TCREUR_Public/140228.mbx         T R O U B L E D   C O M P A N Y   R E P O R T E R

                           E U R O P E

           Friday, February 28, 2014, Vol. 15, No. 42



SAFARI HOLDING: Moody's Assigns B2 Rating to EUR235MM Sr. Notes


HALCYON 2005-1: Fitch Cuts Ratings on 2 Note Classes to 'Csf'
HALCYON 2005-2: Fitch Affirms 'CCsf' Ratings on 3 Note Classes
HARVEST CLO VII: Fitch Assigns 'B(EXP)sf' Rating to Class F Notes
IRISH BANK: Liquidators Offload Second Loan Portfolio


ALLIANCE OIL: Fitch Puts 'B' LT Issuer Default Ratings on RWN


ENEMALTA CORP: S&P Revises Outlook to Stable & Affirms 'B+' CCR


EUROCREDIT CDO III: S&P Cuts Ratings on 2 Note Classes to CCC-
NEPTUNO CLO I: S&P Affirms 'B' Ratings on 2 Note Classes


HIDROELECTRICA: Nears Insolvency Exit; Reorganization Underway


BALTINVESTBANK: Moody's Changes 'B3' Rating Outlook to Stable
METALLOINVEST JSC: S&P Raises Corp Credit Ratings to 'BB'
MOBILE TELESYSTEMS: Fitch Affirms 'BB+' LT Issuer Default Rating
SISTEMA JOINT: Fitch Affirms 'BB-' LT Issuer Default Rating


BBVA FINANZIA: S&P Lowers Rating on Class C Notes to 'D'
ZINKIA: Enters Administration; Creditor Talks Continue


UKRAINE: May Default on US$3 Billion in Eurobonds

U N I T E D   K I N G D O M

HAMILTON SCHOOL: Appoints Liquidators; 78 Jobs Affected
STEMCOR HOLDINGS: To Restructure US$1.3 Billion Debt


* BOOK REVIEW: The Oil Business in Latin America: The Early Years



SAFARI HOLDING: Moody's Assigns B2 Rating to EUR235MM Sr. Notes
Moody's Investors Service has assigned a definitive B2 rating to
Safari Holding Verwaltungs GmbH's senior secured guaranteed
EUR235 million notes. The B2 corporate family rating (CFR) and
B1-PD probability of default rating (PDR) of Safari Holding GmbH
as well as the stable outlook remain unchanged.

Ratings Rationale

Moody's definitive ratings are in line with the provisional
ratings assigned on 30 January 2014.

The B2 CFR primarily reflects (1) Lowen Play's small size and
lack of international diversification; (2) the material
regulatory risk following the regulatory overhaul of the German
gaming industry, which could have a material negative effect on
Lowen Play's business model from July 2017 onwards; and (3) the
key personal risk especially in the context of the regulatory

However, the rating benefits from (1) Lowen Play's leading market
position in the fragmented German gaming arcades market,
supported by a strong network of arcades in affluent states
(mainly Bavaria and Baden Wurttemberg); (2) the group's strong
profitability in the context of the European gaming universe
(based on EBIT margins); (3) the strong demand prospects for the
German gaming market supported by sound macroeconomic conditions,
especially in Lowen Play's key local states; (4) Lowen Play's
good cash conversion supported by strong operating margins, a
negative working capital consumption (players pay cash while
Lowen Play pays its suppliers with a certain time lag and an
acceptable leverage pro-forma of the refinancing with adjusted
debt/EBITDA of around 4.0x; (5) the group's very experienced
management, which is critical at a time when the German gaming
industry is undergoing a material regulatory overhaul; and (6)
the company's ability to reduce costs in case of a credit
negative regulatory change by July 2017 thanks to short-term
gaming machines rental contracts (3 years) and around two-thirds
of the group's real estate lease contracts expiring before 2017
(however with options to prolongation for the hirer).


The liquidity profile of Lowen Play pro-forma of the transaction
is adequate. The company had around EUR40 million of cash on
balance sheet at closing of the transaction. Given the cash flow
generative nature of the business and the negative working
capital consumption (customers pay immediately whilst suppliers
are paid with a time lag), Moody's expect that the company will
rapidly build up a comfortable cash buffer. The group will also
have access to a three-year, EUR15 million facility, provided by
the institutional shareholders. At close, the facility was fully
drawn to cover EUR4.7 million of guarantees and EUR10.3 million
as available liquidity for working capital and general corporate
purposes. The company intends to put in place bilateral lines
which would be used to repay the facility.

Lowen Play will not face any material debt maturities over the
next three years before the EUR15 million credit facility from
its shareholder will come due. The EUR235 million of senior
secured guaranteed notes will mature in 2021.

Lowen Play will not need to comply with any maintenance covenants
neither in the proposed senior secured guaranteed notes nor in
the EUR15 million credit facility from its shareholder.

Under the notes indenture, Lowen Play will not be allowed to pay
out a dividend until 2017. At that time, the company will only be
allowed to pay a dividend if gross leverage is equal to or less
than 1.5x. Further the company has committed to making a
mandatory offer for up to 10% of its originally issued notes
subject to maintaining adequate cash liquidity.

Rating Outlook

The stable outlook assumes an adjusted pro forma leverage of
around 4.0x at the closing of the transaction with a gradual
deleveraging on a net basis. The current rating also assumes that
Lowen Play will maintain conservative financial policies,
especially in light of the regulatory risk the company faces from
July 2017 onwards.

What Could Change the Rating -- UP and DOWN

Positive rating pressure is not anticipated in the short to
medium term due to the pending regulatory risk. Positive rating
pressure would however build if (i) Net debt / EBITDA would drop
sustainably and well below 3.0x; (ii) EBIT/Net interest expense
would increase sustainably and well above 3.0x, (iii) Lowen Play
would generate consistent positive free cash flow. A more benign
change in the regulatory environment could also lead to upward
rating pressure.

Negative rating pressure would be exerted on the rating if (i)
Net debt / EBITDA moves sustainably above 4.5x, (ii) EBIT/Net
interest expense drops sustainably below 2.0x, (iii) Lowen Play
generates negative free cash flow. A more aggressive regulatory
change than currently anticipated by management (especially the
non availability of hardship clauses) could also lead to negative
pressure on the rating.

The principal methodology used in this rating was the Global
Gaming published in December 2009. Other methodologies used
include Loss Given Default for Speculative-Grade Non-Financial
Companies in the U.S., Canada and EMEA published in June 2009.

Safari Holding GmbH is the parent entity of the Lowen Play Group
and the guarantor of the proposed new notes. The Lowen Play Group
is majority owned by AXA LBO Funds. The remaining shares are
owned by management and Cofima, a Luxembourg-based holding
company controlled by a Dutch entrepreneur.

Lowen Play is Germany's largest operator of coin gaming arcades
by number of arcades, in a very fragmented market. The company
operates 316 amusement arcades and 20 single sites/pubs. Lowen
Play operates 8502 slot machines and 1124 amusement machines.
Lowen Play reported revenues of EUR222 million and EBITDA of
EUR92 million (41% margin) notwithstanding that the company
capitalises its gaming machines rental costs (approximately 32%
EBITDA margin when adjusted for the machines' rental costs).


HALCYON 2005-1: Fitch Cuts Ratings on 2 Note Classes to 'Csf'
Fitch Ratings has downgraded two classes issued by Halcyon
2005-1, Ltd. as follows:

-- EUR51,875,000 class A notes to 'Csf' from 'CCsf';
-- EUR15,000,000 class B notes to 'Csf' from 'CCsf'.

Key Rating Drivers

Since Fitch's last rating action in April 2013, 16.3% of the
underlying collateral has been downgraded and 3.4% has been
upgraded.  The downgraded assets include one asset (3.6%) that
has experienced principal losses which resulted in a partial
writedown to the class C notes.

This transaction was analyzed under the framework described in
the report 'Global Rating Criteria for Structured Finance CDOs'
using the Portfolio Credit Model (PCM) for projecting future
default levels for the underlying portfolio.  The degree of
correlated default risk of the reference collateral is high given
the single sector and vintage concentration.  Based on this
analysis and given the credit enhancement available to classes A
and B, the credit characteristics of the bonds are consistent
with a 'Csf' rating.

Halcyon 2005-1 is a static synthetic collateralized debt
obligation (CDO) and closed on July 25, 2005.  The note proceeds
collateralize a credit default swap that references a $1.4
billion portfolio of 30 CMBS assets with FMS WERTMANAGEMENT
(rated 'AAA/F1+'; Outlook Stable by Fitch) as the current swap
counterparty.  The swap originally provided protection on US$96
million of realized losses in the portfolio; the U.S. dollar
losses are converted into euros at a fixed exchange rate of
US$1.20 to EUR1 to the extent such losses are applied to the
euro-denominated class A and class B notes.  Currently, the
proceeds of the notes are invested in short-term money market
investments rated 'F1+' by Fitch.  Fitch previously withdrew the
ratings on the class C notes.

Rating Sensitivities

Further deterioration of the underlying collateral could lead to
further rating actions on the distressed notes.

HALCYON 2005-2: Fitch Affirms 'CCsf' Ratings on 3 Note Classes
Fitch Ratings has affirmed three classes issued by Halcyon
2005-2, Ltd. as follows:

-- EUR38,400,000 class A notes at 'CCsf';
-- EUR25,800,000 class B notes at 'CCsf';
-- $15,750,000 class C notes at 'CCsf'.

Key Rating Drivers

Since Fitch's last rating action in April 2013, 12.7% of the
underlying collateral has been downgraded and 3.2% has been
upgraded.  Currently, 30% of the portfolio has a Fitch derived
rating below investment grade and 16.7% has a rating in the 'CCC'
category and below, compared to 30% and 10%, respectively, at the
last rating action.

This transaction was analyzed under the framework described in
the report 'Global Rating Criteria for Structured Finance CDOs'
using the Portfolio Credit Model (PCM) for projecting future
default levels for the underlying portfolio.  The degree of
correlated default risk of the reference collateral is high given
the single sector and vintage concentration.  Based on this
analysis and given the credit enhancement available to classes A
through C, the credit characteristics of the bonds are consistent
with a 'CCsf' rating.

Halcyon 2005-2 is a synthetic collateralized debt obligation
(CDO) and closed on Oct. 7, 2005.  The note proceeds
collateralize a credit default swap that references a $1.5
billion portfolio of 30 CMBS A-J bonds.  FMS WERTMANAGEMENT
(rated 'AAA/F1+'/Outlook Stable by Fitch) is the current swap
counterparty.  The swap provides protection on $96 million of
realized losses in the portfolio; the U.S. dollar losses are
converted into Euros at a fixed exchange rate of $1.25 to EUR1 to
the extent such losses are applied to the euro-denominated class
A and class B notes.  FMS WERTMANAGEMENT has also entered into a
credit support annex to provide additional collateral to mitigate
market value risk of liquidation on the Euro and U.S dollar
denominated securities due to an early redemption of the notes in
an event of default by the swap counterparty.  Currently, the
proceeds of the notes are invested in U.S. dollar and Euro
denominated cash accounts.

Rating Sensitivities

Further deterioration of the underlying collateral could lead to
further rating actions on the distressed notes.

HARVEST CLO VII: Fitch Assigns 'B(EXP)sf' Rating to Class F Notes
Fitch Ratings has assigned Harvest CLO VIII Limited notes
expected ratings, as follows:

EUR243.0 million Class A: 'AAA(EXP)sf'; Outlook Stable
EUR47.0 million Class B: 'AA(EXP)sf'; Outlook Stable
EUR27.0 million Class C: 'A(EXP)sf'; Outlook Stable
EUR21. 0 million Class D: 'BBB(EXP)sf'; Outlook Stable
EUR31.0 million Class E: 'BB(EXP)sf'; Outlook Stable
EUR10.0 million Class F: 'B(EXP)sf'; Outlook Stable
EUR46.0 million Subordinated Notes: not rated

Final ratings are contingent on the receipt of final documents
conforming to information already reviewed.

Key Rating Drivers

'B'/'B-' Portfolio Credit Quality
Fitch expects the average credit quality of obligors to be in the
'B'/'B-' range.  Fitch has credit opinions on 94% of the
indicative portfolio and has a public rating on the remaining

Above-Average Recoveries
At least 90% of the portfolio will comprise senior secured loans
and senior secured bonds.  Recovery prospects for these assets
are typically more favorable than for second-lien, unsecured, and
mezzanine assets.  Fitch has assigned Recovery Ratings to 84% of
the indicative portfolio.

Shorter Weighted Average Life
The covenanted weighted average life is 7.6 years, lower than the
average for Fitch-rated CLOs 2.0.

Limited FX Risk
All non-euro-denominated assets have to be hedged using suitable
asset swaps.  Non-euro assets are limited to 30% of the
Limited Interest Rate Risk
Fixed rate assets can account for no more than 10% of the

Limited Basis/Reset Risk
A liquidity facility (LF) and an interest smoothing account are
used to mitigate reset risk from assets switching to semi-annual
while the notes are paying quarterly.  If the LF expires or is
terminated, the notes will switch to semi-annually.

The spread on the LF is linked to the outstanding rating of the
senior notes.  In addition, if Fitch withdraws its rating on the
senior notes, or downgrades them below 'BBsf', the LF provider
may terminate the LF.  Fitch believes that ratings should not be
used in this way in transaction documents and has highlighted
this to the manager.

Trading Gain Release
The portfolio manager may designate trading gains as interest
proceeds if the portfolio balance remains above the reinvestment
target par balance and the class E overcollateralization test
stays above its value at the effective date.

Transaction Summary
Harvest CLO VIII Ltd (the issuer) is an arbitrage cash flow CLO.
Net proceeds from the issuance of the notes will be used to
purchase a EUR412 million portfolio of European leveraged loans
and bonds.  The portfolio is managed by 3i Debt Management
Investments Limited.  The reinvestment period is scheduled to end
in 2018.

The transaction documents may be amended subject to rating agency
confirmation or note holder approval.  Where rating agency
confirmation relates to risk factors, Fitch will analyze the
proposed change and may provide a comment if the change has a
negative impact on the then current ratings.  Such amendments may
delay the repayment of the notes as long as Fitch's analysis
confirms the expected repayment of principal at the legal final

If in the agency's opinion the amendment is risk-neutral from the
perspective of the rating Fitch may decline to comment.
Noteholders should be aware that the structure considers the
confirmation to be given in the case where Fitch declines to

Rating Sensitivities

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

A 25% reduction in the expected recovery rates would lead to a
downgrade of one to three notches for the rated notes.

IRISH BANK: Liquidators Offload Second Loan Portfolio
Reuters reports that liquidators appointed to Anglo Irish Bank
have sold a second portfolio of loans held by the collapsed
lender with a par value of EUR7.3 billion (US$10 billion),
removing another contingent liability from the state's finances.

Nationalized Anglo Irish, renamed the Irish Bank Resolution
Corporation (IBRC) in 2011, was put into liquidation last year in
a deal that released Dublin from a commitment to quickly pay off
a EUR29 billion debt incurred by the bank, Reuters recounts.

The liquidators, KPMG, must either complete the sale of its
assets by early this year or transfer them to the National Asset
Management Agency (NAMA), the state-owned "bad bank" that is
already one of the world's biggest property groups, Reuters says.

Ireland, which completed an EU/IMF bailout late last year but
still has one of the highest debt levels in the euro zone, will
have to cover any losses NAMA incurs over its lifetime, Reuters

The portfolio, made up mostly of UK commercial real estate loans,
was sold above initial valuations, which were not specified,
Reuters relays.

The liquidators offloaded 84% of the first EUR2.5 billion
portfolio in December, also at prices above independent
valuations, Reuters recounts.

                   About Irish Bank Resolution

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

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

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

IBRC was granted protection under Chapter 15 of the U.S.
Bankruptcy Code in December 2013.


ALLIANCE OIL: Fitch Puts 'B' LT Issuer Default Ratings on RWN
Fitch Ratings has placed Alliance Oil Company Ltd's (AOIL) Long-
term foreign and local currency Issuer Default Ratings (IDR) of
'B' on Rating Watch Negative (RWN) on the expectation that the
acquisition of the company by Alliance Group could significantly
affect its financial policies, potentially resulting in a
materially worsened credit profile.

Privately-owned Alliance Group, which held a 45% stake in AOIL,
bought out all remaining stock in December 2013, and the company
was then de-listed.  Alliance Group attracted a USD1.2 billion
short-term loan to finance the deal, and although Alliance
Group's creditors legally have no recourse to AOIL, we believe
that Alliance Group may need to change AOIL's financial policies
to be able to service the debt.  This could include retreating
from previously followed zero-dividend practice and/or issuing
financial guarantees, which could translate into AOIL's funds
from operations (FFO) adjusted leverage rising above the current
negative rating action guidance of 5x.

With 9M13 daily hydrocarbon production of 60 thousand barrels of
oil equivalent (mbbl/d), AOIL is a Russia-based small integrated
oil company, accounting for 0.5% of domestic crude production and
1.5% of oil refining.

Key Rating Drivers

Small Russian Crude Producer
AOIL aims for double-digit growth of oil and gas production in
2014-2015, but even if this growth strategy is successful, its
ratings are likely to be limited to the 'B' category, given its
limited scale and concentration on Russia.  AOIL's upstream
production in 9M13 averaged 59.6 mboe/d, up 9% yoy, including
natural gas and condensate production of 7.4mboe/d.  The company
accounts for around 0.5% of crude production in Russia.

Timano-Pechora is Key
AOIL's ability to implement its upstream growth strategy in the
Timano-Pechora region is still important for maintaining and
increasing its production, although its significance has declined
since AOIL launched its gas business in the Tomsk region.  At
end-2012, Timano-Pechora accounted for 42% of the company's
proved oil and gas reserves. The lower-than-expected production
potential of Kolvinskoye, AOIL's largest field, launched in
September 2011, resulted in upstream production falling to 52.3
thousand barrels per day (mbbl/d) in 4Q12 from 62.4mbbl/d in

More Reliance On Downstream
Progress on the Khabarovsk refinery upgrade aimed at increasing
AOIL's primary refining capacity to 100mbbl/d supports AOIL's
credit profile.  Average daily refining volumes at the Khabarovsk
refinery totalled 89.5mbbl/d in 9M13, 13% yoy. The company
intends to connect the refinery to Transneft's ESPO oil pipeline
in 2014, significantly reducing the company's transport costs.
"We expect that lower transport costs will largely offset the
negative effect from the planned increase of export duty on dark
oil products in 2015, and from the expiry of most of AOIL's oil
production tax breaks in 2015," Fitch said.

No Deleveraging Expected
At end-2012 AOIL's FFO Fitch-adjusted gross leverage was 3.2x.
Under the current financial and dividend policies we expect it to
average 3.5x-4.5x in 2013-2018.  "We consider these figures
adequate for the current rating.  However, we consider it likely
that there will be a change in the company's financial policies
stemming from the parent's need to service the acquisition debt.
This could translate into AOIL's credit metrics significantly
worsening, which is reflected by the RWN," Fitch said.

Rating Sensitivities

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

-- A change in dividend policies or a more aggressive financial
    policy, including issuing guarantees in favour of the parent,
    leading to FFO adjusted leverage rising above 5x on a
    sustained basis.

-- Worsened information transparency following the acquisition
    by Alliance Group.

-- Inability to connect AOIL's refinery to ESPO pipeline by end-

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

-- The RWN could be removed and a Stable Outlook assigned if the
    company demonstrates its commitment to the current zero-
    dividend practice and its financial policies remain
    unchanged, maintaining FFO adjusted leverage consistently at
    below 5.0x.

Liquidity And Debt Structure

"We view AOIL's liquidity position as adequate for the current
ratings but challenged overall.  Organic sources of liquidity are
the most constrained due to high capex resulting in negative free
cash flow generation.  At September 30, 2013, AOIL had USD276
million of cash compared with short-term debt of USD486 million.
In 2013, AOIL improved its debt maturity profile by issuing a
USD500 million Eurobond due 2020 and preferred stock for the
equivalent of USD100 million.  The preferred stock was then
bought out by Alliance Group," Fitch said.

Rating Actions

Alliance Oil Company Ltd.

Long-Term foreign currency IDR: 'B', placed on RWN
Long-Term local currency IDR: 'B', placed on RWN
Short-Term foreign currency IDR: affirmed at 'B'
Short-Term local currency IDR: affirmed at 'B'
Foreign currency senior unsecured rating: 'B'/RR4, placed on RWN
National Long-Term Rating: 'BBB(rus)', placed on RWN

OJSC Alliance Oil Company

Local currency senior unsecured rating: 'B'/RR4, placed on RWN
National senior unsecured rating: 'BBB(rus)', placed on RWN


ENEMALTA CORP: S&P Revises Outlook to Stable & Affirms 'B+' CCR
Standard & Poor's Ratings Services said it had revised its
outlook on Malta-based utility Enemalta Corp. to stable from
negative.  At the same time, S&P affirmed its 'B+' long-term
corporate credit rating on the company.

The outlook revision reflects S&P's understanding that the
government of Malta is working on a comprehensive restructuring
of its power sector, with an aim to reduce the island's reliance
on very high-cost, oil-dependent electricity generation.  As part
of this restructuring, Malta is near finalization of a
transaction with Shanghai Power Electric, a subsidiary of China
Power Investment Corporation, which will inject about EUR200
million in equity in return for a minority stake in Enemalta.  In
S&P's view, an equity injection will relieve the immediate
pressure on Enemalta's liquidity position and mark the start of a
deleveraging process.  Nevertheless, under S&P's base-case
scenario, it still expects that Enemalta will generate negative
profits and cash flows in the near to medium term.  This is
because a long-term structural plan to restore profitability has
not been made public and is therefore not yet reflected in S&P's

The cost of electricity in Malta is among the highest in Europe,
mainly reflecting the country's high-cost and oil-based
generation portfolio and lack of interconnection with other
electricity markets.  In order to reduce the high cost of
electricity, Malta is aiming to convert its existing plants to
run on cheaper natural gas instead of heavy fuel oil, and is also
looking to import electricity via a submarine cable from Sicily,
which is currently under construction and scheduled for
completion in 2015 in S&P's base-case scenario.  It is unclear,
however, if these efforts will restore profitability at Enemalta
or be passed on consumers to the detriment of Enemalta.  Absent a
long-term and credible structural solution to restore Enemalta's
very poor profitability, the company is unlikely to achieve a
stand-alone credit profile above S&P's current assessment at

The stable outlook reflects S&P's expectation that Enemalta's
liquidity position will stabilize following the equity injection
from Shanghai Power Electric.

S&P could upgrade Enemalta if it believed its ongoing
restructuring would allow the company to achieve financial
stability in the long term.  This could occur in S&P's view if
Enemalta were able to lower its cost of electricity procurement
(including cost of production for its own generation) and if it
were able to charge the full price for electricity production and
procurement, passing costs on to consumers.  In S&P's opinion,
Enemalta will only stabilize its performance if the company
completes a comprehensive rationalization of its cost structure
and eliminates its exposure to volatile oil prices.

S&P could lower the rating on Enemalta if it believed the company
was unlikely to receive the funds from Shanghai Power Electric
and therefore improve its liquidity position.  Moreover, any sign
of weakening government support could lead S&P to revise its GRE
assessment and a lowering of the ratings.


EUROCREDIT CDO III: S&P Cuts Ratings on 2 Note Classes to CCC-
Standard & Poor's Ratings Services raised its credit ratings on
Eurocredit CDO III B.V.'s class A1, A2, B, C-1, C-2, and R
combination notes.  At the same time, S&P has lowered its ratings
on the class D1, D2, E-1, and E-2 notes.

The rating actions follow S&P's review of the transaction's
performance.  S&P performed a credit and cash flow analysis and
has applied its relevant criteria.  In S&P's analysis, it used
data from the Jan. 13, 2014 trustee report.

"We subjected the capital structure to a cash flow analysis to
determine the break-even default rates for each rated class of
notes.  In our analysis, we used the reported portfolio balance
that we considered to be performing (EUR84,103,658), the current
and covenanted weighted-average spreads (2.90% and 2.80%,
respectively), and the weighted-average recovery rates that we
considered to be appropriate. We applied various cash flow stress
scenarios, using four different default patterns, in conjunction
with different interest rate stress scenarios for each liability
rating category," S&P said.

Eurocredit CDO III has been amortizing since the end of its
reinvestment period in October 2008.  Since S&P's July 20, 2012
review, the aggregate collateral balance has decreased to
EUR84.10 million from EUR222.48 million.  Of this decrease,
EUR132.20 million is due to the partial paydown of the class A1
and A2 notes.  The remaining decrease (EUR6.17 million) relates
to losses from asset defaults. In our view, the partial paydown
of the class A1 and A2 notes has increased the available credit
enhancement for all classes of notes.

In S&P's view, Eurocredit CDO III's portfolio is concentrated.
It comprises 27 performing obligors, down from 63 at S&P's
previous review.  The largest obligor's assets represent almost
7% of the aggregate collateral balance and the 10 largest
obligors comprise more than 56% of the total pool of performing

"We note that 14.75% of the performing assets will mature after
the notes' legal final maturity date in October 2016.  In our
view, this exposes the transaction to market value risk as the
manager may need to sell the assets ahead of the maturity date to
repay the transaction's liabilities.  To address this risk in our
analysis, we gave credit to performing long-dated assets, which
represent 5% of the portfolio to calculate the aggregate
collateral balance.  For the remaining long-dated assets, we
reduced their balance by 10% per year for each year after the
notes' legal final maturity date," S&P added

"In our credit and cash flow analysis, we have considered the
transaction's exposure to potential losses incurred from the
forced sale of the assets that mature after the legal final
maturity date.  However, despite the transaction's exposure to
market risk and highly concentrated portfolio, the available
credit enhancement for the class A1, A2, and B notes is
commensurate with higher ratings than previously assigned due to
the amortization of the class A1 notes.  We have therefore raised
to 'AAA (sf)' our ratings on these classes of the notes," S&P

The results of the largest obligor default test, a supplemental
stress test that S&P introduced in its 2009 criteria update for
corporate collateralized debt obligations (CDOs), constrain its
ratings on the class C-1, C-2, D1, D2, and R combination notes.
The results show that the available credit enhancement for these
classes of notes would be limited if the largest obligor were to
default, assuming a 5% recovery rate.  Taking into account the
available credit enhancement after applying the largest obligor
test (assuming 5% recoveries on defaulted assets), S&P has raised
its ratings on the class C-1, C-2, and R combination notes, and
it has lowered its ratings on the class D1 and D2 notes.

Under S&P's criteria for assigning 'CCC+', 'CCC', 'CCC-', and
'CC' ratings, its credit and cash flow analysis indicates that
the available credit enhancement for the class E-1 and E-2 notes
is commensurate with a 'CCC- (sf)' rating.  S&P has therefore
lowered to 'CCC- (sf)' from 'CCC+ (sf)' its ratings on these
classes of notes.

Eurocredit CDO III is a managed cash flow collateralized loan
obligation (CLO) transaction that securitizes loans to primarily
European speculative-grade corporate firms.  The transaction
closed in September 2003 and is managed by Intermediate Capital
Managers Ltd.


Class      Rating         Rating
           To             From

Eurocredit CDO III B.V.
EUR231.3 Million Fixed- and Floating-Rate Notes and
Accreting Notes

Ratings Raised

A1        AAA (sf)       AA+ (sf)
A2        AAA (sf)       AA+ (sf)
B         AAA (sf)       AA- (sf)
C-1       BBB+ (sf)      BB+ (sf)
C-2       BBB+ (sf)      BB+ (sf)
R (Combo) BBB+ (sf)      BBB (sf)

Ratings Lowered

D1        CCC+ (sf)      B+ (sf)
D2        CCC+ (sf)      B+ (sf)
E-1       CCC- (sf)      CCC+ (sf)
E-2       CCC- (sf)      CCC+ (sf)

NEPTUNO CLO I: S&P Affirms 'B' Ratings on 2 Note Classes
Standard & Poor's Ratings Services took various credit rating
actions on all classes of notes in Neptuno CLO I B.V.

Specifically, S&P has:

   -- Raised its ratings on the class C and D notes;

   -- Affirmed its ratings on the class A-T, A-R, B-1, B-2, E-1,
      E-2, and Y combination notes; and

   -- Lowered its rating on the class Z combination notes.

The rating actions follow S&P's review of the transaction's
performance, using data from the Nov. 24, 2013 payment date
report, and the applications of its relevant criteria.

Since S&P's 2012 review, the weighted-average spread earned on
the collateral pool has increased to 3.98% from 2.95%.  The
transaction's weighted-average life has decreased to 4.42 years
from 5.20 years, over the same period.

S&P has also observed that the pool's credit quality has
improved. The proportion of assets that S&P considers to be rated
in the 'CCC' category ('CCC+', 'CCC', or 'CCC-') has decreased in
both notional and percentage terms to 6.47% from 10.97%.  Assets
that S&P considers to be defaulted (i.e., debt obligations of
obligors rated 'CC', 'SD' [selective default], or 'D') have
decreased to zero from 5.29 million.

The par value tests comply with the required trigger under the
transaction documents for all classes of notes, except for the
class E notes' par value and reinvestment test.  This is
unchanged from S&P's 2012 review.

The available credit enhancement for all classes of notes has
decreased.  In S&P's view, this is a result of the reduced
aggregate collateral balance (ACB).  This decrease is greater
than the partial amortization of the class A-T and A-R notes.
Since S&P's 2012 review, the class A-T and A-R notes' outstanding
balances have decreased by EUR11,250 and EUR16,530, and are now
87.86% and 77.25% of their original balances, respectively.
Interest proceeds were used to partially amortize the class A-T
and A-R notes after the class E notes breached its par value test
at principal and interest payment dates since S&P's 2012 review.

In S&P's analysis, it considered that Neptuno CLO I is in its
reinvestment period, which will end in November 2014.

"We subjected the capital structure to our cash flow analysis, by
applying our 2009 corporate cash flow collateralized debt
obligation (CDO) criteria, to determine the break-even default
rate (BDR) at each rating level.  We used the reported portfolio
balance that we considered to be performing, the principal cash
balance, the weighted-average spread, and the weighted-average
recovery rates that we considered to be appropriate," S&P noted.

S&P incorporated various cash flow stress scenarios, using
various default patterns, levels, and timings for each liability
rating category, in conjunction with different interest rate
stress scenarios.  To help assess the collateral pool's credit
risk, S&P used CDO Evaluator 6.0.1 to generate scenario default
rates (SDRs) at each rating level.  S&P then compared these SDRs
with their respective BDRs.

Taking into account our observations outlined above, S&P
considers the available credit enhancement for the class C and D
notes to be commensurate with higher ratings.  S&P has therefore
raised to 'A (sf)' from 'BBB+ (sf)' its rating on the class C
notes and to 'BBB- (sf)' from 'BB+ (sf)' its rating on the class
D notes.

S&P considers the available credit enhancement for the class Y
combination notes to be commensurate with its currently assigned
rating.  S&P has therefore affirmed its 'BBB+p (sf)' rating on
this class of notes.

"Our ratings on the class E-1 and E-2 notes are constrained by
the application of the largest obligor test, a supplemental
stress test that we introduced in our 2009 corporate cash flow
CDO criteria.  This test addresses event and model risk that
might be present in the transaction and assesses whether a CDO
tranche has sufficient credit enhancement (not including excess
spread) to withstand specified combinations of underlying asset
defaults -- based on the ratings on the underlying assets, with a
flat recovery rate of 5%," S&P noted.

Although the results of S&P's cash flow analysis suggest higher
ratings for these classes of notes, the test results constrain
S&P's ratings.  S&P has therefore affirmed its 'B (sf)' ratings
on the class E-1 and E-2 notes.

At closing, Neptuno I entered into several derivative
obligations, to purchase non-euro-denominated assets and to
mitigate the associated risk of currency movements.  Advances
from the class A-R variable funding notes may fund the purchase
of non-euro-denominated assets.  The class A-R variable funding
notes are currently fully drawn, and their commitment period will
end in November 2014.

Based on S&P's counterparty analysis, it has concluded that the
transaction documents for the derivative counterparty, Barclays
Bank PLC (A/Stable/A-1), do not fully comply with S&P's current
counterparty criteria.  As such, S&P has conducted its cash flow
analysis assuming that the transaction does not benefit from
support from a derivative counterparty.  At the same time, S&P
considers that the replacement language relating to the class A-R
notes does not fully reflect our CDO variable funding notes
criteria. As a result, S&P's current counterparty and CDO
criteria constrain its maximum potential ratings in this
transaction at 'A+ (sf)'.  S&P has therefore affirmed its 'A+
(sf)' ratings on the class A-T, A-R, B-1, and B-2 notes.

The subordinated class Z combination notes consist of two
components in the form of "Obligation Assimilable du Tresor" --
bonds issued by the French treasury, and equity from the
transaction.  Due to the notes' exposure to these bonds and
following S&P's Nov. 8, 2013 downgrade of France, it has lowered
to 'AAp (sf)' from 'AA+p (sf)' its rating on the class Z
combination notes.

Neptuno CLO I is a cash flow collateralized loan obligation (CLO)
transaction that securitizes loans to primarily speculative-grade
corporate firms.  The transaction closed in May 2007.


Class       Rating            Rating
            To                From

Neptuno CLO I B.V.
EUR512.081 Million Senior Secured Fixed- and
Floating-Rate Revolving, and Deferrable Notes

Ratings Affirmed

A-T         A+ (sf)
A-R         A+ (sf)
B-1         A+ (sf)
B-2         A+ (sf)
E-1         B (sf)
E-2         B (sf)
Y Combo     BBB+p (sf)

Ratings Raised

C           A (sf)            BBB+ (sf)
D           BBB- (sf)         BB+ (sf)

Rating Lowered

Z Combo     AAp (sf)           AA+p (sf)



HIDROELECTRICA: Nears Insolvency Exit; Reorganization Underway
Gabriela Stan at Ziarul Financiar reports that Gabriel
Dumitrascu, head of privatization with the Energy Department,
stated the Economy Ministry will take steps for Hidroelectrica to
exit insolvency "as soon as possible", and will reorganize the
company by giving up investments unimportant for electricity

Hidroelectrica is a state-run hydropower producer.

Hidroelectrica entered the insolvency process on June 20, 2012,
in order to be re-organized.  Euro INSOL was appointed the
judicial administrator.  On March 31, 2013, Hidroelectrica had
some 4,900 employees, down from over 5,200 recorded when the
company entered the insolvency process.


BALTINVESTBANK: Moody's Changes 'B3' Rating Outlook to Stable
Moody's Investors Service has changed to stable from positive the
outlook on the B3 long-term local- and foreign-currency deposit
and B3 local currency debt ratings of Baltinvestbank.
Concurrently, Moody's has affirmed the E+ standalone bank
financial strength rating (BFSR), which is equivalent to a
baseline credit assessment (BCA) of b3, B3/Not Prime long-term
and short-term bank deposit ratings and the B3 long-term local
currency debt ratings. The outlook on E+ standalone BFSR remains

Moody's re-assessment of the outlook is based on Baltinvestbank's
latest available audited IFRS for 2012 as well as the bank's
unaudited H1 2013 financial statements prepared under IFRS.

Ratings Rationale

The outlook change reflects Baltinvestbank's: (1) sustained
weakness of its profitability metrics despite diversification
into retail business; and (2) still weak capitalization that is
pressurized by high concentration levels and related-party

Moody's notes that Baltinvestbank's profitability and efficiency
indicators (while somewhat improved) remained weak: return on
average assets (ROAA) was at 0.35%, and the cost-to-income ratio
was a high 76% in H1 2013 (year-end 2012: 0.31% and 82%,
respectively). Moody's notes that the bank reported these weak
figures despite the ongoing diversification into retail lending:
the retail loan portfolio increased to 38% of the gross loan book
at year-end 2013, from 26% at year-end 2011. As a result, Moody's
notes a significant risk associated with the bank's ability to
materially improve profitability and efficiency metrics during
the next 12-18 months, especially given the elevated risks in the
operating environment.

The level of Baltinvestbank's capital adequacy had remained low
during most of 2013: the bank's prudential total capital adequacy
ratio (N1) was slightly above 11% -- i.e., just above the minimum
level of 10% required by the regulator. In December 2013, the
bank received property as a capital contribution from
shareholders, thus increasing its N1 ratio to 12.33% at year-end
2013. In H1 2014, the shareholders plan to increase the bank's
capital by around RUB1 billion. However, Moody's expects the
majority of the bank's new capital to be utilized in the growth
of total assets during 2014, and the rating agency expects the
bank to continue its operations with a modest capital adequacy

Moody's also notes a significant pressure on Baltinvestbank's
capital from (1) high single-name concentrations in the loan book
(top 20 loan exposures accounted for 3.5x Tier 1 capital at end-
H1 2013); and (2) historical appetite for related-party lending
(Moody's estimates that the level of loans to related parties
amounted to no less than 90% of Tier 1 capital at end-H1 2013).

What Could Move The Ratings Up/Down

An upgrade of Baltinvestbank's B3 ratings would be contingent on
the bank's ability to operate on a higher capital buffer,
significantly decrease related-party and single-name credit
concentration, as well as to achieve sustained improvements in
profitability and operating efficiency. Any deterioration of the
bank's capital base -- resulting from impairment of large
corporate exposures or mismanaged growth in the retail segment --
could have negative rating implications.

Principal Methodologies

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

Headquartered in St. Petersburg, Russia, Baltinvestbank reported
total consolidated assets of RUB61 billion (US$1.9 billion) and
total shareholder equity of RUB4.5 billion (US$138 million),
according to its end-H1 2013 unaudited report under IFRS.

METALLOINVEST JSC: S&P Raises Corp Credit Ratings to 'BB'
Standard & Poor's Ratings Services raised its long-term corporate
credit ratings on Russia-based iron ore and iron ore pellet
producer JSC Holding Company Metalloinvest to 'BB' from 'BB-'.
The outlook is stable.

At the same time, S&P raised the issue rating on the senior
unsecured notes, issued by Metalloinvest Finance Ltd., to 'BB'
from 'BB-'.  The recovery rating on these notes is unchanged at
'4', indicating S&P's expectation of average (30%-50%) recovery
in the event of a payment default.

The upgrade reflects S&P's opinion that Metalloinvest has
recently displayed more predictable financial policies, including
for dividend distributions.  S&P also factors in Metalloinvest's
improved debt maturity profile after refinancing most of its 2014
and part of its 2015 maturities with a Russian ruble
(RUB) 55 billion (approximately US$1.6 billion) long-term
facility from Sberbank in January 2014.  Moderate short-term
maturities of US$180 million after the refinancing support S&P's
"adequate" assessment of Metalloinvest's liquidity, with sources
to uses standing over 2.0x.  S&P also takes into account that
Metalloinvest has demonstrated continued good operating
performance, with forecast adjusted debt to EBITDA slightly below
3.0x in 2013.

Under S&P's base-case scenario, it expects Metalloinvest will
show satisfactory operating performance in 2014.  S&P forecasts
2014 EBITDA at about US$1.9 billion, somewhat lower than the 2013
level, assuming lower benchmark iron ore price of US$110 per
metric ton (compared with an average US$125 per metric ton so far
this year and an average US$130 per metric ton in 2013).

According to S&P's estimates, the ratio of adjusted debt to
EBITDA will remain close to 3.0x in 2014-2015.

S&P continues to assess Metalloinvest's business risk profile as
"fair."  The profile is constrained by S&P's assessment of
Metalloinvest's exposure to high country risk in Russia, where
Metalloinvest has its key assets, combined with the volatile and
cyclical nature of the iron ore mining industry, given S&P's
assumption that prices will fall over 2014-2015 as a result of
substantial new capacity additions and somewhat slower growth in

Metalloinvest's "satisfactory" competitive position, in S&P's
opinion, takes into account its view that Metalloinvest is
positioned in the first quartile of the pelletizing cost curve,
although its all-in costs (factoring in high transport costs,
notably for exports) are in the third quartile only.  S&P also
factors in Metalloinvest's iron ore reserves, a large 14.6
billion metric tons, as well as the company's increasingly solid
position in added-value and more stable processed products.  For
example, Metalloinvest has 40% of the global market share in hot
briquetted iron (HBI).  S&P also assess Metalloinvest's
profitability as above average, underpinned by its low cost
production and premium of HBI and iron ore pellets over the

"We continue to assess Metalloinvest's financial risk profile as
"significant."  We think that, in 2013 and over 2014-2015,
Metalloinvest's ratio of funds from operations (FFO) to adjusted
debt will be slightly more than 20%, while adjusted debt to
EBITDA should be relatively stronger at close to 3.0x, even while
factoring in a lower iron ore price environment, based on our
expectation of prices contracting to US$110 per metric ton in
2014 and to US$100 per metric ton in 2015.  Importantly, we
assume that Metalloinvest will generate positive free operating
cash flow over 2014-2015, which should enable it to gradually
deleverage from the current adjusted debt level of about US$6.2
billion," S&P said.

"Under our ratings approach, the combination of a "fair" business
risk profile and a "significant" financial risk profile results
in the anchor of 'bb'.  We apply a one-notch uplift in our
capital structure assessment, reflecting Metalloinvest's liquid
5% stake in Russian metals and mining group OJSC MMC Norilsk
Nickel -- currently worth US$1.3 billion, which we think
Metalloinvest could use to deleverage further.  At the same time,
we apply a negative adjustment of one notch in our assessment of
Metalloinvest's financial policy owing to potential deviations
from our base case, including unforeseen shareholder
distributions and merger and acquisition activity, and the
limited visibility on developments at Udokan, a greenfield copper
mine located in Eastern Siberia. However, in our view, these
constraints are offset by Metalloinvest's more predictable
financial policy in 2013 and its commitment to the dividend-
payout limits established at the beginning of the year," S&P

The stable outlook takes into account S&P's expectation that
Metalloinvest's adjusted debt-to-EBITDA ratio will remain close
to 3.0x, even while factoring in S&P's assumption of a decrease
in iron ore prices to $110 per metric ton in 2014 and to $100 per
metric ton in 2015.

S&P also expects that Metalloinvest will continue to demonstrate
conservative financial strategies and will continue to show its
commitment to deleveraging.  S&P would view an average ratio of
adjusted FFO to debt of 20%-30% as commensurate with the current
rating level.

Rating upside is limited at this stage, given the cyclicality of
the iron ore industry, the company's sales exposure to Russian
domestic market, and still average all-in cost position for
exports to China and other Asian countries, given the high
transport costs.

A negative rating action could be related to elevated leverage
owing to higher shareholder distributions or increased merger and
acquisition activity.  S&P currently do not factor into its
assessment the multibillion-dollar development of the Udokan
mine. Furthermore, S&P may revise the outlook to negative if
adverse changes in iron ore prices result in adjusted FFO to debt
dropping below 20%.

MOBILE TELESYSTEMS: Fitch Affirms 'BB+' LT Issuer Default Rating
Fitch Ratings has revised the Outlook on OJSC Mobile Telesystems'
(MTS) Long-Term Issuer Default Rating (IDR) to Positive from
Stable and affirmed the IDR at 'BB+'.

The revision of the Outlook reflects the revision of the Outlook
on JSFC Sistema (BB-/Positive), MTS's controlling shareholder.
MTS is a leading Russian and CIS mobile operator with modest
leverage and strong free cash flow generation. It is the largest
operator in Russia and the second-largest in Ukraine by

Key Rating Drivers

Fundamentals Overlaid by Shareholding
On a standalone basis, MTS's credit profile is commensurate with
a low investment grade rating.  MTS's ratings are notched down
for the negative influence of Sistema, MTS's majority
shareholder. Under Fitch's methodology, a subsidiary can be
generally rated maximum two notches above its parent if the
parent-subsidiary linkage is weak.

Robust FCF Generation
MTS sustainably generates positive free cash flow (FCF). Capex as
a percentage of revenue has been high (well above 20%) inflated
by 3G, and more recently, long-term evolution (LTE) spending in
Russia.  Fitch expects this ratio to drop in the medium to long
term, but stabilize at a higher level than MTS's European peers,
due to lower average revenue per user (ARPU).

Sufficient LTE Spectrum
MTS has sufficient LTE spectrum to successfully compete in
Russia. The introduction of technological neutrality regarding
the use of radio spectrum in Russia will allow the re-farming
1,800 MHz frequencies, reducing a need for expensive clearance of
800MHz spectrum.

MNP Not A Threat
The introduction of mobile number portability (MNP) in Russia in
2014 is unlikely to put MTS in a disadvantaged position.  "We
believe the hardest hit will be operators in the middle, with the
lowest priced and market leaders including MTS potentially
benefiting from the regulatory change," Fitch said.

Sluggish Growth Prospects
Key Russian and Ukrainian mobile markets are mature and unlikely
to demonstrate further strong growth.  "We expect demand for
faster data to remain strong but it will be a challenge to
monetize it with all operators chasing heavy-data customers,"
Fitch said.  Competition is likely to intensify in light of the
market-share ambitions of Tele2 Russia Holdings AB (BB+/RWE)
backed by mobile assets of Rostelecom (BBB-/Stable).  "However,
we believe the impact of the new larger market player will only
be felt from 2H15," Fitch said.

Modest Leverage
MTS's leverage has been moderate at below 1.5x net debt/EBITDA
and 2.0x FFO adjusted net leverage.  Organic development,
including LTE roll-out in Russia, but also increased pay-outs
under a dividend policy revised in November 2012 and updated in
February 2014 should not jeopardize this.

Corporate Governance is Key
MTS has adhered to high standards of corporate governance with
its strategy and all key transactions reviewed and approved with
the involvement of independent directors.  "We note that
Sistema's financial situation at the holdco level is improving,
which reduces risks that it may leverage its control over MTS to
extract excessive cash flows.  High transparency on Sistema's
financial situation and strategy and its rating level
differentiate MTS from most other private telecom companies in
Russia, where there is significantly less visibility of strategic
plans and the financial agenda of their controlling
shareholders," Fitch said.

Rating Sensitivities

The ratings could benefit from an upgrade of Sistema provided
that MTS continues to adhere to high corporate governance

A downgrade could arise from weaker corporate governance but also
excessive shareholder remuneration and other developments that
lead to a sustained rise in funds from operations adjusted net
leverage to above 3.0x.  Competitive weaknesses and market-share
erosion, leading to significant deterioration in pre-dividend FCF
generation, may also become a negative rating factor.

Full List of Ratings Actions

  Long-Term IDR: affirmed at 'BB+', Outlook revised to Positive
   from Stable

  Short-Term IDR: affirmed at 'B'

  Local currency Long-Term IDR: affirmed at 'BB+, Outlook revised
   to Positive from Stable

  Local currency Short-Term IDR: affirmed at 'B'

  National Long-Term Rating: affirmed at 'AA(rus)', Outlook
   revised to Positive from Stable

  Senior unsecured debt: affirmed at 'BB+' foreign and local
   currency, 'AA(rus)'

  Loan participation notes issued by MTS International Funding
   Ltd and guaranteed by MTS: affirmed at 'BB+'

SISTEMA JOINT: Fitch Affirms 'BB-' LT Issuer Default Rating
Fitch Ratings has revised the Outlook on Sistema Joint Stock
Financial Corp.'s Long-Term Issuer Default Rating (IDR) to
Positive from Stable and affirmed the IDR at 'BB-'.

The revision of the Outlook reflects significant deleveraging at
the holdco level and expectations of continuing stable dividends
from key subsidiaries, which should be sufficient to resolve
legacy support issues for weaker parts of the group.

Sistema is a diversified holding company with its key assets
being controlling stakes in OJSC Mobile TeleSystems (MTS;
BB+/Positive), a large telecoms operator in Russia and CIS, and
Joint Stock Oil Company Bashneft (Bashneft; BB/Positive), a
medium-sized Russian oil company.   Sistema's credit profile is
shaped by its ability to control cash flows and extract dividends
from these two key subsidiaries.  These positives are overlaid by
a significant debt burden at the holdco level including exposure
to substantial off-balance-sheet liabilities through its
subsidiaries and potential support requirements for weaker assets
of the group.

Key Rating Drivers

Reliable Dividend Flow
Sistema's key operating subsidiaries, MTS and Bashneft generate
strong free cash flow (FCF) supporting their ability to pay large
dividends.  Sistema can effectively control the cash flows of
these subsidiaries and shape their dividend policy.

Additional Dividends an Option
In view of both MTS's and Bashneft's low leverage and stable
operating performance, they retain flexibility to upstream
significant additional dividends without jeopardizing their
ratings.  On a standalone basis, MTS's credit profile is
consistent with low investment grade level.  "We estimate that
Sistema may extract up to USD4 billion in extra dividends, which
would be sufficient to address any debt issues at the holdco
level and provide necessary financial support to its weaker
subsidiaries," Fitch said.

Focus on Dividends, Monetization
Sistema adopted a new strategy in 2013, which aims to transform
the company into a diversified investment holding company, with a
focus on receiving stable dividends and monetizing its
investments and less emphasis on operating control.  "However, we
note that material dividend diversification may only be
achievable in the long term, and expect that Sistema will
continue to depend on dividends from MTS and Bashneft as a key
recurring income stream in the short to medium term at least,"
Fitch said.

Diversification benefits will likely come at a price of lower
control over the investments' cash flows if Sistema's portfolio
composition changes to minority stakes.  As an investment holding
company, Sistema will remain intrinsically exposed to high M&A

Off-Balance-Sheet Exposure Reduced
Sistema guarantees some debt of its subsidiaries, most notably
Sistema Shyam TeleServices (SSTL) in India.  On a positive note,
this subsidiary's debt had significantly reduced to USD621
million at end-September 2013 from USD1,574 million at end-
2011with Sistema's help. SSTL significantly downsized its
operations and scaled down its development ambitions in India
with the aim of becoming EBITDA break-even by 1Q15.  "We believe
this will limit the amount of additional support required from
Sistema," Fitch said.

The holdco also granted a number of equity put options, which
effectively turn these instruments into debt recourse to Sistema,
increasing its leverage.

Weak Developing Assets
Some of Sistema's operating subsidiaries are fairly weak credits,
and some are highly leveraged, most importantly in the high-tech
segment, and may require financial support from the parent.
Although Sistema is not contractually committed to provide this
support, additional reputational/strategic considerations may

Holdco Leverage Improving
A sale of the minority 49% stake in Russneft for USD1.2 billion
in 2013 allowed Sistema to notably delever at the holdco level.
"We expect that dividends from MTS and Bashneft will be
sufficient to gradually reduce off-balance sheet liabilities and
sort out legacy support requirements for weak subsidiaries,"
Fitch said.

Rating Sensitivities

A reduction in off-balance-sheet liabilities and sustained
deleveraging at the holdco level to below 2.5x net debt including
off-balance-sheet liabilities to normalized dividends may be
positive.  This is likely to be achieved through limiting
Sistema's exposure to further losses and debt increases at Shyam
and re-organization of the technology segment so that it becomes
capable of sustainably servicing its debt without parental

A protracted rise in this metric to above 4.5x may lead to
negative rating action. A portfolio reshuffle increasing the
share of subsidiaries with low credit profiles could also be
rating negative.

Full List of Rating Actions

  Long-Term IDR: affirmed at 'BB-', Outlook revised to Positive
  from Stable

  Local currency Long-Term IDR: affirmed at 'BB-, Outlook revised
  to Positive from Stable

  National Long-Term Rating: affirmed at 'A+(rus)', Outlook
  revised to Positive from Stable

  Senior unsecured debt: affirmed at 'BB-' foreign and local
  currency, 'A+(rus)'

  Loan Participation Notes issued by Sistema Funding S.A. and
  guaranteed by Sistema: affirmed at 'BB-'


BBVA FINANZIA: S&P Lowers Rating on Class C Notes to 'D'
Standard & Poor's Ratings Services lowered to 'D (sf)' from
'CCC- (sf)' its credit rating on BBVA Finanzia Autos 1, Fondo de
Titulizacion de Activos' class C notes.  At the same time, S&P
has affirmed its 'AA- (sf)' and 'BBB (sf)' ratings on the class A
and B notes, respectively.

S&P has reviewed BBVA Finanzia Autos 1's collateral performance,
considering recent delinquency, default, and recovery levels, as
well as the transaction's current structural features.

Since S&P's previous review on Dec. 28, 2012, the transaction has
paid down significantly.  The outstanding portfolio balance,
excluding defaulted loans (defined in this transaction as loans
in arrears for more than 12 months), as of the last interest
payment date (IPD) in January 2014 was 7.3% of the closing
balance, down from 13.4% at S&P's December 2012 review.

Since S&P's previous review, it has continued to observe
stabilizing delinquencies, with slight reductions in some arrears
buckets.  However, long-term delinquencies have continued to roll
into defaults.  Due to the transaction's deteriorating
performance observed so far, and S&P's opinion of increasing
uncertainty regarding future macroeconomic performance, it has
increased its baseline default rate for the outstanding
securitized portfolio. S&P analyzed the transaction's exposure to
credit risk by applying its European Consumer Finance Criteria.

As of January 2014, cumulative defaults had increased to 8.59% of
the original balance from 8.23% a year before.  The increase in
the level of cumulative defaults has breached the most junior
class of notes' interest deferral trigger, which is set at 8.5%
in the transaction documents.

S&P's ratings on the notes in this transaction address the timely
payment of interest due under the rated notes, and ultimate
payment of principal at maturity.

As the class C notes breached its interest deferral trigger and
missed an interest payment, S&P has lowered to 'D (sf)' from
'CCC- (sf)' its rating on the class C notes.

The increase in the level of defaults had resulted in the
transaction's reserve fund being fully depleted since April 2010.
The reserve fund has not been replenished since then due to the
lack of available funds under the transaction's priority of
payments.  As of the last IPD, the transaction had accumulated a
principal deficiency of EUR4.5 million, which is the difference
between the accrued redemption on the notes and the available
funds in accordance with the priority of payments (the principal
deficiency in October 2012 was EUR4.0 million).

However, despite this principal deficiency, the paydown of the
assets has led to a high level of senior note amortization, which
has in turn increased the available credit enhancement for the
class A and B notes.  Although the level of available credit
enhancement that the performing balance provides is positive for
the class A and B notes, it is negative for the class C notes.
As a result, there is insufficient performing collateral
available to fully repay the principal amount outstanding for the
class C notes, which therefore continue to be

The transaction is exposed to counterparty risk through Societe
Generale Sucursal en Espana as guarantor of the bank account
provider, and Deutsche Bank AG (London Branch) as a swap
provider. Under S&P's current counterparty criteria, it considers
that the required minimum rating for the supporting entities and
the transaction's replacement mechanisms adequately mitigate its
exposure to counterparty risk.

Following S&P's credit and cash flow analysis, it has concluded
that the class A notes in this transaction has sufficient
available credit enhancement to allow them to support a 'AAA'
rating level.

However, S&P's nonsovereign ratings criteria constrain its rating
on the notes at 'AA- (sf)' as, under its criteria, the highest
rating S&P would assign to a structured finance transaction is
six notches above the investment-grade rating on the country in
which the securitized assets are located.  This transaction
securitizes Spanish consumer assets.  Therefore, the highest
rating achievable in this transaction is 'AA- (sf)', which is six
notches above S&P's 'BBB-' long-term sovereign rating on Spain.
Therefore, S&P has affirmed its 'AA- (sf)' rating on the class A

Following S&P's credit and cash flow analysis, it has determined
that the available credit enhancement for the class B notes is
commensurate with the currently assigned rating.  S&P has
therefore affirmed its 'BBB (sf)' rating on the class B notes.

BBVA Finanzia Autos 1 is backed by a portfolio of Spanish loans
granted to purchase new and used cars. Finanzia Banco de Credito
S.A. -- the consumer finance arm of Banco Bilbao Vizcaya
Argentaria S.A. -- originated the transaction, which closed in
April 2007.  The revolving period ended in April 2008, one year
ahead of the scheduled date, because the delinquency rate was
higher than the trigger threshold level.


These ratings are based on S&P's applicable criteria, including
those set out in the criteria article "Nonsovereign Ratings That
Exceed EMU Sovereign Ratings: Methodology And Assumptions,"
published on June 14, 2011.  However, please note that these
criteria are under review.  As a result of this review, S&P's
future criteria applicable to ratings above the sovereign may
differ from its current criteria.  This criteria change may
affect the ratings on these notes.  Until such time that S&P
adopts new criteria, it will continue to rate and surveil these
notes using its existing criteria.


Class    Rating            Rating
         To                From

BBVA Finanzia Autos 1, Fondo de Titulizacion de Activos
EUR800 Million Asset-Backed Floating-Rate Notes

Rating Lowered

C        D (sf)            CCC- (sf)

Ratings Affirmed

A        AA- (sf)
B        BBB (sf)

ZINKIA: Enters Administration; Creditor Talks Continue
Sonya Dowsett at Reuters reports that Zinkia, owner of the
children's TV character Pocoyo, entered administration on
Wednesday, the latest Spanish company to seek protection from
creditors in an economic slowdown.

According to Reuters, despite reaching agreement on refinancing
with bondholders, banks and commercial creditors, Zinkia said in
a statement the company did not manage to renegotiate the terms
of a EUR2.5 million (US$3.4 million) loan with a private lender.

"Zinkia continues to negotiate with different creditors and
potential investors in order to find a solution which will allow
it to come out of administration as quickly as possible with the
least damage to its brands," Reuters quotes the company as saying
in a statement.

Zinkia's shares were suspended from trade by the Spanish stock
market regulator after the announcement, Reuters relates.

Zinkia is a Spanish entertainment company.


UKRAINE: May Default on US$3 Billion in Eurobonds
Darya Korsunskaya at Reuters reports that Russia's Deputy Finance
Minister Sergei Storchak said on Tuesday there is a small risk
that Ukraine may default on US$3 billion in Eurobonds that Russia
recently acquired.

"We probably have risks, but not so big ones," Reuters quotes
Mr. Storchak as saying.  "It's possible to begin with the fact
that the debtor has a difficult financial situation, that it
can't return the money to us in two years."

Mr. Storchak added that while the possibility existed of
substituting one instrument for another, he was opposed to
including Ukraine's debt to Russia in a general restructuring,
Reuters relates.

The comments come as Western governments and the IMF are trying
to put together an international bailout for Ukraine after pro-
Russian president Viktor Yanukovich was forced out after months
of street protests, and are seeking to involve Russia in the
process, Reuters notes.

Mr. Storchak, as cited by Reuters, said Russia was under no legal
obligation to go on with its US$15 billion package of lending to
Ukraine -- agreed after Yanukovich walked away from a free trade
deal with Europe -- but did not rule out Russia's providing more

Russia already purchased US$3 billion worth of Eurobonds in
December, Reuters recounts.

U N I T E D   K I N G D O M

HAMILTON SCHOOL: Appoints Liquidators; 78 Jobs Affected
BBC News reports that The Hamilton School in Aberdeen has
appointed liquidators, with the loss of 78 jobs.

The private school was shut on Friday after inspectors said they
were not confident pupils were "safe and well cared for", BBC

Following the closure, school directors decided to stop operating
the associated nursery, BBC recounts.

Inspectors said they had identified 14 areas of concern at the
nursery, including feeding and medication, BBC relays.

Blair Nimmo and Geoffrey Jacobs, of KPMG, who have been appointed
joint liquidators, said that 78 of 84 staff members had been made
redundant, with the remaining six retained to help transfer pupil
information to new schools, BBC discloses.

STEMCOR HOLDINGS: To Restructure US$1.3 Billion Debt
Duncan Robinson, Andrew Bolger and James Crabtree at The
Financial Times report that Stemcor, which is majority-owned by
the Oppenheimer family, will restructure its US$1.3 billion debt
after a high court judge overruled an objection from one of its

But while the Oppenheimer family retains its 71% stake in the
business, it has in effect lost control of the board, the FT
states.  The new independent board will include senior executives
and have a majority over family representatives, all of whom will
be non-executives, the FT says.

The trading group, which had revenues of more than GBP5 billion
in 2013, defaulted on a US$850 million loan last year, the FT
recounts.  Falling steel prices had damaged the profitability of
the low-margin business, the FT discloses.

According to the FT, under the deal, Stemcor will repay its
US$1.3 billion credit facility over the next two years by selling
or winding down 13 of its businesses.  Creditors will also stump
up US$1.15 billion for a new committed trade finance facility,
the FT says.

In return, creditors get more orthodox corporate governance at
the steel trader, which has been dominated by the family of its
founder, Hans Oppenheimer, the FT notes.

Simon Freakley, chief executive of Zolfo Cooper, who led the
restructuring, as cited by the FT, said a debt-for-equity swap
was never discussed because there was a clear path to resolution
through disposals and future trading.

Headquartered in London, Stemcor Holdings Limited trades steel
and steel-making raw materials worldwide.


* BOOK REVIEW: The Oil Business in Latin America: The Early Years
Author: John D. Wirth Ed.
Publisher: Beard Books
Softcover: 282 pages
List price: $34.95
Review by Gail Owens Hoelscher
Buy a copy for yourself and one for a colleague on-line at

This book grew out of a 1981 meeting of the American Historical
Society. It highlights the origin and evolution of the stateowned
petroleum companies in Argentina, Mexico, Brazil, and

Argentina was the first country ever to nationalize its
petroleum industry, and soon it was the norm worldwide, with the
notable exception of the United States. John Wirth calls this
phenomenon "perhaps in our century the oldest and most
celebrated of confrontations between powerful private entities
and the state."

The book consists of five case studies and a conclusion, as

* Jersey Standard and the Politics of Latin American Oil
  141 Production, 1911-30 (Jonathan C. Brown)
* YPF: The Formative Years of Latin America's Pioneer State
  Oil Company, 1922-39 (Carl E. Solberg)
* Setting the Brazilian Agenda, 1936-39 (John Wirth)
* Pemex: The Trajectory of National Oil Policy (Esperanza
* The Politics of Energy in Venezuela (Edwin Lieuwen)
* The State Companies: A Public Policy Perspective (Alfred
  H. Saulniers)

The authors assess the conditions at the time they were writing,
and relate them back to the critical formative years for each of
the companies under review. They also examine the four
interconnecting roles of a state-run oil industry and
distinguish them from those of a private company. First, is the
entrepreneurial role of control, management, and exploitation of
a nation's oil resources. Second, is production for the private
industrial sector at attractive prices. Third, is the
integration of plans for military, financial, and development
programs into the overall industrial policy planning process.
Finally, in some countries is the promotion of social
development by subsidizing energy for consumers and by promoting
the government's ideas of social and labor policy and labor

The author's approach is "conceptual and policy oriented rather
than narrative," but they provide a fascinating look at the
politics and development of the region. Mr. Brown provides a
concise history of the early years of the Standard Oil group and
the effects of its 1911 dissolution on its Latin American
operations, as well as power struggles with competitors and
governments that eventually nationalized most of its activities.
Mr. Solberg covers the many years of internal conflict over oil
policy in Argentina and YPF's lack of monopoly control over all
sectors of the oil industry. Mr. Wirth describes the politics
and individuals behind the privatization of Brazil's oil
industry leading to the creation of Petrobras in 1953. Mr. Duran
notes the wrangling between provinces and central government in
the evolution of Pemex, and in other Latin American countries.
Mr. Lieuwin discusses the mixed blessing that oil has proven for
Venezuela., creating a lopsided economy dependent on the ups and
downs of international markets. Mr. Saunders concludes that many
of the then-current problems of the state oil companies were
rooted in their early and checkered histories." Indeed, he says,
"the problems of the past have endured not because the public
petroleum companies behaved like the public enterprises they
are; they have endured because governments, as public owners,
have abdicated their responsibilities to the companies."

John D. Wirth is Gildred Professor of Latin American Studies at
Standford University.


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

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  Go to 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,

Copyright 2014.  All rights reserved.  ISSN 1529-2754.

This material is copyrighted and any commercial use, resale or
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Information contained herein is obtained from sources believed to
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