/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/140516.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Friday, May 16, 2014, Vol. 15, No. 96 Headlines F R A N C E TECHNICOLOR SA: To Exit Creditor Protection Ahead of Schedule G E R M A N Y WELTBILD: Paragon to Acquire Publishing Group for EUR20 Million G R E E C E EUROBANK ERGASIAS: S&P Withdraws 'D' Preferred Stock Ratings NATIONAL BANK OF GREECE: S&P Withdraws 'D' Preferred Stock Rating I R E L A N D ENDO FINANCE: Moody's Rates Senior Unsecured Notes 'B1' GILLESPIE CLO: Moody's Affirms B2 Rating on EUR15MM Cl. E Notes IRISH BANK: Gets Bankruptcy Court Approval for Sale of Loans I T A L Y * ITALY: Number of Corporate Bankruptcies Up 4.6 in Q1 2014 L U X E M B O U R G KKR RETAIL: S&P Affirms 'B' LT Corp. Credit Rating N E T H E R L A N D S CID FINANCE: S&P Hikes Credit Rating on 2 Note Series to 'B+' NRG: High-Flux Reactor Faces Bankruptcy Risk N O R W A Y NASSA MIDCO: S&P Assigns 'B' Rating to Proposed Sr. Sec. Loans R O M A N I A FC DINAMO: Files for Insolvency R U S S I A BRUNSWICK RAIL: S&P Lowers LT Corp. Credit Rating to 'B+' S P A I N HIPOTECARIO MIXTO V: Moody's Affirms Caa3 Rating on Class C Notes PYMES BANESTO 3: S&P Lowers Credit Rating to 'Dsf' S W E D E N DANNEMORA MINERAL: To Resume Production Under Reconstruction Plan OVAKO GROUP: S&P Assigns Prelim. 'B' Corp. Credit Rating S W I T Z E R L A N D SUNRISE COMMUNICATIONS: S&P Affirms 'B+' LT Corp. Credit Rating U K R A I N E CREDIT DNEPR: Moody's Withdraws Caa3 Long-term Deposit Rating U N I T E D K I N G D O M DRACO ECLIPSE 2005-4: S&P Cuts Rating on Class F Notes to CCC-sf RANGERS FOOTBALL: Faces Director Disqualification Action SIGNET UK: Moody's Rates US$400MM Senior Unsecured Notes 'Ba1' X X X X X X X X * BOOK REVIEW: The First Junk Bond ********* =========== F R A N C E =========== TECHNICOLOR SA: To Exit Creditor Protection Ahead of Schedule ------------------------------------------------------------- David Whitehouse at Bloomberg News, citing Le Figaro, reports that Technicolor SA is to exit creditor protection three years ahead of the initially planned date. Technicolor SA is a French producer of film-making products and technology. In May 2012, Technicolor's unprofitable set-top box factory in Angers, France, filed for insolvency with the Nanterre Commercial Court. ============= G E R M A N Y ============= WELTBILD: Paragon to Acquire Publishing Group for EUR20 Million --------------------------------------------------------------- DACH unquote reports that Munich-based Paragon Partners has signed a preliminary agreement with insolvency administrator Arndt Geiwitz to take a majority stake in troubled publishing group Weltbild. DACH unquote says the German media has reported that Paragon has taken a 51% stake in the company for EUR20 million. Further details on the restructuring policy are expected to be finalised by the end of the month, with Arndt Geiwitz remaining a minority shareholder in the company, the report says. According to the report, the liquidator, who represents all of Weltbild's creditors, contacted numerous parties in order to secure an investor for the entirety of Weltbild's operation, including both local stores in Germany, the holding company and subsidiary operations in Austria and Switzerland. Paragon's offer will enable the group to continue as a whole, the report notes. Both Paragon and Geiwitz aim to advance the redevelopment of the group and return it to a stable footing. The shareholders are in talks to create a new company to which Weltbild employees will be transferred, DACH unquote discloses. The report says the buyer stated that it has been buoyed by the constant demand from loyal customers in recent months and is aiming to build on this core consumer base by taking advantage of e-commerce growth opportunities. Weltbild filed for bankruptcy in January after its Roman Catholic church backers, including 12 dioceses, declined to provide additional financing, the report discloses. It also failed to keep up with competition from internet-based rivals such as Amazon. The group had a total of 6,300 employees, 2,200 of whom were based in the Bavarian city of Augsburg. Geiwitz recently announced it was selling 53 of Weltbild's 220 stores and transferring 293 employees to a different company, having already transferred almost 650 employees, the report adds. Weltbild is a Roman Catholic Church of Germany-owned bookseller. The company relies on sales from catalogues and is part-owner of Germany's second biggest brick-and-mortar bookstore chain Hugendubel. =========== G R E E C E =========== EUROBANK ERGASIAS: S&P Withdraws 'D' Preferred Stock Ratings ------------------------------------------------------------ Standard & Poor's Ratings Services corrected on May 14, 2014 its ratings on two preferred stocks (ISIN: XS0232848399, and ISIN: DE000A0DZVJ16) issued by EFG Hellas Funding Ltd. by lowering the ratings to 'D' from 'CC' to reflect coupon nonpayment. "The two stocks are guaranteed by EFG's parent, Eurobank Ergasias S.A. (Eurobank). The issuer was due to pay interest on these stocks on Nov. 2, 2013 and March 18, 2014, but did not pay the amount due; instead, EFG deferred the coupon without notifying us of its plans. Had we received the relevant information, we would have lowered the issue ratings to 'D' from 'CC' on the due date, rather than [on May 14]," said S&P. "We subsequently withdrew our ratings on all the preferred stocks issued or guaranteed by Eurobank due to lack of sufficient information to maintain surveillance on the ratings. Those include two other issuances (ISIN: XS0234821345 and ISIN: XS0440371903) that we already rated 'D'," said S&P. NATIONAL BANK OF GREECE: S&P Withdraws 'D' Preferred Stock Rating ----------------------------------------------------------------- Standard & Poor's Ratings Services corrected on May 14, 2014, its ratings on three preferred stocks (ISIN: XS0211489207, ISIN: XS0172122904, and ISIN: XS0272106351) issued by National Bank of Greece Funding Ltd. by lowering the ratings to 'D' from 'CC' to reflect coupon nonpayment. The three stocks are guaranteed by the parent company, National Bank of Greece S.A. (NBG). The issuer was due to pay interest on these stocks on Feb. 18, 2014, Nov. 9, 2013, and July 11, 2013, but did not pay the amount due; instead, the issuer deferred the coupon without notifying us of its plans. "Had we received the relevant information, we would have lowered the issue ratings to 'D' from 'CC' on the due date, rather than [on May 14]," said S&P. "We subsequently withdrew our ratings on all the preferred stocks issued or guaranteed by National Bank of Greece due to lack of sufficient information to maintain surveillance on the ratings. Those include two other issuances (ISIN: XS0203171755 and ISIN: XS0203173298) that we already rated 'D'," said S&P. ============= I R E L A N D ============= ENDO FINANCE: Moody's Rates Senior Unsecured Notes 'B1' ------------------------------------------------------- Moody's Investors Service assigned a B1 rating to the senior unsecured notes issued by Endo Finance LLC, a subsidiary of Endo International plc. (collectively with other subsidiaries, "Endo") following an exchange offer for senior unsecured notes previously issued by Endo Health Solutions, Inc. There are no changes to Endo's existing ratings, including its Ba3 Corporate Family Rating, Ba3-PD Probability of Default Rating and SGL-2 Speculative Grade Liquidity Rating. The rating outlook remains negative. Ratings assigned: Endo Finance LLC B1 (LGD5, 74%) senior unsecured notes due 2019, 2020 and 2022 Moody's withdrew the ratings on the senior unsecured notes due 2019, 2020 and 2022 issued by Endo Health Solutions following settlement of the exchange offer for the new notes issued by Endo Finance LLC. Moody's also withdrew the ratings on the former credit facilities of Endo Health Solutions, since these obligations are no longer outstanding. For administrative purposes, Moody's reassigned the following ratings to Endo Luxembourg Finance I Company S.....r.l. from Endo Health Solutions, Inc.: Ba3 Corporate Family Rating Ba3-PD Probability of Default Rating Speculative Grade Liquidity Rating at SGL-2 Ratings Rationale Endo's Ba3 Corporate Family Rating reflects its modest size and scale relative to larger pharmaceutical peers, partially offset by the company's solid market positioning as a niche player in the pain and urology markets and by its revenue diversity across branded drugs, generic drugs and medical devices. Endo's expertise in pain drugs and its good compliance with US Drug Enforcement Agency (DEA) regulations act as high barriers to entry, also a credit strength. The company faces a significant challenge reviving top-line growth because of generic pressures affecting two branded franchises (Lidoderm and Opana ER) and softness in medical procedure volumes. Amidst these pressures, Endo is undergoing senior leadership change and a major cost reduction initiative. Further, Endo will pursue business development. Although there are many variables, the Ba3 Corporate Family Rating envisions a variety of scenarios in which debt/EBITDA is sustained within a range of 3.0 to 4.0 times. The rating outlook is negative. Mesh-related litigation outflows will constrain Endo's cash flow at a time when Lidoderm sales are declining and debt may rise in support of business development. Further, mesh litigation costs could exceed those that Endo is estimating in its accruals. Although not expected in the near term, Moody's could upgrade Endo's ratings if the company substantially increases its size, scale and diversification and makes further progress resolving litigation while sustaining conservative credit metrics including gross debt/EBITDA below 3.0 times. Conversely, Moody's could downgrade Endo's ratings if gross debt/EBITDA is sustained above 4.0 times. This scenario could occur if Endo performs debt- financed M&A, faces higher-than-expected litigation cash outflows, or suffers operating setbacks on products like Lidoderm or Opana ER. Headquartered in Dublin, Ireland, Endo International plc is a specialty healthcare company offering branded and generic pharmaceuticals, medical devices and services. Including the predecessor entity Endo Health Solutions, Inc., net revenues for the twelve months ended March 31, 2014 were approximately $2.5 billion. GILLESPIE CLO: Moody's Affirms B2 Rating on EUR15MM Cl. E Notes --------------------------------------------------------------- Moody's Investors Service announced that it has upgraded the ratings on the following notes issued by Gillespie CLO PLC: EUR26,700,000 Class B Senior Secured Floating Rate Notes due 2023, Upgraded to Aaa (sf); previously on Oct 14, 2011 Upgraded to Aa2 (sf) EUR20,700,000 Class C Secured Deferrable Floating Rate Notes due 2023, Upgraded to A1 (sf); previously on Oct 14, 2011 Upgraded to A3 (sf) Moody's also affirmed the ratings on the following notes issued by Gillespie CLO PLC: EUR97,500,000 (currently EUR66.7M outstanding) Class A-1 Senior Secured Floating Rate Notes due 2023, Affirmed Aaa (sf); previously on Oct 14, 2011 Upgraded to Aaa (sf) EUR65,000,000 (currently EUR 38.9M outstanding) Class A-2 Senior Secured Floating Rate Variable Funding Multi-Currency Notes due 2023, Affirmed Aaa (sf); previously on Oct 14, 2011 Upgraded to Aaa (sf) EUR40,000,000 Class A-3 Senior Secured Floating Rate Notes due 2023, Affirmed Aaa (sf); previously on Oct 14, 2011 Upgraded to Aaa (sf) EUR18,000,000 Class D Secured Deferrable Floating Rate Notes due 2023, Affirmed Ba1 (sf); previously on Oct 14, 2011 Upgraded to Ba1 (sf) EUR15,000,000 (currently EUR14.2M outstanding) Class E Secured Deferrable Floating Rate Notes due 2023, Affirmed B2 (sf); previously on Oct 14, 2011 Upgraded to B2 (sf) Gillespie CLO PLC, issued in August 2007, is a multi-currency Collateralised Loan Obligation ("CLO") backed by a portfolio of mostly senior secured European and US loans. The portfolio is managed by BNP Paribas. This transaction passed its reinvestment period in August 2013. Ratings Rationale According to Moody's, the rating actions taken on the notes result from an improvement in credit metrics of the underlying portfolio and also the benefit of modelling actual credit metrics following the expiry of the reinvestment period in August 2013. 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 compared to the levels assumed prior the end of the reinvestment period in August 2013. The credit quality has improved as reflected in the average credit rating of the portfolio (measured by the weighted average rating factor, of WARF) and a decrease in the proportion of securities from issuers with ratings of Caa1 or lower. As of the trustee's June 2013 report, the WARF was 2741, compared with 2648 in March 2014 and 3035 at the time of the last rating action in October 2011. Securities with ratings of Caa1 or lower currently make up approximately 7.4% of the underlying portfolio, versus 17.1% at the time of the last rating action. The key model inputs Moody's uses in its analysis, such as par, weighted average rating factor, diversity score and the weighted average recovery rate, are based on its published methodology and could differ from the trustee's reported numbers. In its base case, Moody's analyzed the underlying collateral pool as having a performing par and principal proceeds balance of EUR227.1 million, defaulted par of EUR11.2 million, a weighted average default probability of 17% (consistent with a WARF of 2637 with a weighted average life of 3.9 years), a weighted average recovery rate upon default of 47.74% for a Aaa liability target rating, a diversity score of 33 and a weighted average spread of 3.73%. The default probability derives from the credit quality of the collateral pool and Moody's expectation of the remaining life of the collateral pool. The estimated average recovery rate on future defaults is based primarily on the seniority of the assets in the collateral pool. For a Aaa liability target rating, Moody's assumed that 94.1% of the portfolio exposed to senior secured corporate assets would recover 50% upon default, while the remainder non first-lien loan corporate assets would recover 15%. In each case, historical and market performance and a collateral manager's latitude to trade collateral are also relevant factors. Moody's incorporates these default and recovery characteristics of the collateral pool into its cash flow model analysis, subjecting them to stresses as a function of the target rating of each CLO liability it is analyzing. Methodology Underlying the Rating Action: The principal methodology used in this rating was " Moody's Global Approach to Rating Collateralized Loan Obligations " published in February 2014. Factors that would lead to an upgrade or downgrade of the rating: In addition to the base-case analysis, Moody's conducted sensitivity analyses on the key parameters for the rated notes, for which it assumed a lower credit quality in the portfolio to address refinancing risk. Loans to European corporates rated B3 or lower and maturing between 2014 and 2015 make up approximately 7.4% of the portfolio, which could make refinancing difficult. Moody's ran a model in which it raised the base case WARF to 2871 by forcing ratings on 50% of the refinancing exposures to Ca; the model generated outputs that were within one notch of the base- case results. This transaction is subject to a high level of macroeconomic uncertainty, which could negatively affect the ratings on the note, in light of 1) uncertainty about credit conditions in the general economy and 2) the concentration of lowly- rated debt maturing between 2014 and 2015, which may create challenges for issuers to refinance. CLO notes' performance may also be impacted either positively or negatively by 1) the manager's investment strategy and behavior and 2) divergence in the legal interpretation of CDO documentation by different transactional parties due to because of embedded ambiguities. Additional uncertainty about performance is due to the following: 1) Portfolio amortization: The main source of uncertainty in this transaction is the pace of amortization of the underlying portfolio, which can vary significantly depending on market conditions and have a significant impact on the notes' ratings. Amortization could accelerate as a consequence of high loan prepayment levels or collateral sales by the collateral manager or be delayed by an increase in loan amend-and-extend restructurings. Fast amortization would usually benefit the ratings of the notes beginning with the notes having the highest prepayment priority. 2) 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. 3) Around 40% of the collateral pool consists of debt obligations whose credit quality Moody's has been assessed by using credit estimates. 4) Foreign currency exposure: The deal has significant exposure to non-EUR denominated assets. Volatility in foreign exchange rates will have a direct impact on interest and principal proceeds available to the transaction, which can affect the expected loss of rated tranches. In addition to the quantitative factors that Moody's explicitly modelled, qualitative factors are part of the rating committee's considerations. These qualitative factors include the structural protections in the transaction, its recent performance given the market environment, the legal environment, specific documentation features, the collateral manager's track record and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, can influence the final rating decision. IRISH BANK: Gets Bankruptcy Court Approval for Sale of Loans ------------------------------------------------------------ Dawn McCarty at Bloomberg News reports that Irish Bank Resolution Corp., formed to complete the liquidation of Anglo Irish Bank Corp., received U.S. bankruptcy court approval for the sale of loans with nominal balances totaling more than US$19 billion. U.S. Bankruptcy Judge Christopher Sontchi approved the U.S. asset sales to purchasers including affiliates of Goldman Sachs Group Inc., Deutsche Bank AG and Lone Star Funds, Bloomberg says, citing an April 22 filing by Kiernan Wallace, the liquidator of the nationalized lender, in U.S. Bankruptcy Court in Wilmington, Delaware. Ireland's government seized the Dublin-based bank in January 2009 as its bad loans soared following the collapse of the nation's real-estate market, Bloomberg relates. IBRC filed for creditor protection in Delaware in August to protect its U.S. holdings during the wind-down, Bloomberg recounts. About Irish Bank Resolution Irish Bank Resolution Corp., the liquidation vehicle for what was once one of Ireland's largest banks, filed a Chapter 15 petition (Bankr. D. Del. Case No. 13-12159) on Aug. 26, 2013, to protect U.S. assets of the former Anglo Irish Bank Corp. from being seized by creditors. Irish Bank Resolution sought assistance from the U.S. court in liquidating Anglo Irish Bank Corp. and Irish Nationwide Building Society. The two banks failed and were merged into IBRC in July 2011. IBRC is tasked with winding them down and liquidating their assets. In February, when Irish lawmakers adopted the Irish Bank Resolution Corp., IBRC was placed into a special liquidation in the Irish High Court to complete liquidation and distribution of the two banks' assets. IBRC's principal asset as of June 2012 was a loan portfolio valued at some EUR25 billion (US$33.5 billion). About 70 percent of the loans were to Irish borrowers. Some 5 percent of the portfolio was under U.S. law, according to a court filing. Total liabilities in June 2012 were about EUR50 billion, according to a court filing. Most assets in the U.S. have been sold already. IBRC is involved in lawsuits in the U.S. IBRC was granted protection under Chapter 15 of the U.S. Bankruptcy Code in December 2013. Kieran Wallace and Eamonn Richardson of KPMG have been named the special liquidators. ========= I T A L Y ========= * ITALY: Number of Corporate Bankruptcies Up 4.6 in Q1 2014 ----------------------------------------------------------- ANSA reports that business information provider Cerved said Thursday the number of bankruptcies in Italy in the first quarter of 2014 rose by 4.6% over the same period last year. According to ANSA, the source said that the total number of company closures, however, fell by 3.5% compared to the first quarter of 2013. In all 23,000 Italian companies closed between January and March this year, ANSA discloses. "This improvement is due to a drop in the number of voluntary liquidations, which fell by 5%, and of non-bankruptcy procedures, which fell by 1.4%," ANSA quotes Cerved CEO Gianandrea De Bernardis as saying. ANSA notes that the agency said some 3,811 Italian companies went bankrupt in the first quarter of 2014. Bankruptcies rose throughout the country with the exception of the northeast, which registered a drop of 1.8%, ANSA relays. The sectors worst affected by default were services (up 7.3%) and construction (6.3%), ANSA states. =================== L U X E M B O U R G =================== KKR RETAIL: S&P Affirms 'B' LT Corp. Credit Rating -------------------------------------------------- Standard & Poor's Ratings Services affirmed its 'B' long-term corporate credit rating on KKR Retail Partners Midco S.a.r.l., the majority owner of French-based clothes retailer Groupe SMCP. The outlook is stable. At the same time, S&P withdrew its 'B' preliminary rating on KKR Retail Partners' subsidiary Groupe SMCP S.A.S., since it is a holding company below KKR Retail Partners Midco S.a.r.l. and does not have any outstanding debt. "We also affirmed our 'B' issue rating on KKR Retail Partners' EUR290 million senior secured notes. The recovery rating of '3' on these notes remains unchanged, indicating our expectation of meaningful (50%-70%) recovery in the event of a payment default," said S&P. The affirmation reflects S&P's assessment of the group's business risk profile as "fair." It operates in the highly fragmented affordable luxury segment. Although its focus is on already existing trends with the aim of lowering fashion risks, it is nonetheless dependent on trends, including the inherent risk of missing one or adopting it too late. Given the moderate level of customer diversification, with strong focus on women between 15 and 45 years in the medium to high income bracket, SMCP Groupe strongly depends on consumer sentiment in this segment. In addition, it has limited geographical diversification, given that around 65% of sales are in France. "We believe that planned investments in the U.S. and Asia will improve diversification somewhat, but they also imply a certain level of execution risk," said S&P. "Positively, we note that Groupe SMCP is one of the few clothes retailers in Europe with significant like-for-like sales growth. This is partially due to the group's positioning in the mid- market segment, which has been fairly resilient to recessionary trends over the past few years. SMCP has a well-established brand name which, in our view, is expensive and time-consuming to build, especially in the affordable luxury segment," said S&P. "Our assessment of the financial risk profile as "highly leveraged" reflects our forecast that the group's Standard & Poor's-adjusted FFO to-debt ratio will be between 7%-9% in 2014, 10%-12% in 2015. We also forecast debt to EBITDA of around 5.5x in 2014, falling to around 5x in 2015," said S&P. "Our financial risk assessment is capped at highly leveraged due to financial sponsor ownership," said S&P. "The stable outlook reflects our view that Groupe SMCP's current expansion program aimed at opening around 100 new stores a year will be successful and supported by positive like-for-like sales growth. As a result of the higher base, we expect revenue growth to fall from below 20% in 2014 to around 10% until 2016. We expect the group's reported EBITDA margin to decline by around 50 basis points (bps) a year until 2015. "Although we expect additional working capital needs and capex to fall from high 2013 levels, we nonetheless expect FOCF to remain negative at around EUR30 million in 2014, about the same as in 2013. In anticipation of continued EBITDA growth, lower tax payments, and further reduction in working capital and capex, we expect break-even free cash flow in 2015. "We might consider a negative rating action if Group SMCP's revenue growth or profitability was lower than we anticipate. This could happen if the group failed to expand as planned, or if there was a market-driven decrease in demand for fashion clothing. "Specifically, downside pressure could arise if it appeared increasingly likely that the group would find it difficult to generate positive FOCF on a sustainable basis from 2015, leading to further use of bank lines or the RCF. We could also become more cautious if the group's Standard and Poor's-adjusted EBITDA interest coverage fell significantly below 2x. "We might consider a positive rating action if revenues continued to rise significantly and the EBITDA margin stabilized near current levels or rose. Under this scenario, a positive rating action would also be contingent on an improvement in core leverage ratios well into the "aggressive" region on a sustainable basis. It would also depend on positive FOCF generation and the associated buildup of cash, which would serve as a buffer against unexpected losses, said S&P. ===================== N E T H E R L A N D S ===================== CID FINANCE: S&P Hikes Credit Rating on 2 Note Series to 'B+' ------------------------------------------------------------- Standard & Poor's Ratings Services raised to 'B+' from 'B' its credit ratings on CID Finance B.V.'s series 47 and series 48 notes. The upgrades follow S&P's recent rating action on the reference obligation. Under S&P's criteria applicable to transactions such as these, it would generally reflect changes to the rating on the reference obligation in its ratings in the transactions. CID Finance's series 47 and 48 are European repack transactions. NRG: High-Flux Reactor Faces Bankruptcy Risk -------------------------------------------- According to Bloomberg News' Fred Pals, television program Brandpunt, citing NRG director Niels Unger, reported on Wednesday that its high-flux reactor in Dutch town of Petten may file for bankruptcy and be closed. NRG, which operates the reactor, has asked the Dutch government to provide a credit facility while talking with banks on a loan of EUR80 million, Bloomberg relates. Maintenance works, technical issues have been hurting revenue, Bloomberg notes. High-flux reactor supplies isotopes used for cancer treatment. =========== N O R W A Y =========== NASSA MIDCO: S&P Assigns 'B' Rating to Proposed Sr. Sec. Loans -------------------------------------------------------------- Standard & Poor's Ratings Services said it assigned its 'B' long-term corporate credit rating to Nordic payment processor Nassa Midco AS (Nets). The outlook is stable. At the same time, S&P assigned its 'B' issue rating with a recovery rating of '4' to the proposed senior secured loans and RCF. S&P's rating on Nets is derived from its anchor of 'b+', based on its assessments of the company's business risk profile as "satisfactory" and its financial risk profile as "highly leveraged," and S&P's downward adjustment of one notch from the anchor, reflecting its comparable rating analysis. S&P's business risk profile assessment is supported by Nets' leading position in the Nordic payment system, high proportion of recurrent revenues, diversified product range and customer base, solid barriers to entry, and growth opportunities. Nets holds a strong market share as acquirer and issuer processor in the Nordic countries, and most households in Denmark and Norway use its direct debit solutions. S&P thinks that Nets' market share is so significant and its products so integrated into the banking system that it has a critical position within the entire Nordic payment system. Nets has long-standing experience in the Nordic payment market through providing Nordic banks with solutions for many years, and S&P understands that more than 85% of revenues are recurrent. Nets offers a broad range of products covering bank payments, digital identity solutions, card payments including issuer and acquirer processing, and financial acquiring. It is also the owner of the Danish national card scheme Dankort, and the processor of the Norwegian national card scheme, BankAxept. It has a diversified customer base including 260 banks and 600,000 direct and non-direct merchants. Furthermore, S&P thinks barriers to entry are high, since a customer opting for an alternative supplier could face significant switching costs and a lengthy process involving some operating risks. In some segments, particularly clearing and direct debit, S&P thinks it would be extremely difficult for a competitor to replace Nets. S&P expects the Nordic electronic payment market to grow, given the stable macroeconomic environment in Nordic countries, an already high level of sophistication including early adoption of digitalization and new solutions, and Nordic banks' willingness to outsource. These strengths are constrained by Nets' modest scale and limited geographic diversification, as 80% of revenues are generated in Denmark and Norway. It has modest profitability, with an adjusted EBITDA margin -- based on gross revenues including interchange -- of 14.4% in 2013. Price pressure exists, particularly from banks, but also from merchants, while competition from international competitors is likely to grow, as we consider scale to be a key competitive advantage. Nets also faces technology and regulatory risks. S&P's financial risk profile assessment is constrained by Nets' very high leverage, with a gross adjusted debt-to-EBITDA ratio of 9.8x in 2014. S&P's debt adjustments, in addition to operating leases, include DKK3.3 billion (EUR442 million) in payment-in- kind (PIK) notes in accordance with S&P's methodology, despite its lack of cash payments, structural subordination (being issued by Nassa Holdco AS, an entity outside of the restricted group), and maturity after the senior bank debt. Excluding the PIK notes, senior gross debt-to-EBITDA would still be very high at 6.8x. S&P's adjusted EBITDA measure is after restructuring costs and capitalized development costs, in line with S&P's methodology. This weakness is partly offset by EBITDA cash interest coverage of about 3x -- including S&P's understanding that floating interest rates will be substantially hedged in the medium term to mitigate the risk of rising interest expenses -- and our anticipation of stable funds from operations (FFO) of about DKK1 billion. "We apply a one-notch negative adjustment, based on our comparable rating analysis. This is because we assess Nets' business risk profile at the lower end of our "satisfactory" category, given its below average profitability and fairly small scale. Furthermore, we assess Nets' financial risk profile at the lower end of our "highly leveraged" category, due to its high leverage. Specifically, peer First Data Corp., which we rate higher than Nets but assess as having the same business and financial risk profiles, generates significantly higher revenues, reports a higher EBITDA margin, and has broader geographic diversification. We see Nets' credit quality as more comparable with that of highly leveraged U.K.-based payment processing company Ship Luxco 3 S.a.r.l (Worldpay)," S&P said. S&P's financial policy assessment is neutral for the rating, but it constrains our financial risk profile assessment at "highly leveraged." This is because Nets' adjusted debt to EBITDA is above 6x and because S&P believes that its private equity owners will continue to pursue a very aggressive financial policy over the medium term. The stable outlook reflects S&P's expectation that Nets will maintain adequate liquidity, EBITDA cash interest coverage of about 2.5x to 3.0x, and positive FOCF excluding clearing activities of at least DKK500 million. S&P could lower the ratings if revenues or EBITDA declined, for instance because of competitive pressure, which could lead S&P to reassess the business risk profile to "fair." S&P could also lower the ratings if liquidity was less than adequate or if covenant headroom fell below 15%. Rating upside appears remote over the next 12 months because S&P do not expect Nets' adjusted debt to EBITDA to decline to 6x. ============= R O M A N I A ============= FC DINAMO: Files for Insolvency ------------------------------- The Associated Press reports that FC Dinamo Bucharest has filed for insolvency, the fifth Romanian team in the top flight to do so in the past two years. AP says Dinamo, currently fourth in the league, submitted its application on May 14 with the Bucharest court, which is expected to name an administrator to handle the club's finances. The news agency relates that the club was hit financially after former executive chairman Cristi Borcea was sentenced in March to six years in prison for tax evasion in the transfer of players and Dinamo sponsor Gigi Netoiu was also sentenced to three years in the same case. Founded in 1948, Dinamo has won the league 18 times and won the Romanian Cup on 13 occasions. =========== R U S S I A =========== BRUNSWICK RAIL: S&P Lowers LT Corp. Credit Rating to 'B+' --------------------------------------------------------- Standard & Poor's Ratings Services lowered to 'B+' from 'BB-' its long-term corporate credit rating on Brunswick Rail Ltd., a rail freight car lessor in Russia. The outlook is stable. At the same time, S&P lowered to 'B+' from 'BB-' its issue rating on the company's US$600 million 6.5% senior unsecured notes due 2017 issued by Brunswick Rail Finance Ltd. The recovery rating on these notes is '3', indicating S&P's expectation of meaningful (50%-70%) recovery prospects in the event of a payment default. "The rating action reflects our view that Brunswick Rail is unlikely to materially improve its credit measures within the next 12-18 months to levels that we consider commensurate with a 'BB-' rating. On Dec. 31, 2013, Brunswick Rail's ratio of Standard & Poor's-adjusted funds from operations (FFO) to debt was 14%, which is below what we would expect for the 'BB-' rating. In our opinion, this result primarily reflects the downturn in the Russian rail freight market, which has resulted in the average gondola railcar spot market rental rate decreasing by 50% in 2013, compared to 2012. Brunswick Rail continues to diversify its fleet and took delivery of 2,564 new railcars in 2013, reducing the share of gondola railcars in its portfolio from 63% in 2012 to 60% in 2013. However, we believe that the company's current operating performance, albeit fairly robust, is unlikely to meet our previous expectation of more than 15% FFO to debt, on a sustainable basis. In 2014, we forecast that this ratio will be 12%-13%, which falls short of what we consider commensurate with a 'BB-' rating. "The rating action also takes into account Brunswick Rail's aggressive fleet expansion program, which we believe takes priority over deleveraging. In September 2013, the company adopted a growth strategy that will see its fleet size increase to 40,000 railcars in 2018. Management successfully executed a capital raising plan to support the strategy, completing a $150 million placement of preference shares with the European Bank of Reconstruction and Development (EBRD). Standard & Poor's considers the preference shares to be debt, although they are accounted for as equity under International Financial Reporting Standards (IFRS). We understand that the proceeds, together with the company's internal cash flows, will be used to acquire railcars at the current bottom of the cycle. That said, the company has a proven track record of reducing capital expenditure (capex) when it needs to; in 2009, the company cut capex to $38 million from $209 million the year before. Brunswick Rail's railcar fleet is modern at five years old on average and requires low maintenance capex. This enables the company to scale back on expansionary capex and generate positive free operating cash flow, if needed. "In addition to the difficult market conditions and weakening financial metrics, we also note a degree of refinancing risk related to a sizable debt maturity in the last quarter of 2014. We believe that Brunswick Rail will need new financing to repay around $100 million in finance leases. We view refinancing risk as manageable as we understand that the company is close to securing a deal with a selection of banks. In its base-case scenario for Brunswick Rail, S&P assumes: -- Revenue contraction of between 10%-15%, due to our expectation that the current soft conditions in the Russian rail freight market will continue over the next 12-18 months. -- The adjusted EBITDA margin will remain high at between 70%- 75%. -- Significant capex of about $150 million to support the growth strategy of expanding the fleet. Based on these assumptions, S&P arrives at the following credit measures: -- FFO to debt of about 12%-13% in 2014 and 2015. -- Debt to EBITDA of 5x and 4.5x in 2014 and 2015, respectively. The major constraints on the "fair" business risk profile are S&P's view of Brunswick Rail's exposure to industry cyclicality and high customer concentration. The company has a leading market position in the operating lease market for rail freight cars, which makes up about 15% of the Russian operating lease market. However, entrance by other competitors, especially peers with larger fleets, could challenge the company's 100% utilization rates and harm revenues and margins. "The stable outlook reflects our view that Brunswick Rail will maintain "adequate" liquidity and that adjusted FFO to debt will remain at about 12%, on a sustainable basis. It further reflects our expectation that Brunswick Rail's operating performance will remain robust, at least maintaining current EBITDA levels and high utilization rates. "We could lower the rating if the company fails to maintain "adequate" liquidity, for example as a result of failing to refinance the sizable fourth-quarter 2014 debt maturity well in advance. This could also occur if weakening economic conditions lead to further pricing pressure, lower utilization rates, and significant counterparty defaults. "Downward rating pressure could also arise from more aggressive financial policies, such as employing a larger capex program than we currently anticipate or large debt-funded acquisitions, without corresponding lease contracts, resulting in FFO to debt of sustainably below 12%. "We could consider a positive rating action if Brunswick Rail's credit metrics remain sustainably at levels that we consider commensurate with the higher end of an "aggressive" financial risk profile, such as FFO to debt of more than 16%, on a sustainable basis and "adequate" liquidity. This takes into account our assumption that the company's business risk profile will likely remain in the "fair" category, in light of the difficult industry conditions," said S&P. ========= S P A I N ========= HIPOTECARIO MIXTO V: Moody's Affirms Caa3 Rating on Class C Notes ----------------------------------------------------------------- Moody's Investors Service has confirmed ratings on Classes A and B, and affirmed Class C issued by AyT Hipotecario Mixto V, FTA Spanish residential mortgage backed securities. Issuer: AyT HIPOTECARIO MIXTO V, FTA EUR649.4M Class A Notes, Confirmed at Baa3 (sf); previously on Mar 17, 2014 Baa3 (sf) Placed Under Review for Possible Upgrade EUR12.2M Class B Notes, Confirmed at B3 (sf); previously on Mar 17, 2014 B3 (sf) Placed Under Review for Possible Upgrade EUR13.4M Class C Notes, Affirmed Caa3 (sf); previously on May 22, 2013 Downgraded to Caa3 (sf) The ratings were placed on review for upgrade on 17 March 2014, 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. The actions conclude the review of the notes mentioned above after a revision of key collateral assumptions and a detailed analysis of decreased sovereign risk and counterparty risk taking into account the new approach to swap counterparty linkage. The actions also reflect the correction of one model input in relation to the modelling of interest deferral triggers. Ratings Rationale The action is the result of a detailed analysis of counterparty risk and decreased sovereign risk combined with the correction of one model input since the last rating action. Regarding counterparty risk, at closing there were three unrated entities, whereas more than 60% of the pool is serviced by investment grade rated entities which positively affects our commingling risk assessment. However, the rating action on Classes A and B primarily reflects the insufficiency of credit enhancement to achieve a higher rating when combined with the correction of one of the inputs for interest deferral modelling for Classes B and C. Previously modelled Interest Deferral Triggers were assumed to be hit earlier than expected. This correction has a negative impact which offsets the reduced sovereign risk and improvement in servicer ratings. -- Key collateral assumptions Moody's has not revised the Milan CE assumption for this deal which remains at 15.0%. Moody's has also maintained its Expected Loss (EL) assumption as a percentage of original pool balance to 2.4%. Although the performance of AyT Hipotecario Mixto V has slightly deteriorated since March 2013: 90+ arrears as a percentage of pool's current balance increased from 2.09% as of March 2013 to 2.55% as of March 2014 and cumulative defaults as a percentage of original balance increased from 0.57% to 1.07% in the same period, Moody's considers this increase to be within its expectation. -- Exposure to Counterparty Risk Treasury Account is held by Barclays Bank Plc (A2/P-1). There is no back up servicer in place. This is a multi-servicer transaction, which partly mitigates servicer disruption risk. In addition, there is an independent BUS facilitator and independent cash manager. The conclusion of Moody's rating review of AyT Hipotecario Mixto V takes into consideration the exposure to Banco Bilbao Vizcaya Argentaria, S.A. (BBVA, Baa2/P-2)), Banco Mare Nostrum (NR) and CaixaBank (Baa3/P-3) as servicers. The conclusion of Moody's rating review of AyT Hipotecario Mixto V also takes into consideration the exposure to CECABank S.A. (Ba3/NP) which acts as swap counterparty. As part of its review, Moody's has incorporated the risk of additional losses on the notes in the event of them becoming un-hedged after a swap counterparty default, following the rating agency's updated approach to assessing swap counterparty linkage in structured finance cash flow transactions ("Approach to Assessing Swap Counterparties in Structured Finance Cash Flow Transactions" published on the 12 November 2013). Factors that would lead to an upgrade or downgrade of the ratings: Factors or circumstances that could lead to a downgrade of the ratings affected by the action would be the worse-than-expected performance of the underlying collateral, deterioration in the credit quality of the counterparties and an increase in sovereign risk. Factors or circumstances that could lead to an upgrade of the ratings affected by the action would be the better-than-expected performance of the underlying assets, and a decline in both counterparty and sovereign risk. The principal methodology used in this rating was "Moody's Approach to Rating RMBS Using the MILAN Framework" published in March 2014. PYMES BANESTO 3: S&P Lowers Credit Rating to 'Dsf' -------------------------------------------------- Standard & Poor's Ratings Services lowered to 'D (sf)' from 'CC (sf)' its credit rating on PYMES BANESTO 3, Fondo de Titulizacion de Activos' class C notes. PYMES BANESTO 3 issued the class C notes at closing to fund the reserve fund. The notes are subordinated to the reserve fund's replenishment in the priority of payments. On the April 2014 payment date, PYMES BANESTO 3 used the reserve fund for the first time. This decreased the reserve fund to 99.55% of its required level under the transaction documents. Consequently, the class C notes defaulted on their interest payment. "Our rating on PYMES BANESTO 3's class C notes address the timely payment of interest and the payment of principal during the transaction's life. We have therefore lowered to 'D (sf)' from 'CC (sf)' our rating on the class C notes, in accordance with our criteria (see "Timeliness of Payments: Grace Periods, Guarantees, And Use Of 'D' And 'SD' Ratings," published on Oct. 24, 2013)," said S&P. PYMES BANESTO 3 closed in January 2013 and securitizes secured and unsecured loans granted to small and midsized enterprises. Banco Espanol de Credito S.A., which merged with Banco Santander S.A., is the transaction's originator. =========== S W E D E N =========== DANNEMORA MINERAL: To Resume Production Under Reconstruction Plan ----------------------------------------------------------------- Andy Blamey at Platts reports that Sweden's Dannemora Mineral said it was set to resume iron ore mining yesterday after securing temporary funding under a "company reconstruction" plan. "As part of the reconstruction process, a liquidity plan has been developed which means that liquidity is assured for the next three months," Platts quotes the company as saying in a statement yesterday. On Tuesday, the company said it had applied for company reconstruction, a Swedish version of Chapter 11 bankruptcy, to allow for further discussions with investors about a long-term solution to secure the company's future business, Platts relates. Dannemora, which has been having financial trouble and struggling to meet interest payments on its debt, said Monday it had halted production at its iron ore mine in southeastern Sweden until further notice, Platts relays. Earlier this month, the company reported a first-quarter net loss of SEK84.8 million (US$13 million), compared with a net loss of SEK133.9 for in Q1 2013, Platts notes. Dannemora Mineral AB is a Swedish iron ore supplier. OVAKO GROUP: S&P Assigns Prelim. 'B' Corp. Credit Rating -------------------------------------------------------- Standard & Poor's Ratings Services said it had assigned its preliminary 'B' corporate credit rating to Sweden-based engineering steel producer Ovako Group AB (Ovako). The outlook is stable. "At the same time, we assigned our preliminary 'B' issue rating to the company's proposed EUR285 million senior secured notes, with a preliminary recovery rating of '4', indicating our expectation of average (30%-50%) recovery in the event of a payment default. "The preliminary rating is based on the company's plan to refinance its outstanding debt over the next few months with EUR285 million five-year senior secured notes. It also factors in that the company will sign a EUR40 million medium-term revolving credit facility (RCF) and that headroom under the financial covenants and permitted indebtedness baskets will enable the company to fund future working capital fluctuations. The preliminary rating takes into account a moderate interest rate on the notes, which would allow Ovako to achieve a ratio of funds from operations (FFO) to interest coverage above 3x, according to our base-case scenario. "The preliminary rating also reflects our assessments of Ovako's business risk profile as "weak" and its financial risk profile as "highly leveraged." Our assessment of company's financial risk profile as highly leveraged takes into account its Standard & Poor's-adjusted debt to EBITDA ratio of 7x-8x for 2014-2015, according to our base-case scenario. It also reflects the company's financial sponsor ownership and volatile profits and credit metrics. "Our assessment of Ovako's business risk profile as "weak" is based on the moderately high risk of the global metals and mining downstream industry and the company's "weak" competitive position. "The stable outlook reflects our expectation that Ovako's operating performance will improve in 2014 on the back of increasing industrial production in Europe, which should result in EBITDA of about EUR70 million and gradual deleveraging. We believe that a ratio of FFO to cash interest above 3x and adjusted debt to EBITDA of below 5.0x, excluding the shareholder loans, is commensurate with the current rating, given the weak business risk profile and limited FOCF generation," said S&P. ===================== S W I T Z E R L A N D ===================== SUNRISE COMMUNICATIONS: S&P Affirms 'B+' LT Corp. Credit Rating --------------------------------------------------------------- Standard & Poor's Ratings Services revised to stable from negative the outlook on Switzerland-based telecommunications company Sunrise Communications Holdings S.A. At the same time, S&P affirmed its 'B+' long-term corporate credit rating on the company. "The outlook revision reflects our current base-case forecast of improved operating performance at Sunrise. We anticipate reduced pricing pressures as the majority of its customers have migrated to lower-priced plans, and an improved cost base following the restructuring Sunrise has undertaken over the last 18 months. In addition, Sunrise has not taken additional measures to increase leverage since the issuance of its payment-in-kind (PIK) toggle notes in March 2013, which caused us to revise the outlook to negative (see "Sunrise Outlook Revised To Negative On Refinancing; 'B+' Rating Affirmed; Proposed PIK Toggle Notes Rated 'B-'," published on March 11, 2013, on RatingsDirect). "We have already observed some improvements in Sunrise's EBITDA at the end of 2013, but assess there may still be some risks associated with Sunrise's new mobile strategy. This focuses on allowing customers to move easily between different price plans, without tying them to service contracts, which could have implications for customer spending. However, given Sunrise's strong focus on network quality and customer service, as well as our anticipation of relatively stable macroeconomic conditions in Switzerland, we currently assume that risks related to this strategy are limited. "We estimate that Sunrise will continue to lose subscribers on the fixed-line segment, only partially mitigated by higher broadband speeds and growth in customers for Internet-protocol TV. We anticipate continued fierce competition in the fixed-line segment from the dominant network-based operators, Swisscom and Cablecom, particularly for "ultra-fast" broadband. "We assess Sunrise's business risk profile as "satisfactory," as our criteria define the term, underpinned by the company's established market position and brand in the mature Swiss telecoms market. Sunrise is the second-largest diversified telecoms operator, able to offer quadruple-play services (landline telephony, broadband, TV, and mobile) to about 85% of the Swiss population. Sunrise's business risk profile is also supported by the resilient and wealthy Swiss economy, and our view of the relatively stable competitive and regulatory landscape in the Swiss telecoms market, particularly in comparison to many of its peers in Europe. We also consider that Sunrise's competitive position benefits from the company's well- invested mobile network. However, Sunrise's business risk profile is constrained by the competition from the better-capitalized Swiss incumbent Swisscom AG, which has significantly higher fixed and mobile market share. "Our assessment of Sunrise's "highly leveraged" financial risk profile primarily reflects its meaningful debt burden and the aggressive financial policy pursued by the group's sponsor, private-equity company CVC Capital Partners, which we have seen in CVC's continued conversion of shareholder instruments into third-party debt at Sunrise's parent company, Mobile Challenger Intermediate Group S.A. (MCIG). We adjust the company's reported debt for the PIK toggle notes and preferred equity certificates at MCIG (a total of about swiss franc [CHF] 1.3 billion) and postponed spectrum license liabilities of about CHF200 million. The financial risk profile assessment also reflects Sunrises's moderate free cash flow generation, which we expect to weaken over the next couple of years following an increase in receivables related to handset sales and further high investments in the network, notably related to LTE (Long-Term Evolution) coverage. The main support factors for our assessment are Sunrise's solid interest coverage of more than 3x, including the interest on the PIK toggle notes at MCIG, and the company's relatively long-dated capital structure, with no debt maturities until 2017. S&P's base-case operating scenario for Sunrise assumes: -- Real GDP growth in Switzerland of 2.2% in 2014 and 2.5% in 2015, with the unemployment rate remaining low at about 3%. -- Revenue growth of 1%-3% in 2014, with increasing handset sales offsetting a continued moderate decline in fixed-line subscribers and meaningful decline in mobile ARPU (average revenue per user). -- Flat revenue growth in 2015, as we assume a significant decline in handset sales. -- Stable EBITDA margins in 2014, as we assume that an increase in handset volumes and related sales are offset by the removal of handset subsidies. -- Margin increase of about 2% in 2015 due to a decline in the cost of handset sales. -- High ratio of capital expenditure (capex) to sales of 14%- 15% in 2014, declining to about 13% in 2015 (excluding the payment of postponed license liabilities) as investments in LTE network coverage decrease. -- Declining debt in 2015 and 2016 due to the repayment of delayed spectrum license liabilities. Based on these assumptions, S&P arrives at the following credit measures: -- Funds from operations (FFO) to debt of about 10% in 2014 and 2015, up from about 9% at year-end 2013; -- Debt to EBITDA of about 5.8x in 2014, declining to about 5.5x in 2015 from 5.9x in 2013; -- FOCF to debt of about 2%-3% in 2014 and 2015, declining from about 6.5% in 2013; and -- Adjusted EBITDA interest coverage of more than 3x including interest on the PIK toggle notes at MCIG. The stable outlook reflects S&P's anticipation of stable operating performance in 2014, helping Sunrise to maintain leverage below 6x, which S&P views as commensurate with the current rating. Upside scenario "We do not anticipate an upgrade over the next 12 months as we believe that continued competitive pressures in the fixed-line segment and limited cash flow generation will constrain Sunrise's ability to reduce leverage. "We could upgrade Sunrise to 'BB-' if the company reduces its ratio of adjusted debt to EBITDA sustainably below 5x, and we believe that there is limited risk that leverage will return to higher levels," said S&P. Downside scenario "We could downgrade Sunrise to if we see continued operating pressures on the mobile segment, leading to further decline in revenues and profitability. "A downgrade is likely to occur if leverage increases to more than 6x with no short-term debt reduction prospects, or if EBITDA cash interest coverage, including PIK toggle interest, declines below 3x. This may happen if the company's new flexible-plan mobile strategy and the removal of handset subsidies lead to a meaningful increase in customer turnover. However, this is not our current forecast. "We may also consider a downgrade if the company's free operating cash flow is materially negative, excluding payments related to spectrum licenses," said S&P. ============= U K R A I N E ============= CREDIT DNEPR: Moody's Withdraws Caa3 Long-term Deposit Rating ------------------------------------------------------------- Moody's Investors Service has withdrawn Credit Dnepr Bank's Caa3 long-term local currency and Ca foreign-currency deposit ratings, Not Prime short-term deposit ratings, E standalone bank financial strength rating (BFSR), equivalent to a caa3 baseline credit assessment and Caa3.ua National Scale Rating (NSR). At the time of the withdrawal the bank's long-term deposit ratings carried a negative outlook, whilst the BFSR and the NSR carried no specific outlook. Ratings Rationale Moody's has withdrawn the rating for its own business reasons. Moody's has not adjusted these Credit Ratings before their withdrawal. Moody's National Scale Ratings (NSRs) are intended as relative measures of creditworthiness among debt issues and issuers within a country, enabling market participants to better differentiate relative risks. NSRs differ from Moody's global scale ratings in that they are not globally comparable with the full universe of Moody's rated entities, but only with NSRs for other rated debt issues and issuers within the same country. NSRs are designated by a ".nn" country modifier signifying the relevant country, as in ".mx" for Mexico. For further information on Moody's approach to national scale ratings, please refer to Moody's Rating Methodology published in October 2012 entitled "Mapping Moody's National Scale Ratings to Global Scale Ratings". =========================== U N I T E D K I N G D O M =========================== DRACO ECLIPSE 2005-4: S&P Cuts Rating on Class F Notes to CCC-sf ---------------------------------------------------------------- Standard & Poor's Ratings Services took various credit rating actions in DRACO (ECLIPSE 2005-4) PLC. Specifically, S&P has: -- Affirmed its 'B (sf)' rating on the class E notes; -- Lowered to 'CCC- (sf)' from 'CCC (sf)' our rating on the class F notes; and -- Withdrawn its ratings on the class A, B, C, and D notes The rating actions follow S&P's review of the underlying loan's credit quality and reflect its opinion on the risk of cash flow disruptions in the transaction. DRACO (ECLIPSE 2005-4) is a U.K. commercial mortgage-backed securities (CMBS) transaction that closed in December 2005. It was initially secured against five loans, four of which have fully repaid. One U.K. commercial property secures the pool's remaining loan. Since closing, the note balance has reduced to GBP7.94 million as of the April 2014 interest payment date (IPD) from GBP284.98 million. HERBERT HOUSE (100% OF THE SECURITIZED LOAN POOL) Herbert House, with an outstanding balance of GBP7.94 million, is secured by an office property in Birmingham's city center. A U.K.-based telecommunication services company leases the property. The lease is on a full repairing lease basis for a 25- year term from July 2000, with a break option in 2015. The borrower failed to repay the loan on the Jan. 7, 2014 loan maturity date. As a result, an event of default occurred under the facility agreement, and the loan entered special servicing. In the most recent investor report (dated March 18, 2014) the servicer reported a projected interest coverage ratio (ICR) of 1.87x. The July 2012 property valuation of GBP5.1 million reflects a 157% loan-to-value ratio. "In our analysis, we have assumed principal losses in our expected base-case scenario," S&P said. CASH FLOW ANALYSIS The earlier repayment of four of the five initial loans caused a spread compression between the remaining loan and the remaining notes. On the IPDs where there are increased issuer prior ranking fees and expenses, the remaining loan's interest payments may not be sufficient to fully match the coupon on the remaining class E and F notes, in S&P's opinion. "The class F notes are subject to an available funds cap (AFC) mechanism that limits interest due and payable to what is available. Therefore, we are able to treat the interest payments on a class of notes with an AFC mechanism as a pass-through by the issuer of its available income. Consequently, this meets our requirements for the timely payment of interest (to the extent that the AFC mechanism does not cover default risk)," said S&P. The class E notes are not subject to an AFC mechanism that would protect it against cash flow disruptions resulting from loan repayments. The class E notes are therefore more vulnerable to cash flow disruptions, in our opinion. RATING ACTIONS "Our ratings in DRACO (ECLIPSE 2005-4) address the timely payment of interest and payment of principal no later than the October 2017 final legal maturity date. "We have withdrawn our ratings on the class A, B, C, and D notes as these classes of notes have fully repaid. "We believe that the class E notes' creditworthiness has not changed. The available credit enhancement for the class E notes is adequate to mitigate asset credit and/or liquidity risks at its current rating level, in our view. We have therefore affirmed our 'B (sf)' rating on the class E notes. "We believe that the class F notes have become more vulnerable to principal losses. We have therefore lowered to 'CCC- (sf)' from 'CCC (sf)' our rating on the class F notes," said S&P. RATINGS LIST DRACO (ECLIPSE 2005-4) PLC GBP284.978 mil commercial mortgage-backed floating-rate notes Rating Class Identifier To From A XS0238139983 NR A+ (sf) B XS0238140569 NR A (sf) C XS0238140999 NR BBB (sf) D XS0238141377 NR BB (sf) E XS0238141617 B (sf) B (sf) F XS0238142342 CCC- (sf) CCC (sf) NR-Not Rated. RANGERS FOOTBALL: Faces Director Disqualification Action -------------------------------------------------------- The Scotsman reports that former Rangers supremo Craig Whyte is facing a legal move to disqualify him from being a company director. The venture capitalist took over the Ibrox club in 2011 when he bought the controlling interest in Rangers from majority shareholder Sir David Murray for GBP1, The Scotsman relates. But the club was plunged into administration the following year following moves at the Court of Session in Edinburgh and later went into liquidation before a consortium led by Charles Green was able to buy out the business, The Scotsman recounts. Mr. Whyte, 43, is now facing an action at the same court by a Government department over his fitness to be a company director, The Scotsman discloses. The action has been brought by the Secretary of State for Business Innovation and Skills, The Scotsman notes. An initial hearing in the case is expected to take place next week before one of the court's commercial judges, Lord Tyre, The Scotsman says. About Rangers Football Club Rangers Football Club PLC -- http://www.rangers.premiumtv.co.uk/ -- is a United Kingdom-based company engaged in the operation of a professional football club. The Company has launched its own Internet television station, RANGERSTV.tv. The station combines the use of Internet television programming alongside traditional Web-based services. Services offered include the streaming of home matches and on-demand streaming of domestic and European games, which include dedicated pre-match, half-time and post- match commentary. The Company will produce dedicated news magazine and feature programs, while the fans can also access a library of classic European, Old Firm and Scottish Premier League (SPL) action. Its own dedicated television studio at Ibrox provides onsite production, editing and encoding facilities to produce content for distribution on all media platforms. SIGNET UK: Moody's Rates US$400MM Senior Unsecured Notes 'Ba1' -------------------------------------------------------------- Moody's Investors Service assigned a Ba1 rating on the proposed US$400 million senior unsecured notes to be issued by Signet UK Finance plc, an indirect subsidiary of Signet Jewelers Limited (together, "Signet"). All other ratings are unchanged, including the company's Ba1 Corporate Family Rating (CFR), Ba1-PD Probability of Default Rating (PDR) and SGL-1 liquidity rating. The ratings are subject to review of final documentation and completion of the transaction as proposed. On February 19, 2014, Signet announced that it entered into a definitive agreement to acquire Zale Corporation ("Zale") for US$21 per share in a transaction valued at about US$1.4 billion. The transaction is expected to be financed with a combination of US$800 million of unsecured debt, including the proposed US$400 notes and a committed US$400 million term loan, and the securitization of US$600 million of Signet's U.S. accounts receivable portfolio. The transaction is subject to approval by Zale shareholders, and is expected to close by the end of 2014. The following ratings were assigned to Signet UK Finance plc: US$400 million unsecured notes at Ba1 (LGD4, 57%) Ratings Rationale The Ba1 Corporate Family Rating reflects Signet's position as the largest specialty retail jeweler in the U.S. and U.K., its well- recognized brand names, and solid execution and marketing, all of which drive strong profitability. The rating also acknowledges the strategic benefits of the proposed acquisition of Zale, which will strengthen Signet's leading position in the U.S. while adding the leading jewelry store brand in Canada. The rating also acknowledges Signet's very good liquidity, supported by the expectation that balance sheet cash and cash flow will be more than sufficient to cover required cash flow needs over the next 12-18 months. The rating also reflects, however, the company's weak pro forma debt protection measures combined with a narrow focus on a discretionary product with a demonstrated sensitivity to weak economic conditions. Signet is purchasing a company with a much weaker credit profile. While Zale's operating margins have improved over the past two years due to successful implementation of a turnaround plan, it is still in the early stages and margins remain very low, at around 2.5% -- well below Signet's approximately 13.5% margin. When coupled with the acquisition debt, pro forma lease-adjusted debt/EBITDA for the twelve months ended February 1, 2014, will be high at about 4.4 times. While significant synergies are expected, integration risk does exists and it will likely take several years to fully execute the integration plan. The company is committed to achieving approximately $100 million in annual synergies within three full fiscal years of closing, through the leveraging of the combined company's scale and geographic reach, sourcing capabilities, marketing efficiencies and store rationalization. The stable outlook reflects Moody's expectation that the company will successfully integrate Zale without disruption over the next several years, and that debt protection metrics will modestly improve over time through a combination of organic revenue growth and revenue/cost saving synergies. Ratings could be upgraded if the company continues to exhibit strong revenue growth while improving consolidated margins and generating consistent positive free cash flow. The company would also need to maintain a balanced financial policy, including the use of free cash flow to reduce debt. Specific metrics include lease-adjusted debt/EBITDA sustained near 3.5 times and retained cash flow to net debt above 20%. Signet's ratings could be downgraded if operating performance or integration issues cause lease-adjusted debt/EBITDA to increase above 4.5 times, retained cash flow to net debt fall below 12.5% or EBITA/Interest below 3.25 times on a sustained basis. Signet UK Finance plcis an indirect subsidiary of Bermuda-based Signet Jewelers Limited (together, "Signet"). Signet is the leading specialty jewelry retailer in the U.S. and U.K., operating over 1,900 stores and e-commerce websites. Zale Corporation ("Zale") is a leading specialty jewelry retailer in the U.S. and Canada, operating approximately 1,680 retail locations and e-commerce websites. Pro forma revenue approaches US$6.1 billion. =============== X X X X X X X X =============== * BOOK REVIEW: The First Junk Bond ---------------------------------- Author: Harlan D. Platt Publisher: Beard Books Softcover: 236 pages List Price: $34.95 Review by Gail Owens Hoelscher Order your personal copy today and one for a colleague at http://www.beardbooks.com/beardbooks/the_first_junk_bond.html Only one in ten failed businesses is equal to the task of reorganizing itself and satisfying its prior debts in some fashion. This engrossing book follows the extraordinary journey of Texas International, Inc (known by its New York Stock Exchange stock symbol, TEI), through its corporate growth and decline, debt exchange offers, and corporate renaissance as Phoenix Resource Companies, Inc. As Harlan Platt puts it, TEI "flourished for a brief luminous moment but then crashed to earth and was consumed." TEI's story features attention-grabbing characters, petroleum exploration innovations, financial innovations, and lots of risk taking. The First Junk Bond was originally published in 1994 and received solidly favorable reviews. The then-managing director of High Yield Securities Research and Economics for Merrill Lynch said that the book "is a richly detailed case study. Platt integrates corporate history, industry fundamentals, financial analysis and bankruptcy law on a scale that has rarely, if ever, been attempted." A retired U.S. Bankruptcy Court judge noted, "(i)t should appeal as supplementary reading to students in both business schools and law schools. Even those who practice in the areas of business law, accounting and investments can obtain a greater understanding and perspective of their professional expertise." "TEI's saga is noteworthy because of the company's resilience and ingenuity in coping with the changing environment of the 1980s, its execution of innovative corporate strategies that were widely imitated and its extraordinary trading history," says the author. TEI issued the first junk bond. In 1986 it achieved the largest percentage gain on the NYSE, and in 1987 suffered the largest percentage loss. It issued one of the first bonds secured by a physical commodity and then later issued one of the first PIK (payment in kind) bonds. It was one of the first vulture investors, to be targeted by vulture investors later on. Its president was involved in an insider trading scandal. It innovated strip financing. It engaged in several workouts to sell off operations and raise cash to reduce debt. It completed three exchange offers that converted debt in to equity. 205In 1977, TEI, primarily an oil production outfit, had had a reprieve from bankruptcy through Michael Milken's first ever junk bond. The fresh capital had allowed TEI to acquire a controlling interest of Phoenix Resources Company, a part of King Resources Company. TEI purchased creditors' claims against King that were subsequently converted into stock under the terms of King's reorganization plan. Only two years later, cash deficiencies forced Phoenix to sell off its nonenergy businesses. Vulture investors tried to buy up outstanding TEI stock. TEI sold off its own nonenergy businesses, and focused on oil and gas exploration. An enormous oil discovery in Egypt made the future look grand. The value of TEI stock soared. Somehow, however, less than two years later, TEI was in bankruptcy. What a ride! All told, the book has 63 tables and 32 figures on all aspects of TEI's rise, fall, and renaissance. Businesspeople will find especially absorbing the details of how the company's bankruptcy filing affected various stakeholders, the bankruptcy negotiation process, and the alternative post-bankruptcy financial structures that were considered. Those interested in the oil and gas industry will find the book a primer on the subject, with an appendix devoted to exploration and drilling, and another on oil and gas accounting. Harlan Platt is professor of Finance at Northeastern University. He is president of 911RISK, Inc., which specializes in developing analytical models to predict corporate distress. ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than US$3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/booksto order any title today. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Europe is a daily newsletter co- published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA. Valerie U. Pascual, Marites O. Claro, Rousel Elaine T. Fernandez, Joy A. Agravante, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2014. All rights reserved. ISSN 1529-2754. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Europe subscription rate is US$775 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter Chapman at 215-945-7000 or Nina Novak at 202-241-8200. * * * End of Transmission * * *