/raid1/www/Hosts/bankrupt/TCREUR_Public/140409.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
E U R O P E
Wednesday, April 9, 2014, Vol. 15, No. 70
Headlines
A U S T R I A
UNICREDIT BANK: Moody's Affirms 'D+' Financial Strength Rating
C Z E C H R E P U B L I C
NEW WORLD: Needs Capital Injection to Avert Collapse
F R A N C E
CERBA EUROPEAN: Lab Purchases No Impact on Fitch's B+ Rating
CGG: Moody's Lowers Corp. Family Rating to 'Ba3'; Outlook Stable
CGG: S&P Lowers Corporate Credit Rating to 'B+'; Outlook Stable
LAFARGE SA: Moody's Places 'Ba1' CFR on Review for Upgrade
G E R M A N Y
KION GROUP: Moody's Raises Corporate Family Rating to 'Ba2'
G R E E C E
FREESEAS INC: Incurs US$48.7 Million Net Loss in 2013
I R E L A N D
MALLINCKRODT PLC: S&P Affirms 'BB-' CCR; Outlook Stable
I T A L Y
WIND ACQUISITION: S&P Assigns 'B' Rating to EUR3.75BB Sr. Notes
I R E L A N D
CELBRIDGE PLAYZONE: Placed into Examinership in Circuit Court
L U X E M B O U R G
APERAM SA: S&P Revises Outlook to Positive & Affirms 'B+' CCR
MALLINCKRODT INT'L: Moody's Affirms 'Ba3' Corp. Family Rating
WIND ACQUISITION: Fitch Rate EUR3.75MM Senior Notes 'B(EXP)'
N E T H E R L A N D S
HIGHLANDER EURO: Moody's Raises Rating on EUR15MM Notes to 'Ba1'
S P A I N
AYT CAIXA: Fitch Lowers Rating on Class C Tranche to 'CCCsf'
AYT KUTXA HIPOTECARIO II: Fitch Affirms CCC Rating on Cl. C Notes
FONCAIXA FTGENCAT: Moody's Lifts Rating on EUR7.2MM Notes to B1
U N I T E D K I N G D O M
ALBEMARLE & BOND: H&T, Burt Emerge as Potential Bidders
CO-OPERATIVE BANK: Delays Publication of Annual Report
LION/GLORIA HOLDCO: Moody's Assigns 'B3' CFR; Outlook Stable
LION/GLORIA HOLDCO: S&P Assigns 'B-' CCR; Outlook Stable
ODEON & UCI: S&P Revises Outlook to Negative & Affirms 'B-' CCR
RMAC 2005-NS3: S&P Raises Rating on Class B1 Notes to 'B'
ROWLANDS CLOTHING: Goes into Administration
SECURE ELECTRANS: Software Vendor Enters Administration
UK COAL: MPs, Unions Pressure Gov't to Rescue Coal Mines
*********
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A U S T R I A
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UNICREDIT BANK: Moody's Affirms 'D+' Financial Strength Rating
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Moody's Investors Service has confirmed the Aa1 ratings assigned
to the mortgage covered bonds and the Aaa ratings assigned to the
public-sector covered bonds issued by UniCredit Bank Austria AG
(UBA; deposits Baa2 stable, standalone bank financial strength
rating D+/baseline credit assessment ba1).
This rating action concludes the review of the bonds, which
Moody's initiated on March 24, 2014.
Ratings Rationale
Moody's confirmation of both covered bond ratings follows UBA's
decision to enter into agreements to maintain 32.0% over-
collateralization (OC) for its mortgage covered bonds and 26.5%
OC for its public-sector covered bonds in a form that Moody's
considers "committed". UBA has signed this agreement, which came
into effect on April 3, 2014. The OC comes in the form of a
contract for the benefit of a third party, the bondholders. UBA's
commitment to maintain OC in committed form will apply to the
affected covered bonds and all newly issued covered bonds under
both covered bond programs.
Under Moody's rating approach, only limited value is given to
collateral that is not considered "committed". Moody's considers
OC to be "committed" if the issuer's discretion to remove this is
sufficiently restricted.
The Timely Payment Indicator (TPI) remains "Probable" for UBA's
mortgage covered bonds and "High" for the public-sector covered
bonds.
Moody's reference point for determining the probability that UBA
will cease making payments under the covered bond program, the
covered bond (CB) anchor, is SUR +1 notch, given that UBA's debt
ratio is between 5% and 10%.
Given that the CB anchor is SUR +1 notch, and the TPI assigned to
the mortgage covered bonds is "Probable", Moody's TPI framework
constrains the ratings of these covered bonds at Aa1.
Key Rating Assumptions/Factors
Moody's determines covered bond ratings using a two-step process;
an expected loss analysis and a TPI framework analysis.
Expected Loss: Moody's uses its Covered Bond Model (COBOL) to
determine a rating based on the expected loss on the bond. COBOL
determines expected loss as (1) a function of the probability
that the issuer will cease making payments under the covered
bonds (a CB anchor event); and (2) the stressed losses on the
cover pool assets following issuer default.
The cover pool losses for each program are an estimate of the
losses Moody's currently models if a CB anchor event occurs.
Moody's splits cover pool losses between market risks and
collateral risks. Market risks measure losses stemming from
refinancing risks and risks related to interest-rate and currency
mismatches. These losses may also include certain legal risks.
Collateral risks measure losses resulting directly from cover
pool assets' credit quality. Moody's derives the collateral risk
from the collateral score.
Mortgage Covered Bonds
The cover pool losses are 30.2%, with market risk of 18.1% and
collateral risk of 12.1%. The collateral score is 18.1%. The
present value OC in this cover pool is 88.0%, of which UBA
provides 32.0% on a committed basis. The minimum OC level that is
consistent with the Aa1 rating target is 26.0% in present value
terms, of which UBA should provide 20.0% in a committed form.
These numbers show that Moody's is not fully relying on
uncommitted OC in its expected loss analysis for the Aa1 rating
of the mortgage covered bonds.
Public-Sector Covered Bonds
The cover pool losses are 21.0%, with market risk of 16.2% and
collateral risk of 4.8%. The collateral score is 7.1%. The
present value OC in this cover pool is 27.4%, of which UBA
provides 26.5% on a committed basis. The minimum OC level that is
consistent with the Aaa rating target is 23.5% in present value
terms, of which UBA should provide 23.5% in a committed form.
These numbers show that Moody's is not relying on uncommitted OC
in its expected loss analysis for the Aaa rating of the public-
sector covered bonds.
All numbers in this section derive from Moody's most recent
modelling, based on data as per 31 December 2013. For further
details on cover pool losses, collateral risk, market risk,
collateral score and TPI Leeway across all covered bond programs
rated by Moody's please refer to "Moody's EMEA Covered Bonds
Monitoring Overview", published quarterly.
Tpi Framework: Moody's assigns a TPI which indicates the
likelihood that the issuer will make timely payments to covered
bondholders in the event of an issuer default. The TPI framework
limits the covered bond rating to a certain number of notches
above the CB anchor.
Factors that would lead to an upgrade or downgrade of the
ratings:
The CB anchor is the main determinant of a covered bond program's
rating robustness. A change in the level of the CB anchor could
lead to an upgrade or downgrade of the covered bonds.
The TPI Leeway measures the number of notches by which Moody's
might lower the CB anchor before the rating agency downgrades the
covered bonds because of TPI framework constraints. Based on the
current TPIs of "Probable" for UBA's mortgage covered bonds and
"High" for its public-sector covered bonds, there is no TPI
Leeway for both programs. This implies that if Moody's downgrades
the issuer rating by one notch, the rating agency might also
downgrade the covered bonds because of a TPI cap, all other
variables being equal.
A multiple notch downgrade of the covered bonds might occur in
certain limited circumstances, such as (1) a sovereign downgrade
negatively affecting both the CB anchor and the TPI; (2) a
multiple-notch lowering of the CB anchor; or (3) a material
reduction of the value of the cover pool.
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C Z E C H R E P U B L I C
===========================
NEW WORLD: Needs Capital Injection to Avert Collapse
----------------------------------------------------
Jan Lopatka at Reuters reports that Czech trade minister
Jan Mladek said on Monday loss-making coal miner New World
Resources needed CZK3 billion (US$149.72 million) or more in new
capital or it would face bankruptcy.
According to Reuters, the company, which made a record fourth-
quarter loss due to a sharp fall in coal prices, has been working
on a capital restructuring since January.
Main shareholder BXR, which owns a 63.6% stake, said it is
willing to invest new equity if there is a "revised and
satisfactory" capital structure, Reuters relates. Analysts have
said a possible change in its capital structure could result in a
loss for bondholders, Reuters notes.
NWR's problems have turned the spotlight on Czech investor
Zdenek Bakala, a major shareholder in BXR, Reuters discloses.
"So if Mr. Bakala does not put 3 billion crowns there, it will go
into bankruptcy," Mr. Mladek, as cited by Reuters, said on Czech
Television on Monday. Elsewhere in the interview the minister
estimated the amount needed at CZK3-CZK5 billion crowns and said
this was required from the owners (BXR) by the autumn of this
year.
He said it was a matter for private creditors and not the
government to take any steps, but the government was responsible
for the situation of NWR's workers, Reuters relays.
NWR reiterated on Monday BXR was prepared to commit new equity if
a satisfactory capital restructuring is achieved, Reuters
recounts.
New World Resources Plc is the largest Czech producer of coking
coal.
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F R A N C E
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CERBA EUROPEAN: Lab Purchases No Impact on Fitch's B+ Rating
------------------------------------------------------------
Fitch Ratings says that France-based clinical pathology
laboratory group Cerba European Lab SAS's (Cerba; B+/Stable)
acquisition of a network of 40 laboratories including six
technical platforms in the South East of France for an estimated
enterprise value of less than EUR90 million has no impact on
Cerba's rating.
"While this bolt-on acquisition may slightly dilute Cerba's
EBITDA margin initially, we consider that Cerba will manage to
achieve cost savings from the enlarged group in the near term,
especially on reagent purchasing terms and by transferring some
of the target's operations onto Cerba's existing platform in the
Marseille area. We also deem integration risk to be low,
supported by Cerba's sound track record at past bolt-on
acquisitions," Fitch said.
Cerba plans to fund up to the entire amount of the acquisition
with additional senior secured debt. If successful, the
acquisition would, at worst, lead to a marginal increase in
financial leverage in 2014, after adjusting for expected cost
savings. "However, on a pro forma basis, we forecast the group's
funds from operations (FFO) adjusted gross leverage to remain
below 6.5x and the FFO fixed charge cover above 2.0x by 2015-
2016, provided that Cerba maintains a disciplined approach toward
future acquisitions. These credit metrics are consistent with a
'B+' IDR within the healthcare sector and are supported by
Cerba's resilient operating and financial performance, reflected
in steady EBITDA and FFO growth," Fitch said.
"We believe that the acquisition fits into Cerba's consolidation
strategy in France. It will also strengthen Cerba's market
position in the South East of the country and increase the
group's scale as the target generated about EUR45 million of
sales and EBITDA should reach about EUR13 million after expected
synergies," Fitch said.
CGG: Moody's Lowers Corp. Family Rating to 'Ba3'; Outlook Stable
----------------------------------------------------------------
Moody's Investors Service downgraded CGG Holdings' corporate
family rating (CFR) to Ba3 from Ba2 and probability of default
rating (PDR) to Ba3-PD from Ba2-PD. Moody's has also affirmed the
Baa3 ratings on the US$325 million senior secured French
revolving credit facility and the US$165 million senior secured
US revolving credit facility (RCF) issued by CGG and CGG Holding
(U.S.) Inc respectively, and the Ba3 rating on their senior notes
due 2016, 2017 and 2021. The outlook was changed to stable from
negative.
Ratings Rationale
The rating action follows CGG's weaker operating performance in
2013 compared with Moody's expectations. Total revenue in 2013
went up 10% compared to prior year but excluding the impact from
the Fugro Geoscience acquisition, revenue went down 3% due to
softer market conditions in the second half of the year.
Similarly, total reported EBIT margin before exceptional items
decreased to 11% from 12%.
Because of the lower than expected level of profitability,
Moody's-adjusted Debt/EBITDA excluding multi-client amortization
stands at 4.6x at year-end 2013 compared to 4.5x a year ago. This
leverage has been consistently above the level of our trigger for
a downward rating. The company recently announced a new 2014-2016
strategic plan which, among other things, includes a rebalancing
of the portfolio towards less cyclical and more profitable
activities. While Moody's sees the new strategic orientations as
sound, Moody's also believes that it entails significant
execution risks and expects that de-leveraging will continue to
be hampered by capital expenditures constraints at major
international oil companies that are likely to affect upstream
investments, notably exploration seismic.
In line with Moody's prior statements, the downgrade of the CFR
did not trigger a downgrade of the instrument ratings as the weak
positioning of the previous CFR at Ba2 was already factored in
those ratings.
More positively, the ratings also reflect (i) the group's
position as leader in seismic equipment (through Sercel) and
among the two largest players in marine seismic services
worldwide following the acquisition of Fugro's geoscience
division; (ii) its geographic diversification; and (iii) its good
liquidity position.
The stable outlook reflects Moody's expectations that CGG will be
able to stabilize its operating performance and maintain its
liquidity profile over the next 12 to 18 months, and also takes
account of the company's financial policy to focus on
deleveraging. Additionally, Moody's also continues to have a
positive view on the medium-term fundamentals for the seismic
industry as international oil companies will eventually have to
resume exploration activity into deeper waters to offset the
natural depletion of their producing oil fields.
What Could Change The Rating Up
Positive pressure could arise in the event of material
improvements in profitability translating into leverage falling
towards 3x on a sustained basis. Any potential upgrade would also
include an assessment of market conditions and the company's
success in achieving its portfolio rebalancing.
What Could Change The Rating Down
A downgrade of the CFR could occur in the event of further
deterioration in operating performance, resulting in leverage
sustainably above 4.5x and/or weakening liquidity position.
Moody's could also consider downgrading the ratings in event of
any material acquisitions or change in financial policy.
CGG ranks among the top three players in the seismic industry. It
is listed on both Euronext Paris and the New York Stock Exchange,
with a market capitalization of EUR2.1 billion as of April 7,
2014.
CGG: S&P Lowers Corporate Credit Rating to 'B+'; Outlook Stable
---------------------------------------------------------------
Standard & Poor's Ratings Services said that it had lowered its
long-term corporate credit rating on CGG -- France-based provider
of oil and gas seismic data acquisition services -- to 'B+' from
'BB-'. The outlook is stable.
At the same time, S&P lowered its issue ratings on CGG's
unsecured notes to 'B+' from 'BB-'. The recovery rating on this
debt is unchanged at '4', reflecting S&P's expectation of average
(30%-50%) recovery for noteholders in the event of a default.
S&P also lowered the issue ratings on CGG's senior secured credit
facilities to 'BB-' from 'BB'. The recovery rating on this debt
is unchanged at '2', reflecting S&P's expectation of substantial
(70%-90%) recovery in a default scenario.
The rating actions reflect S&P's anticipation that CGG's credit
metrics will remain weak over the next few years. S&P forecasts
a Standard & Poor's-adjusted ratio of funds from operations (FFO)
to debt of 10%-15% and debt to EBITDA of about 5x in 2014, which
are in line with the previous year's performance. The company's
recently announced strategic three-year plan indicates that it
will increase its focus on more profitable vessels. Based on
this, S&P projects that FFO to debt should improve to about 20%
and that debt to EBITDA will likely reduce to close to 3x,
assuming the EBITDA margin improves to 25%-30% from the current
20%. Nevertheless, S&P considers that, on average, the credit
metrics are still not commensurate with a 'BB-' rating.
The ratings on CGG reflect S&P's assessment of the group's
business risk profile as "weak" and its financial risk profile as
"aggressive."
S&P's assessment of business risk reflects the intensely
competitive nature of the seismic industry, which S&P views as
highly cyclical, notably in the capital-intensive offshore marine
segment. This results in highly volatile profit generation. Key
business strengths include CGG's leading global position and
diversity from its land, marine, and imaging seismic services,
and seismic equipment manufacturing. S&P considers that market
conditions will remain challenging in 2014, particularly in the
land-acquisition segment, and that decisions on new contracts
might be delayed, given the uncertainty of demand from key
clients amid potentially volatile oil prices.
The company has started implementing its three-year strategic
plan, aimed at reducing the number of vessels utilized to 13 from
20, while using the most profitable assets to push the EBIT
margin upward. If the plan succeeds, this could strengthen CGG's
credit profile. However, S&P also considers the associated
execution risks because of the plan's relatively long time frame
and possible changes in market conditions.
S&P maintains its assessment of the financial risk profile as
aggressive because it believes that CGG is at the peak of its
investment cycle for 2014. Although S&P foresees the company's
credit metrics improving after 2014, this will come quite late in
our rating horizon of 2014-2016.
S&P anticipates that CGG's reported debt will remain high in 2014
at about US$2.7 billion. S&P's adjustments would add about $0.9
billion to this figure, related to operating leases, pensions,
and unamortized borrowing costs. S&P forecasts that CGG's annual
investments will increase to about US$900 million in 2014,
including multi-client capital expenditure (capex) of between
US$500 million and US$550 million mainly related to growth
opportunities in key regions such as the Gulf of Mexico and
Middle East. In 2015 and 2016, S&P assumes that reported capex
will reduce to between US$700 million and US$750 million. This
leads S&P to assume that reported free operating cash flow (FOCF)
will be negative in 2014, lower than US$100 million in 2015, and
below US$200 million in 2016. On an adjusted basis, S&P assumes
that FOCF will be modestly positive, that is, less than US$100
million in 2014 and more than US$200 million thereafter. S&P
anticipates that CGG will use all of its positive FOCF to reduce
its high debt.
The stable outlook reflects S&P's view that CGG's credit metrics
will be relatively stable in 2014 amid continued, uncertain
market conditions in the land-acquisition segment. From 2015,
S&P anticipates FFO to debt increasing on the back of improving
EBITDA margins to about 25%, assuming that CGG's strategic plan
achieves its goal. However, S&P forecasts this ratio to reach
only about 20% in 2016.
S&P could raise the rating by one notch if CGG's credit metrics
strengthen, such that FFO to debt is sustainably above 20%, and
if liquidity remains at least adequate.
S&P might take a negative rating action if FFO to debt
deteriorated to less than 12% on average, which could be
triggered by weakening demand, major operational issues, or a
slower increase of the EBITDA margin than S&P anticipates. An
upsurge in capex leading to persistent negative FOCF or S&P's
perception of less prudent financial management could also put
pressure on the ratings.
LAFARGE SA: Moody's Places 'Ba1' CFR on Review for Upgrade
----------------------------------------------------------
Moody's Investors Service, has placed on review for upgrade the
Ba1 corporate family rating (CFR), the Ba1-PD probability of
default rating (PDR) for Lafarge SA (Lafarge) and all Ba1 debt
ratings of Lafarge and its rated and guaranteed subsidiary, as
well as the (P)Ba1 senior unsecured and (P)Ba2 subordinated
rating of its EMTN program, following the announced merger
proposal with Holcim (Baa2 negative).
Ratings Rationale
"The review was triggered by Lafarge's announcement of its merger
proposal with Holcim which has a stronger balance sheet and
credit rating than Lafarge and would lead to an enhancement of
Lafarge's credit profile", says Falk Frey, Senior Vice President
and lead analyst at Moody's for Lafarge. "In our view the plan,
if executed successfully, is credit positive for Lafarge. Whereas
we estimate Lafarge's leverage calculated as debt/EBITDA to be at
5.4x in 2013, Holcim's adjusted debt/EBITDA was 3.1x in 2013",
Mr. Frey added.
The review will mainly but not exclusively focus on the timely
and successful execution of the merger especially with regards to
the asset disposals planned and the valuation achieved as well as
the realisation and timeline of the cost synergies targeted.
Moody's expects to close the review shortly after the closure of
the merger, which is expected for Q1 2015. If the transaction is
successful, which Moody's does not expect to happen before Q1
2015, the review could lead to an upgrade of Lafarge's long-term
ratings to the same level as that of Holcim.
Liquidity Profile
Moody's considers Lafarge's liquidity profile to be good for the
next 12 months, largely supported by the group's high and stable
balances of cash and marketable securities (of EUR3.536 billion
per end of September 2013), as well as its unused and committed
EUR1.2 billion syndicated long-term credit line, maturing in
July 2015. In addition, Lafarge has approximately EUR2.2 billion
in unused bilateral and committed credit lines. Moody's takes
comfort from the long average maturity of these bilateral lines,
which are well spread over 2014 to 2018, and from the absence of
a repeating MAC clause and specific financial covenants. Moody's
believes that Lafarge's cash sources together with its funds from
operations are more than sufficient to cover cash outflows such
as debt repayments, capex, working capital changes and dividends
during the next 12 months.
What Could Change The Ratings Down/Up
Lafarge's ratings could be upgraded once the merger with Holcim
will have been concluded successfully, and, if performance of
both entities will improve in 2014 compared to 2013 performance.
Negative rating pressure would build if the announced merger
could not conclude, and, if at the same time Lafarge's standalone
metrics, such as RCF/net debt will not have improved to around
15% in 2014.
Principal Methodologies
The principal methodology used in these ratings was the Global
Building Materials Industry published in July 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.
Headquartered in Paris, France, Lafarge is one of the leading
building materials suppliers globally, and one of the three
largest cement producers worldwide with annual production of 137
million tons in 2013. Lafarge operates in 62 countries and
generated sales of EUR15.2 billion for the fiscal year ended
December 31, 2013.
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G E R M A N Y
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KION GROUP: Moody's Raises Corporate Family Rating to 'Ba2'
-----------------------------------------------------------
Moody's Investor Services has upgraded the corporate family
rating (CFR) of KION Group AG (KION) to Ba2 from Ba3 and its
probability of default rating (PDR) to Ba2-PD from B1-PD.
Concurrently, Moody's has upgraded the ratings of the debt
instruments issued by KION Finance S.A. to Ba2 from Ba3. The
outlook on all ratings remains stable.
Ratings Rationale
"The rating action primarily reflects our expectation that KION
is willing and able to continue deleveraging its capital
structure further, both through continued EBITDA improvement and
the reduction of debt on balance sheet with free cash flows
generated" says Martin Fujerik, Moody's lead analyst for KION. As
of December 2013, KION's net leverage stood at 1.4x, as defined
and reported by KION, which translates into Moody's-adjusted
gross debt/EBITDA of 3.4x, which is in line with the triggers set
for an upgrade to Ba2 from Ba3.
Although the track record of financial discipline following the
IPO in June 2013 still needs to be established, Moody's believes
that KION will maintain fairly conservative financial policies
focused on further deleveraging. Moody's understands that KION
intends to further improve its net leverage towards below 1x in
the intermediate term. Dividend payouts in 2014 will be moderate
at 25% of 2013 net income, but Moody's has incorporated the
expectation that KION may progressively increase this ratio
towards the higher end of the indicated dividend payout range of
25%-35%, assuming no significant deterioration in KION's markets.
Moody's also expects that KION will continue with opportunistic
small-to-medium sized acquisitions, broadly in line with previous
years.
Although 2013 was a challenging year for KION, with headwinds in
Western European markets, where KION is particularly strong, the
group managed to further improve its profitability. Moody's-
adjusted EBITA margin improved to 9.5% in 2013, from 8.8% in
2012, despite a 1.4% revenue decline. Moody's believes that KION
will be able to further expand its EBITA margin to low double
digits in percentage terms through fully realizing benefits from
streamlining its operations and footprint, as well as through
unlocking synergies from its cross-brand and cross-regional
modular and platform strategy. This, together with lower
financing costs driven by repayment and refinancing of the
expensive debt, is likely to translate into improved free cash
flow generation. Moody's also believes that the resilience of the
business has improved through the operational restructuring
focused on footprint consolidation and relocation of production
and R&D capabilities to lower-cost countries.
The main constraints for the Ba2 ratings are KION's (1) focus on
material handling equipment, which is very sensitive to economic
cycles and which in turn may lead to above average margin
volatility, notwithstanding the increasingly flexible cost
structure; (2) fairly high share of revenues generated in Europe,
particularly Western Europe; (3) mixed history with regard to
free cash flow (FCF) generation in the past five years, with a
return to sustained FCF since 2011; and (4) still high adjusted
leverage for the rating category and limited track record of
conservative financial policies post-IPO.
The Ba2 ratings are supported by (1) KION's number two market
position in the material handling industry worldwide, with clear
market leadership in Europe and selected regions in Asia and
Latin America, underpinned by technology leadership; (2) large
installed base of around 1.2 million trucks, with wide product
and services offering through multiple brands, supported by a
dense network of more than 1,200 service centers worldwide, which
creates an important barrier to entry; (3) large share of service
revenues (over 40%), which are more profitable and less volatile
than new truck business; (4) strategy to increase its footprint
in growing emerging markets; and (5) high customer and end-market
diversification.
Rationale For The Stable Outlook
The stable outlook reflects Moody's expectation that over the
next 12-18 months, KION will be able deleverage further towards
3.0x Moody's-adjusted debt/EBITDA, with further expansion of
margins and free cash flow generation.
What Could Move The Ratings Up/Down
Upward pressure on the ratings would develop if KION further
builds a track record of resilient operational performance and
conservative financial policy. This would be evidenced by KION
being able to further (1) expand its margins above 10% (Moody's-
adjusted EBITA margin of 9.5% in 2013) assuming a normal economic
environment; (2) decrease leverage sustainably below 3.0x
(Moody's-adjusted debt/EBITDA for 2013 of 3.4x); and (3) improve
its free cash flow generation, while maintaining a strong
liquidity profile.
Downward pressure might develop on the ratings if KION were to
employ more aggressive financial policies, as exemplified by
debt/EBITDA over 3.75x, and not only temporarily. Moody's would
also consider a downgrade, if KION's margins were to decline
below 7%, assuming a normal economic environment, or if free cash
flow turned negative on a sustainable basis.
KION, headquartered in Wiesbaden, Germany, produces forklift
trucks and material handling equipment. The group holds the
market-leading position in Europe and ranks second on a global
basis. KION, which was spun off from Linde AG in 2006, has 14
production sites across the world and follows a multi-brand
strategy (with brands such as Linde, Still, OM-Still, Fenwick,
Baoli and Voltas). In 2013, KION generated revenues of
EUR4.5 billion with a workforce of around 22,000 employees.
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G R E E C E
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FREESEAS INC: Incurs US$48.7 Million Net Loss in 2013
-----------------------------------------------------
FreeSeas Inc. filed with the U.S. Securities and Exchange
Commission its annual report on Form 20-F disclosing a net loss
of US$48.70 million on US$6.07 million of operating revenues for
the year ended Dec. 31, 2013, as compared with a net loss of
US$30.88 million on US$14.26 million of operating revenues in
2012. The Company incurred a net loss of US$88.19 million in
2011.
As of Dec. 31, 2013, the Company had US$87.63 million in total
assets, US$74.83 million in total liabilities and US$12.79
million in total shareholders' equity.
RBSM LLP, in New York, issued a "going concern" qualification on
the consolidated financial statements for the year ended Dec. 31,
2013. The independent auditors noted that the Company has
incurred recurring operating losses and has a working capital
deficiency. In addition, the Company has failed to meet
scheduled payment obligations under its loan facilities and has
not complied with certain covenants included in its loan
agreements. Furthermore, the vast majority of the Company's
assets are considered to be highly illiquid and if the Company
were forced to liquidate, the amount realized by the Company
could be substantially lower that the carrying value of these
assets. These conditions among others raise substantial doubt
about the Company's ability to continue as a going concern.
A copy of the Form 20-F is available for free at:
http://is.gd/Z1QwzG
About FreeSeas Inc.
Headquartered in Athens, Greece, FreeSeas Inc., formerly known as
Adventure Holdings S.A., was incorporated in the Marshall Islands
on April 23, 2004, for the purpose of being the ultimate holding
company of ship-owning companies. The management of FreeSeas'
vessels is performed by Free Bulkers S.A., a Marshall Islands
company that is controlled by Ion G. Varouxakis, the Company's
Chairman, President and CEO, and one of the Company's principal
shareholders.
The Company's fleet consists of six Handysize vessels and one
Handymax vessel that carry a variety of drybulk commodities,
including iron ore, grain and coal, which are referred to as
"major bulks," as well as bauxite, phosphate, fertilizers, steel
products, cement, sugar and rice, or "minor bulks." As of
Oct. 12, 2012, the aggregate dwt of the Company's operational
fleet is approximately 197,200 dwt and the average age of its
fleet is 15 years.
=============
I R E L A N D
=============
MALLINCKRODT PLC: S&P Affirms 'BB-' CCR; Outlook Stable
-------------------------------------------------------
Standard & Poor's Ratings Services affirmed its 'BB-' corporate
credit rating on Mallinckrodt plc. The outlook is stable.
At the same time, S&P affirmed the 'BB+' issue-level rating
assigned to the company's senior secured debt, and 'B' rating
assigned to the company's senior unsecured debt. The respective
recovery ratings of '1' and '6' remain unchanged.
"The acquisition of Questcor Pharmaceuticals expands
Mallinckrodt's pharmaceutical portfolio," said Standard & Poor's
credit analyst Michael Berrian. "Although we do not believe it
adds sufficient diversity to elevate the company's business risk
profile, the acquisition will reduce the company's dependence on
its imaging business. And given the acquisition financing mix of
stock, cash, and debt, we expect debt leverage to decline below
5x more rapidly than previously expected. We also expect that
the proposed financing will not disrupt our expectations for
current recovery prospects."
Standard & Poor's 'BB-' rating on Mallinckrodt derives from its
anchor of 'bb-' based on its "fair" business risk and
"aggressive" financial risk profile assessments for the company.
Mallinckrodt's fair business risk profile incorporates the
product and revenue diversity afforded by two businesses, imaging
and pharmaceuticals, which is offset by lower-than-average
profitability relative to peers. Moreover, performance has fallen
short of S&P's expectations given supply constraints experienced
by the imaging segment and a somewhat thin pipeline. The
addition of recently acquired Cadence Pharmaceutical's single
product, Ofirmev, and Questcor's Acthar to the pharmaceutical
business are not significant enough to alter S&P's view of the
company's business risk at this time, given the rapid pace of
acquisitions and integration risk. Generic pricing pressures and
underperformance in global medical imaging additionally support
our assessment of business risk as fair.
Pro forma debt leverage, which is about 5x for the Cadence and
Questcor acquisitions, should decline further by fiscal year-end
2014 as a result of further sales growth and modest debt
reductions during the second half of the year. However, S&P
anticipates there will be integration expenses related to these
acquisitions, which it has not yet incorporated into its base
case. Given the recent pace of acquisitions, S&P would not view
these charges as one-time.
=========
I T A L Y
=========
WIND ACQUISITION: S&P Assigns 'B' Rating to EUR3.75BB Sr. Notes
---------------------------------------------------------------
Standard & Poor's Ratings Services said that it assigned its 'B'
issue rating to the proposed EUR3.75 billion-equivalent senior
notes due 2021 to be issued as euro- and U.S. dollar-denominated
notes by Wind Acquisition Finance S.A. Wind Acquisition Finance
is a wholly owned subsidiary of Italian-based telecoms operator
WIND Telecomunicazioni SpA (Wind). The 'B' issue rating with a
recovery of '6' reflects the subordination of the proposed notes
to Wind's existing senior secured debt.
The issue and recovery ratings on the existing senior secured
debt issued by Wind and Wind Acquisition Finance remain unchanged
at 'BB' and '2', respectively.
The company plans to use the proceeds of the proposed notes,
combined with cash on its balance sheet and an equity injection
from VimpelCom Ltd. to redeem the existing senior notes and the
payment-in-kind notes.
S&P expects that the existing senior notes will be fully repaid
after the transaction closes. S&P expects to withdraw the
ratings on those notes when they are repaid. Any senior notes
that are not refinanced would have recovery prospects in line
with the proposed senior notes and we will revise the recovery
rating to '6' from '5'.
RECOVERY ANALYSIS
The proposed notes benefit from similar guarantees to the
existing secured notes and bank facilities, but on a subordinated
basis. The proposed notes' indenture includes typical high-yield
terms, including incurrence covenants. However, it permits a
one-time, optional redemption of up to EUR300 million of the
proposed notes using proceeds from the sale of signal tower
assets. The documentation also contains provisions so that the
change of control clause would not be triggered if the
consolidated leverage ratio is below 4.25x.
S&P values the business as a going concern, reflecting its view
of Wind's good market position in Italy, established network
assets, and valuable customer base.
S&P's simulated default scenario assumes that a default is
triggered by operating underperformance as a result of lower
revenue growth and margin erosion in the mobile segment, along
with a significant capital investment. S&P assumes that EBITDA
would have declined to EUR1.45 billion by the time of default in
2018.
Assuming a valuation multiple of 5.0x leads to a stressed
enterprise value of about EUR7.3 billion. From this, S&P deducts
EUR0.5 billion of enforcement costs, leaving a net enterprise
value of EUR6.8 billion. Assuming EUR7.0 billion of senior
secured debt outstanding at default (including principal plus six
months' of prepetition interest), S&P expects secured lenders to
benefit from very high recovery prospects. However, S&P caps the
recovery rating on the secured debt at '2' to reflect the
company's exposure to the Italian insolvency regime, which S&P
views as fairly unfavorable to creditors. After repayment of the
secured debt, S&P assumes that the senior unsecured debt -- which
it assumes would total EUR3.8 billion -- would have negligible
(0%-10%) recovery prospects, leading to a recovery rating of '6'.
=============
I R E L A N D
=============
CELBRIDGE PLAYZONE: Placed into Examinership in Circuit Court
-------------------------------------------------------------
Business and Leadership reports that Celbridge Playzone has
become the first company to be put in examinership through the
Circuit Court, following the appointment by Judge Gerard Griffin
in Naas Circuit Court of Joseph Walsh --
joseph.walsh@hughesblake.ie -- of Hughes Blake Chartered
Accountants as examiner.
Legislation permitting Circuit Court examinership for companies
with up to EUR8.8 million turnover or fewer than 50 employees was
introduced on Christmas Eve in 2013 in order to make the process
more accessible and affordable for small and medium-sized firms,
Business and Leadership relates.
Celbridge Playzone operates a children's play center in Celbridge
and has 33 employees.
===================
L U X E M B O U R G
===================
APERAM SA: S&P Revises Outlook to Positive & Affirms 'B+' CCR
-------------------------------------------------------------
Standard & Poor's Ratings Services said it revised its outlook on
Luxembourg-based stainless steel producer Aperam S.A. to positive
from negative.
At the same time S&P affirmed its 'B+' long-term corporate credit
rating on Aperam and its 'B+' issue ratings on its US$200 million
senior unsecured convertible notes maturing in 2020, US$250
million senior unsecured notes maturing in 2016, and US$250
million senior unsecured bonds maturing in 2018. The recovery
rating on each of these debt instruments is '4'.
The outlook revision factors in the signs of recovery that S&P is
starting to see in stainless steel markets, especially in Europe,
which started to show in Aperam's fourth quarter 2013 results.
Aperam delivered stronger-than-expected EBITDA of US$292 million
in 2013, thanks to a successful ongoing cost reduction program
despite industry conditions remaining difficult last year. This
compares with $214 million in reported EBITDA in a very difficult
2012.
S&P's forecast for EBITDA rising to US$350 million-US$370 million
in 2014 assumes continuing benefits from the company's cost
savings program. Management is targeting a further US$75 million
in savings in 2014 after about US$100 million in 2013.
Although market fundamentals in the stainless steel industry are
volatile and offer limited visibility, S&P also believes
improving prospects for the industry reflect rising nickel
prices. A higher nickel price tends to stimulate demand for
stainless steel, while customers are more likely to destock in a
falling nickel price environment, as has happened in previous
years.
Improvements in the supply and demand balance for stainless steel
in Europe are also supporting Aperam, as significant excess
capacity has been shut down over the last few years and more
closures have been announced for 2014-2015, spearheaded by market
leader Outokumpu Oyj. According to Aperam's management, plant
capacity reductions amount to about 20% of European capacities,
including Aperam's closure of its Isbergues and L'Ardoise plants.
S&P thinks this should lead to a structural improvement for the
European industry, which should continue to support some positive
momentum on volumes and selling prices for Aperam in 2014. That
said, competition from Asian imports is likely to keep a lid on
substantial margin improvement.
Aperam's stainless steel activities in Brazil are also positive
for the rating, in S&P's view, and should deliver a significant
50% of its stainless and electrical steel segment's EBITDA in
2014. S&P sees growth prospects in currently low stainless steel
per capita consumption supporting long-term volume demand and
selling prices, as well as high utilization rates. This also
reflects the benefits from import duties on Asian low cost
products in Brazil -- anti-dumping measures on certain imports
have been extended for five years from 2013.
The positive outlook reflects the possibility of a one-notch
upgrade over the next 12 months if S&P sees further evidence of
improvements in Aperam's profits and credit metrics in 2014.
Aperam should continue, in S&P's view, to benefit from
restructuring measures it has already taken and from the
structurally improving market environment.
If S&P's base case were to materialize, it would see adjusted FFO
to debt improving toward 20% from the current 12%-15%. This
would also imply a continued moderate financial policy regarding
the use of excess cash balances.
Rating downside is now remote at the 'B+' level. S&P might,
however, revise the outlook to stable if market fundamentals were
to deteriorate again without prospects of recovery. Pressure
would also arise from a more aggressive financial policy, if for
instance Aperam embarked on a large debt-funded acquisition.
MALLINCKRODT INT'L: Moody's Affirms 'Ba3' Corp. Family Rating
-------------------------------------------------------------
Moody's Investors Service affirmed the ratings of Mallinckrodt
International Finance S.A., including the Ba3 Corporate Family
Rating. This rating action follows the announcement that parent
company Mallinckrodt plc will acquire Questcor Pharmaceuticals,
Inc. (unrated) for approximately US$5.6 billion in cash and
stock.
Ratings of Mallinckrodt International Finance S.A. affirmed:
Ba3 Corporate Family Rating
Ba3-PD Probability of Default Rating
Ba2 senior secured term loan and revolver (LGD3, 31%)
B2 senior unsecured notes (LGD5, 85%)
SGL-1 Speculative Grade Liquidity Rating
Moody's rationale for affirming the ratings includes the mildly
positive impact on Mallinckrodt's financial leverage following
the transaction based on significant use of equity funding. Pro
forma debt/EBITDA prior to the acquisition was approximately 5.0
times, and this should decline to below 4.5 times given
Questcor's high EBITDA, which exceeded US$400 million in 2013.
The anticipated debt portion of the financing includes a
combination of secured and unsecured debt. Moody's has not yet
assigned ratings to the new debt instruments.
Benefits of the transaction include the addition of a significant
new growth driver -- the injectable specialty product H.P. Acthar
Gel ("Acthar"). The transaction will reduce Mallinckrodt's
reliance on its high-risk nuclear products business. However,
Mallinckrodt's financial profile will have significant
concentration in Acthar, i.e. over 20% of revenue and
approximately one-half of EBITDA. While near term growth in
Acthar should remain strong, the product is not currently
protected by any patents, and it is difficult to predict the
timing or impact of any generic risks. In addition, as a low-
volume, high-cost product, Acthar's revenues could be sensitive
to changes in reimbursement policies of private or government
payors. Other risks include reliance on a sole supplier for
finished product, and an unresolved Department of Justice
investigation into Questcor's promotional practices for Acthar.
The Speculative Grade Liquidity Rating is affirmed at SGL-1, but
Moody's will evaluate the impact of the financing on
Mallinckrodt's currently strong liquidity profile.
Ratings Rationale
Mallinckrodt's Ba3 Corporate Family Rating reflects good balance
between two business segments (Specialty Pharmaceuticals and
Global Medical Imaging) but is constrained by its overall modest
scale and relatively high debt/EBITDA. Mallinckrodt will generate
good free cash flow, creating the potential for rapid
deleveraging. Somewhat overshadowing the deleveraging potential,
however, is the potential for both the separation of the Global
Medical Imaging business lines as well as for acquisitions in a
rapidly consolidating specialty pharmaceutical industry.
The rating outlook is stable, reflecting Moody's expectation that
branded near-term growth in Acthar and Ofirmev will facilitate a
decline in debt/EBITDA to below 4.0 times. Sustaining good
organic growth, a successful launch of Xartemis XR, and
maintenance of debt/EBITDA below 3.0 times could result in a
ratings upgrade. Conversely, debt/EBITDA sustained above 4.0
times could result in a ratings downgrade. This scenario could
arise if Mallinckrodt makes acquisitions before deleveraging, if
it faces unexpected generic competition for key products,
regulatory compliance or reimbursement issues, product
withdrawals, or supply disruptions.
Luxembourg-based Mallinckrodt International Finance SA is a
subsidiary of Dublin, Ireland-based Mallinckrodt plc
(collectively "Mallinckrodt"). Mallinckrodt is a specialty
pharmaceutical and medical imaging company. Revenues for the 12
months ended December 27, 2013 were approximately US$2.2 billion.
WIND ACQUISITION: Fitch Rate EUR3.75MM Senior Notes 'B(EXP)'
------------------------------------------------------------
Fitch Ratings has assigned Wind Acquisition Finance S.A.'s
proposed EUR3,750 million (equivalent) senior notes due 2021 a
'B(EXP)' expected rating. The notes will be guaranteed by Wind
Telecomunicazioni S.p.A. Fitch has also affirmed Wind's Long-
term Issuer Default Rating (IDR) at 'BB-' with a Negative
Outlook.
The proposed notes will effectively be a senior unsecured
obligation of Wind subordinated to approximately EUR6 billion of
senior secured debt. The 'B(EXP)' expected rating reflects
Fitch's expectation of fairly low recoveries for unsecured
creditors. The issue proceeds will be applied to redemption of
the existing unsecured notes and payment of over EUR800 million
to Wind's immediate parent, Wind Acquisition Holdings Finance
S.A., which will apply the proceeds plus a EUR500 million cash
injection provided by Vimplecom Ltd, towards the repayment of its
existing PIK notes. As a result, the amount of unsecured debt at
Wind's restricted group level is likely to increase, reducing
recoveries for unsecured creditors. The PIK instrument is
expected to be redeemed post refinancing.
On a standalone basis, WIND's rating corresponds to 'B+' with a
Negative Outlook. This is uplifted by one notch for potential
parental support. The Negative Outlook is driven by continuing
operating pressures and shrinking EBITDA leading to higher
leverage on the back of weak free cash flow generation.
WIND is the number-three mobile operator in Italy with a
subscriber market share of approximately 24% and the second-
largest alternative fixed-line/broadband provider with a
subscriber market share of approximately 16% at end-2013. Its
leverage is high at 5.3x net debt (including PIK debt)/EBITDA at
end-2013.
Key Rating Drivers
Difficult Operating Environment
The Negative Outlook reflects continuing revenue and EBITDA
erosion, and the likelihood that this negative trend will
persist. The Italian mobile market has experienced significant
re-pricing, with Wind being at the forefront of tariff
competition. The company has managed to erode the market shares
of its peers but at the expense of average revenue per user
(ARPU) across the industry. Mobile termination rate (MTR) cuts
were also a major negative factor behind ARPU pressures, in
addition to tariff under-cutting. Austerity in Italy further
weighs on the telecoms market. 2014 is likely to be less negative
following the end of MTR cuts in July 2013.
Stable Fixed-Line
Wind significantly improved profitability in its fixed-line
segment, which we believe should be sustainable with continuing
focus on more profitable direct customers. Fibre roll-out in
Italy is likely to be slow, protecting Wind's position as the
largest alternative fixed-line operator in Italy.
High Leverage
Wind's leverage is high at 5.3x net debt (including PIK
debt)/EBITDA at end-2013 (Fitch defined). "We estimate that
leverage may further increase by end-2014 due to continuing
EBITDA and cash flow pressures but also significant one-off
refinancing costs, which are likely to push 2014 free cash flow
to negative territory," Fitch said.
Shareholder Support Positive but Limited
Wind's ratings benefit from potential support from its sole
ultimate shareholder, Vimpelcom, whose credit profile remains
significantly stronger than Wind's. However, a EUR500 million
cash contribution from Vimplecom has been insufficient to
materially reduce Wind's leverage given its limited size relative
to Wind's total amount of debt of approximately EUR10 billion.
In addition, Vimpelcom has not committed itself to additional
support. We believe that a further rise in Wind's leverage may
diminish Vimpelcom's propensity to provide support for Wind.
No Short-Term Refinancing Risks
Wind does not face any material refinancing risks before 2016
when the bulk of its debt comes due. Post-refinancing, the
maturity profile is expected to improve.
Rating Sensitivities
Negative: Future developments that may individually or
collectively lead to negative rating action include:
-- A deterioration in leverage beyond 5.5x net debt (including
PIK debt)/EBITDA for a sustained period.
-- Low-to-mid single digit decline in operating profitability
in 2014 driven by a further deterioration in the operating
environment and/or negative FCF generation
Positive: Future developments that may individually or
collectively lead to positive rating action include:
-- Tangible parental support such as equity contribution or debt
refinancing via intercompany loans leading to a material
reduction in Wind's leverage.
-- Stabilization of operating and financial performance
The rating actions are as follows:
Long-term IDR: affirmed at 'BB-'; Negative Outlook
Short-term IDR: affirmed at 'B'
WIND's senior credit facilities: affirmed at 'BB'
Senior secured 2018 notes issued by WIND Acquisition Finance
S.A.: affirmed at 'BB'
Senior secured 2020 notes issued by WIND Acquisition Finance
S.A.: affirmed at 'BB'
Senior secured 2019 floating notes issued by WIND Acquisition
Finance S.A.: affirmed at 'BB'
Senior 2017 notes issued by WIND Acquisition Finance S.A.:
affirmed at 'B'
Senior PIK notes issued by WIND Acquisition Holdings Finance
S.A.: affirmed at 'B-
=====================
N E T H E R L A N D S
=====================
HIGHLANDER EURO: Moody's Raises Rating on EUR15MM Notes to 'Ba1'
----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of the
following notes issued by Highlander Euro CDO III B.V.:
Issuer: Highlander Euro CDO III B.V.
EUR536M Class A Senior Secured Floating Rate Notes due 2023,
Upgraded to Aaa (sf); previously on Jul 25, 2011 Upgraded to
Aa1 (sf)
EUR76M Class B Senior Secured Floating Rate Notes due 2023,
Upgraded to Aa2 (sf); previously on Jul 25, 2011 Upgraded to
A3 (sf)
EUR48M Class C Senior Secured Deferrable Floating Rate Notes
due 2023, Upgraded to A3 (sf); previously on Jul 25, 2011
Upgraded to Baa3 (sf)
EUR34M Class D Senior Secured Deferrable Floating Rate Notes
due 2023, Upgraded to Baa3 (sf); previously on Jul 25, 2011
Upgraded to Ba2 (sf)
EUR26M Class E Senior Secured Deferrable Floating Rate Notes
due 2023, Upgraded to Ba2 (sf); previously on Jul 25, 2011
Upgraded to B1 (sf)
EUR5M Class R Combination Notes due 2023, Upgraded to A3 (sf);
previously on Jul 25, 2011 Upgraded to Ba3 (sf)
EUR15M Class S Combination Notes due 2023, Upgraded to Ba1
(sf); previously on Jul 25, 2011 Upgraded to B3 (sf)
Highlander Euro CDO III B.V. issued in April 2007, is a multi-
currency Collateralised Loan Obligation ("CLO") backed by a
portfolio of mostly high yield European loans. The portfolio is
managed by CELF Advisors LLP. The transaction's reinvestment
period will end in May 2014. The portfolio is predominantly
composed of senior secured loans.
Ratings Rationale
The actions on the Class A, B, C, D and E notes and on Class R
and S Combination notes are primarily a result of the improvement
of the key credit metrics (WARF, WARR and WAS) of the underlying
pool and the benefit of the shorter period of time remaining
before the end of the reinvestment period in May 2014.
In light of reinvestment restrictions during the amortization
period, and therefore the limited ability to effect significant
changes to the current collateral pool, Moody's analyzed the deal
assuming a higher likelihood that the collateral pool
characteristics would maintain an adequate buffer relative to
certain covenant requirements. In particular, Moody's assumed
that the deal will benefit from a shorter amortization profile
and higher spread levels given the transaction will reach the end
of the reinvestment period in less than one month.
As of the latest trustee report dated February 2014, the Class
A/B, Class C, Class D and Class E over-collateralization ratios
are reported at 125.48%, 115.80%, 109.80% and 106.04%
respectively, as compared to 124.70%, 115.08%, 109.11 % and
105.38 %, respectively, on February 2013. All of the notes are
passing their over-collateralization tests.
The ratings on the combination notes address the repayment of the
rated balance on or before the legal final maturity. For Classes
R and S, 'Rated Balance' is equal at any time to the principal
amount of the Combination Note on the Issue Date minus the
aggregate of all payments made from the Issue Date to such date,
either through interest or principal payments. The rated balance
may not necessarily correspond to the outstanding notional amount
reported by the trustee.
The key model inputs Moody's uses in its analysis, such as par,
weighted average rating factor, diversity score, and weighted
average recovery rate, are based on its published methodology and
may be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of EUR716.6
million, defaulted par of EUR13.46 million, a weighted average
default probability of 19.97% (consistent with a WARF of 2687), a
weighted average recovery rate upon default of 48.16% for a Aaa
liability target rating, a diversity score of 44 and a weighted
average spread of 3.75%.
In its base case, Moody's addresses the exposure to obligors
domiciled in countries with local currency country risk bond
ceilings (LCCs) of A1 or lower. Given that the portfolio has
exposures to 7.56% of obligors in Spain whose LCC is A1 and 5.10%
in Italy and Ireland, whose LCC is A2, Moody's ran the model with
different par amounts depending on the target rating of each
class of notes, in accordance with Section 4.2.11 and Appendix 14
of the methodology. The portfolio haircuts are a function of the
exposure to peripheral countries and the target ratings of the
rated notes, and amount to 1.07% for the Class A, 0.67% for the
Class B and 0.27% for the Class C notes.
The default probability is derived from the credit quality of the
collateral pool and Moody's expectation of the remaining life of
the collateral pool. The average recovery rate to be realised 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 95.5% of the portfolio exposed to first lien
senior secured corporate assets would recover 50% upon default,
while the non first-lien loan corporate assets (0.7%) and the
structured finance sub-pool (3.95) would recover 15% and 8.2%
respectively. In each case, historical and market performance
trends and collateral manager latitude for trading the collateral
are also relevant factors. Moody's incorporates these default and
recovery characteristics of the collateral pool into its cash
flow model analysis, subjecting them to stresses as a function of
the target rating of each CLO liability it is analyzing.
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 lowered the base case WAS to 3.5%; 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 the uncertainty about credit conditions in the
general economy. 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 embedded ambiguities.
Additional uncertainty about performance is due to the following:
Portfolio amortization: The main source of uncertainty in this
transaction is the pace of amortization of the underlying
portfolio, which can vary significantly depending on market
conditions and have a significant impact on the notes' ratings.
Amortization could accelerate as a consequence of high loan
prepayment levels or collateral sales by the collateral manager
or be delayed by an increase in loan amend-and-extend
restructurings. Fast amortization would usually benefit the
ratings of the notes beginning with the notes having the highest
prepayment priority.
Recovery of defaulted assets: Market value fluctuations in
trustee-reported defaulted assets and those Moody's assumes have
defaulted can result in volatility in the deal's over-
collateralization levels. Further, the timing of recoveries and
the manager's decision whether to work out or sell defaulted
assets can also result in additional uncertainty. Moody's
analyzed defaulted recoveries assuming the lower of the market
price or the recovery rate to account for potential volatility in
market prices. Recoveries higher than Moody's expectations would
have a positive impact on the notes' ratings.
In addition to the quantitative factors that Moody's explicitly
modeled, 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.
=========
S P A I N
=========
AYT CAIXA: Fitch Lowers Rating on Class C Tranche to 'CCCsf'
------------------------------------------------------------
Fitch Ratings has downgraded three tranches of AyT Caixa Sabadell
Hipotecario I, a prime Spanish RMBS comprising loans initially
originated by Caixa Sabadell, which now forms part of Banco
Bilbao Vizcaya Argentaria ('BBB+'/Stable/'F2').
Key Rating Drivers
Weak Asset Performance
The downgrades reflect the weak performance of the portfolio over
the past year. As of the most recent interest payment date,
three-month plus arrears stood at 9% of the current pool balance,
while cumulative defaults (defined as loans in arrears by more
than 18 months) were at 9.7% of the initial portfolio balance.
Both three-month plus arrears and cumulative gross defaults are
significantly above the averages of 2.35% (three-month plus
arrears) and 4.35% (cumulative gross defaults) in other Fitch-
rated prime Spanish RMBS.
With expectations of future defaults in the upcoming payment
dates and the further build-up in un-provisioned loans, Fitch
believes that the level of credit enhancement available to the
class A notes is sufficient to withstand 'BBsf' stresses. For
this reason the agency has placed the class A notes on Stable
Outlook. The class D was affirmed at 'CCsf' with 0% Recovery
Estimate as the agency believes that the likelihood of default on
the tranche remains probable.
Depleted Reserve Fund
The transaction's structure allows for the full provisioning of
defaulted loans. At present, gross excess spread (0.49% per
annum as of the latest payment date) and recoveries on defaulted
loans have been insufficient to generate sufficient cash flow and
fully provision newly defaulted assets. Consequently, the reserve
fund has been depleted since May 2013 and un-provisioned defaults
are being assigned to the implicit principal deficiency ledgers.
The current outstanding un-cleared principal deficiency ledger
stands at EUR11.7 million.
Fitch expects the balance of un-provisioned defaults to increase
due to a combination of factors including the migration of late
stage arrears to default, the thin level of excess spread
available and the weak track record of recoveries to date (27.6%
of the cumulative defaulted balance).
Insufficient Information on Recoveries
No data was available on the sale of properties in possession,
which remain limited to date given the outstanding balance of
defaults (EUR36.6 million). Given the absence of data Fitch
applied conservative assumptions on future recoveries from these
assets, which has led to the downgrade of the class A notes to
'BBsf'. In addition, the Outlooks on the mezzanine class B and C
notes remain Negative.
Rating Sensitivities
Deterioration in asset performance may result from economic
factors, in particular the increasing effects of unemployment.
An increase in new defaults and associated pressure on excess
spread levels and reserve funds beyond Fitch's expectations could
result in negative rating actions.
The rating actions are as follows:
AyT Caixa Sabadell Hipotecario
-- Class A (ES0312192000) downgraded to 'BBsf' from 'BBBsf';
Outlook Stable
-- Class B (ES0312192018) downgraded to 'Bsf' from 'BBsf';
Outlook Negative
-- Class C (ES0312192026) downgraded to 'CCCsf' from 'Bsf';
Recovery Estimate 15%
-- Class D (ES0312192034) affirmed at 'CCsf'; Recovery Estimate
0%
AYT KUTXA HIPOTECARIO II: Fitch Affirms CCC Rating on Cl. C Notes
-----------------------------------------------------------------
Fitch Ratings has upgraded one and affirmed five tranches of AyT
Kutxa Hipotecario I and II, a series of Spanish prime RMBS
comprising loans originated and serviced by Kutxabank, S.A.
(BBB/Negative/F3).
Key Rating Drivers
Strong Performance of AyT Kutxa Hipotecario I
A combination of sufficient credit enhancement and continued
strong asset performance has contributed to the affirmation of
the class A and B notes, upgrade of the class C notes and
revision of Outlook to Stable on the class B and C notes. As of
the latest interest payment date in January 2014, three-month
plus arrears were 36bps of the current pool balance, while
cumulative defaults (defined as loans in arrears by more than 18
months) stood at 40bps of the initial portfolio balance. These
levels of arrears and defaults are lower than the average for
Spanish RMBS transactions rated by Fitch (2.35% and 4.35%,
respectively). Fitch expects the robust performance to continue
due to a more stable macroeconomic environment in Spain and the
collateral profile.
Stable Performance of AyT Kutxa Hipotecario II
The affirmation reflects the transaction's relatively stable
performance over the past year. As of the most recent interest
payment date, three-month plus arrears were 2.17% (a decline of
23bps compared with a year ago) of the current pool balance,
while cumulative defaults were 4.79% of the initial portfolio
balance. These ratios are similar to the Spanish RMBS averages.
Fitch believes the different performance of these two deals is
mainly explained by the higher proportion of loans that are
linked to the IRPH interest rate index in AyT Kutxa Hipotecario
II (43.23%) than in AyT Kutxa Hipotecario I (0.36%). With an
IRPH of 3.2% versus the 0.6% of Euribor 12 months as of February
2014, the debt service charge on IRPH loans is far higher than
that of Euribor-linked loans.
Reserve Funds
The transactions' structures allow for the full provisioning of
defaulted loans. In AyT Kutxa Hipotecario I, gross excess spread
(0.30% per annum as of the latest payment date) has remained
adequate to fully provision for defaulted loans and ensure that
the reserve fund remains fully funded throughout the whole life
of the transaction.
AyT Kutxa Hipotecario II's gross excess spread (0.23% per annum
as of the latest payment date) and recoveries on defaulted loans
have been insufficient to fully cover period defaults.
Consequently, there have been reserve fund draws and its current
level is 24.1% of its target amount. The Negative Outlooks on
the class A and B notes and the 50% Recovery Estimate on the
class C notes continue to reflect Fitch's expectations of further
draws on the reserve fund due to the migration of the late stage
arrears into default and low recoveries in the context of a weak
Spanish residential property market.
Payment Interruption Mitigated in AyT Kutxa Hipotecario II
Fitch believes that in a 'AA-sf' scenario a hypothetical servicer
disruption is sufficiently mitigated in AyT Kutxa Hipotecario II
as there is a purpose-specific and dynamically established cash
reserve, which complements the partially depleted reserve fund.
These two sources of liquidity could cover for up to two interest
payment dates due amounts on the senior classes of notes.
Rating Sensitivities
Deterioration in asset performance may result from economic
factors, in particular the increasing effects of unemployment. An
increase in new defaults and associated pressure on excess spread
and reserve funds beyond Fitch's expectations could result in
negative rating actions.
The rating actions are as follows:
AyT Kutxa Hipotecario I
Class A (ES0370153001) affirmed at 'AA-sf' ; Outlook Stable
Class B (ES0370153019) affirmed at 'Asf'; Outlook revised to
Stable from Negative
Class C (ES0370153027) upgraded to 'BBBsf' from 'BBsf'; Outlook
Stable
AyT Kutxa Hipotecario II
Class A (ES0370154009) affirmed at 'AA-sf' ; Outlook Negative
Class B (ES0370154017) affirmed at 'BBBsf' ; Outlook Negative
Class C (ES0370154025) affirmed at 'CCCsf'; Recovery Estimate
50%
FONCAIXA FTGENCAT: Moody's Lifts Rating on EUR7.2MM Notes to B1
----------------------------------------------------------------
Moody's Investors Service has upgraded to A3 (sf) from Baa1(sf),
to Ba2(sf) from Ba3(sf) and to B1(sf) from B2(sf) the ratings on
the class A(G), B and C notes in Foncaixa FTGENCAT 4, FTA.
The actions conclude the review of the ratings on the relevant
classes of notes and follow Moody's increase to A1 from A3 of the
local-currency country ceiling, the maximum achievable rating in
Spain. The higher country ceiling has credit positive
implications for the Foncaixa FTGENCAT 4's A(G), B and C notes.
The upgrades also reflect the availability of sufficient credit
enhancement to address the notes' exposure to the swap
counterparty, Caixabank (deposits Baa3 stable, standalone bank
financial strength rating D+/ baseline credit assessment ba1).
The transaction is a Spanish asset-backed securities (ABS)
transaction backed primarily by loans to small and medium-sized
enterprises (SMEs) originated by Caixabank.
Ratings Rationale
The upgrade of class A(G), B and C notes in this transaction stem
from reduced country risk as illustrated by the raising of the
Spanish country ceiling.
The reduced country risk has a positive impact on the loss
distribution curve, with a reduced probability of high-loss
scenarios for the pool.
Rationale For Previous Review
Moody's initially placed on review for downgrade class B and C
notes on 14 November 2013 because of the linkage between the swap
counterparty (Caixabank) and the credit quality of the notes,
following Moody's introduction of the rating agency's updated
approach to assessing swap counterparties in structured finance
cash flow transactions. Subsequently, on March 17, 2014, Moody's
placed on review for upgrade class A notes following the upgrade
of the Spanish sovereign rating to Baa2 from Baa3 and the
resulting increase of the local-currency country ceiling to A1
from A3. On that date, Moody's also changed to uncertain the
rating review direction of class B and C notes ratings because
the negative effect of the swap exposure could potentially be
offset by the reduced country risk.
Revised Key Collateral Assumptions
The reclassification of some loans as doubtful -- because of
Caixabank's introduction of new Bank of Spain classification
rules for restructured loans -- prompted a peak in 90+
delinquencies to 4.9% in January 2014, from much lower levels in
the past. These loans are in fact current in their payments but
are owed by debtors that have other loans with Caixabank that
have been restructured. This reclassification should be a one off
event and therefore Moody's has not updated its default rate
assumption for this deal, because apart from that temporary peak
in 90+ delinquencies, the deal's collateral performance is in
line with the rating agency's expectations.
Moody's maintained the default rate assumption at 11% of the
current portfolio and its fixed recovery rate assumption at 55%.
To capture reduced sovereign-related risks, Moody's has decreased
the loss distribution volatility (CoV assumption) to 115.3% from
140.3%, which combined with the other key collateral assumptions
result in an unchanged portfolio credit enhancement of 24.5%.
Exposure To The Swap Counterparty
The rating actions reflect the availability of sufficient credit
enhancement to address the notes' exposure to the swap
counterparty, Caixabank. Credit enhancement stands at 13.6% below
the class A(G) tranche, 9.1% below the class B tranche and at
5.72% below the class C tranche. It is in the form of
subordination as well as a 2.6% cash reserve held by Barclays
Bank Plc (A2 negative, C-/baa2), the issuer account bank.
As part of its review, Moody's has incorporated the risk of
additional losses on the notes, in case the notes become unhedged
following a swap counterparty default. Assets backing the notes
in this deal are floating-rate assets indexed to various indices,
while the notes are referenced to three-month EURIBOR. The
transaction includes a basis swap agreement with Caixabank. The
swap provides substantial support to the notes in this
transaction because the swap counterparty pays on the balance of
the notes whereas the issuer pays on the balance of the
performing pool.
The swap also provides 0.5% excess spread to the transaction. Net
swap payments in recent periods were in favour of the swap
counterparty, given the current interest-rate environment;
however, future net swap payments could be in favour of the
issuer. The issuer does not need to post collateral according to
the most recent collateral-posting computations made by the
valuation agent.
Factors that would lead to an upgrade or downgrade of the rating:
Factors that could lead to a downgrade of the rating include (1)
worse-than-expected performance of the underlying collateral; (2)
deterioration in the credit quality of the counterparties; and
(3) an increase in Spain's sovereign risk.
Factors that could lead to an upgrade of the rating include
better-than-expected performance of the underlying assets, and a
decline in both counterparty risk and Spain's sovereign risk.
List of Affected Ratings
Issuer: FONCAIXA FTGENCAT 4, FTA
EUR326M A (G) Notes, Upgraded to A3 (sf); previously on Mar 17,
2014 Baa1 (sf) Placed Under Review for Possible Upgrade
EUR9.6M B Notes, Upgraded to Ba2 (sf); previously on Mar 17,
2014 Ba3 (sf) Placed Under Review Direction Uncertain
EUR7.2M C Notes, Upgraded to B1 (sf); previously on Mar 17,
2014 B2 (sf) Placed Under Review Direction Uncertain
===========================
U N I T E D K I N G D O M
===========================
ALBEMARLE & BOND: H&T, Burt Emerge as Potential Bidders
-------------------------------------------------------
Duncan Robinson at The Financial Times reports that H&T, the UK's
largest pawnbroker measured by pledgebook, and a consortium
featuring a former Bank of Scotland boss have emerged as two of
the potential bidders for failed pawnbroker Albemarle & Bond.
According to the FT, H&T said that it had "submitted a proposal"
to buy "some" of A&B's assets, after it called in administrators
last month.
The move came after it was revealed in The Sunday Times this
weekend that former Bank of Scotland boss Sir Peter Burt had
tabled a bid for A&B, which is being backed with cash from
American billionaire Dan Gilbert, who also owns US basketball
team the Cleveland Cavaliers, the FT relates.
A&B called in PricewaterhouseCoopers after its attempts to stave
off collapse -- which included melting down some of its gold
stocks as well as unsuccessfully tapping shareholders for funds
-- failed, the FT recounts.
A&B called in administrators after its lenders declined to back
its proposed turnround plan, the FT relays. The pawnbroker had
fallen into trouble after it overexpanded in the late 1990s,
trying to ride on a combination of rising gold prices and an
increase in the number of cash-strapped consumers, the FT
discloses.
A collapse in the gold price -- coupled with increased
competition -- hit the pawnbroker hard, leaving it in need of a
cash injection, which shareholders declined to provide last
autumn, the FT states.
Albemarle & Bond Holdings PLC provides pawnbrokering services.
The Company, through its subsidiaries, provide pawnbroking, check
cashing services, retail jewelry sales and unsecured lending.
Albemarle operates in the United Kingdom.
CO-OPERATIVE BANK: Delays Publication of Annual Report
------------------------------------------------------
Martin Arnold at The Financial Times reports that Co-operative
Bank has delayed the publication of its annual report and
accounts.
The bank, which is controlled by its lenders after a GBP1.5
billion recapitalization last year, said it would miss its
already delayed deadline of publishing its results by Tuesday,
the FT relates.
Its results are now due to be published by Friday, the FT says.
They are expected to include an explanation of how the Co-op Bank
accrued record losses of GBP1.2 billion-GBP1.3 billion last year
and detail on the remuneration of the executives responsible, the
FT notes.
Two weeks ago, it said it would need to raise an additional
GBP400 million after a string of misconduct charges created
another hole in its finances just months after its earlier
recapitalization, the FT relays.
About Co-operative Bank
Co-op Bank -- part of the mutually owned food-to-funerals
conglomerate Co-operative Group -- traces its history back to
1872. The bank gained prominence for specializing in ethical
investment. It refuses to lend to companies that test their
products on animals, and its headquarters in Manchester is
powered by rapeseed oil grown on Co-operative Group farms.
Founded in 1863, the Co-op Group has more than six million
members, employs more than 100,000 people, and has turnover of
more than GBP13 billion.
* * *
The Troubled Company Reporter-Europe on Nov. 14 and 18, 2013 has
reported that Moody's Investors Service has affirmed The
Co-operative Bank's Caa1 senior unsecured debt and deposit
ratings, and changed the outlook on the rating to negative from
developing, and Fitch Ratings has downgraded the company's Issuer
Default Rating to 'B' from 'BB-' and placed it on Rating Watch
Negative.
LION/GLORIA HOLDCO: Moody's Assigns 'B3' CFR; Outlook Stable
------------------------------------------------------------
Moody's Investors Service, has assigned a first-time B3 corporate
family rating (CFR) and a B3-PD probability of default rating
(PDR) to Lion/Gloria Holdco Limited, the ultimate parent of the
Jemella Group, which trades under the brand commonly known as
"ghd" (goodhairday).
Concurrently, Moody's has assigned a provisional (P)B3 rating and
loss given default (LGD) assessment of LGD4 (53%) to the proposed
GBP165 million worth of senior secured notes due in 2020 to be
issued by ghd Bondco plc. The outlook for all ratings is stable.
This is the first time that Moody's has assigned ratings to ghd.
Moody's issues provisional ratings in advance of the final sale
of securities and these ratings reflect the rating agency's
preliminary credit opinion regarding the transaction only. Upon a
conclusive review of the final documentation, Moody's will
endeavor to assign a definitive rating to the company's proposed
senior secured notes. The definitive rating may differ from the
provisional rating.
Ratings Rationale
"The company is strongly positioned in the B3 category reflecting
credit strengths such as (1) ghd's established brand equity and
its continuous brand investment; (2) ghd's clear market
leadership in the hair stylers sector; (3) a strong focus on
innovation and technology; and (4) its adequate liquidity
profile," says Mrs. Cavanilles.
"At the same time, the rating reflects credit challenges such as
(1) ghd's small size; (2) its limited product diversification;
(3) the potential risk of competitors achieving similar brand
propositions; and (4) its high initial leverage," says Lola
Cavanilles, a Moody's Associate Vice President and lead analyst
for ghd.
ghd intends to refinance its existing indebtedness by issuing
GBP165 million of senior secured fixed rate notes in conjunction
with a GBP20 million Super Senior Revolving Credit Facility
(SSRCF). The company will use the proceeds to repay existing bank
debt of GBP125 million and make a GBP36 million partial repayment
of its shareholders loan.
The total capitalization at the time of the transaction would be
GBP318 million, consisting of GBP153 million capital employed and
GBP165 million of bond debt. The company will also have cash in
balance sheet of around GBP 5 million with additional liquidity
from the GBP20 million SSRCF. The SSRCF will be undrawn at
closing, but could be used to support general corporate and
working capital needs as well as acquisitions. The capital
structure has limited covenants as the lenders are relying only
on the incurrence covenants of the bonds and one broad
maintenance covenant of minimum EBITDA of GBP19 million that will
be at 40% headroom at the time of issuance of the bonds. Moody's
has used its standard 50% LGD assumption and the notes are in
line with the CFR given the limited amount of debt ranking ahead.
At the completion of the transaction, ghd's debt/EBITDA (as
adjusted by Moody's) will be around 6.0x. The company should have
an improvement in the leverage ratio which will derive from
EBITDA growth rather than a reduction in the level of gross debt.
This is because it will not be possible to repay the bonds until
2016 due to the standard HY non-call periods, although an equity
clawback in the first two years will allow the redemption of up
to 40% of the notes from equity offering proceeds at par plus
coupon. No material acquisitions nor dividends are planned.
The company has a solid track record of operating performance
with good brand recognition. Since its commercial launch in 2001,
and in particular since the professionalization of the business
in 2008, ghd has focused on consolidating its position in the
premium hair care styling market. In this period, the company has
delivered through the cycle growth and has set the grounds for
continued growth and profitability going forward.
ghd's liquidity is expected to be adequate. Moody's notes the
seasonality of cash flows, with a peak during the Christmas
period which is mitigated by ghd's adequate liquidity position
throughout the year. The company is likely to fund through
internally generated cash flow and existing cash balances all
basic and other cash obligations during the next 12 months.
Rationale For The Stable Outlook
The stable outlook reflects our expectation that debt/EBITDA
ratio (as adjusted by Moody's) will remain above 5.5x over the
next 12 to 18 months, despite the expected revenue growth in
Continental Europe. This also reflects its market positions and
track record of resilient operating margins.
What Could Change The Rating Up/Down
Upward pressure on the rating could develop if the company
delivers on its business plan, such that its adjusted debt/EBITDA
ratio (as adjusted by Moody's) is below 5.5x on a sustained
basis.
Downward pressure could be exerted on the rating if ghd's
operating performance weakens or the company increases its debt
as a result of acquisitions or shareholder distributions, such
that its adjusted debt/EBITDA (as adjusted by Moody's) trends
towards 7.0x. A weakening in the company's liquidity profile
could also exert downward pressure on the rating.
Lion/Gloria Holdco, the ultimate parent of the Jemella Group,
operates under the commercial name "ghd" and offers high-end hair
styling tools and salon quality hair dryers complemented by a
range of accessories.
As of December 2013, ghd reported revenues of GBP155 million and
EBITDA of GBP32 million. ghd's shareholders are the management
with a 2.6% stake, and Lion Capital with a 97.4% stake.
LION/GLORIA HOLDCO: S&P Assigns 'B-' CCR; Outlook Stable
--------------------------------------------------------
Standard & Poor's Ratings Services said that it assigned its 'B-'
long-term corporate credit rating to Lion/Gloria HoldCo Ltd., the
holding company of U.K.-based premium hair styling appliances
manufacturer GHD Group Holdings Ltd. (GHD). The outlook is
stable.
At the same time, S&P assigned its 'B-' issue rating to the
proposed GBP165 million senior secured notes, due 2020, to be
issued by ghd Bondco PLC, a subsidiary of Lion/Gloria HoldCo.
The recovery rating on the proposed notes is '4', indicating
S&P's expectation of average (30%-50%) recovery in the event of a
payment default.
The issue and recovery ratings on the proposed notes are based on
preliminary information. These ratings are subject to the
successful closing of the proposed notes issuance and depend on
our receipt and satisfactory review of the final transaction
documentation.
The rating on Lion/Gloria HoldCo reflects S&P's assessment of the
company's business risk profile as "weak" and financial risk
profile as "highly leveraged," as S&P's criteria define these
terms. S&P assess Lion/Gloria HoldCo's liquidity as "adequate,"
incorporating the proposed refinancing of its existing bank
facilities and the repayment of part of its shareholder loan with
the proceeds from the new GBP165 million senior secured notes.
GHD is a manufacturer of premium hair styling appliances, with a
leading market share in this niche segment in both the U.K. and
Australia. The company distributes its products mainly through
hair salons (76% of 2013 sales), but also online (18%) and in
premium retail stores (6%). For the year ending Dec. 31, 2013,
GHD's revenues amounted to GBP155 million and its Standard &
Poor's-adjusted EBITDA margin was 17%. GHD was acquired by the
private equity group Lion Capital in March 2013 through a
secondary leveraged buyout.
"Our assessment of Lion/Gloria HoldCo's business risk profile as
"weak" reflects GHD's narrow business focus, which in our view
limits its addressable customer base. Despite GHD's high brand
recognition in its core markets, in our view the company is a
relatively small player in a broad field of hair care products,
services, and appliances, and operates in a very fragmented
environment. Our assessment also reflects GHD's high dependence
on the salon distribution channel and one product category (hair
styling appliances), which contributed over 90% of GHD's revenues
in 2013. However, we understand that GHD aims to increase its
product diversification, notably with hair dryers and curlers,"
S&P said.
Mitigating these factors is GHD's track record of maintaining
sales through an economic downturn, and its robust pipeline of
new products, which should support sales over the next few years.
S&P also views positively GHD's presence in more than 14
countries, although most of its revenues come from Western Europe
(74%) and Australia (17%), where weak macroeconomic forecasts
continue to weaken consumer demand.
"Our assessment of Lion/Gloria HoldCo's financial risk profile as
"highly leveraged" reflects our view that its free operating cash
flow base will stay modest over the next couple of years, despite
our forecast of some sales growth as a result of management's
geographic and product expansion plans. In addition, our
assessment of financial risk is constrained by Lion/Gloria
HoldCo's high level of debt, which will continue to weigh
negatively on its credit metrics over the next few years. Based
on the current proposed refinancing, we expect Lion/Gloria
HoldCo's adjusted ratio of cash-paying debt to EBITDA to be about
5.9x pro forma the refinancing, or close to 10.0x including
preference shares totaling GBP125.9 million at closing of the
refinancing. We treat these preference shares as debt as per our
criteria," S&P noted.
S&P's base-case scenario for Lion/Gloria HoldCo assumes:
-- Mid-single-digit revenue growth in the next two years,
taking into account the launch of new products in new and
existing markets.
-- A stable adjusted EBITDA margin of about 17%-18%, assuming
that the increase in sales and a more favorable sales
channel mix will offset ongoing investments into brand
marketing to support expansion. S&P's EBITDA margin
calculation notably includes an adjustment for capitalized
development costs, which we treat as operating expenses in
line with its criteria for ratios and adjustments.
-- A small increase in working capital, reflecting new product
launches, although S&P believes that GHD will continue to
adequately manage its working capital volatility.
-- Capital expenditures (capex) of about 5% of sales, in line
with management's assumptions.
Based on these assumptions, S&P arrives at the following credit
measures:
-- Funds from operations (FFO) cash interest coverage of about
2.2x-2.3x in 2014 and 2015.
-- Free operating cash flow of less than GBP5 million per
year.
For the purposes of S&P's analysis, it has used the historical
accounts consolidated under GHD. S&P understands that in future,
GHD's accounts will be consolidated under the holding company
Lion/Gloria HoldCo, but will have substantially the same scope in
respect of operating assets and cash flows.
S&P assess Lion/Gloria HoldCo's management and governance as
"fair," reflecting management's extensive experience in consumer
products, although S&P notes that many members of the senior
management team only joined GHD in the past 12 months.
"Our assessment of Lion/Gloria HoldCo's financial policy as
"financial sponsor-6," reflects its private equity ownership and
the relatively high amount of cash-paying debt after the proposed
refinancing," S&P added.
The stable outlook reflects S&P's view that GHD's established
market position in the niche market of premium hair styling
appliances should enable it to maintain its revenue base and
stable EBITDA margin, thanks to high brand awareness in its core
markets and its robust pipeline of new products.
The outlook further assumes that Lion/Gloria HoldCo's liquidity
will remain "adequate," as per S&P's criteria. Over the next 12
months, S&P anticipates that Lion/Gloria HoldCo's coverage of
cash interest by FFO will remain around 2x. S&P considers this
level of coverage as commensurate with a "highly leveraged"
financial risk profile and the current rating.
Upside scenario
S&P could take a positive rating action if it sees a material
reduction in medium-term refinancing risks as a result of a
significant increase in free operating cash flow generation, or
if the ratio of cash-paying debt to EBITDA falls to less than 5x.
In S&P's view, this would most likely occur if sales and EBITDA
increase materially thanks to the contribution from new hair-
styling products in new and existing markets.
Downside scenario
S&P could lower the ratings if Lion/Gloria HoldCo's free
operating cash flow became significantly negative, which would
weaken its liquidity assessment. The most likely triggers for
these developments would be a substantial decrease in EBITDA or
an increase in debt to fund capex. However, S&P do not consider
these risks as central to its base-case assumptions.
ODEON & UCI: S&P Revises Outlook to Negative & Affirms 'B-' CCR
---------------------------------------------------------------
Standard & Poor's Ratings Services said it revised its outlook on
U.K.-based cinema operator Odeon & UCI Cinemas Group Ltd. to
negative from stable. At the same time, S&P affirmed its 'B-'
long-term corporate credit rating.
The negative outlook reflects S&P's view that Odeon's recent
declining performance, if it continues, could make the group's
capital structure unsustainable. The deterioration of the
Spanish market, along with adverse weather and a moderately
disappointing film slate, have lowered adjusted EBITDA to GBP215
million in 2013 from GBP233 million in 2012, or to GBP72 million
from GBP93 million without adjusting for operating leases, based
on S&P's calculations. S&P do not expect a substantial rebound
in 2014. Even though economic conditions are improving in Spain,
where Odeon operates some cinemas, S&P expects unemployment to
remain high and we believe that the soccer world cup may weigh on
attendance.
As a result, S&P forecasts that Odeon's adjusted debt-to-EBITDA
ratio will remain at about 10x over the next 12 months, or 6.5x
excluding shareholder loans. S&P also expects negative free
operating cash flow generation, even though the group reduced its
reported capital expenditure (capex) by about a quarter in 2013,
to GBP30 million. In addition, interest coverage ratios are
rather weak, in S&P's view. S&P forecasts reported EBITDA-to-
interest plus capex slightly below 1x in 2014, although S&P
acknowledges that Odeon still has room to cut capex further, if
necessary.
On the positive side, Odeon's liquidity remains adequate. Thanks
to a positive working capital inflow in the fourth quarter of
2013, the group has replenished its GBP90 million revolving
credit facility (RCF), and had GBP40 million of cash at the end
of the year. In addition, Odeon Property Group, which leases
cinemas to Odeon in the U.K., made a GBP16 million equity
injection in March 2014. S&P believes this will be enough to
finance working capital movements and negative free operating
cash flows for the next 12 months.
S&P's base case assumes:
-- Flat revenues in 2014, with the negative effects of the
world soccer cup offsetting limited improvement in the
Spanish market.
-- A limited rise in adjusted EBITDA driven by the benefits of
2013 cost cutting.
-- Capex in line with 2013, at about 4% of revenues.
-- S&P notes that performances have historically been volatile
and therefore difficult to predict.
Based on these assumptions, S&P arrives at the following credit
measures:
-- An adjusted EBITDA margin of about 30% in 2014.
-- Adjusted debt-to-EBITDA of about 10x, or 6.5x excluding
shareholder loans.
-- Adjusted EBITDA to cash interest (fully adjusted for
operating leases) of about 2x.
The negative outlook reflects S&P's view that Odeon's capital
structure could become unsustainable if the group fails to
improve its operating performance. S&P's base-case scenario
factors in flat revenues for 2014, and a slight increase in
adjusted EBITDA on the back of cost savings.
S&P could lower the rating on Odeon if the company appeared
unable to stop the decline of its EBITDA generation. S&P would
also consider a downgrade if liquidity deteriorated or if Odeon
started to purchase bonds at discounted price, which S&P could
consider a distressed exchange under our criteria.
S&P might consider a positive rating action if Odeon sustainably
reversed the recent trend of deteriorating performances while
maintaining adequate liquidity.
RMAC 2005-NS3: S&P Raises Rating on Class B1 Notes to 'B'
---------------------------------------------------------
Standard & Poor's Ratings Services raised its credit ratings on
RMAC 2005-NS3 PLC's class M2a and M2c notes, and on RMAC 2005-NS4
PLC's class B1 notes. At the same time, S&P has affirmed its
ratings on all other classes of notes in these transactions.
The rating actions follow S&P's review of the March 2014 investor
reports, and its credit and cash flow analysis of transaction
information (dated December 2013) that S&P has received for RMAC
2005-NS3 and RMAC 2005-NS4. S&P's analysis also reflects the
application of its relevant criteria.
Due to the loans' seasoning increase and the decline in arrears
in the pools backing these transactions, S&P has decreased its
weighted-average foreclosure frequency (WAFF) and its weighted-
average loss severity (WALS) calculations for both transactions
since S&P's March 21, 2012 review.
RMAC 2005-NS3
Rating WAFF WALS
level (%) (%)
AAA 37.05 30.93
AA 31.68 25.87
A 25.67 17.37
BBB 21.79 12.92
BB 17.90 9.93
B 15.69 7.39
RMAC 2005-NS4
Rating WAFF WALS
level (%) (%)
AAA 36.88 30.61
AA 31.15 25.75
A 30.16 26.69
BBB 25.55 22.24
BB 21.17 19.09
B 18.89 16.17
The weighted-average seasoning of the loans is 103 months in both
transactions. Arrears of more than 90 days in RMAC 2005-NS3 have
decreased to 13.36% of the pool, from 20.59% in December 2011.
Arrears of more than 90 days have also decreased in RMAC
2005-NS4 -- to 10.63% of the pool from 20.48% over the same
period.
The decline in arrears reduces our arrears adjustment to S&P's
WAFF assumptions. In addition, it results in more loans
benefitting from a seasoning adjustment, which S&P applies to
loans outstanding for more than five years. In S&P's analysis,
it has considered scenarios in which interest rates increase and
arrears return to previous highs.
In both transactions, the notes are amortizing pro rata, as they
satisfy all documented pro rata triggers. However, in S&P's
analysis, it has considered the possibility of these triggers not
being satisfied. Both transactions' reserve funds have reached
their floor level and will no longer amortize.
Taking into account S&P's forecast for the U.K. economy, the
various scenarios it has considered, the rating levels at which
the notes pass its cash flow stresses, the improvement in S&P's
WAFF and WALS assumptions, and increased available credit
enhancement, S&P has raised its ratings on RMAC 2005-NS3's M2a
and M2c notes, and on RMAC 2005-NS4's class B1
For both transactions, the bank account agreement and liquidity
facility agreements are not in line with S&P's current
counterparty criteria. Accordingly, S&P's ratings on the notes
in these transactions are capped at its 'A' long-term issuer
credit rating (ICR) on Barclays Bank PLC (A/Stable/A-1). Due to
this cap, S&P has affirmed its ratings on the class A2a, A2c,
M1a, and M1c notes in RMAC 2005-NS3, and the class A3, M1, and M2
notes in RMAC 2005-NS4, despite their improved performance.
S&P has also affirmed its 'B- (sf)' ratings on the class B1a and
B1c notes in RMAC 2005-NS3, as this is the highest rating level
which this note passes S&P's cash flow stresses at.
S&P's credit stability analysis indicates that the maximum
projected deterioration that we would expect at each rating level
over one- and three-year periods, under moderate stress
conditions, are in line with S&P's credit stability criteria.
RMAC 2005-NS3 and RMAC 2005-NS4 are U.K. nonconforming
residential mortgage-backed securities transactions originated by
Paratus AMC Ltd. (formerly known as GMAC Residential Funding
Co.).
RATINGS LIST
Class Rating Rating
To From
RMAC 2005-NS3 PLC
EUR448.2 Million, GBP397.5 Million Multi-Currency Mortgage-Backed
Floating-Rate Notes
Ratings Raised
M2a BBB+ (sf) BBB (sf)
M2c BBB+ (sf) BBB (sf)
Ratings Affirmed
A2a A (sf)
A2c A (sf)
M1a A (sf)
M1c A (sf)
B1a B- (sf)
B1c B- (sf)
RMAC 2005-NS4 PLC
GBP280 Million, US$206 Million Mortgage-Backed
Floating-Rate Notes
Rating Raised
B1 B (sf) B- (sf)
Ratings Affirmed
A3 A (sf)
M1 A (sf)
M2 A (sf)
ROWLANDS CLOTHING: Goes into Administration
-------------------------------------------
FashionUnited reports that Rowlands Clothing has gone into
administration just two years after it was saved from closure by
a private equity firm. Insolvency firm KCBS is already working to
find out a convenient financial solution for the struggling
British retailer, the report says.
In February 2012, the company was bought by Rosemex Trading, a
subsidiary of London-based New World Private Equity, days after
it went into administration. Back then, Stewart Cantley, chairman
and chief executive of Rowlands, said that the retailer had shed
its debts, according to FashionUnited.
Rosemex's rescue came in along with a GBP2 million cash injection
which was said to be invested in developing its own brand for the
55-plus market, as published 'Gazette & Herald', the report
relays.
"We are very much appealing to the market of women who are over
55, as we don't feel there is enough out there for them. We have
been through difficult times and times are still uncertain, but
we think we can grow in this market," Mr. Cantley stated at the
time, reports FashionUnited.
FashionUnited says KCBS confirmed they have been appointed as
administrators for Rowlands but said no one was available for
comment at the moment. Additionally, the retailer has already
taken down its website.
SECURE ELECTRANS: Software Vendor Enters Administration
-------------------------------------------------------
InsolvencyNews reports that Secure Electrans Limited has entered
administration.
InsolvencyNews relates that Secure Electrans became insolvent
after an attempt by the company's management to secure further
working capital from shareholders, which did not succeed.
After a potential buyer of the company withdrew from a deal,
Secure Electrans was placed into administration by its
management, according to the report.
Alex Cadwallader -- alex.cadwallader@leonardcurtis.co.uk -- and
Andrew Duncan -- andrew.duncan@leonardcurtis.co.uk -- of Leonard
Curtis Business Solutions Group were appointed as joint
administrators to the company on March 17.
"We are now working closely with the management team with a view
to not only selling the core business and assets of the company,
but also the impressive patent portfolio it has developed,"
InsolvencyNews quotes Mr. Cadwallader, joint administrator and
director at Leonard Curtis Business Solutions Group, as saying.
"It's clear that these patents hold a significant amount of
value. We are working to ensure that the value of these is
firstly protected before it is realised. Expressions of interest
are currently being invited."
InsolvencyNews says administrators are currently working towards
securing a sale of the core business and assets of Secure
Electrans. Some of the 30 staff employed by the company have been
retained whilst the administrators establish the financial
position and the viability of the business.
Secure Electrans Limited is a Cheshire-based software vendor
specialising in online payment and energy management solutions.
UK COAL: MPs, Unions Pressure Gov't to Rescue Coal Mines
--------------------------------------------------------
Andrew Bounds and Chris Tighe at The Financial Times report that
MPs and unions are putting pressure on the government to save two
of Britain's last three pits, as UK Coal teeters on the brink of
insolvency.
On Wednesday, the UK's largest coal mining company started
statutory redundancy consultations with staff at its Thoresby and
Kellingley collieries, and warned that cuts would be necessary
even if government support staved off immediate closure, the FT
relates.
UK Coal, which has been hit by the strong pound and cheap
imports, has asked for GBP10 million from Whitehall to keep the
mines open until October 2015, the FT discloses. The Doncaster-
based company also operates six surface mines, the FT notes.
Hargreaves Services, Britain's only other significant producer,
as cited by the FT, said it had "offered assistance".
Nigel Adams, Conservative MP for Selby and Ainsty, whose
constituency includes Kellingley, told ITV that he would ask the
government to help, the FT relays.
Yvette Cooper, the shadow home secretary and MP for Normanton,
called for government intervention, the FT says.
The Thoresby and Kellingley deep mines employ 1,300 of UK Coal's
2,000 staff, the FT discloses.
UK Coal was rescued last year by the Pension Protection Fund,
which preserves the pensions of employees whose companies go
bust, but is on the brink again, the FT recounts. The business
is owned by an employee trust after a 2012 restructuring, the FT
says.
UK Coal, as cited by the FT, said talks with the government and
the PPF were continuing but that job cuts would be needed in any
event.
Trade union leaders visited Brussels to seek aid from the
European Commission, the FT relates. According to the FT, they
said the commission would fast-track any application for state
aid and that the government should invest about GBP50 million to
prolong the pits' life.
UK Coal plc -- http://www.ukcoal.com/-- is a United Kingdom-
based company engaged in surface and underground coal mining,
property regeneration and management, and power generation.
*********
Monday's edition of the TCR delivers a list of indicative prices
for bond issues that reportedly trade well below par. Prices are
obtained by TCR editors from a variety of outside sources during
the prior week we think are reliable. Those sources may not,
however, be complete or accurate. The Monday Bond Pricing table
is compiled on the Friday prior to publication. Prices reported
are not intended to reflect actual trades. Prices for actual
trades are probably different. Our objective is to share
information, not make markets in publicly traded securities.
Nothing in the TCR constitutes an offer or solicitation to buy or
sell any security of any kind. It is likely that some entity
affiliated with a TCR editor holds some position in the issuers'
public debt and equity securities about which we report.
Each Tuesday edition of the TCR contains a list of companies with
insolvent balance sheets whose shares trade higher than US$3 per
share in public markets. At first glance, this list may look
like the definitive compilation of stocks that are ideal to sell
short. Don't be fooled. Assets, for example, reported at
historical cost net of depreciation may understate the true value
of a firm's assets. A company may establish reserves on its
balance sheet for liabilities that may never materialize. The
prices at which equity securities trade in public market are
determined by more than a balance sheet solvency test.
A list of Meetings, Conferences and Seminars appears in each
Thursday's edition of the TCR. Submissions about insolvency-
related conferences are encouraged. Send announcements to
conferences@bankrupt.com
Each Friday's edition of the TCR includes a review about a book
of interest to troubled company professionals. All titles are
available at your local bookstore or through Amazon.com. Go to
http://www.bankrupt.com/booksto order any title today.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Europe is a daily newsletter co-
published by Bankruptcy Creditors' Service, Inc., Fairless Hills,
Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA.
Valerie U. Pascual, Marites O. Claro, Rousel Elaine T. Fernandez,
Joy A. Agravante, Ivy B. Magdadaro, and Peter A. Chapman,
Editors.
Copyright 2014. All rights reserved. ISSN 1529-2754.
This material is copyrighted and any commercial use, resale or
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Information contained herein is obtained from sources believed to
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contact Peter Chapman at 215-945-7000 or Nina Novak at
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