TCREUR_Public/140321.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, March 21, 2014, Vol. 15, No. 57



HYPO ALPE-ADRIA: BayernLB Ex-Chair Says Managers Didn't Mislead


CHIMCO: Asset Auction Fails to Attract Investor Interest


METSA BOARD: Moody's Rates EUR225MM Senior Unsecured Bond 'B2'


GREECE: Inks Deal with Int'l Lenders to Unlock Next Loan Tranche


PREPS 2007-1: Fitch Lowers Rating on Class A1 Notes to 'Csf'
TITAN EUROPE 2006-1: Moody's Cuts Rating on Class X Notes to 'C'


BERTONE: Enters Into Court Bankruptcy Proceedings


POLARE: Group of Employees to Take Over Rotterdam Bookshop
PROSPERO CLO II: Moody's Lowers Rating on Class D Notes to 'B1'


PLAY HOLDINGS: S&P Assigns 'B+' Corp. Rating; Outlook Stable


* SERBIA: Fitch Says Election Suggests Reform Mandate


ABENGOA SA: S&P Revises Outlook to Positive & Affirms 'B' CCR
FTPYME BANCAJA 3: S&P Affirms 'CCC' Rating on Class D Notes
PESCANOVA SA: Offers Creditors Up to 60% Stake in Revised Plan
SPAIN: Bailed-Out Banks Face Claims on EUR3.1-Bil. Debt


VAT VAKUUMVENTILE: S&P Assigns 'B+' CCR; Outlook Stable

U N I T E D   K I N G D O M

ARGON CAPITAL: Moody's Lowers Rating on GBP750MM Notes to 'B2'
HEARTS OF MIDLOTHIAN: UBIG Creditors' Meeting Set for March 28

* S&P Affirms Ratings on 5 Natural-Peril Catastrophe Bonds
* Fitch Says UK Flood Defense Spending May Not Be Enough


* EUROPE: Reaches Banking Union Deal



HYPO ALPE-ADRIA: BayernLB Ex-Chair Says Managers Didn't Mislead
Oliver Suess at Bloomberg News reports that Bayerische Landesbank
former chair said Bayerische managers didn't mislead its
administrative board over the acquisition of Hypo Alpe-Adria Bank
International AG.

"The information given by the management board to us was precise
and comprehensive," Bloomberg quotes Kurt Faltlhauser, who headed
BayernLB's administrative board from October 1998 to June 1999
and from July 2002 until July 2005, as saying in testimony on
Tuesday.  "I wasn't misled."

Former BayernLB executives are on trial over the takeover that
led to EUR3.7 billion (US$5.1 billion) of losses, Bloomberg

According to Bloomberg, prosecutors allege they didn't inform the
state-owned lender's administrative board correctly and overpaid
by EUR550 million when they purchased a majority stake of
Klagenfurt, Austria-based Hypo Alpe-Adria for EUR1.63 billion in
May 2007.  They are charged with "breach of trust," a criminal
offense in Germany that punishes misuse of other people's money.
All of them deny the charges, Bloomberg relays.

"The due diligence didn't reveal any deal-breakers,"
Mr. Faltlhauser, as cited by Bloomberg, said.  "The risks were
assessed during the due diligence.  We had more than 800 risk
managers at BayernLB at the time, there were plenty of experts
available.  The process was well-structured and not chaotic, as
suggested by media reports."

In the case, the first in Germany to put management board members
on trial for overpaying for an acquisition, prosecutors allege
the executives at state-owned BayernLB rushed the deal, Bloomberg
notes.  They didn't properly assess the risks and didn't include
precautions in the agreement because they were under political
pressure to buy Hypo Alpe-Adria after they lost the bidding for
Vienna-based Bawag PSK Bank in 2006, Bloomberg relays.

                     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.


CHIMCO: Asset Auction Fails to Attract Investor Interest
SeeNews reports that assets of Chimco, which were put up for sale
at BGN28.5 million (US$20.3 million/EUR14.6 million) in an
auction, attracted no investor interest.

According to SeeNews, the state-run Bulgarian News Agency, BTA,
said that following the unsuccessful sale attempt, Chimco's
assets will be offered to investors again, as the starting price
in the next auction will be 20% lower.

Earlier this year, the economy ministry said it planned to
acquire the insolvent Bulgarian fertilizer plant in an attempt to
revive its production, SeeNews relates.

Chimco, which halted operations in 2003, used to be Bulgaria's
biggest urea producer.  The plant produced ammonia, carbon
dioxide, argon and various types of catalysts, as well.  It was
declared bankrupt in 2004.


METSA BOARD: Moody's Rates EUR225MM Senior Unsecured Bond 'B2'
Moody's Investors Service assigned a definitive B2 (LGD4, 57%)
unsecured instrument rating to the upsized 5-year non-call EUR225
million senior unsecured Nordic bond at a 4% fixed interest rate
issued by Metsa Board Corporation. The company's B2 Corporate
Family Rating (CFR), B2-PD probability of default rating (PDR) as
well as the positive outlook remain unchanged.

The issuance of a minimum 5-year EUR200 million unsecured bond
that was condition precedent to the funding of the Metsa Board's
new loan facility, has been met. Metsa Board will use the net
proceeds from the combined debt issuance to repay the existing
EUR350 million term loan maturing on 31 March 2016 and to replace
a currently undrawn EUR100 million revolving credit facility due
on 2 May 2015. With the issuance of the bond and the funding of
the loan facility, Metsa Board's short term liquidity position
will have strongly improved including manageable near-term debt

Ratings Rationale

Moody's definitive ratings are in line with the provisional
ratings assigned on March 4, 2014.

The positive outlook on Metsa Board's B2 CFR is supported (1) by
the company's recently completed refinancing exercises that
termed out the debt maturity profile, and (2) the reduced
financial leverage with gross leverage as adjusted by Moody's
expected to decline towards 4x Debt/EBITDA by 2015. Moody's also
takes comfort from the improved company's profitability following
significant restructuring measures implemented over the past
years. While extensive maintenance shutdowns at the Husum and
Kemi mills impacted the profitability of the paper and pulp
division during 2013, continued strong performance in its
packaging business area provide further support to profit and
cash generation. Based on full year 2013 results, Metsa Board's
credit metrics are fully commensurate with a B2 rating including
Debt/EBITDA at 4.5 times and EBITDA margins of around 9% (all as
adjusted by Moody's). Higher profitability and lower
restructuring payouts should also allow Metsa Board to return to
sustained positive free cash flow generation in 2014 (EUR2
million of free cash flow generated in 2013), albeit at a
relatively low level and to some extent driven by increased
dividend payments.

Moody's expects the group's packaging operations to continue to
perform solidly in 2014 despite the subdued economic environment
in Europe, with further gradual improvements to come from ongoing
efficiencies, the replacement of unprofitable paper capacities
with profitable packaging capacities, and growing demand.
However, Moody's caution that profitability of Metsa Board's
paper and pulp business area may experience further pressure as
overcapacity for paper is significant, resulting in weak pricing
power of producers, and therefore diluting the group's overall
margin. In addition, new pulp capacities scheduled to come on
stream in South America may result in declining pulp prices in H1
2014, which could also put further pressure on already weak paper
pricing levels.

More fundamentally, the B2 rating is supported by (1) Metsa
Board's strong market position, being among the leading producers
of paperboard in Europe, (2) its good vertical integration into
pulp, reducing dependency on the volatile pulp prices, and (3)
positive industry fundamentals with structural growth for paper-
based packaging products, which will be the major profit
contributor going forward. At the same time, Moody's note that
Metsa Board still needs to prove the ability to generate
resilient returns through the cycle under the restructured setup.

Subsequent to the refinancing, Moody's view Metsa Board's
liquidity profile as good including EUR94 million of cash as per
end of December 2013, EUR25 million overfunding as a result of
the upsized bond, EUR100 million undrawn bank revolving credit
facility and EUR150 million short-term liquidity provided by
Metsa Group Treasury. Annual debt maturities are viewed as
manageable until larger bullet maturities fall due in 2018 and
2019. Moody's understands that Metsa Board's new bank financing
arrangements contain financial covenants but expects the group to
retain good headroom.

The B2 rating assigned to the EUR225 million senior unsecured
notes are at the level of the group's CFR, considering that Metsa
Board's mostly unsecured existing debt arrangements effectively
rank pari passu with the new unsecured debt. Given only marginal
asset security of Metsa Board's priority ranking amortising
pension loans in an amount of EUR217million, due between 2014 -
2020, additional notching of the unsecured debt is not justified
in Moody's view. Moody's notes that the new bond and loan
documentations' negative pledge clause is subject to certain
exceptions including permitted secured pension loans of up to
EUR250m and permitted non-recourse trade receivable
securitizations of up to EUR50 million.

A rating upgrade would require Metsa Board to continue its track
record of gradually improving operating profitability and cash
flow generation despite the challenging macroeconomic conditions
in its European markets. Quantitatively, Moody's would consider a
rating upgrade if Metsa Board was able to sustain EBITDA margins
of at least low double digit percentages, with Moody's adjusted
leverage of Debt/EBITDA consistently at or below 4x (per full
year 2013: 4.5), and RCF/Debt of around 10% (per full year 2013:

The rating could come under negative pressure if the company's
Debt/EBITDA as adjusted by Moody's were to move towards 6x or if
material negative free cash flow generation further weakens the
group's liquidity position.

The principal methodology used in this rating was the Global
Paper and Forest Products Industry published in October 2013.
Other methodologies used include Loss Given Default for
Speculative-Grade Non-Financial Companies in the U.S., Canada and
EMEA published in June 2009.

Metsa Board, headquartered in Espoo, Finland, is a leading
European primary fibre paperboard producer. Metsa Board also
produces office paper and coated papers as well as market pulp.
Sales during FY ended December 2013 amounted to EUR2.0 billion.


GREECE: Inks Deal with Int'l Lenders to Unlock Next Loan Tranche
Harry Papachristou and Lefteris Papadimas at Reuters report that
Greece and its international lenders struck a deal to unlock the
next tranche of loans under its rescue package on Tuesday, ending
six months of negotiations that Athens called its "toughest"
review since being bailed out.

The deal paves the way for Greece to repay nearly EUR10 billion
of bonds due in May and bolsters expectations it could soon
return to the bond markets for the first time since its debt
crisis escalated four years ago, Reuters says.

Athens and its European Union and IMF lenders had been haggling
over the bailout review since September, making it the longest
inspection of the country's finances since Greece was first
rescued from bankruptcy by the creditors in 2010, Reuters relays.

Prime Minister Antonis Samaras immediately promised voters that
the deal with lenders came without any additional demands for
austerity, and promised a EUR500-million windfall to poor,
austerity-hit Greeks that will be funded out of the primary
budget surplus Greece unexpectedly posted last year, Reuters

Greece has no pressing funding needs until May, when EUR9.3
billion of its bonds expire, the biggest refinancing hump the
country will face in the next three decades, Reuters notes.
According to Reuters, an EU diplomat said, on condition of
anonymity, that the next tranche of aid will be released by the
end of April, allowing Greece to meet its May obligations.


PREPS 2007-1: Fitch Lowers Rating on Class A1 Notes to 'Csf'
Fitch Ratings has downgraded one class of notes and affirmed five
classes of notes from the transactions PREPS 2005-2, PREPS 2006-1
and PREPS 2007-1.

The PREPS series are cash securitizations of subordinated loans
to medium-sized enterprises located in up to eight jurisdictions:
Germany, Austria, Switzerland, Italy, Belgium, Luxembourg, the
Netherlands and the United Kingdom.

Key Rating Drivers

PREPS 2005-2
The affirmations of the class B1 and B2 notes at 'Csf' reflect
Fitch's view that default is inevitable.

Preps 2005-2 reached scheduled maturity in December 2012. Since
the underlying companies' subordinated loans securitized in the
pool are bullet loans with the same tenor, they all became due on
the same scheduled maturity date.  The senior class A1 and A2
notes were repaid in full (PIF).  Beyond the scheduled maturity,
10 companies with a notional loan amount of EUR78 million are
still listed as constituents of the portfolio.  Yet, as one has
defaulted and nine are insolvent, their aggregate portfolio loan
amount is zero. Fitch does not expect any further payments from
future recoveries of these assets through to their legal final
maturity in December 2014.  This is because the securitized debt
instruments of these insolvent companies rank junior to any other
claims and are unsecured in character.

PREPS 2006-1
The affirmations of the class B1 and B2 notes at 'Csf' reflect
Fitch's view that default is inevitable.  The class A1 and A2
notes were fully repaid at the transaction's scheduled maturity
date in July 2013.

Since the companies' subordinated loans securitized in the pool
are bullet loans with the same tenor, they all became due on the
same scheduled maturity date.  Beyond the scheduled maturity
date, 14 companies are still listed as constituents of the
portfolio. Eleven companies have defaulted.  Thus, their
aggregate notional loan amount of EUR55 million does not
constitute as part of the portfolio.  Three companies with valid,
on-going loan contracts but missed payments have an aggregate
outstanding portfolio loan amount of EUR12.8 million.  Their
interest payments are not enough to cover the interest payments
on the rated notes.  Fitch lacks information on the recovery
prospects of these companies with missed payments at maturity.
Therefore, the agency does not expect any further payments to the
benefit of the noteholders from these loans to occur.  The agency
also does not expect any recoveries from defaulted assets through
to their legal final maturity in March 2015.

PREPS 2007-1
The downgrade of the class A1 notes to 'Csf' from 'CCCsf' and
affirmation of the class B1 and B2 notes at 'Csf' reflect Fitch's
view that default is inevitable.

PREPS 2007-1 reached scheduled maturity in March 2014. Since the
companies' subordinated loans securitized in the pool are bullet
loans with the same tenor, they all became due on the same
scheduled maturity date.  The senior class A1 notes were not
repaid in full.  Beyond the scheduled maturity date, 12 companies
are still listed as constituents of the portfolio.  Eight
companies are insolvent and one has defaulted. Thus, their
aggregate notional loan amount of EUR61 million does not
constitute as part of the portfolio.  Two companies with valid,
on-going loan contracts but missed payments have an aggregate
outstanding portfolio amount of EUR12 million.  On March 19,
2014, PREPS 2007-1 PLC announced that another company with missed
payments at scheduled maturity has now fully repaid the principal
amount of EUR9.5 million.  The amount will be part of the
available funds at the next payment date to pay class A1 coupon
payments and redeem the class A1 notes further.  Fitch lacks
information on the recovery prospects of the other two companies
with missed payments at maturity. Therefore, Fitch does not
expect any further payments to the benefit of the noteholders
from these loans to occur. The agency also does not expect any
recoveries from defaulted assets through to their legal final
maturity in March 2016.

The Recovery Estimate (RE) on the class A1 notes has been lowered
to 0% from 70%.

Rating Sensitivites

After scheduled maturity, the transactions are primarily
sensitive to the recoveries from defaulted agreements (e.g. via
sales of rights and obligations arising from securitized
subordinated loans). Fitch does not expect any recoveries due to
the junior, unsecured nature of the loans.  These risks are
reflected in the current ratings of the notes.

Fitch assigns RE to all notes rated 'CCCsf' or below.  REs are
forward-looking recovery estimates, taking into account Fitch's
expectations for principal repayments on a distressed structured
finance security.

The REs and the ratings assigned to the transactions' notes are
given below.

PREPS 2005-2 plc (PREPS 2005-2)

Class A1 notes (XS0236849005): PIF
Class A2 notes (XS0236849427): PIF
EUR35,575,846 class B1 notes (ISIN: XS0236849930): affirmed at
  'Csf; RE: 0%
EUR10,715,616 class B2 notes (ISIN: XS0236850862): affirmed at
  'Csf; RE: 0%

PREPS 2006-1 plc (PREPS 2006-1)

Class A1 notes (ISIN: XS0261122732): PIF
Class A2 notes (ISIN: XS0261125081): PIF
EUR22,833,717 class B1 notes (ISIN: XS0261125677): affirmed at
  'Csf'; RE: 0%
EUR5,137,586 class B2 notes (ISIN: XS0261127376): affirmed at
  'Csf'; RE: 0%

PREPS 2007-1 plc (PREPS 2007-1)

EUR44,708,578 class A1 notes (ISIN: XS0289620709): downgraded to
  'Csf' from 'CCCsf'; RE: 0% reduced from RE: 70%
EUR35,000,000 class B1 notes (ISIN: XS0289620881): affirmed at
  'Csf'; RE: 0%

TITAN EUROPE 2006-1: Moody's Cuts Rating on Class X Notes to 'C'
Moody's Investors Service has taken rating action on the
following classes of Notes issued by TITAN EUROPE 2006-1 p.l.c .

Moody's rating action is as follows:

Issuer: TITAN Europe 2006-1 p.l.c.

  EUR112.05M (current outstanding balance of EUR81M) B Notes,
  Downgraded to Ca (sf); previously on Aug 7, 2012 Downgraded to
  Caa2 (sf)

  EUR39.76M (current outstanding balance of EUR30M) C Notes,
  Affirmed C (sf); previously on Aug 7, 2012 Downgraded to C (sf)

  EUR46.99M (current outstanding balance of EUR35M) D Notes,
  Affirmed C (sf); previously on Jul 5, 2011 Downgraded to C (sf)

  EUR50.61M (current outstanding balance of EUR38M) E Notes,
  Affirmed C (sf); previously on Jul 1, 2010 Downgraded to C (sf)

  X Notes, Downgraded to C (sf); previously on Aug 22, 2012
  Downgraded to Caa2 (sf)

Moody's does not rate the Class F, G, H and V notes.

Ratings Rationale

The downgrade action reflects Moody's increased loss expectation
on the Tiden loan coupled with the fact that the underlying
secondary office portfolio needs to be sold within a remaining
short tail period. With less than two years to legal final
maturity and ongoing insolvency proceedings, Moody's expects the
recoveries on the Tiden loan to be significantly below the
June 2012 valuation. Increased and continuing liquidity drawing
will increase the principal losses to the class B note holders,
this has been factored into our ratings. The rating action for
the Class X notes is driven by the increased expected loss of the
loan pool. The Class X Notes reference the underlying loan pool.
As such, the key rating parameters that influence the expected
loss on the referenced loan pool also influences the ratings on
the Class X Notes. The rating of the Class X was based on the
methodology described in Moody's Approach to Rating Structured
Finance Interest-Only Securities published in February 2012.

Methodology Underlying the Rating Action:

The principal methodology used in this rating was Moody's
Approach to Rating EMEA CMBS Transactions published in December

Other factors used in this rating are described in European CMBS:
2014-16 Central Scenarios published in March 2014.

Factors that would lead to an upgrade or downgrade of the rating:

The main factor that could lead to a downgrade of the rating is a
further decline in the property values backing the underlying
loans that is worse than Moody's expectation, thereby leading to
lower recoveries on the loans.

The main factor that could lead to an upgrade of the rating is an
increase in the property values backing the underlying loans
leading to loan recoveries higher than Moody's expectation.

Moody's Portfolio Analysis

TITAN EUROPE 2006-1 p.l.c. closed in March 2006 and represents
the securitisation of initially ten commercial mortgage loans
originated by Credit Suisse International.

As of the January 2014 interest payment date, the transaction's
total pool balance was EUR 212.7 million down from EUR 723.7
million at closing due to repayments, prepayments and allocation
of workout proceeds. Only 4 of the original 10 loans remain in
the pool.

All the loans are in default and in special servicing. Based on
Moody's revised assessment of underlying property values, the
loss expectation for the remaining pool is very large (>40%).

The Tiden loan defaulted at maturity on Jan 18, 2013, following
which the Special Servicer had granted standstill period to the
Borrower and began the discussion of potential joint work-out
options. After negotiations failed, the insolvency proceedings
commenced in April 2013. In December 2013 an insolvency
administrator was appointed and subsequently an asset manager for
the portfolio was appointed with a view to commence asset sales
in the near future. Moody's expects sales proceeds to be
significantly below the June 2012 portfolio revaluation resulting
in high loan level losses.

Most of the assets of the KQ Warehouse loan and the Mangusta loan
have been sold and principal recoveries have been allocated to
the Notes. Moody's does not expect any significant recoveries on
the KQ Warehouse loan. On the Mangusta loan, closing of the sale
on the 7 remaining assets is incomplete owing to ongoing legal
proceedings, Moody's expects significant losses on this loan.

On the Nuremberg retail loan, the Special Servicer and the
Sponsor agreed to a discounted purchase offer of EUR14.65 million
compared to an outstanding loan balance of EUR16.3 million. It
was originally estimated that the DPO would close prior to the
October IPD 2013 however, the sponsor exercised certain extension
rights and the DPO is expected to complete by the April 2014
interest payment date.

Portfolio Loss Exposure: Moody's expects a large amount of losses
on the remaining securitized portfolio as a whole and expects
that losses will eventually reach the Class B Notes. Given
anticipated work-out strategy for the loans, Moody's expects that
the majority of the losses will be allocated towards the end of
the transaction term.


BERTONE: Enters Into Court Bankruptcy Proceedings
Nick Gibbs at The Telegraph reports that Bertone has confirmed it
has entered court bankruptcy proceedings after mounting debts
forced it to send staff home.

"The problem is many debts and very high costs.  At the moment,
everything is blocked," a spokesperson told The Telegraph.
"People haven't been coming to work for a month and a half now."

According to The Telegraph, the spokesperson said that the fate
of the Turin-based company will be known by the end of April.  A
court will either declare that the company will close for good or
reveal the name of the most suitable buyer, The Telegraph

"The court is evaluating proposals from foreign companies
interested in buying Bertone," the spokesperson, as cited by The
Telegraph, said, confirming reports that one is Turkish.

According to its website, the company has 200 employees,
including engineers and designers.  Italian law means they are
currently paid benefits by the state until the court decides
Bertone's fate next month, The Telegraph notes.

Bertone is an Italian design house.


POLARE: Group of Employees to Take Over Rotterdam Bookshop
Maxime Zech at reports that the Rotterdam bookshop of
the bankrupt Polare chain may survive.

According to, a group of Polare employees announced on
Monday that they have managed to collect enough money to take
over the shop.

It will be established on the Coolsingel under its old name,
Donner, says, citing Telegraaf.

The group of employees says different individual investors and
crowd funding are behind the money, discloses.
According to, the curator said it is true that the
agreement is "a hair's breadth" away from being done, the
signatures must still be put down.

Polare went bankrupt at the end of February, recounts.
The curator has been trying since then to sell of individual
bookstores separately or in groups, relays.
Meanwhile, the establishments just stay open, notes.

PROSPERO CLO II: Moody's Lowers Rating on Class D Notes to 'B1'
Moody's Investors Service has taken the following rating actions
on notes issued by Prospero CLO II B.V.:

Issuer: Prospero CLO II B.V.

  US$80M (current balance USD 42.4M) Class A-1 A Notes, Affirmed
  Aaa (sf); previously on Mar 9, 2007 Assigned Aaa (sf)

  EUR64M (current balance EUR 33.9M) Class A-1 B Notes, Affirmed
  Aaa (sf); previously on Mar 9, 2007 Assigned Aaa (sf)

  GBP10.5M (current balance GBP 5.6M) Class A-1 C Notes, Affirmed
  Aaa (sf); previously on Mar 9, 2007 Assigned Aaa (sf)

  US$100M (current balance equivalent to USD 53.4M) A-1 VF Notes,
  Affirmed Aaa (sf); previously on Mar 9, 2007 Assigned Aaa (sf)

  US$30M Class A-2 Notes, Upgraded to Aaa (sf); previously on Sep
  8, 2011 Upgraded to Aa3 (sf)

  US$25M Class B Notes, Upgraded to A2 (sf); previously on Sep 8,
  2011 Upgraded to A3 (sf)

  US$15M Class C Notes, Affirmed Baa3 (sf); previously on Sep 8,
  2011 Upgraded to Baa3 (sf)

  US$13.5M Class D Notes, Downgraded to B1(sf); previously on Sep
  8, 2011 Upgraded to Ba2 (sf)

Prospero CLO II B.V., issued in November 2006, is a multi
currency Collateralised Loan Obligation ("CLO") backed by a
portfolio of mostly high yield European and US loans. It is
predominantly composed of senior secured loans. The portfolio is
managed by Alcentra NY, LLC, and this transaction passed its
reinvestment end date in October 2012.

Ratings Rationale

According to Moody's, the upgrade of the Class A-2 and Class B
notes is primarily a result of the continued amortization of the
portfolio and subsequent increase in the collateralization ratios
over the past twelve months. Moody's notes that as of the January
2014 payment date, the Class A-1 notes and Class A-1 VF Notes
have paid down by approximately USD60.6 million, EUR31.9 million,
and GBP5.9 million, in total c 43% since January 2013. As a
result of this deleveraging, the overcollateralization ratios (or
"OC ratios") of the senior notes have increased over this period.
As per the trustee report dated January 2014, the Class A, Class
B, Class C, and Class D ratios are reported at 135.69%, 120.29%,
112.62%, and 106.50% respectively, versus January 2013 levels of
122.96%, 113.57%, 108.59% and 104.47%. Reported WARF has worsened
from 2324 to 2425 between January 2013 and January 2014, exposure
to Caa assets has increased from 5.45% to 6.82%, and the reported
diversity score has reduced from 71 to 53 during the same period.

The base currency in this transaction is USD, and the collateral
pool has EUR and GBP denominated assets which are naturally
hedged by EUR and GBP liabilities. As per the January 2014
trustee report, the un-hedged EUR and GBP amounts are equivalent
to USD8.7 million and USD5.9 million respectively.

The downgrade to the rating of the Class D notes is primarily due
to the impact of un-hedged EUR and GBP positions which represent
an increasing proportion of the outstanding balance of the rated
notes as the latter are paid down. In addition, there has been a
marginal deterioration in the average credit quality of the
collateral pool and a small increase in the percentage of assets
rated Caa.

The key model inputs Moody's uses in its analysis, such as par,
weighted average rating factor, 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
(i) a USD pool with performing par and principal proceeds balance
of USD154.8 million, (ii) a EUR pool with performing par and
principal proceeds of EUR52.5 million , and (iii) a GBP pool with
performing par and principal proceeds of GBP14.4 million, a
weighted average default probability of 17.7% (consistent with a
WARF of 2644 with a weighted average life of 4.1 years), a
weighted average recovery rate upon default of 47.07% for a Aaa
liability target rating, a diversity score of 43 and a weighted
average spread of 3.35%. 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 87.8% of the
portfolio exposed to senior secured corporate assets would
recover 50% upon default, while the remainder non first-lien loan
corporate assets would recover 15%. 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

Moody's notes the February 2014 trustee report has recently been
issued. Reported diversity score, WARF, weighted average spread
and OC ratios for all classes of notes are materially unchanged
from January 2014 data.

Methodology Underlying the Rating Action:

The principal methodology used in this rating was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
February 2014.

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
4.8% of the portfolio, which could make refinancing difficult.
Moody's ran a model in which it raised the base case WARF to 2715
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 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) The deal has significant exposure to non-USD denominated
assets. Volatilities in foreign exchange rate will have a direct
impact on interest and principal proceeds available to the
transaction, which may affect the expected loss of rated
tranches, particularly the junior ones. Repayments received in
different currencies from portfolio amortization which are not
proportional to outstanding liabilities in those currencies could
lead to an increase in un-hedged positions.

3) Around 15% of the collateral pool consists of debt obligations
whose credit quality Moody's has been assessed by using credit

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.


PLAY HOLDINGS: S&P Assigns 'B+' Corp. Rating; Outlook Stable
Standard & Poor's Ratings Services said that it assigned its 'B+'
long-term corporate credit rating to Poland-based wireless
telecommunications company Play Holdings 2 S.a.r.l. (PLAY).  The
outlook is stable.

At the same time, S&P assigned its 'B+' issue rating to the
EUR630 million-equivalent senior secured notes, due 2019, issued
by Play Finance 2 S.A., and S&P's 'B-' issue rating to the EUR270
million senior unsecured notes, due 2019, issued by Play Finance

The rating on PLAY reflects S&P's assessment of its financial
risk profile as "aggressive" and its view of its business risk
profile as "fair," as well as its view of the group's significant
exposure to currency mismatch risk owing to its euro-denominated
debt and Polish zloty-denominated revenue.

PLAY's "fair" business risk profile reflects S&P's view of its
solidifying position as the No. 4 mobile network operator in
Poland, with relatively significant subscriber market share of
over 18%, representing over 10 million subscribers.  S&P also
views PLAY's strong brand as value-for-money, and it considers
the company's very meaningful growth in recent years and
declining customer turnover as positives for S&P's assessment.
In addition, the business risk profile is supported by S&P's
anticipation of additional growth in revenue and EBITDA for PLAY,
owing to the room for growth from mobile broadband and additional
subscribers. S&P considers PLAY's operating efficiency to be
adequate, with a relatively low-cost business model and
attractive network-sharing agreements.

The business risk profile is constrained by PLAY's lack of
operating diversity, as it relies on a single market in a single
country, with a relatively high proportion of low-value prepaid
subscribers.  S&P views the competition from larger operators --
who have greater financial resources, higher network coverage, or
broader product ranges -- as a primary constraint to S&P's
evaluation of PLAY's business risk profile.  S&P also assess the
company's profitability as below average for the industry.

S&P's assessment incorporates its view of the telecoms and cable
industry's "intermediate" risk and our view of Poland's
"moderately high" country risk.

"We assess PLAY's financial risk profile as "aggressive" due to
its controlling financial sponsor ownership of over 40% (about
50% owned by NTP S.a r.l.) and the degree of uncertainty we have
regarding its long-term financial policy and leverage targets.
Our financial risk profile assessment also reflects our forecast
that the group's Standard & Poor's-adjusted debt-to-EBITDA ratio
will decline to slightly below 4.0x in 2014 from about 5.4x in
2013, pro forma the planned recapitalization of its balance
sheet. Furthermore, we forecast that the group's adjusted debt to
EBITDA will likely remain comfortably below 5x going forward, in
view of its meaningful organic deleveraging prospects and
limitations on debt incurrence.  We anticipate that free cash
flows could remain negative in 2014, similar to 2013, due to the
possible purchase at auction of a 800MHZ/2600 MHZ spectrum
license.  However, we forecast meaningful improvement in the
group's recurring free cash flows, excluding one-off spectrum
license acquisitions, despite an increasing interest burden and
capital expenditure (capex) requirements in order to increase the
company's long-term evolution high-speed data coverage," S&P

"We assess PLAY's anchor at 'bb-'. To reach the long-term
corporate credit rating of 'B+', we make a one-notch downward
adjustment to the anchor for our comparable rating analysis,
whereby we review an issuer's credit characteristics in
aggregate. This reflects what we view as significant currency
mismatch exposure.  The group's debt will be fully euro-
denominated, but we anticipate that it will generate nearly 100%
of its EBITDA in Polish zloty (PLN), with no hedging of its
principal in place.  The company's plans to hedge near-term
coupon payments only partly offsets currency risks in our view.
The comparable rating analysis also reflects our view of the
company's lower-than-average profitability compared with industry
peers," S&P added.

S&P's base-case operating scenario for PLAY assumes:

   -- GDP growth in Poland of 2.0% in 2014.

   -- High-single-digit revenue growth in 2014, reflecting
      continued, though moderated, subscriber growth and
      stabilizing average revenue per user due to growth in data

   -- Significant subscriber acquisition and retention costs at
      over 20% of revenues.

   -- An increase in the adjusted EBITDA margin to over 25% in
      2014, from about 21% in 2013.  The main factor behind the
      margin growth S&P anticipates is the meaningful decline in
      interconnection costs in 2013, thanks to a 48% cut in
      Poland's mobile termination rates (MTRs) in July (PLAY is a
      net payer of MTRs).  In addition, S&P assumes that margins
      will be supported by improving economies of scale.

   -- Capital expenditure (capex) of 10%-11% of revenues in 2014.

Based on these assumptions, we arrive at the following credit

   -- Funds from operations to debt of about 20% in 2014, up from
      about 14% at year-end 2013;

   -- A decline in debt to EBITDA to about 4.0x in 2014 from 5.6x
      at year-end 2013;

   -- Adjusted interest coverage of over 4.0x in 2014; and

   -- Adjusted free operating cash flow (FOCF) to debt of 9%-11%
      in 2014, excluding the potential spectrum license

The stable outlook reflects S&P's view of the prospects that
PLAY's profitability and cash flow generation will meaningfully
improve over the next 12 months.  S&P anticipates that this is
likely to happen even if growth is slower than in its base-case
scenario, due to lower subscriber acquisition costs.

Upside scenario

S&P sees limited chances of an upgrade over the next 12 months.
This is due to S&P's view that it will continue to assess PLAY's
business risk profile as "fair," given the company's position as
a challenger in the mobile market and its relatively low
profitability.  The company's currency risk exposure, controlling
sponsor ownership, and lack of a defined financial policy also
reduce the likelihood of an upgrade.

S&P could consider raising the ratings, however, if PLAY
substantially hedges its debt principal, while maintaining
adjusted leverage below 5x, FOCF to debt of about 10% (excluding
one-off spectrum license acquisitions), and EBITDA margins in the
mid-20% range.  This will likely require the company to clarify
any additional spectrum spending requirements.

Downside scenario

"We also see limited chances of a downgrade in the short term,
given our view of the company's solid deleveraging prospects.  We
could lower the rating if we were to revise downward our
assessment of PLAY's business risk profile.  This could happen if
the group's positive momentum significantly slows in 2014 due to
tougher market conditions and an increase in subscriber retention
costs, leading to lower profitability.  We may also assess the
business risk profile as weaker if PLAY has no access to 800MHZ
spectrum (either by owning licenses or acquiring access through a
wholesale agreement), as we think it could place PLAY at a
significant long-term disadvantage compared with its competitors.
We may also lower the rating if PLAY's financial policy is more
aggressive than in our base-case assumptions, leading to an
increase in leverage to over 5x and a decline in free cash flow
to debt (excluding one-off spectrum license acquisitions) to
below 5%," S&P said.


* SERBIA: Fitch Says Election Suggests Reform Mandate
The decisive victory by the Serbian Progressive Party (SNS) in
Serbia's parliamentary elections arguably constitutes a mandate
to accelerate fiscal consolidation and structural reform in line
with SNS's broad policy commitments, Fitch Ratings says.  But it
remains to be seen how a new government will overcome deep-rooted
opposition to reform in areas such as restructuring state-owned

SNS leader Aleksander Vucic has reiterated his pro-reform agenda
and commitment to EU accession and a renewed IMF agreement.  He
said on Monday that he expects to pass "key laws, including the
labour law, the bankruptcy law, [and] the privatization law . . .
by the end of June or mid-July," according to news agency
reports. Restructuring state-owned enterprises and successful
implementation of other structural reforms could speed up
economic recovery and narrow external imbalances, supporting
Serbia's credit profile.

However, SNS was the largest party in the outgoing coalition
government, which made limited progress on consolidation and
reform in the face of popular and political opposition.
Restructuring and privatizing of SOEs has been delayed, for
example, while fiscal measures such as wage and pension reform
and VAT increases may not fully address the deterioration in
public finances.  Popular opposition to reform may persist, as
voters appear to have responded to SNS's anti-corruption stance
as much as its economic program.

And despite SNS's margin of victory -- it won over 48% of the
vote and over 150 seats in Sunday's poll, giving it an outright
parliamentary majority in the most emphatic result since the
introduction of multiparty elections -- Vucic has appeared to
acknowledge the need for broad political support for reform. He
said on Monday he will "extend a hand" to other political
parties, with a view to forming a new government by May 1.

A precautionary lending agreement with the IMF could provide a
policy anchor and boost investor confidence, but this will depend
on reform and consolidation commitments.  Negotiations on EU
accession, which began in January, could also help to sustain
reform momentum.

The recent signing of a US$1 billion loan agreement with the
United Arab Emirates may help Serbia refinance some of its most
expensive debt, but Serbia remains dependent on short-term market

Fitch downgraded Serbia to 'B+' from 'BB-' in January to reflect
the sovereign's widening budget deficit and growing debt.  The
Outlook on the rating is Stable.  Concluding an IMF deal,
containing inflation and maintaining exchange rate stability as
well as structural reform and fiscal consolidation would be
credit positive.


ABENGOA SA: S&P Revises Outlook to Positive & Affirms 'B' CCR
Standard & Poor's Ratings Services said that it had revised its
outlook on Spain-based engineering and construction company
Abengoa S.A. to positive from negative.  At the same time, S&P
affirmed its 'B/B' long- and short-term corporate credit ratings
on the company.

The outlook revision reflects S&P's understanding that Abengoa
recently registered a yield company with the U.S. SEC, and that
the company plans to reduce its capital expenditures to about
EUR450 million, compared with about EUR1.2 billion in corporate
capital spending in the past.  S&P expects Abengoa will keep only
minority stakes in concessions assets.

"Overall we think these steps could lead to a meaningful
reduction of debt on the balance sheet, thanks to both the impact
of the sale of part of the equity stake in the yield company, if
proceeds are used to lower corporate debt, and to reduced
consolidated debt if ownership in the concessions operations is
meaningfully lowered.  Over time, this could result in a revised
analytical approach of the concessions business, which we
currently fully consolidate.  However, any positive revision
would likely be somewhat mitigated by increased risk in the
business risk profile, if the concessions business no longer
added stability and high margins on a consolidated level," S&P

"Furthermore, we view as positive management's proactive issuance
of debt and equity in 2013.  Management has indicated it will use
the proceeds of its actions last year to meet upcoming debt
maturities in 2014 and 2015, which leads us to expect that
liquidity will remain at least "adequate" over 2014.  Moreover,
we think the reduced capital expenditure guidance for 2014 will
enable neutral to moderately positive free operating cash flow
(FOCF) already this year, as well," S&P added.

The positive outlook reflects the potential improvement in
Abengoa's financial risk profile, stemming from the increased
likelihood that management will reduce it ownership in the
concessions business.  The positive outlook also reflects
Abengoa's improved liquidity from fund raising in 2013, S&P's
expectation that capital expenditures will be significantly lower
in 2013, allowing neutral to moderately positive FOCF already in

S&P could raise the rating if Abengoa places a significant part
of the concessions business in the yield company or at the same
time significantly reduces its ownership in the concessions
business. This could eventually lead to S&P to raise the rating
by one notch if and when this becomes visible in the form of
lower debt levels. S&P would then likely revise its assessment of
the financial risk profile to a level of the "highly leveraged"
category closer to "aggressive," or to "aggressive."  This also
assumes management continues to maintain at least "adequate"

S&P could revise the outlook to stable if there were no visible
results of a meaningful improvement in Abengoa's financial risk
profile over 2014, that is, if key credit ratios, such as FFO to
debt, remained at about or below 6%.  S&P could also revise the
outlook to stable if FOCF continued to be negative over 2014,
implying a continued increase in Abengoa's debt.  This could
occur, notably if capital spending remained high, in contrast to
S&P's expectations.

FTPYME BANCAJA 3: S&P Affirms 'CCC' Rating on Class D Notes
Standard & Poor's Ratings Services affirmed its credit ratings on
FTPYME Bancaja 3, Fondo de Titulizacion de Activos' class B, C,
and D notes.

The affirmations follow S&P's review of the transaction's
performance.  S&P has based its analysis on the trustee report
for the December 2013 interest payment date (the collateral
information is as of Nov. 30, 2013), and has applied its relevant


FTPYME Bancaja 3's collateral is a closed portfolio of secured
(97.48%) and unsecured (2.52%) loans granted to Spanish small and
midsize enterprises (SMEs) originated by Caja de Ahorros de
Valencia, Castellón y Alicante (Bancaja).  The pool has a pool
factor (the percentage of the outstanding aggregate principal
balance) of 5.50%. Of the pool, 59.13% of its outstanding balance
is concentrated in the originator's home market of Valencia.
Concentration in the real estate and construction sectors
represents 34.68% of the outstanding pool balance.  Since closing
in October 2004, obligor concentration has increased due to the
pool's deleveraging.  The top one, five, and 10 obligors
represent 4.55%, 19.13%, and 29.27% respectively, of the
outstanding pool balance.

Available credit enhancement for the class B, C, and D notes is
provided by subordination and excess spread and totals 68.58%,
16.93%, and -4.28%, respectively (the class D notes are
undercollateralized).  S&P calculated these amounts using the
outstanding pool balance (excluding defaults) as of Nov. 30,
2013. Since S&P's November 2012 review, credit enhancement has
increased due to the deleveraging of the class B and C notes.  By
contrast, it has decreased for the class D notes.

S&P has applied its European SME collateralized loan obligations
(CLOs) criteria to determine the scenario default rates (SDRs)
for this transaction.  The SDR is the minimum level of portfolio
defaults that S&P expects each tranche to support the specific
rating level using Standard & Poor's CDO Evaluator.

"Our qualitative originator assessment is moderate because of the
lack of data the servicer, Bankia, provided. Taking into account
Spain's Banking Industry Country Risk Assessment (BICRA) of 6, we
have applied a one-notch decrease to the archetypical European
SME average credit quality assessment as described in our
criteria.  We applied a portfolio selection adjustment of minus
three notches based on the portfolio selection adjustment.  As a
result, our average credit quality assessment of the portfolio is
'ccc'," S&P said.

The originator did not provide S&P with internal credit scores.
Therefore, S&P assumed that each loan in the portfolio had a
credit quality that is equal to its average credit quality
assessment of the portfolio.

S&P used CDO Evaluator to determine the 'AAA' SDR.  S&P
determined that the whole portfolio's 'AAA' SDR is 87.32%.  In
S&P's view, the high SDR is due to significant obligor
concentration, industry concentration in the real estate and
construction sector, and S&P's 'ccc' average credit quality
assessment of the portfolio.

S&P has reviewed historical originator default data, and assessed
market trends and developments, macroeconomic factors, changes in
country risk, and the way these factors are likely to affect the
loan portfolio's creditworthiness.

Total delinquencies have decreased to 9.25% of the outstanding
pool balance, from a peak of 20.61% in November 2012, and have
rolled into higher arrears buckets.  The levels of 30 to 180 days
arrears have decreased significantly since S&P's last review,
when they were about 20%, and are low at 2.54%.  As of January
2014, 180+ days arrears were 6.70%.  Because of the increase in
defaulted assets, and given that the transaction structure has to
artificially write off the defaulted loans, the reserve fund has
been fully depleted since June 2013.

As a result of this analysis, S&P's 'B' SDR is 7.68%.

The SDRs for rating levels between 'B' and 'AAA' are interpolated
in line with S&P's European SME CLO criteria.


At each liability rating level, taking into account the observed
historical recoveries, S&P assumed a weighted-average recovery
rate (WARR) by taking into consideration the asset type, its
seniority, and the country recovery grouping.

As a result of this analysis, S&P's WARR assumptions in 'AA-' and
'BB' scenarios were 41.32% and 59.03%, respectively.


S&P subjected the capital structure to various cash flow
scenarios, incorporating different default patterns and interest
rate curves, to determine each tranche's passing rating level
under S&P's European SME CLO criteria.  S&P gave benefit to the
swap in its analysis.  Additionally, there was an amortization
deficit of about EUR1.84 million on the December 2013 payment
date.  S&P's cash flow analysis shows that the class B notes are
able to withstand its cash flow stresses at a 'AA' rating level.
However, sovereign risk constrains S&P's rating on this class of


S&P's supplemental tests take into account obligor concentration,
industry concentration, and regional concentration for the 'AAA'
and 'AA' rating categories, and only obligor concentration for
the remaining rating categories.  S&P's ratings on the notes were
not constrained by the application of the supplemental tests as
the maximum ratings achievable resulting from the tests were 'AAA
(sf)', 'A+ (sf)', and 'CCC+ (sf)', for the class B, C, and D
notes, respectively.


The issuer receives from the swap counterparty (The Royal Bank of
Scotland [RBS]) an amount equivalent to the weighted-average
coupon of the notes plus 87 basis points per annum on the
performing balance of the collateral (this includes loans that
are up to 90 days in arrears).  S&P has reviewed the swap
counterparty's downgrade provisions in the swap agreement, and
they comply with its current counterparty criteria.  Under the
transaction documentation, the swap counterparty has chosen
replacement option 1 in accordance with S&P's criteria, and is
posting collateral.  Therefore, it is eligible to remain in the
transaction as long as it has a long-term rating of 'BBB+' or


S&P's nonsovereign ratings criteria constrain its rating on the
class B notes at 'AA- (sf)', as, under these 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.  Because
this transaction securitizes Spanish SME loans, and S&P's
criteria deem it to have low sensitivity or exposure to sovereign
risk, the highest rating achievable is 'AA-', which is six
notches above S&P's 'BBB-' long-term sovereign rating on Spain.


Following S&P's full analysis described above, it has affirmed
its 'AA- (sf)' and 'BB (sf)' ratings on the class B and class C
notes, respectively.  Despite having no reserve fund, credit
enhancement from the performing pool and excess spread in the
transaction is sufficient to support S&P's ratings on these
classes of notes, in S&P's view.

"We have affirmed our 'CCC (sf)' rating on the class D notes
because we do not expect this class of notes to default in the
next 12 to 18 months.  This class of notes will default if the
interest deferral trigger is breached and available funds are not
sufficient to meet interest payments under this class, after the
senior classes of notes have amortized.  However, it is unlikely
that the transaction will breach this trigger in the
aforementioned timeframe, in our view," S&P said.

FTPYME Bancaja 3 is a cash flow CLO transaction that securitizes
a portfolio of SME loans that Bancaja, today merged with Bankia.
The transaction closed in October 2004.


Class    Rating

FTPYME Bancaja 3, Fondo de Titulizacion de Activos
EUR900 Million Floating-Rate Notes

Ratings Affirmed

B        AA- (sf)
C        BB (sf)
D        CCC (sf)

PESCANOVA SA: Offers Creditors Up to 60% Stake in Revised Plan
Katie Linsell at Bloomberg News reports that Pescanova SA, the
Spanish fishing company trying to avoid liquidation, offered
creditors a larger equity stake in exchange for additional
capital under a modified restructuring proposal.

According to Bloomberg, a filing on March 19 said the plan
proposed by shareholders Damm SA, the Spanish brewer, and
Luxempart SA, allows lenders up to 65 % of shares in a
restructured business, up from 35% in the original proposal
published March 4.  The share sale seeks as much as EUR62.5
million (US$86.2 million) in capital, with lenders having to
accept average losses of 60% to 90% on their debt, Bloomberg

The company must win agreement from more than 50% of creditors to
carry out the restructuring plan, Bloomberg notes.

Should the new proposal be approved by the court, it will be
submitted to a creditors' vote, Bloomberg states.

The restructuring plan groups all of Pescanova's Spanish units
apart from Novapesca Trading into a new company, Bloomberg says,
citing the March 4 regulatory filing.  It excludes international
units and aims to cut debt to EUR812.5 million, Bloomberg notes.

The debt will be split between senior and junior tranches held by
lenders totaling EUR700 million, while EUR112.5 million of super
senior debt will be held by Damm, Luxempart and other creditors,
Bloomberg says, citing the March 4 filing.

Pescanova's Spanish units will seek creditor protection by
April 10 as part of the restructuring plan, according to a letter
from the company's court-appointed administrator Deloitte LLP
included in the revised plan, Bloomberg discloses.

Pontevedra, Galicia-based Pescanova borrowed from more than 100
lenders, including Banco Sabadell SA, Banco Popular Espanol SA,
CaixaBank SA, Banco Bilbao Vizcaya Argentaria SA, Bankia SA and
NCG Banco SA, Bloomberg says, citing a list of creditors prepared
by Deloitte.

                      About Pescanova SA

Pescanova SA is a Galicia-based fishing company.  The company
catches, processes, and packages fish on factory ships.  It is
one of the world's largest fishing groups.

Pescanova filed for insolvency on April 15, 2013, on at least
EUR1.5 billion (US$2 billion) of debt run up to fuel expansion
before economic crisis hit its earnings.  The Pontevedra
mercantile court in northwestern Galicia accepted Pescanova's
insolvency petition on April 25.  The court ordered the board of
directors to step down and proposed Deloitte as the firm's

SPAIN: Bailed-Out Banks Face Claims on EUR3.1-Bil. Debt
Esteban Duarte at Bloomberg News reports that arbitrators
appointed by the Spanish government are considering claims that
might leave rescued lenders Bankia SA, NCG Banco and Catalunya
Banc liable to pay compensation to individual investors who
bought as much as EUR3.1 billion (US$4.3 billion) of junior debt.

Independent assessors including KPMG and Ernst & Young are
examining the possible mis-selling of products such as preferred
shares and have agreed to consider compensation requests from
269,204 customers, Bloomberg says, citing a government report
sent to parliament on March 14 that was seen by Bloomberg News.

According to Bloomberg, the report said that the requests being
reviewed represent 45% of the EUR6.8 billion of securities
subject to the claims.

Spain's government is trying to coax the economy back to life
after two recessions in six years and a EUR41 billion bailout for
the banking system, Bloomberg relays.  The arbitration process
was set up to assess claims from savers who say their banks
failed to have properly explained the risks of buying junior debt
instruments during the financial crisis, Bloomberg notes.

The process "will likely reduce the negative political impact of
burden-sharing," Bloomberg quotes Antonio Barroso, a London-based
political analyst at Teneo Intelligence, as saying.  "It might
also partially help to repair the loss of confidence in financial

Bloomberg relates that spokeswomen at the lenders said KPMG is
assessing client claims against Bankia while Ernst & Young is
reviewing Catalunya Banc claims.


VAT VAKUUMVENTILE: S&P Assigns 'B+' CCR; Outlook Stable
Standard & Poor's Ratings Services said it had assigned its 'B+'
long-term corporate credit rating to Switzerland-based developer
and producer of valves VAT Vakuumventile AG (VAT).  The outlook
is stable.

At the same time, S&P assigned its 'B+' issue rating to VAT's
US$405 million senior term loan.  The recovery rating on this
loan is '3', indicating S&P's expectation of meaningful (50%-70%)
recovery in the event of a payment default.

The ratings reflect S&P's assessment of the company's financial
risk profile as "highly leveraged" and business risk profile as
"fair," as defined in S&P's criteria.

The ratings on VAT are primarily constrained by S&P's view of the
company's highly leveraged financial profile and its assessment
of the company's financial policy as FS-6, based on VAT's private
equity ownership.  S&P understands that the shareholder has part
financed the recent VAT acquisition through Swiss franc (CHF) 356
million (about US$410 million) of shareholder loans.  Despite
S&P's view that these shareholder loans have certain equity
characteristics, are noncash paying, and subordinated, S&P treats
these instruments as debt-like, according to its criteria.  At
year-end 2014, S&P therefore assumes adjusted debt to EBITDA of
around 7.0x-7.5x (3.0x-3.5x excluding the shareholder loan).  In
S&P's opinion, VAT should be able to generate solid operating
cash flow after the acquisition.  However, S&P believes that
there is little room for deleveraging, due to the accruing
shareholder loan.

S&P views VAT's business risk profile as fair.  VAT enjoys a
strong market position, with market share of around 47%,
technology leadership, and high EBITDA margins, which S&P assumes
will remain in the mid to upper end of the 20%-30% range.

S&P views the financial risk profile to be at the stronger end of
the highly leveraged range, and therefore believe that VAT
compares favorably with peers at the same rating level.  Under
S&P's comparable rating analysis, it adds a one-notch uplift from
the anchor to arrive at a rating of 'B+'.

S&P's base case assumes:

   -- A healthy revenue increase in 2014, between 10% and 15%,
      predominantly driven by increased demand from the
      semiconductor industry.

   -- EBITDA margins remaining in the mid to upper end of the
      20%-30% range.

   -- Capital expenditure below CHF20 million.

In the medium term, however, S&P expects some volatility due to
the semiconductor exposure.

Based on these assumptions, S&P arrives at the following credit
measures at year-end 2014:

   -- Adjusted debt to EBITDA of 7.0x-7.5x (or 3.0x-3.5x
      excluding the shareholder loan).

   -- Free operating cash flow to debt of 5.5%-7.5%.

The stable outlook reflects S&P's opinion that VAT will retain
its leading position in its niche market, and its relatively high
profitability.  S&P expects the EBITDA margin to remain at least
in the high twenties as a percentage, and free operating cash
flow to be positive.

S&P could consider a positive rating action if VAT's adjusted
debt to EBITDA moved permanently to below 5.0x, including the
shareholder loan, and debt started to decrease in absolute terms.
Due to the shareholder loan, S&P sees this as unlikely in the
coming years.

S&P could lower the rating if unexpected adverse operating
developments occurred, and VAT started losing market share,
pushing the group's reported EBITDA margin to the 20% level,
leading to covenant headroom that S&P considered tight under its

U N I T E D   K I N G D O M

ARGON CAPITAL: Moody's Lowers Rating on GBP750MM Notes to 'B2'
Moody's Investors Service has downgraded the rating of the
following notes issued by Argon Capital PLC:

  Series 100 GBP750,000,000 Perpetual Non-Cumulative Securities,
  Downgraded to B2; previously on Feb 20, 2014 B1 Placed Under
  Review for Possible Downgrade

Ratings Rationale

Moody's explained that the rating action taken is the result of
the rating action on the Pref. Stock Non-cumulative of Royal Bank
of Scotland Group plc which were downgraded to B2 (hyb) from B1
(hyb) on review for possible downgrade on 13 March 2014. The
transaction is a repackaging of preference shares issued by Royal
Bank of Scotland Group plc.

Factors that would lead to an upgrade or downgrade of the rating:

This rating is essentially a pass-through of the rating of the
underlying securities. Noteholders are exposed to the credit risk
of the preference shares of Royal Bank of Scotland Group plc and
therefore the rating moves in lock-step.

Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, which could negatively impact the
ratings of the notes, as evidenced by 1) uncertainties of credit
conditions in the general economy and 2) more specifically, any
uncertainty associated with the underlying credits in the
transaction could have a direct impact on the repackaged

Methodology Underlying the Rating Action:

The principal methodology used in this rating was Moody's
Approach to Rating Repackaged Securities published in April 2010.

HEARTS OF MIDLOTHIAN: UBIG Creditors' Meeting Set for March 28
Barry Anderson at Edinburgh Evening News reports that the Hearts
of Midlothian Football Club hope to take a major step towards
exiting administration next week when creditors of Ukio Bankas
Investment Group meet to vote on transferring the club's shares
to owner-in-waiting Ann Budge.

A creditors' meeting has been scheduled for next Friday,
March 28, with a vote due to take place on releasing UBIG's 50%
shareholding in the Edinburgh club, Edinburgh Evening News
discloses.  According to Edinburgh Evening News, should creditors
agree to the share transfer and have it legally ratified in
Lithuania, Hearts will be able to complete a GBP2.5 million
Creditors' Voluntary Arrangement (CVA) and exit administration
within a matter of weeks.

The club's administrators, BDO, plan to add UBIG's 50% stake to
the 29.9% held by Ukio Bankas and transfer all shares to Budge's
BIDCO holding company in one transaction, Edinburgh Evening News
says.  The shares are worthless at the moment as Hearts, UBIG and
Ukio are all in administration after the empire of Russian
businessman Vladimir Romanov collapsed last year, Edinburgh
Evening News notes.

However, a token payment of more than GBP50,000 has been agreed
with UBIG administrators, Bankroto Administrativo Paslaugos, for
the release of Hearts' shares, according to Edinburgh Evening
News.  The deal will be concluded provided UBIG's creditors vote
it through next Friday, Edinburgh Evening News states.

Ms. Budge is personally funding the GBP2.5 million CVA and
intends to become chairwoman at Tynecastle, but the CVA is
conditional upon the share transfer, Edinburgh Evening News

Ms. Budge hopes to be in charge before the end of April but that
will depend on how much time it takes to legally transfer shares
from Lithuania, Edinburgh Evening News says.  She is expected to
run the club for anything up to five years before handing control
to the united fans group, Foundation of Hearts, Edinburgh Evening
News notes.

According to Edinburgh Evening News, for now, Hearts' immediate
fate appears to rest with the Lithuanian creditors of UBIG, who
are owed around GBP9 million by Hearts but will not see any money
from the CVA as they are an unsecured creditor.  The only secured
creditor is Ukio Bankas, who are owed GBP15 million by the club,
Edinburgh Evening News states.

                   About Hearts of Midlothian

Hearts of Midlothian Football Club, more commonly known as
Hearts, is a Scottish professional football club based in Gorgie,
in the west of Edinburgh.

Hearts went into administration after the Scottish FA opened
disciplinary proceedings against the club.  BDO was appointed
administrators on June 19.

* S&P Affirms Ratings on 5 Natural-Peril Catastrophe Bonds
Standard & Poor's Ratings Services affirmed its ratings on five
natural-peril catastrophe bonds issued by four different issuers.
The bonds had annual resets of the probability of attachment.  In
each case, the probability of attachment was reset to a
percentage consistent with the transaction documents and the
current rating. In addition, S&P reviewed the creditworthiness of
each ceding company and the ratings on the collateral that will
be used to redeem the principal on the redemption date, or the
rating on the repurchase counterparty as applicable.

Ratings Affirmed

Atlas Reinsurance VII Ltd.
US$60 mil, EUR130 mil fltg rate principal at-risk variable-rate
notes due
Class A    BB-(sf)
Class B    BB(sf)

Green Fields Capital Ltd.
EUR75 mil fltg rate principal-at-risk variable-rate notes series
2011-1 due
Class A    BB+(sf)

Kibou Ltd.
US$300 mil Principal-At-Risk variable rate notes series 2012-1
due 02/16/2015
Class A    BB+(sf)

Tramline Re Ltd.
US$150 mil var rate principle-at-risk variable-rate notes series
2011-1 due
Class A    B-(sf)

* Fitch Says UK Flood Defense Spending May Not Be Enough
Uncertainty about UK government spending on flood defenses means
the Flood Re scheme to pool flood risk may face higher-than-
expected claims in the future, Fitch Ratings says.  In the long
term this could push up buildings and contents insurance premiums
for all UK households and in the short term could expose insurers
to additional risk.

Under new funding arrangements, future central government capital
expenditure on flood defenses, which forms part of the joint
understanding on which Flood Re is based, will remain below the
2010-2011 peak in real terms until at least 2020-2021.  The level
of funds provided through local investment, designed to offset
some of the planned reduction, remains uncertain.  Central
government funds allocated for flood defense spending fell 6% in
FY12-FY15 compared with the previous four years, representing a
real-terms cut of around 20%.

A longer-term reduction in spending could increase the number of
properties in England at significant risk of flooding. A study by
the Committee on Climate Change estimated that spending would
need to increase by around GBP20 million a year on top of
inflation through 2035 just to keep the number of significant-
risk properties steady.  This could mean that Flood Re's funds
and reinsurance cover may prove inadequate to meet outgoings.  In
that situation, insurers would be required to make up the
difference in the near term, but would then pass on the cost to
households through an increase in the annual premiums.

The Association of British Insurers' latest claims estimate of
GBP1.1 billion from the 2013-2014 winter storms and floods is
manageable for the sector, but would have been much higher if
flooding had hit more highly populated areas.

The storms are likely to increase the sector's combined ratio by
around 3.4 percentage points. The negative impact on insurers'
earnings will therefore be limited and will probably be further
reduced by future price increases. However, Fitch expects
earnings in the non-life sector in general to remain under
pressure. The underwriting performance of personal motor business
is likely to rely increasingly on prior-year reserve releases,
while the contribution to earnings from investment income remains

Flood Re is a not-for-profit reinsurance scheme owned and managed
by the UK insurance industry that will help to provide affordable
flood insurance to households deemed to be at high flood risk.
The scheme will be part-funded by a levy on all UK personal
buildings and contents insurance policies, expected to be
GBP10.50 per year.  The scheme is expected to start operating in
2015 and last 20 to 25 years.


* EUROPE: Reaches Banking Union Deal
Alex Barker at The Financial Times reports that Europe agreed the
final piece of its banking union after marathon talks ended on
Thursday, with a deal on a common system for handling bank crises
that pushed Germany's red lines on cost sharing.

Once formally approved by the parliament, the legislation will
establish a single eurozone system to shut failing banks -- the
Single Resolution Mechanism -- and a EUR55 billion shared fund to
cover costs, paid for by banks, the FT says.

While the compromise falls well short of the parliament's opening
position, the MEPs secured terms to ensure the fund is mutualized
earlier and somewhat curbed the influence of finance ministers in
decisions to close a lender, the FT notes.

The main concessions made to the parliament is accelerating the
build-up of a common bank-paid fund from 10 to eight years and
front-loading its mutualization, so that a bigger proportion of
the fund is shared at an earlier stage, the FT discloses.  Under
the provisional deal, 40% of contributions are mutualized from
the first year and 60% from the second, the FT states.


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
publication in any form (including e-mail forwarding, electronic
re-mailing and photocopying) is strictly prohibited without prior
written permission of the publishers.

Information contained herein is obtained from sources believed to
be reliable, but is not guaranteed.

The TCR Europe subscription rate is US$775 per half-year,
delivered via e-mail.  Additional e-mail subscriptions for
members of the same firm for the term of the initial subscription
or balance thereof are US$25 each.  For subscription information,
contact Peter Chapman at 215-945-7000 or Nina Novak at

                 * * * End of Transmission * * *