring strategy for the cooperative banking sector
has been developed in close coordination with the European
Central Bank (ECB) and the International Monetary Fund (IMF) and
is part of the assistance program for Cyprus, Cyprus Mail notes.
The Commission, as cited by Cyprus Mail, said it would closely
monitor the correct and timely implementation of the plan.
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F R A N C E
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BANQUE PSA: Moody's Affirms 'D' Bank Financial Strength Rating
--------------------------------------------------------------
Moody's Investors Service has affirmed Banque PSA Finance (BPF)'s
standalone bank financial strength rating (BFSR) of D, equivalent
to a baseline credit assessment (BCA) of ba2, and its long-term
debt and deposit ratings of Ba1, but changed the outlooks on
those ratings to stable from negative. Furthermore, the outlook
on the Ba1 backed long-term debt ratings of BPF's subsidiary,
Peugeot Finance International N.V. (PFI), has also been changed
to stable from negative.
The change in outlook on the ratings of BPF and PFI follows the
change to a stable outlook on the long-term ratings of BPF's
parent, Peugeot S.A. (PSA).
The rating on the EUR1.2 billion government-guaranteed senior
unsecured debt securities due 2016 is unaffected by the rating
actions and remains rated Aa1, negative.
Ratings Rationale
The bank's stronger credit profile means that its ba2 BCA is two
notches above PSA's B1 senior debt rating. Nevertheless, Moody's
believes that the strong credit linkages to the lower-rated
industrial group constrain BPF's standalone BCA. This is because
of the intricate strategic, commercial and financial ties to the
parent. The change in the outlook of PSA's rating to stable thus
prompted Moody's to revise the outlook on BPF's BFSR to stable.
As a consequence, Moody's has also today revised the outlook on
BPF's Ba1 long-term debt and deposit ratings to stable from
negative.
On February 19, PSA announced that BPF and Santander Consumer
Finance S.A. (Santander CF, Baa2 stable, BFSR C-/BCA baa2
stable), the consumer finance division of Banco Santander S.A.
(Baa2 stable, C-/baa2 stable), had entered into exclusive
negotiations with a view to set up 50/50 local partnerships to
develop BPF's European activities. The details of the future set-
up are still unknown and completion is not expected until H2
2015. However, Moody's believes that a partnership with Santander
CF would be positive for the bank, at least in relation to the
expansion of its business. For example, BPF would have access to
cheaper funding, significantly improving its profitability, since
it would be able to discontinue its reliance on the French State
guarantee, which is costly and contributed to a reduction of
BPF's net interest margin in 2013. However, too little is yet
known about the implications of the joint venture for the bank's
strategy or structure for Moody's to draw any clear conclusions
in relation to the implications for current holders of BPF's
debt.
What Could Change The Rating Up
An upgrade of PSA's long-term ratings would likely result in a
similar rating action on BPF's standalone BFSR, which would, in
turn, likely exert upward pressure on the bank's long-term
ratings.
An upgrade of BPF's standalone BFSR and long-term ratings could
also occur if (1) the stresses associated with the bank's
intrinsic credit links with its industrial parent are alleviated;
combined with either (2) a continuation or improvement in BPF's
financial performance.
What Could Change The Rating Down
A downgrade of PSA's long-term ratings may result in a similar
rating action on BPF's standalone BFSR, which could in turn
impact the bank's long-term ratings.
The long-term ratings of BPF could also be downgraded in the
event of (1) deterioration in the bank's standalone financial
strength; or (2) a lower probability of systemic support
available to BPF, which is unlikely in our opinion.
List of Affected Ratings
The following ratings of BPF and related entities were affected
by the rating actions:
-- The outlook on BPF's standalone BFSR of D/ba2 was changed to
stable from negative
-- The outlook on BPF's long-term debt and deposit ratings of
Ba1 was changed to stable from negative
-- The outlook on Peugeot Finance International N.V.'s backed
long-term senior unsecured rating of Ba1 was changed to
stable from negative
-- All of the above ratings were affirmed
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G E R M A N Y
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HYPO ALPE ADRIA: Two Parties Back Review of Nationalization
-----------------------------------------------------------
Michael Shields at Reuters reports that the heads of Austria's
two ruling parties on Tuesday backed the idea of letting a
commission of experts look into the 2009 emergency
nationalization of lender Hypo Alpe Adria, a step that could head
off a parliamentary investigation of the deal.
The takeover of Hypo from Bavarian state bank BayernLB and other
owners staved off a collapse that would have sent shock waves
across the region a year after Wall Street bank Lehman Brothers
went down, Reuters notes.
But Hypo's mounting costs have made it a huge headache for the
ruling Social Democrats and conservative People's Party, Reuters
states. Taxpayers have provided EUR4.8 billion (US$6.6 billion)
in aid since 2008 and face a bill for up to EUR4 billion more,
Reuters relays.
Opposition parties have called for an investigative panel to look
into the whole affair, which the coalition partners which have
been in power since 2006 want to avoid, Reuters discloses.
According to Reuters, a proposal by central bank Governor Ewald
Nowotny for a "council of wise people" now may offer a compromise
solution.
The FPO says other parties also backed the guarantees and that
the federal government let Hypo's woes fester too long, Reuters
relates.
Chancellor Werner Faymann and conservative leader Michael
Spindelegger, the finance minister, as cited by Reuters, said the
focus now had to be on how to wind down Hypo in a way that
protects taxpayers as much as possible.
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.
KIRCH MEDIA: Deutsche Bank Agrees to Pay EUR775MM Settlement
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dw.de reports that Deutsche Bank said it has agreed to pay
EUR775 million (US$1.1 billion) plus interest and legal fees to
resolve a long-standing legacy matter with the heirs of Leo
Kirch.
dw.de relates that Deutsche Bank co-Chief Executives Jrgen
Fitschen and Anshu Jain said the settlement, which is estimated
to amount to a total cost of between EUR900 million and EUR925
million, was in the best interests of Deutsche Bank's
stakeholders.
Originally, German media mogul Leo Kirch sought about
EUR3.3 billion in damages from the Frankfurt-based lender,
claiming former Deutsche Bank CEO Rolf Breuer had questioned his
creditworthiness in a public interview in 2002, leading to his
media group's insolvency a month later, dw.de recalls. The
lawsuits, which continued after Mr. Kirch's death in July 2011,
alleged the bank secretly plotted to bring down the Kirch empire,
replacing him with a bank-appointed restructuring advisor,
according to dw.de.
Following the settlement, the Kirch family said it welcomed the
settlement offer by Deutsche Bank, the report relates.
"We wish it was reached while Mr. Kirch was still alive," a
spokesman for the family said, adding that the damage caused was
much higher, dw.de relays.
In 2012, Deutsche Bank's board still rejected a settlement. But
current co-CEOs Jain and Fitschen apparently seek to clear the
decks of legacy issues as they reshape the bank. On Feb. 20,
Deutsche Bank said the settlement would be reflected in its 2013
fourth quarter results, pushing it about EUR350 million deeper
into the red after tax and bringing its net loss to about
EUR1.3 billion, the report adds.
Headquartered in Ismaning, Germany, KirchMedia GmbH --
http://www.kirchmedia.de/-- was the country's second largest
media company prior to its insolvency filing in June 2002. The
firm's collapse, caused by a US$5.7 billion debt incurred during
an expansion drive, was Germany's biggest since World War II.
Taurus Holding is the former holding company for the Kirch
group. The case is docketed under Case No. 14 HK O 1877/07 at
the Regional Court of Munich.
LOEWE AG: Panthera Defends Contract Withdrawal
----------------------------------------------
Reuters reports that Panthera would reject legal claims announced
by Loewe AG in connection with the cancelled purchase of the
insolvent company.
Panthera regretted its withdrawal from the contract, the firm
added, which, however, became inevitable after banks had refused
to support funding for the deal, Reuters relates.
"This has finally stopped the launch of New Loewe GmbH's
operative business," Reuters quotes Panthera spokesman
Stefan Kalum as saying.
On Tuesday, Loewe announced it would take legal steps against
Panthera, claiming there was no legal basis for them to withdraw
from the purchase contract, Reuters relays.
Panthera, which includes former Apple Europe chief Jan Gesmar-
Larsen, bought Loewe for an undisclosed sum in January, promising
to keep 400 out of 550 jobs at the firm's main manufacturing site
in Kronach, Germany, Reuters recounts. Panthera was itself
struggling financially, Reuters says, citing a report in the
German daily FAZ on Tuesday.
Loewe AG is a German high-end television maker.
Loewe first sought protection from creditors in July 2013 and
then filed for insolvency in October 2013 after a strategy to
combat the economic downturn by focusing on premium customers
backfired.
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I T A L Y
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BANCA MONTE: Financial Police Probes Criminal Association
---------------------------------------------------------
Elisa Martinuzzi and Sergio Di Pasquale at Bloomberg News report
that Italy's finance police searched premises in cities including
Milan and Siena as prosecutors probe a criminal association that
defrauded Banca Monte dei Paschi di Siena SpA of at least EUR47
million (US$65 million).
According to Bloomberg, a police official said that the police
were notifying eight individuals including Monte Paschi's former
finance head Gianluca Baldassarri of a ban from traveling outside
Italy as part of [Tues]day's searches.
The group allegedly defrauded Monte Paschi and other unidentified
parties for as much as EUR90 million, Bloomberg says, citing a
court official, who asked not to be identified before the
searches are completed.
The investigation is one of several by Siena prosecutors into
former managers of Monte Paschi (BMPS), Italy's third-biggest
bank, Bloomberg relates. Mr. Baldassarri, former Chairman
Giuseppe Mussari and former General Manager Antonio Vigni are on
trial for obstructing regulators by allegedly hiding a document
that showed how the lender hid losses from its accounts,
Bloomberg discloses.
Banca Monte dei Paschi di Siena SpA -- http://www.mps.it/-- is
an Italy-based company engaged in the banking sector. It
provides traditional banking services, asset management and
private banking, including life insurance, pension funds and
investment trusts. In addition, it offers investment banking,
including project finance, merchant banking and financial
advisory services. The Company comprises more than 3,000
branches, and a structure of channels of distribution. Banca
Monte dei Paschi di Siena Group has subsidiaries located
throughout Italy, Europe, America, Asia and North Africa. It has
numerous subsidiaries, including Mps Sim SpA, MPS Capital
Services Banca per le Imprese SpA, MPS Banca Personale SpA, Banca
Toscana SpA, Monte Paschi Ireland Ltd. and Banca MP Belgio SpA.
* * *
As reported by the Troubled Company Reporter-Europe on Sept. 18,
2013, Fitch downgraded MPS's Viability Rating (VR) to 'ccc' from
'b' and removed it from Rating Watch Negative (RWN).
TCR-Europe also reported on June 19, 2013, that Standard & Poor's
Ratings Services lowered its long-term counterparty credit rating
on Italy-based Banca Monte dei Paschi di Siena SpA (MPS) to 'B'
from 'BB', and affirmed the 'B' short-term rating. S&P also
lowered its rating on MPS' Lower Tier 2 subordinated notes to
'CCC-' from 'CCC+'. S&P affirmed the ratings on MPS' junior
subordinated debt at 'CCC-' and on its preferred stock at 'C'. At
the same time, S&P removed the ratings from CreditWatch, where it
placed them with negative implications on Dec. 5, 2012.
SALINI IMPREGILO: Fitch Puts 'BB' IDR on Rating Watch Negative
--------------------------------------------------------------
Fitch Ratings has placed Salini Impregilo S.p.A.'s 'BB' Long-term
Issuer Default Rating (IDR) and senior unsecured rating on Rating
Watch Negative (RWN).
The RWN reflects the sizable cost overruns and difficulties
surrounding the Panama Canal extension project. The final cash
impact, which may take several years to determine, is dependent
on Salini's ability to be reimbursed for its share of cost-
overruns. Despite Salini's strong liquidity, the eventual effect
on future profitability could negatively impact credit metrics,
leading to them weakening against our deleveraging profile.
Notwithstanding the Panama Canal project, Salini's trading
figures to 3Q13 were in line with expectations. Fitch will review
the RWN upon presentation of FY13 results in March, updated
management cash flow forecasts or further information around
dispute settlements.
KEY RATING DRIVERS
Under-Performing Contracts
The Panama Canal contract is Fitch's key credit concern. This
situation underlines the inherent risk of carrying out large
scale construction projects outside known domestic markets.
However, Fitch recognizes that this project was originally
tendered for by Impregilo before its merger with Salini and is
therefore considered a legacy issue with Salini having a good
track record of project risk management. Fitch notes that there
are no other big losses on large contracts, Salini's management
has been proactive in resolving this dispute and that the greater
size of the group has diversified the risk profile of the
combined companies.
Recoverability of Cost-overruns
Cost overruns for the consortium delivering the Panama Canal
project have been cited as USD1.6 billion with Salini sharing a
38% stake. Fitch understands that a large part of Salini's share
has already been accrued for in prior periods. The project is
around 70% complete and expected completion is in late 2015.
Management believes there is a likelihood that claims for cost-
overruns will be successful, although the timeline is unclear.
Prior year rating guidance indicated negative pressure should
further project losses be incurred, which cannot currently be
ruled out. Fitch will closely monitor Salini's leverage headroom
under our guidance with an FFO adjusted net leverage above 2.0x
leading to negative rating pressure.
Large Liquidity Buffer
Salini's credit profile is supported by a significant cash
position of EUR1.0 billion as of September 2013 that has recently
improved with the successful disposals of Shanghai Pucheng (EUR65
million) and TEM (EUR67 million) operations. Liquidity
strengthened even further in November 2013 with the approval of a
new unsecured revolving facility of EUR100 million. Fitch
believes this is sufficient to withstand seasonal volatility in
working capital or any delays in receivables from the Panama
Canal project.
Solid Business Profile
Salini's business profile is commensurate with a 'BB' category
engineering and construction issuer. However, Salini has a
greater concentration to larger projects than its peers, which
underlines the importance of strong project risk management. With
EUR4.1 billion pro-forma revenues in 2012, the group ranks among
the top 15 European construction companies. While smaller than
some competitors, the group is highly specialized in complex high
value-added segments (i.e. hydro-electric plants, metro,
railways, highways) offering higher margins. The Salini Impregilo
integration benefits from wide geographical diversification, with
presence in 50 countries worldwide and a well-balanced mix
between mature and emerging markets.
Strong Order Book
The group has not diversified into the more stable service and
concession businesses, like some of its major peers. However, the
solid order backlog (EUR36bn at September 2013) increases
visibility of future revenues. The backlog corresponds to 8.5x
annual revenue, the highest among Fitch-rated construction
companies. However, the top 10 contracts represent approximately
50% of the total backlog. The long duration of some contracts in
the metro and dam segments (up to seven years) offers a recurring
revenue profile similar to the service segment.
RATING SENSITIVITIES:
Negative: Future developments that could lead to negative rating
action include:
-- Liquidity below 1.1x-1.2x on a sustained basis.
-- FFO net leverage above 2.0x.
-- Poor performance on major contracts with a material impact on
profitability.
-- Further evidence of increased cost-overruns or escalation in
the dispute surrounding the Panama Canal project.
Positive: Future developments that could lead to removal of the
RWN and affirmation include:
-- Liquidity to remain comfortably above 1.25x on a sustained
basis.
-- FFO net leverage to improve to 1.0x or below on a sustained
basis.
* Italy's Garment Makers Fight to Survive in New Luxury Market
--------------------------------------------------------------
Manuela Mesco, writing for Daily Bankruptcy Review, reported that
the fashion world's race to reach ultrarich shoppers is leaving
some of Italy's vaunted leather and garment manufacturers high
and dry.
According to the report, a sharp split is dividing Italy's luxury
manufacturing base. The winners are enjoying rich new contracts
or even being purchased, as fashion heavyweights such as LVMH
Moet Hennessy Louis Vuitton SA are increasingly eager to scoop up
the best Italian manufacturers.
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I R E L A N D
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GSC EUROPEAN CDO: Moody's Affirms Ca Rating on Class Z Notes
------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the
following notes issued by GSC European CDO I-R:
EUR37M (currently EUR15.4M outstanding) Class A1 Floating Rate
Notes due 2022, Upgraded to Aaa (sf); previously on Apr 12, 2013
Affirmed Aa1 (sf)
EUR35M Class A2B Floating Rate Notes due 2022, Upgraded to Aaa
(sf); previously on Apr 12, 2013 Upgraded to Aa3 (sf)
EUR25M (currently EUR10.4M outstanding) Class A3 Revolving
Floating Rate Notes due 2022, Upgraded to Aaa (sf); previously on
Apr 12, 2013 Affirmed Aa1 (sf)
EUR16.8M Class B Floating Rate Notes due 2022, Upgraded to Aaa
(sf); previously on Apr 12, 2013 Upgraded to A2 (sf)
EUR18.4M Class C1 Floating Rate Notes due 2022, Upgraded to A2
(sf); previously on Apr 12, 2013 Upgraded to Ba1 (sf)
EUR10M Class C2 Customised Rated Notes, Upgraded to A2 (sf);
previously on Apr 12, 2013 Upgraded to Ba1 (sf)
EUR10M Class C2 Zero Coupon Accreting Notes due 2022, Upgraded
to A2 (sf); previously on Apr 12, 2013 Upgraded to Ba1 (sf)
EUR20.3M Class D Floating Rate Notes due 2022, Upgraded to Ba1
(sf); previously on Apr 12, 2013 Upgraded to B3 (sf)
EUR12.5M Class E Floating Rate Notes due 2022, Upgraded to B3
(sf); previously on Apr 12, 2013 Affirmed Caa3 (sf)
EUR7M (currently EUR6.0M outstanding) Class W Combination Notes,
Upgraded to Baa2 (sf); previously on Apr 12, 2013 Upgraded to B1
(sf)
Moody's has also affirmed the rating on the following notes:
EUR140M (currently EUR37.9M outstanding) Class A2A Floating Rate
Notes due 2022, Affirmed Aaa (sf); previously on Apr 12, 2013
Upgraded to Aaa (sf)
EUR4M Class Z Combination Notes, Affirmed Ca (sf); previously on
Apr 12, 2013 Affirmed Ca (sf)
GSC European CDO I-R, issued in December 2006, is a single
currency Collateralised Loan Obligation ("CLO") backed by a
portfolio of mostly high yield European and US loans. The
portfolio is managed by GSCP (NJ), L.P. and is predominantly
composed of senior secured loans. This transaction exited its
reinvestment period in December 2012.
Ratings Rationale
The rating actions on the notes are primarily a result of
significant deleveraging arising from both prepayments and
scheduled amortizations since the last rating action in April
2013.
Since April 2013, classes A1, A2A and A3 notes have paid down
EUR16.3 million (44% of initial balance), EUR77.3 million (55% of
initial balance) and EUR11.0 million (44% of initial balance)
respectively resulting in significant increases to over-
collateralization levels. As of the January 2014 trustee report,
Class A/B, C, D and E observed over-collateralization levels of
154.1%, 123.7%, 108.4% and 100.8% respectively, compared with
126.3%, 111.9%, 103.4% and 98.8%,respectively, at the April 2013
rating action (based on the January 2013 report). A large
proportion of this deleveraging occurred during the recent period
between December 2013 and January 2014 where class A/B OC
increased from 136.6% to 154.1% in a single month.
The reported weighted average rating factor ("WARF") and weighted
average spread ("WAS"), have remained stable since the April 2013
rating action, whilst the diversity score has decreased from 36
to 27.
The ratings of the Combination Notes address the repayment of the
Rated Balance on or before the legal final maturity. For Classes
W, the 'Rated Balance' is equal at any time to the principal
amount of the Combination Note on the Issue Date increased by a
Rated Coupon of 0.25% per annum respectively, accrued on the
Rated Balance on the preceding payment date minus the aggregate
of all payments made from the Issue Date to such date, either
through interest or principal payments. For Classes Z and C2
Customized, the 'Rated Balance' is equal at any time to the
principal amount of the Combination Note on the Issue Date minus
the aggregate of all payments made from the Issue Date to such
date, either through interest or principal payments. The Rated
Balance may not necessarily correspond to the outstanding
notional amount reported by the trustee.
The key model inputs Moody's uses in its analysis, such as par,
WARF, diversity score and the weighted average recovery rate, are
based on its published methodology and could differ from the
trustee's reported numbers. In its base case, Moody's analyzed
the underlying collateral pool as having a performing par and
principal proceeds balance of EUR192.3 million, defaulted par of
EUR3.0 million, a weighted average default probability of 18.2%
(consistent with a WARF of 2712), a weighted average recovery
rate upon default of 48.0% for a Aaa liability target rating, a
diversity score of 24 and a WAS of 3.5%.
The default probability derives from the credit quality of the
collateral pool and Moody's expectation of the remaining life of
the collateral pool. The estimated average recovery rate on
future defaults is based primarily on the seniority of the assets
in the collateral pool. For a Aaa liability target rating,
Moody's assumed that a recovery of 50% of the 95% of the
portfolio exposed to first-lien senior secured corporate assets
upon default and of 15% of the remaining non-first-lien loan
corporate assets upon default. In each case, historical and
market performance and a collateral manager's latitude to trade
collateral are also relevant factors. Moody's incorporates these
default and recovery characteristics of the collateral pool into
its cash flow model analysis, subjecting them to stresses as a
function of the target rating of each CLO liability it is
analyzing.
Methodology Underlying the Rating Action:
The principal methodology used in this rating was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
November 2013.
Factors that would lead to an upgrade or downgrade of the rating:
In addition to the base-case analysis, Moody's conducted
sensitivity analyses on the key parameters for the rated notes,
for which it assumed lower credit quality in the portfolio to
address refinancing risk. Loans to European corporates rated B3
or lower and maturing between 2014 and 2015 make up approximately
19% of the portfolio, which could make refinancing difficult.
Moody's ran a model in which it raised the base case WARF to 4019
by forcing ratings on 50% of the refinancing exposures to Ca; the
model generated outputs that were within one notch of the base-
case results.
This transaction is subject to a high level of macroeconomic
uncertainty, which could negatively affect the ratings on the
note, in light of 1) uncertainty about credit conditions in the
general economy and 2) the concentration of lowly- rated debt
maturing between 2014 and 2015, which may create challenges for
issuers to refinance. CLO notes' performance may also be impacted
either positively or negatively by 1) the manager's investment
strategy and behavior and 2) divergence in the legal
interpretation of CDO documentation by different transactional
parties due to because of embedded ambiguities.
Additional uncertainty about performance is due to the following:
1. Portfolio amortization: The main source of uncertainty in this
transaction is the pace of amortization of the underlying
portfolio, which can vary significantly depending on market
conditions and have a significant impact on the notes' ratings.
Amortization could accelerate as a consequence of high loan
prepayment levels or collateral sales by the collateral manager
or be delayed by an increase in loan amend-and-extend
restructurings. Fast amortization would usually benefit the
ratings of the notes beginning with the notes having the highest
prepayment priority.
2. Around 40% of the collateral pool consists of debt obligations
whose credit quality Moody's has assessed by using credit
estimates.
3. Recovery of defaulted assets: Market value fluctuations in
trustee-reported defaulted assets and those Moody's assumes have
defaulted can result in volatility in the deal's over-
collateralization levels. Further, the timing of recoveries and
the manager's decision whether to work out or sell defaulted
assets can also result in additional uncertainty. Moody's
analyzed defaulted recoveries assuming the lower of the market
price or the recovery rate to account for potential volatility in
market prices. Recoveries higher than Moody's expectations would
have a positive impact on the notes' ratings.
In addition to the quantitative factors that Moody's explicitly
modelled, qualitative factors are part of the rating committee's
considerations. These qualitative factors include the structural
protections in the transaction, its recent performance given the
market environment, the legal environment, specific documentation
features, the collateral manager's track record and the potential
for selection bias in the portfolio. All information available to
rating committees, including macroeconomic forecasts, input from
other Moody's analytical groups, market factors, and judgments
regarding the nature and severity of credit stress on the
transactions, can influence the final rating decision.
===========
P O L A N D
===========
PBO ANIOLA: To File for Reorganization
--------------------------------------
Warsaw Business Journal reports that PBO Aniola has decided to
file for reorganization with trustee.
According to WBJ, "As a result of the analysis from ongoing
restructuring efforts, the board has decided that the effects
have been inadequate to keep the company in a financially stable
situation," the company wrote in a press release.
However, the board positively assessed the restructuring efforts,
as they may give the company a chance to function if it is under
legal protection in the form of administration, WBJ relates.
The board decided to go into administration, "which will allow
the company to pay its commitments as much as possible," WBJ
quotes the statement as saying.
The company plans to present its plans for reorganization, and
hopes to write off as much as 50% of its outstanding debt
depending on the category of the creditor, a deferred capital
payment, or write off interest payable, WBJ discloses.
Earlier, the company's creditors filed a number of bankruptcy
claims to courts over PBO Aniola, WBJ recounts.
PBO Aniola is a Polish construction firm.
===========
R U S S I A
===========
PETERSBURG SOCIAL: Moody's Affirms 'B2' Deposit Ratings
-------------------------------------------------------
Moody's Investors Service has affirmed Petersburg Social
Commercial Bank's B2/Not Prime global foreign- and local-currency
deposit ratings and E+ standalone bank financial strength rating
(BFSR), equivalent to b2 baseline credit assessment (BCA).
Moody's maintains a stable outlook on all of the aforementioned
long term ratings.
Moody's assessment of Petersburg Social Commercial Bank's is
largely based on its audited financial statements for 2012,
unaudited financial statements for 2013, prepared under local
GAAP, as well as information received from the bank.
Ratings Rationale
The affirmation of Petersburg Social Commercial Bank's ratings
reflects the bank's (1) robust asset quality; and (2) healthy
capital buffer, which, together with a good pre-provision
profitability, provide the bank with strong loss-absorption
capacity (3) adequate liquidity profile. At the same time,
Moody's says that the ratings remain constrained by the bank's
small size, limited franchise and its predominantly short-term
funding base.
Moody's notes that Petersburg Social Commercial Bank has
maintained consistently robust asset quality over recent years
which has been supported by the bank's focus on selective
borrowers of satisfactory credit standing. According to the bank,
its non-performing loans (NPLs, defined as loans 90+ days
overdue) stood at around 1.3% of the total loan portfolio at end-
year 2013 and remained well below the banking system average.
The affirmation also considers Moody's expectation that
Petersburg Social Commercial Bank's financial performance will
remain solid over the next 12-18 months as it has been in recent
years supported by its strong fee-generating capacity. The rating
agency notes that the bank's proprietary universal payment
service "Kassira.net' remains the important source of its fee and
commission earnings, which, in turn, composed around a half of
its operating revenues. For year-end 2013, the bank reported net
income of RUB364 million, in accordance with local GAAP,
translating into return on average assets of around 2.0%.
As at January 1, 2014, Petersburg Social Commercial Bank reported
the total regulatory capital ratio (N1) of above 15%. Moody's
expects that the bank's capital buffer, which benefits from its
good internal capital generation, will be sufficient to absorb
expected credit losses under Moody's central and adverse
scenario.
Although Petersburg Social Commercial Bank's funding base is
largely short term, its liquidity profile remains adequate,
supported by a consistently high level of liquid assets,
accounting for more than 40% of its total assets at year-end
2013.
What Could Move The Rating Up/Down
Petersburg Social Commercial Bank's ratings have limited upside
potential at its current level. At the same time, any potential
upgrade in the long term will be contingent on the bank's ability
to materially strengthen its franchise and diversify its funding
base, while also demonstrating a sustained track record of
satisfactory financial fundamentals. However, downward pressure
could be exerted on Petersburg Social Commercial Bank's ratings
by a material deterioration of the bank's risk profile,
particularly by any material weakening in asset quality,
deterioration of its liquidity profile, increase in the
concentration levels or loss of business with key customers.
Headquartered in Saint Petersburg, Russia, Petersburg Social
Commercial Bank's reported unaudited (local GAAP) total assets of
RUB17 billion and total shareholders' equity of RUB2.0 billion at
year-end 2013.
The principal methodology used in this rating was Global Banks
published in May 2013.
=========
S P A I N
=========
* Turnaround Fund Eyes Recovery Plays in Spain, Portugal
--------------------------------------------------------
Dan Dunkley, writing for Daily Bankruptcy Review, reported that a
Spanish turnaround firm is attempting to raise EUR100 million for
investments in the country in the latest sign of improving
fortunes for private equity in the region.
According to people familiar with the matter, Sherpa Capital
Gestion is on the road looking to raise a maximum of EUR100
million for investments in struggling companies in Spain and
Portugal.
According to the report, the firm, which invests in special
situations and restructurings in Iberia, makes most of its
investments in the mid-market, targeting investments in companies
which have a turnover of between $10 million and $200 million,
according to its website.
Sherpa invests in companies facing bankruptcy or facing debt
restructurings, the report said. The firm's portfolio includes
Spanish retail company KA International, packaging company
Polibol and chemicals company Coveright.
According to people familiar with the matter, Sherpa is in the
later stages of its fundraising effort and is expected to close
the fund in the first half of the year, the report related. The
firm declined to comment.
Sherpa joins a host of other private equity firms looking to
raise capital in southern Europe at a time when appetite for
doing deals in the region is improving, the report further
related.
=============
U K R A I N E
=============
CRIMEA REPUBLIC: S&P Cuts ICR to 'CCC'; Outlook Negative
--------------------------------------------------------
Standard & Poor's Ratings Services lowered its long-term issuer
credit rating on Ukraine's Autonomous Republic of Crimea to 'CCC'
from 'CCC+'. The outlook is negative.
At the same time, S&P lowered the Ukraine national scale rating
on Crimea to 'uaB-' from 'uaBB'.
As defined in EU CRA Regulation 1060/2009 [EU CRA Regulation],
the ratings on Crimea are subject to certain publication
restrictions set out in Art 8a of the EU CRA Regulation,
including publication in accordance with a pre-established
calendar. Under the EU CRA Regulation, deviations from the
announced calendar are allowed only in limited circumstances and
must be accompanied by a detailed explanation of the reasons for
the deviation. In this case, the deviation has been caused by
the events described in the following Rationale.
Rationale
The downgrade follows S&P's rating action on Ukraine.
Under S&P's methodology, a local or regional government (LRG) can
be rated higher than its sovereign only if it considers that it
exhibits certain characteristics. S&P do not currently believe
that Ukrainian LRGs, including Crimea, meet these conditions.
S&P consequently caps the long-term rating on Crimea at the level
of the long-term foreign currency rating on Ukraine.
"We assess Crimea's indicative credit level (ICL) at 'b'. The
ICL is not a rating. It is a means of assessing an LRG's
intrinsic creditworthiness under the assumption that there is no
sovereign rating cap. The ICL results from the combination of
our assessment of an LRG's individual credit profile and the
effects we see of the institutional framework in which it
operates," S&P said.
"Our view incorporates our assessments of Crimea's low debt,
conservative debt policies, and sound budgetary performance in
recent years. We also factor in our view that Crimea lacks
revenue predictability and has very low budgetary flexibility in
terms of revenues and expenditures. Crimea relies heavily on
subsidies and excise tax revenues and has high expenditure needs,
due in our view to the "volatile and underfunded" Ukrainian
institutional framework. Crimea has low wealth levels, weak
financial management practices, negative liquidity, and
contingent liabilities related to its municipalities and
companies," S&P added.
Outlook
The negative outlook on Crimea reflects the negative outlook on
Ukraine. S&P would take positive rating actions on Crimea if it
took positive actions on Ukraine and if other rating factors
developed in line with its base-case scenario.
S&P might lower the ratings on Crimea if it lowered the ratings
on Ukraine.
Even if the sovereign ratings remain unchanged, S&P could
consider a negative rating action on Crimea in the unlikely case
that its liquidity substantially weakened ahead of its June 2014
bond repayment.
In accordance with S&P's relevant policies and procedures, the
Rating Committee was composed of analysts that are qualified to
vote in the committee, with sufficient experience to convey the
appropriate level of knowledge and understanding of the
methodology applicable. At the onset of the committee, the chair
confirmed that the information provided to the Rating Committee
by the primary analyst had been distributed in a timely manner
and was sufficient for Committee members to make an informed
decision.
After the primary analyst gave opening remarks and explained the
recommendation, the Committee discussed key rating factors and
critical issues in accordance with the relevant criteria.
Qualitative and quantitative risk factors were considered and
discussed, looking at track-record and forecasts. The chair
ensured every voting member was given the opportunity to
articulate his/her opinion. The chair or designee reviewed the
draft report to ensure consistency with the Committee decision.
The views and the decision of the rating committee are summarized
in the above rationale and outlook.
RATINGS LIST
Downgraded
To From
Crimea (Autonomous Republic of)
Issuer Credit Rating CC/Negative/-- CCC+/Negative/--
Ukraine National Scale uaB-/--/-- uaBB/--/--
DNIPROPETROVSK CITY: S&P Lowers ICR to 'CCC'; Outlook Negative
--------------------------------------------------------------
Standard & Poor's Ratings Services lowered its long-term issuer
credit rating on the Ukrainian City of Dnipropetrovsk to 'CCC'
from 'CCC+'. The outlook is negative.
At the same time, S&P lowered the Ukraine national scale rating
to 'uaB-' from 'uaBB'.
As defined in EU CRA Regulation 1060/2009 [EU CRA Regulation],
the ratings on Dnipropetrovsk are subject to certain publication
restrictions set out in Art 8a of the EU CRA Regulation,
including publication in accordance with a pre-established
calendar. Under the EU CRA Regulation, deviations from the
announced calendar are allowed only in limited circumstances and
must be accompanied by a detailed explanation of the reasons for
the deviation. In this case, the deviation has been caused by
the events described in the following Rationale.
Rationale
The downgrade follows the downgrade of Ukraine on Feb. 21, 2014.
Under S&P's methodology, a local and regional government (LRG)
can be rated higher than its sovereign only if it considers that
it exhibits certain characteristics. S&P do not currently
believe that Ukrainian LRGs, including Dnipropetrovsk, meet these
conditions.
The long-term rating on Dnipropetrovsk is therefore capped at
'CCC', the same level as the Ukrainian sovereign foreign currency
rating. However, in accordance with S&P's criteria, it assess
Dnipropetrovsk's indicative credit level (ICL) at 'b'. The ICL
is not a rating, but a means of assessing an LRG's intrinsic
creditworthiness under the assumption that there is no sovereign
rating cap. The ICL results from the combination of S&P's
assessment of an LRG's individual credit profile and the effects
it sees of the institutional framework in which it operates.
S&P's view also reflects Ukraine's "volatile and underfunded"
public finance system, which results in the city's low financial
flexibility and predictability. S&P also factors in its view of
Dnipropetrovsk's "negative" financial management, material
contingent liabilities related to municipal utilities, and a poor
and concentrated economy. These constraints are mitigated by the
city's low debt burden, a strong budgetary performance, and a
"neutral" liquidity position.
Outlook
The negative outlook on Dnipropetrovsk reflects that on Ukraine.
Because the rating on the city is capped at the sovereign rating,
any rating action on Ukraine would likely lead to a similar
action on Dnipropetrovsk, all else being equal. S&P currently do
not see a viable scenario in which it would revise down its
assessment of Dnipropetrovsk's ICL to below 'ccc'.
In accordance with S&P's relevant policies and procedures, the
Rating Committee was composed of analysts that are qualified to
vote in the committee, with sufficient experience to convey the
appropriate level of knowledge and understanding of the
methodology applicable. At the onset of the committee, the chair
confirmed that the information provided to the Rating Committee
by the primary analyst had been distributed in a timely manner
and was sufficient for Committee members to make an informed
decision.
After the primary analyst gave opening remarks and explained the
recommendation, the Committee discussed key rating factors and
critical issues in accordance with the relevant criteria.
Qualitative and quantitative risk factors were considered and
discussed, looking at track-record and forecasts. The chair
ensured every voting member was given the opportunity to
articulate his/her opinion. The chair or designee reviewed the
draft report to ensure consistency with the Committee decision.
The views and the decision of the rating committee are summarized
in the above rationale and outlook.
RATINGS LIST
Downgraded
To From
Dnipropetrovsk (City of)
Issuer Credit Rating CCC/Negative/-- CCC+/Negative/--
Ukraine National Scale uaB-/--/-- uaBB/--/--
Senior Unsecured CCC CCC+
Senior Unsecured uaB- uaBB
IVANO-FRANKIVSK CITY: S&P Lowers ICR to 'CCC'; Outlook Negative
---------------------------------------------------------------
Standard & Poor's Ratings Services lowered its long-term issuer
credit rating on the Ukrainian City of Ivano-Frankivsk to 'CCC'
from 'CCC+'. The outlook is negative.
At the same time, S&P lowered the Ukraine national scale rating
on Ivano-Frankivsk to 'uaB-' from 'uaBB'.
As defined in EU CRA Regulation 1060/2009 (EU CRA Regulation),
the ratings on Ivano-Frankivsk are subject to certain publication
restrictions set out in Art 8a of the EU CRA Regulation,
including publication in accordance with a pre-established
calendar. Under the EU CRA Regulation, deviations from the
announced calendar are allowed only in limited circumstances and
must be accompanied by a detailed explanation of the reasons for
the deviation. In this case, the deviation has been caused by
the events described in the following Rationale.
RATIONALE
The downgrade follows S&P's rating action on Ukraine.
Under S&P's methodology, a local or regional government (LRG) can
be rated higher than its sovereign only if it considers that it
exhibits certain characteristics. S&P currently do not believe
that Ukrainian LRGs, including Ivano-Frankivsk, meet these
conditions. S&P consequently caps the rating on Ivano-Frankivsk
at the level of the long-term foreign currency rating on Ukraine.
Additionally, in accordance with S&P's criteria, it assess the
city's indicative credit level (ICL) at 'b'. The ICL is not a
rating, but a means of assessing an LRG's intrinsic
creditworthiness under the assumption that there is no sovereign
rating cap. The ICL results from the combination of S&P's
assessment of an LRG's individual credit profile and the effects
we see from the institutional framework in which it operates.
Furthermore, S&P's rating reflects Ukraine's "volatile and
underfunded" institutional framework, resulting in the city's
relatively low wealth levels, "negative" management quality, low
budgetary flexibility, "negative" liquidity, and moderate
contingent risks related to the weak financial position of the
city's government-related entities. The city's low debt and
moderate budgetary performance help offset these weaknesses,
however.
OUTLOOK
The negative outlook on Ivano-Frankivsk reflects the negative
outlook on Ukraine. Because the rating on the city is capped at
the level of the long-term foreign currency sovereign rating, any
rating action on Ukraine would likely lead to a similar action on
Ivano-Frankivsk, all else being equal.
S&P would consider a positive rating action on Ivano-Frankivsk if
it took a positive action on Ukraine.
S&P currently do not see a viable downside scenario in which the
city's ICL would fall below 'ccc'.
In accordance with S&P's relevant policies and procedures, the
Rating Committee was composed of analysts that are qualified to
vote in the committee, with sufficient experience to convey the
appropriate level of knowledge and understanding of the
methodology applicable. At the onset of the committee, the chair
confirmed that the information provided to the Rating Committee
by the primary analyst had been distributed in a timely manner
and was sufficient for Committee members to make an informed
decision.
After the primary analyst gave opening remarks and explained the
recommendation, the Committee discussed key rating factors and
critical issues in accordance with the relevant criteria.
Qualitative and quantitative risk factors were considered and
discussed, looking at track-record and forecasts. The chair
ensured every voting member was given the opportunity to
articulate his/her opinion. The chair or designee reviewed the
draft report to ensure consistency with the Committee decision.
The views and the decision of the rating committee are summarized
in the above rationale and outlook.
RATINGS LIST
Downgraded
To From
Ivano-Frankivsk (City of)
Issuer Credit Rating CCC/Negative/-- CCC+/Negative/--
Ukraine National Scale uaB-/--/-- uaBB/--/--
KYIV CITY: S&P Lowers ICR to 'CCC'; Outlook Negative
----------------------------------------------------
Standard & Poor's Ratings Services lowered its long-term issuer
credit rating on Ukraine's capital City of Kyiv to 'CCC' from
'CCC+'. The outlook is negative.
As defined in EU CRA Regulation 1060/2009 (EU CRA Regulation),
the ratings on Kyiv are subject to certain publication
restrictions set out in Art 8a of the EU CRA Regulation,
including publication in accordance with a pre-established
calendar. Under the EU CRA Regulation, deviations from the
announced calendar are allowed only in limited circumstances and
must be accompanied by a detailed explanation of the reasons for
the deviation. In this case, the deviation has been caused by
the events described in the following Rationale.
RATIONALE
The rating action follows S&P's downgrade of Ukraine on Feb. 21,
2014.
Under S&P's methodology, a local and regional government (LRG)
can be rated higher than its sovereign only if it considers that
it exhibits certain characteristics as described in. S&P do not
currently believe that Ukrainian LRGs, including the city of
Kyiv, meet these conditions.
The long-term rating on Kyiv is therefore capped at 'CCC' by the
Ukrainian sovereign foreign currency rating. However, in
accordance with S&P's criteria, it assess Kyiv's indicative
credit level (ICL) at 'b-'.
The ICL is not a rating, but a means of assessing an LRG's
intrinsic creditworthiness under the assumption that there is no
sovereign rating cap. The ICL results from the combination of
S&P's assessment of an LRG's individual credit profile and the
effects it sees of the institutional framework in which it
operates.
S&P's view also reflects Ukraine's "volatile and underfunded"
public finance system, which results in the city's low financial
flexibility and predictability, weak budgetary performance,
"negative" financial management, "very negative" liquidity,
material debt burden with associated foreign-exchange risks, and
high contingent liabilities.
The rating is supported by the city's position as the
administrative and economic center of Ukraine, its fairly
diversified economy, and wealth levels exceeding the national
average severalfold.
OUTLOOK
The negative outlook on the city of Kyiv reflects that on
Ukraine.
S&P would revise the outlook to stable only if it took the
similar action on Ukraine and if other rating factors developed
in line with its base-case scenario.
A negative rating action on Kyiv would follow a negative action
on Ukraine. S&P could also take a negative rating action on the
city even if the sovereign ratings remain unchanged if the
central government's support for Kyiv diminished, leading to a
weaker debt repayment capacity for the city. This would likely
result in worse liquidity than S&P currently expects in its base-
case scenario, and take the form of restricted access to state
banks' and the treasury's liquidity.
In accordance with S&P's relevant policies and procedures, the
Rating Committee was composed of analysts that are qualified to
vote in the committee, with sufficient experience to convey the
appropriate level of knowledge and understanding of the
methodology applicable. At the onset of the committee, the chair
confirmed that the information provided to the Rating Committee
by the primary analyst had been distributed in a timely manner
and was sufficient for Committee members to make an informed
decision.
After the primary analyst gave opening remarks and explained the
recommendation, the Committee discussed key rating factors and
critical issues in accordance with the relevant criteria.
Qualitative and quantitative risk factors were considered and
discussed, looking at track-record and forecasts. The chair
ensured every voting member was given the opportunity to
articulate his/her opinion. The chair or designee reviewed the
draft report to ensure consistency with the Committee decision.
The views and the decision of the rating committee are summarized
in the above rationale and outlook.
RATINGS LIST
Downgraded
To From
Kyiv (City of)
Issuer Credit Rating CCC/Negative/-- CCC+/Negative/--
Senior Unsecured CCC CCC+
Kyiv Finance PLC
Senior Unsecured CCC CCC+
LVIV CITY: S&P Lowers ICR to 'CCC'; Outlook Negative
----------------------------------------------------
Standard & Poor's Ratings Services lowered its long-term issuer
credit rating on the Ukrainian City of Lviv to 'CCC' from 'CCC+'.
The outlook is negative.
At the same time, S&P lowered the Ukraine national scale rating
to 'uaB-' from 'uaBB'.
As defined in EU CRA Regulation 1060/2009 (EU CRA Regulation),
the ratings on Lviv are subject to certain publication
restrictions set out in Art 8a of the EU CRA Regulation,
including publication in accordance with a pre-established
calendar. Under the EU CRA Regulation, deviations from the
announced calendar are allowed only in limited circumstances and
must be accompanied by a detailed explanation of the reasons for
the deviation. In this case, the deviation has been caused by
the events described in the following Rationale.
RATIONALE
The downgrade follows S&P's rating action on Ukraine.
Under S&P's methodology, a local or regional government (LRG) can
be rated higher than its sovereign only if it considers that it
exhibits certain characteristics. S&P do not currently believe
that Ukrainian LRGs, including Lviv, meet these conditions.
Consequently, S&P would lower the ratings on Lviv if it lowered
the long-term rating on Ukraine.
The long-term rating on Lviv is therefore capped at 'CCC' by the
Ukrainian sovereign foreign currency rating, although, in
accordance with S&P's criteria, it assess Lviv's indicative
credit level (ICL) at 'ccc+'.
The ICL is not a rating, but a means of assessing an LRG's
intrinsic creditworthiness under the assumption that there is no
sovereign rating cap. The ICL results from the combination of
S&P's assessment of an LRG's individual credit profile and the
effects we see of the institutional framework in which it
operates.
S&P's view also reflects Ukraine's volatile and underfunded
intergovernmental system and Lviv's low wealth levels and limited
financial flexibility on revenues and expenditures.
The ratings also reflect S&P's view of the city's liquidity as
"very negative." Lviv has repeatedly missed repayments on a loan
from Ukraine's Ministry of Finance that the city had guaranteed.
Although the city is trying to resolve the problem, the situation
weighs on S&P's assessment of Lviv's financial management, which
it views as "very negative" in an international context.
Material contingent liabilities related to municipal utilities
also constrain the ratings.
On the positive side, the ratings on Lviv reflect its fairly
sound financial performance and modest debt.
OUTLOOK
The negative outlook reflects the negative outlook on Ukraine.
S&P might revise its outlook on Lviv to stable if it took a
positive rating or outlook action on Ukraine and if Lviv's other
rating factors developed in line with S&P's base-case scenario.
A negative rating action on Lviv would follow a negative action
on Ukraine. S&P could also lower the ratings if it sees an
imminent risk of default because of lower-than-expected liquidity
before the May 2014 bond repayment.
In accordance with S&P's relevant policies and procedures, the
Rating Committee was composed of analysts that are qualified to
vote in the committee, with sufficient experience to convey the
appropriate level of knowledge and understanding of the
methodology applicable. At the onset of the committee, the chair
confirmed that the information provided to the Rating Committee
by the primary analyst had been distributed in a timely manner
and was sufficient for Committee members to make an informed
decision.
After the primary analyst gave opening remarks and explained the
recommendation, the Committee discussed key rating factors and
critical issues in accordance with the relevant criteria.
Qualitative and quantitative risk factors were considered and
discussed, looking at track-record and forecasts. The chair
ensured every voting member was given the opportunity to
articulate his/her opinion. The chair or designee reviewed the
draft report to ensure consistency with the Committee decision.
The views and the decision of the rating committee are summarized
in the above rationale and outlook.
RATINGS LIST
Downgraded
To From
Lviv (City of)
Issuer Credit Rating CCC/Negative/-- CCC+/Negative/--
Ukraine National Scale uaB-/--/-- uaBB/--/--
Senior Unsecured CCC CCC+
Senior Unsecured uaB- uaBB
UKRAINE: Replaces Central Bank Chief Amid Default Threat
--------------------------------------------------------
Daryna Krasnolutska, Kateryna Choursina and Ilya Arkhipov at
Bloomberg News report that Ukraine replaced its central bank
chief as it scrambles to fend off default, while Russia poured
scorn on the legitimacy of the new interim leadership.
According to Bloomberg, the temporary government in Kiev said it
needs US$35 billion of financial assistance as the U.S. and the
European Union pledged aid for a new administration.
Bloomberg relates that Russia's Foreign Ministry said opponents
of deposed President Viktor Yanukovych broke a Feb. 21 peace
agreement and set the country on a course for "dictatorial,
terrorist methods."
Lawmakers appointed Stepan Kubiv, the ex-chairman of Lviv-based
VAT Kredobank, to head the central bank after voting out Ihor
Sorkin, Bloomberg discloses.
With Kremlin-backed Yanukovych on the run from an arrest warrant,
payments from a US$15 billion Russian bailout stand suspended,
Bloomberg relays. An international aid package is taking shape
as demonstrators control Kiev and jockeying gets underway before
early presidential elections scheduled for May 25, Bloomberg
states.
Bloomberg notes that Elmar Brok, the head of the European
Parliament's foreign affairs committee, said while a new
government needs to be established before Ukraine can receive
aid, the first payments may arrive next week.
Acting Finance Minister Yuriy Kolobov proposed calling an
international conference of donors with the EU, the U.S. and
other countries, Bloomberg relates. The ministry estimated US$35
billion financing package is needed for this year and next,
Bloomberg states.
European Commission spokesman Olivier Bailly said on Tuesday the
EU has been working on an international economic support package
for Ukraine for the short, medium and long term.
* Fitch Says Russian Banks' Ukraine Exposures Raise Risks
---------------------------------------------------------
Russian banks' significant exposures to Ukraine may materially
impact the solvency of some institutions if borrowers suffer as a
result of the current heightened political and economic stress,
Fitch Ratings says. But the most vulnerable banks have support-
driven ratings, which are unlikely to change unless there is
evidence of a reduced probability of support from the Russian
government.
Russian banks' total exposures to Ukraine are substantial at
around USD28 billion, according to President Putin's statement in
November 2013. Fitch estimates Russian state-related banks hold
the bulk of this, with approximately half at their Ukrainian
subsidiaries (which are to a large degree parent-funded) and half
booked directly on parent banks' balance sheets or at other group
entities.
Risks relate primarily to loans to local corporates (more than a
half of the total exposure), and to Russian and Ukrainian
businessmen who have borrowed funds for the acquisition of
Ukrainian assets (about 25%). Fitch believes these are exposed to
both economic and political risks in Ukraine, including
recession, potential challenges to the ownership of pledged
assets, and the devaluation of the hryvna, since around 60% of
lending is done in foreign currency. Local retail loan books
(less than 5%) and Ukrainian sovereign exposures of Russian banks
are limited.
Fitch estimates that the most exposed banks (relative to equity)
are Vnesheconombank (VEB, 74%), Gazprombank (about 40%) and VTB
(at least 14%). Sberbank (8%) and Alfa Bank (3%) are less
vulnerable.
VEB's Ukrainian subsidiary has assets of about USD5bn (equal to
29% of parent equity), and there are also corporate loans booked
on VEB's balance sheet, including a large M&A finance
transaction.
Gazprombank has the second largest exposure relative to its
capital, despite not having a local subsidiary. This comprises a
loan to Naftogaz (around 15% of capital), the national oil and
gas company of Ukraine, secured on payments from Russia's Gazprom
which partially mitigates the risks, and other corporate
exposures, including acquisition financing.
VTB's risks are mainly from its local subsidiary (assets of about
USD3bn, equal to 11% of parent equity), although it has also said
it was directly exposed to the Ukrainian sovereign for around
RUB20 billion (USD0.7 billion) at end-2013. VTB's direct exposure
to local corporates, if any, is not disclosed publicly.
For Sberbank the potential problem is manageable because the
local subsidiary is relatively small (about USD4 billion, or 7%
of parent equity) and there is limited direct exposure to local
corporates.
Alfa Bank is the least exposed. Loans to Ukrainian corporates
amounted to only USD120 million at February 20, 2014. Alfa Bank
(Ukraine), a sister bank with USD3 billion of assets (excluding
foreign interbank and related party loans) is primarily locally
funded, so poses limited contingent risks.
===========================
U N I T E D K I N G D O M
===========================
CENTAUR GLOBAL: Directors Banned For 8 Years
--------------------------------------------
Michael Brown at The Journal reports that bosses of betting
investment firm Centaur Global have been banned from running
another company for eight years after losing millions while
gamblers were kept in the dark.
Northumberland-based Centaur Global collapsed in 2012, owing
GBP2 million. At the time it went under the firm had been
trading while insolvent for two years, The Journal notes.
Now an insolvency judgment reveals the full extent of the failure
-- and how it may never be known where all the money went,
according to the report.
Founded by a former Audit Commission senior manager Keith Sobey
in 2000, Centaur provided members of the public and institutions
with the opportunity to invest in gaming related funds and in
gambling.
The Journal relates it went on to open an "academy" in the heart
of London's financial district and as recently as January 2011
claimed it was on track to handle GBP20 million worth of
investment funds, creating GBP2 million a year in revenue. But
Centaur was placed into liquidation in January 2012 owing
creditors more than GBP2 million, including a significant
shortfall of client account monies, the report says.
Now the Insolvency Service judgment show the company was in
trouble long before that, losing money nearly every month from
the end of 2008 onwards, and using its clients' supposedly ring-
fenced cash to try to cover mounting problems at the business,
The Journal relays.
CITY EQUITIES: Claims Bar Date Set For March 21
-----------------------------------------------
Donia O'Loughlin at FTAdviser reports that the administrators of
City Equities Ltd is set to publish a notice in local and
national press to invite missing investors who have not yet
submitted their claim to do so or they may miss out altogether.
FTAdviser relates that the joint special administrators said the
bar date, 5:00 p.m. on March 21, gives time for the remaining
investors to be able to calculate and submit their claims.
James Moore, part of the Bird & Bird restructuring and insolvency
group team advising on the matter, clarified that the purpose of
a bar date is to get clients' assets back to the clients as
quickly as possible, the report notes.
FTAdviser says Mr. Moore added there are currently 30 clients
left who have not claimed who have a total asset pot of
GBP300,000 in total.
He said: "The bar date allows the [administrator] to make
provisions and see if there could be shortfalls. It also makes
clients aware they need to formulate and submit claims.
"We are not expecting a shortfall in client equity. As yet, we
don't know whether client monies will be returned as it is more
complicated [than equities].
"There were originally circa 300 active clients although the bar
date is likely to impact on about 30 clients and an asset pot
remaining of circa GBP300,000."
The bar date notice, seen by FTAdviser, also warned that
investors who do not respond within the bar date without a
"justifiable reason" may lose their right to the asset and become
an unsecured creditor in this matter.
City Equities Limited is a London-based broker and small-cap
equity dealer.
As reported in the Troubled Company Reporter-Europe on
Oct. 22, 2013, Business Credit Management said Andrew Andronikou
and Peter Kubik of the accounting firm UHY Hacker Young Group
have been appointed as City Equities under the Special
Administration Regime.
A special administration order in respect of City Equities
Limited was granted on Oct. 11, 2013, during an out of hours
hearing after the directors' made an urgent application to court
the same day, according to Business Credit Management News. The
report relates that the application was made following previously
unsuccessful attempts to recapitalise City Equities under the
FCA's capital adequacy rules.
CORNERSTONE TITAN 2005-2: S&P Withdraws BB- Rating on Cl. E Notes
-----------------------------------------------------------------
Standard & Poor's Ratings Services has withdrawn its 'BB- (sf)'
credit rating on Cornerstone Titan 2005-2 PLC's class E notes
following their full redemption.
The withdrawal follows S&P's receipt of the cash manager's
report, which confirms that the class E notes fully redeemed on
the January 2014 interest payment date.
Cornerstone Titan 2005-2 is a 2005-vintage European commercial
mortgage-backed securities transaction, which is currently
secured against one U.K. commercial property loan.
DGT STRUCTURES: More Than 100 Jobs Axed as Firm Collapses
---------------------------------------------------------
Ben Woods at EDP reports that more than 100 jobs have been put at
risk after DGT Structures collapsed into administration on
Feb. 21.
EDP says the company confirmed that redundancies looked likely as
it appointed insolvency specialists McTear Williams and Wood to
find a buyer. And the EDP understands that some staff have now
been told that their jobs will not be safe.
The business -- which employs 119 people and recorded a
GBP20 million turnover in 2012 -- hoped an investment boost would
strengthen its balance sheet and spark a turnaround of fortunes,
the report relays.
But pressure from creditors, problems collecting payments, and a
downgrade of the company's credit rating had made trading
difficult, according to the report.
EDP notes that the announcement is the latest chapter in a
turbulent saga for the firm, which was hit by a watchdog
investigation in 2012 when a steel frame surrounding a five-
storey London church fell apart.
"We have been advising the DGT directors over the last week as
they seek to complete a number of contracts which will enhance
realisation for creditors," the report quotes Chris Williams --
chriswilliams@mw-w.com -- insolvency practitioner, as saying.
"We are already aware of a number of interested parties and will
speak to them shortly with a view to concluding an early sale of
DGT's business and assets. Regrettably, at this point we cannot
rule out redundancies."
According to the latest filed accounts for September 30 2012,
Pre-tax profits fell by GBP90,273 to GBP159,113, despite turnover
increasing GBP740,423 to GBP20.3m, EDP discloses. But the amount
falling due to creditors within one year had risen from GBP9.1m
in 2011 to GBP10.2m in 2012. This included GBP7.3 million owed to
trade creditors and GBP2.1 m million owed in VAT during 2012, the
report adds.
DGT Structures Ltd is a steelworks contractor based in Norfolk,
United Kingdom.
DIXONS RETAIL: Fitch Says CPW Merger Can Achieve BB-Range Rating
----------------------------------------------------------------
A merger of Dixons and Carphone Warehouse could create a company
with the size to achieve a rating a notch or two higher than
Dixons' current 'B+' IDR, Fitch Ratings says.
The rating of a combined entity would be constrained by its
relatively low operating profitability and high lease-adjusted
leverage. A rating below the low 'BB' category could result from
factors including how a deal was structured, the potential for
integration risks and the financial policies of the combined
business, particularly its approach to shareholder remuneration.
Dixons and Carphone Warehouse have said they are in preliminary
discussions regarding a possible merger.
A combination of the two companies would create a business with
annual sales of over GBP12 billion and EBITDAR of over GBP1.2
billion. It would also generate significant cost-saving
opportunities from merging back-office and distribution functions
and the potential to increase combined sales.
The greater profitability of mobile phones than household
appliances means it would also have slightly stronger margins
than Dixons does on its own. The combined EBIT margin for FY13
would have been around 2.2%, compared with 1.6% for Dixons, and
synergies from the combination would lift this figure further.
However, even with the benefit of significant cost savings, the
EBIT margin would probably remain below 5%, low compared with
other non-food retail sectors, leaving limited margin for error
in the event of adverse business or economic conditions.
Although both companies have very low financial debt, they have
high rent costs. Dixons' leverage, measured as lease-adjusted net
debt/EBITDAR, was 4.7x at end FY13 and Fitch believes a combined
company would have similar leverage.
There would be an opportunity to reduce lease costs by merging
stores, but this would be limited because the two companies tend
to operate in different locations. Carphone Warehouse stores are
generally on high streets, while Dixons' are more often in retail
parks. If there are store closures they would probably be
concentrated in high streets and shopping centers because the
longer leases in retail parks makes them harder to exit.
GOLDTRAIL TRAVEL: Was Insolvent Before Collapse, Court Told
-----------------------------------------------------------
Ian Taylor at Travelweekly reports that Goldtrail Travel was
insolvent a year before it went into administration at a cost of
GBP25 million to the Air Travel Trust fund, a Court heard on
Feb. 17.
The company ceased trading in July 2010 in a failure that cost up
to GBP33 million, but Goldtrail was GBP2.4 million in debt in
October 2009 and had net liabilities of almost GBP3 million by
March 2010, Travelweekly discloses.
According to Travelweekly, the High Court in London saw the
beginning of a claim for GBP1.4 million brought by Goldtrail
liquidator PwC against Phil Wyatt, Halldor Sigurdarson, Magnus
Stephensen and Black Pearl Investments (BPI) and a linked claim
for GBP3.64 million against airline Onur Air.
Travelweekly relates that the claim centres on allegations that
the Black Pearl defendants gave "dishonest assistance" to
Goldtrail's sole director Abdulkadir Aydin "in a breach of his
fiduciary duty", and that all the defendants were involved in the
"misapplication" and "misuse of payments".
Mr. Aydin is believed to have transferred more than GBP10 million
to himself and his family ahead of putting Goldtrail into
administration, according to Travelweekly.
Travelweekly notes that Wyatt, Sigurdarson and Stephensen ran
Viking Airlines which sold seats to Goldtrail.
All the defendants contest the claims, the report says.
Headquartered in New Malden, Surrey, Goldtrail Travel Limited is
a Greece and Turkey budget holiday operator specialist. Mark Fry
and Edward Taylor of Begbies Traynor were appointed
administrators of Goldtrail Travel on July 16, 2010.
HERO ACQUISITIONS: Moody's Assigns 'B2' Corporate Family Rating
---------------------------------------------------------------
Moody's Investors Service has assigned a definitive B2 corporate
family rating (CFR) to Hero Acquisitions Limited (HSS or the
company). Concurrently, Moody's has assigned a B1-PD probability
of default rating (PDR) to the company, and a definitive B2
rating to the GBP200 million senior secured notes maturing in
2019 issued by HSS Financing plc, a subsidiary of HSS. The
outlook on the ratings remains stable.
Ratings Rationale
The final terms of the Notes are in line with the drafts
previously reviewed to assign the provisional ratings.
The PDR at B1-PD, one level above the CFR, reflects our
assumption of a 35% family recovery rate given the lack of any
financial maintenance covenants in the structure. The GBP60
million revolving credit facility has a springing leverage
covenant that effectively acts as a draw stop, tested only once
25% of the facility is utilized.
The principal methodology used in these ratings was the Global
Equipment and Automobile Rental Industry published in December
2010. Other methodologies used include Loss Given Default for
Speculative-Grade Non-Financial Companies in the U.S., Canada and
EMEA published in June 2009.
Headquartered in Surrey, United Kingdom, HSS is a provider of
tool and equipment hire and related services in the United
Kingdom and Ireland. The company operates mainly in the B2B
market, and generated GBP234-GBP236 million of revenues in 2013
(based on management's estimates pro-forma for the acquisition of
UK Platforms). HSS was acquired by Exponent Private Equity
(Exponent) in October 2012. Exponent has 79% ownership in HSS
with the management holding the remaining 21%.
PENDRAGON PLC: Moody's Raises CFR to 'B1', Outlook Stable
---------------------------------------------------------
Moody's Investors Service has upgraded the corporate family
rating (CFR) of Pendragon PLC to B1 from B2 and its probability
of default rating (PDR) to B1-PD from B2-PD, on the back of its
strong operating performance. At the same time, Moody's has
upgraded the rating on the company's GBP175 million notes to B1
(LGD3) from B2 (LGD3). The outlook on the ratings is stable.
"We are upgrading Pendragon's ratings to B1 because of its strong
recent operating performance, which has resulted in significant
improvements to the company's quantitative credit profile," says
Andreas Rands, a Moody's Vice President - Senior Analyst and lead
analyst for Pendragon.
Moody's estimates that Pendragon's debt/EBITDA has fallen to 5.5x
for the fiscal year 2013 ended December 31, and its interest
coverage (as measured by EBITA/Interest) has improved to 2.1x.
Moody's expects that Pendragon will largely maintain this overall
credit profile for the next 12-18 months.
Moody's rating action recognizes the significant improvement in
the company's credit profile following (1) the recent recovery in
the UK macroeconomic environment, and (2) the competitive
financing deals being offered by the financing arms of auto
manufacturers eager to mitigate continued sluggish performance in
continental Europe.
Ratings Rationale
Pendragon's B1 rating recognizes (1) the cyclical nature of new
and used car sales (representing 56.4% of the company's reported
underlying gross profit in fiscal 2013); (2) the linkage between
new car sales and the aftersales segment, the key profit
generator for the company; and (3) the company's principal focus
on the UK market, which leaves it exposed to economic conditions
in the country, albeit Moody's notes the modest recovery in the
macroeconomic environment during calendar 2013. In addition,
Moody's estimates that Pendragon's adjusted leverage will remain
high at around 4.75x-5.5x over the next 12-18 months. However,
these factors are partially offset by the company's improved
credit metrics over the past four financial years, especially
debt/EBITDA, as well as its leading market position in the very
fragmented UK auto retailing market.
In addition, the rating incorporates the company's favorable
brand mix, with its key premium and volume-led brands (Stratstone
and Evans Halshaw, respectively) generating similar reported
underlying operating profit in fiscal 2013.
The rating is further supported by Pendragon's parts and service
offering (accounting for around 38% of reported underlying gross
profit), which is driven by the stability of the overall UK car
parc, and the recent return to growth in the `less than three
years old' car segment, which is the company's core focus. The
rating is also supported by the company's recent tightening of
its leverage target to 1.0x-1.5x, following early delivery of its
previous target of 1.5x.
Rationale For Stable Outlook
The stable outlook on the rating reflects Moody's view that
Pendragon's favorable brand mix will continue to resonate with
consumers, and that the company will continue to prudently manage
its expenses, resulting in credit metrics that the rating agency
expects will continue to improve over the next 12 months. This
expectation of improved credit metrics is driven by the current
attractive fundamentals of the new car sales market in the UK,
which is likely to support growth in the core aftersales segment
in the near term.
What Could Change The Rating Up/Down
Although not expected in the short term, positive rating pressure
could result if Pendragon continues to improve its operating
performance and credit metrics, as well as maintain a balanced
financial policy. Quantitatively, Moody's could upgrade the
rating if debt/EBITDA was sustained below 4.5x and EBITA/interest
was sustained above 2.25x.
Conversely, negative rating pressure could arise if Pendragon's
liquidity or operating performance were to weaken, or if the
company were to undertake an aggressive financial policy such
that debt/EBITDA remained above 5.5x or if EBITA/interest was
maintained below 1.75x.
Principal Methodology
The principal methodology used in this rating was the Global
Retail Industry published in June 2011. Other methodologies used
include Loss Given Default for Speculative-Grade Non-Financial
Companies in the U.S., Canada and EMEA published in June 2009.
Pendragon PLC, headquartered in Nottingham, England, is the UK's
leading automotive retailer by revenues, according to the
company, with around 225 franchises, and posted revenues of
GBP3.8 billion in fiscal 2013.
WOLVERHAMPTON CITY: To Cut More Jobs to Avoid Insolvency
--------------------------------------------------------
CIPD reports that austerity cuts are being blamed for a large
increase in the number of planned job losses at Wolverhampton
City Council.
CIPD says the Labour-led council had previously announced it
would reduce headcount by 1,400 over five years to make savings
of GBP98 million. However, a reassessment of the organisation's
finances revealed that job cuts would now need to rise to 2,000,
despite raising the council tax by 2 per cent, to avoid
insolvency.
In January, council leaders revealed that additional savings of
GBP31 million would need to be made before 2015 or the authority
would be down to its last GBP620,000 and face "bankruptcy shortly
after," according to CIPD.
New calculations suggested that the council must now save GBP123
million with many of the 2,000 posts to be cut in the next two
years, the report relates.
"We have lost a huge proportion of the main source of our income,
which is the grant from the government. That's why we have to
make these job cuts," the report quotes Andrew Johnson, cabinet
member for resources, as saying. "The job cuts will be across
the council except in some essential services such as children's
social work. We are offering voluntary redundancy."
Wolverhampton is a city and metropolitan borough in the West
Midlands, England.
*********
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
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re-mailing and photocopying) is strictly prohibited without prior
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Information contained herein is obtained from sources believed to
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The TCR Europe subscription rate is US$775 per half-year,
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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
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