/raid1/www/Hosts/bankrupt/TCREUR_Public/140613.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, June 13, 2014, Vol. 15, No. 116
Headlines
A U S T R I A
HYPO ALPE-ALDRIA: Austria Plans to Bail In EUR890MM Sub. Debt
B E L G I U M
ONTEX IV: S&P Puts 'B' CCR on CreditWatch Positive
F I N L A N D
PAROC GROUP: S&P Assigns 'B' Corp. Credit Rating; Outlook Stable
G E R M A N Y
DECO 7-PAN EUROPE: S&P Withdraws 'BB+' Rating on Class A2 Notes
WINDERMERE VII: S&P Lowers Ratings on Two Note Classes to 'D'
WINDERMERE X: S&P Lowers Ratings on Three Note Classes to 'D'
I R E L A N D
PARIS BAKERY: Revenue to Step in on Bakery Worker Dispute
SHOE RACK: Examiner Gains More Time to Draw Up Survival Plan
I T A L Y
AERADRIA SPA: July 14 Tender Offer Deadline Set
ITALFINANCE SECURITISATION: Moody's Lifts Rating on D Notes to B2
UNIPOLSAI ASSICURAZIONI: Moody's Rates Junior Bonds 'Ba2(hyb)'
L U X E M B O U R G
GSC EUROPEAN I-R: S&P Raises Rating on Class E Notes to 'BB-'
R O M A N I A
OTEL GALATI: Second-Richest Romanian Businessman Arrested
* ROMANIA: Insolvencies Fell 14% in the First 4 Months of 2014
R U S S I A
ALLIANCE OIL: S&P Keeps 'B-' CCR on CreditWatch Negative
S L O V E N I A
ENGROTUS: Celje District Court Launches Restructuring Procedure
S P A I N
PESCANOVA SA: Creditor Banks to Commence Insolvency of Units
S W I T Z E R L A N D
GATEGROUP HOLDING AG: Moody's Affirms 'B1' Corp. Family Rating
U N I T E D K I N G D O M
HEARTS OF MIDLOTHIAN: Officially Exits Administration
JACOB H: High Court Winds Up LGV Training Company
LCP PROUDREED: S&P Withdraws 'B' Ratings on Two Note Classes
MERGERMARKET GROUP: S&P Affirms 'B' CCR; Outlook Stable
PIPE HOLDINGS: S&P Withdraws 'BB' Corporate Credit Rating
UK COAL: Hargreaves Services Withdraws Loan Plan
X X X X X X X X
* BOOK REVIEW: Risk, Uncertainty and Profit
*********
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A U S T R I A
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HYPO ALPE-ALDRIA: Austria Plans to Bail In EUR890MM Sub. Debt
-------------------------------------------------------------
James Shotter at The Financial Times reports that the Austrian
government plans to bail in EUR890 million of publicly guaranteed
subordinated debt in Hypo Alpe Adria, in an attempt to ensure
that investors as well as taxpayers shoulder the burden of
winding down the Austrian lender.
Austrian Finance Minister Michael Spindelegger said the draft
Hypo law, approved by Austrian ministers on Wednesday, should
come as no surprise to investors, as the government had made
clear in March that it intended to take such steps, the FT
relates.
"This legislation only affects holders of subordinated bonds with
a guarantee from the state of Carinthia, and no one else,"
Mr. Spindelegger told the FT. "It has absolutely no impact on
any other case. We designed this law specifically for Hypo Alpe
Adria, so you can't conclude from this that we won't stand by
other obligations."
The proposed law must now be approved by Austria's parliament,
and could also be challenged by investors, the FT says.
According to the FT, Vienna Insurance Group and Uniqa, Austria's
two biggest insurers, stand to lose about EUR50 million and
EUR35 million respectively if the law is introduced as planned,
and both said on Wednesday that they would take steps to protect
their rights.
The Austrian government is also targeting a contribution of
EUR800 million from BayernLB, the regional German lender that
co-owned Hypo when it had to be nationalized in 2009 after an
over-rapid expansion into the Balkans left the bank saddled with
large amounts of toxic assets, the FT notes.
The legislation paves the way for a so-called bad bank to be set
up to wind down about EUR18 billion in assets from Hypo, which
has received EUR5.75 billion in state aid in the years since its
nationalization, the FT states.
About Hypo Alpe-Adria
Hypo Alpe-Adria International AG is a subsidiary of BayernLB. It
is active in banking and leasing. In banking, HGAA serves both
corporate and retail customers and offers services ranging from
traditional lending through savings and deposits to complex
investment products and asset management services.
Hypo Alpe has received EUR1.75 billion in aid in emergency
capital from the Austrian government. European Union Competition
Commissioner Joaquin Almunia said in March 2013 that Hypo faced
possible closure for failing to adequately restructure.
The European Commission approved Hypo's recapitalization in
December 2013, but made it conditional on the management
presenting a thorough plan to overhaul the group. The Austrian
finance ministry, which effectively runs Hypo Alpe, submitted a
restructuring plan to the Commission on Feb. 5.
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B E L G I U M
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ONTEX IV: S&P Puts 'B' CCR on CreditWatch Positive
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Standard & Poor's Ratings Services placed its 'B' long-term
corporate credit rating on Belgium-based manufacturer of hygienic
disposables, Ontex IV S.A., on CreditWatch with positive
implications.
At the same time, S&P placed the 'B' and 'CCC+' issue ratings on
Ontex's debt on CreditWatch positive.
The CreditWatch placement follows Ontex Group's announcement that
it is seeking to issue equity through an IPO on Euronext
Brussels, from which it expects to raise about EUR325 million,
resulting in about 25% of free float. S&P expects the company to
use the net proceeds from the transaction for debt repayment. If
gross proceeds reach EUR325 million and Ontex repays EUR280
million of its senior secured debt, as is currently the plan, S&P
believes this transaction could enhance the group's financial
risk profile and may result in a higher group credit profile.
If Ontex achieves a 25% free float and uses the proceeds to repay
its senior secured debt, while also meeting listing requirements,
S&P would likely revise its financial policy score on the group
to Financial Sponsor (FS)-5 from FS-6. This would be to reflect
the greater presence of minorities not associated with financial
sponsors.
If the IPO and the associated debt reduction go to plan, S&P
anticipates that debt protection metrics will likely improve to
the lower end of the "aggressive" category under its criteria,
resulting in an anchor of 'bb-' for the group. However, assuming
that the IPO is successful, the overall rating would be dependent
on the group financial policy post the IPO. The rating will also
be dependent on whether debt metrics are likely to improve over
the medium term to the higher end of the range that S&P considers
commensurate with an "aggressive" financial risk profile.
S&P intends to resolve the CreditWatch placement following the
completion of Ontex's planned IPO. S&P will assess the impact of
any debt reduction on both the group's and Ontex's financial risk
profiles, as appropriate. However, if Ontex Group does not
complete the proposed IPO as currently described, S&P would
reevaluate the CreditWatch placement and ratings.
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F I N L A N D
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PAROC GROUP: S&P Assigns 'B' Corp. Credit Rating; Outlook Stable
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Standard & Poor's Ratings Services assigned its 'B' long-term
corporate credit rating to Finland-based stone wool insulation
materials provider Paroc Group Oy. The outlook is stable.
At the same time, S&P assigned its 'B' issue rating to the EUR430
million senior secured notes due 2020, issued by Paroc. The
recovery rating on these notes is '4', indicating S&P's
expectation of meaningful (30%-50%) recovery in the event of a
payment default.
The ratings on Paroc reflect S&P's assessment of the group's
financial risk profile as "highly leveraged" and business risk
profile as "fair," as S&P's criteria define these terms.
Paroc issued EUR430 million of senior secured notes, and used the
proceeds to repay EUR351.8 million of existing term debt and
partially repay EUR105 million of existing shareholder loans and
accrued payment-in-kind (PIK) interest.
After the refinancing, the group's capital structure now includes
EUR37.8 million of shareholder loans that accrue PIK interest at
10%, which S&P considers to be an aggressive rate. S&P views
these loans as debt under its criteria.
Paroc's "fair" business risk profile indicates that Paroc is the
No. 1 stone wool insulation manufacturer in the Nordic region and
also has a leading position in the Baltic region and a growing
presence in Russia. The group benefits from a strong and
recognizable brand and good pricing power. Paroc benefits from
relatively high barriers to entry. It owns its own stone
quarries, has production assets located near to its end customers
and benefits from the strengthening of regulations governing the
use of its product in offshore and marine applications for
environmental reasons.
Tempering these strengths is Paroc's exposure to cyclical
construction end markets; this can result in more-volatile demand
for the group's products. Paroc is also generating more revenue
in higher-risk countries such as Russia. Although a very
flexible cost base enables the group to protect its margins when
markets are choppy, Paroc's absolute EBITDA has exhibited high
volatility in the past and could do so again in the future,
especially if the group's efforts to aggressively expand the
business meet a sudden sharp drop in demand.
Taking historical performance into account, S&P considers that
the group exhibits average profitability compared with many rated
building materials peers. S&P forecasts that Paroc's Standard &
Poor's-adjusted EBITDA margin will be about 18%-19% for the
financial year ending Dec. 31, 2014. In S&P's criteria, it
defines average profitability as an adjusted EBITDA margin of 9%-
18%.
Paroc plans to embark on a sizable capital expenditure (capex)
plan to invest in a second production line in Russia and S&P
forecasts that capex will reach about 15% of revenues in 2015,
before returning to normal levels of about 4%-5% of revenues in
2016 and beyond. A continued rise in demand for Paroc's products
in its main markets, specifically Russia, is crucial to the
volumes S&P assumes in its base case.
S&P assess Paroc's management and governance as "fair,"
reflecting its experienced management team and clear organic
growth plans.
S&P deems Paroc's financial policy score to be 'FS-6', as the
group has a tolerance for high leverage and aggressive
shareholder returns.
S&P's base-case operating scenario for Paroc in 2014 assumes:
-- Revenue growth of about 5% to more than EUR450 million.
-- An improvement in the group's EBITDA margin toward 19%, as
management continues to optimize the cost base.
-- Adjusted funds from operations (FFO) of about EUR40
million, continuing a trend of robust cash flow generation.
-- Capex of up to EUR44 million in 2014, and just over EUR70
million in 2015, resulting in negative free operating cash
flow until at least 2016.
-- A potential partial draw-down on Paroc's new revolving
credit facility (RCF), to fund capex.
-- No major acquisitions or divestitures.
This results in the following credit measures in 2014:
-- FFO to debt of 7%-8%, including shareholder loans (about 9%
excluding these instruments); and
-- Debt to EBITDA of just under 6x, including shareholder
loans (just over 5x without).
The stable outlook signifies S&P's expectation that Paroc will be
able to increase its revenues and slightly improve its margins
over the 12-month rating horizon, while investing heavily to meet
anticipated growth in demand. S&P forecasts that the group's
adjusted debt to EBITDA, including shareholder loans, should be
just under 6x in 2014, and that its cash interest cover will be
good at about 3x. However, the group's free operating cash flow
will likely be negative due to its sizable capex plan, which will
probably result in the group drawing on its RCF to fund its
investment spend. If pricing in the sector were to become more
competitive, a lower-than-expected EBITDA growth rate could
result in weaker leverage metrics.
S&P could lower the ratings if Paroc were to experience severe
margin pressure, or poorer cash flows, leading to weaker credit
metrics. This could occur if the company did not curtail its
capital expenditure in time to reduce debt before a potential
drop in earnings. Downward rating pressure may also stem from
debt-funded acquisitions or increased shareholder returns.
S&P considers the scope for raising the ratings limited at this
stage, because of Paroc's high leverage and limited prospects for
deleveraging over the 12-month rating horizon--it plans to spend
any excess cash on capex. The FS-6 financial policy assessment
effectively caps the financial risk profile at "highly
leveraged," because it creates increased uncertainty regarding
the possibility of future releveraging, aggressive shareholder
returns, and changes to the group's acquisition/disposal
strategy.
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G E R M A N Y
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DECO 7-PAN EUROPE: S&P Withdraws 'BB+' Rating on Class A2 Notes
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Standard & Poor's Ratings Services withdrew its 'BB+ (sf)' rating
on DECO 7 - Pan Europe 2 PLC's class A2 notes. At the same time,
S&P has affirmed its ratings on all other classes of notes.
The rating actions follow S&P's review of the credit quality of
the four remaining loans under its European commercial mortgage-
backed securities (CMBS) criteria.
S&P's review follows the Tiago loan's full repayment (EUR94.9
million) on the April 2014 interest payment date (IPD).
KARSTADT KOMPAKT (50% OF THE POOL)
The loan is secured by a portfolio of 21 retail properties in
Germany. The properties are generally in small- to medium-sized
towns or in suburban locations of major cities. The properties
are either three- to five-story department stores or two-story
malls.
The single-tenant occupier of the portfolio, Karstadt, filed for
insolvency in2008. In December 2010, the servicer notified the
borrower of an event of default due to Karstadt's failure to pay
rent on certain properties since 2008. The loan entered special
servicing on Dec. 15, 2010.
The properties currently generate no income as they are vacant.
As of the April 2014 IPD, the loan's securitized loan-to-value
(LTV) ratio was 239.2%, based on a March 2011 valuation.
S&P has assumed losses on the loan in its expected-case scenario.
WORLD FASHION CENTER (34% OF THE POOL)
The loan is secured by an office complex comprised of three
towers and an exhibition hall in Amsterdam.
The property is the center for business-to-business activity
between fashion designers and retailers in the Amsterdam and
Benelux region. These tenants use the property for office and
showroom space. The property's tenants are primarily fashion
companies/designers that organize and show their latest lines to
industry retailers at the property.
The loan was due to mature in April 2014. However, following the
borrower's request, the maturity of the loan was extended by the
servicer until October 2015, subject to certain amortization
targets.
The property is currently 77.4% occupied. As of the April 2014
IPD, the loan's securitized LTV ratio was 56.5%, based on a
September 2005 valuation.
S&P has assumed losses on the loan in its expected-case scenario.
PROCOM LOAN (12% OF THE POOL)
The loan is secured by three retail assets in Germany
(Neumunster, Erfurt, and Ludwigslust). The loan did not repay at
maturity in November 2012 and entered special servicing.
There were eight properties securing the loan at closing. Five
were sold in December 2013 for a total of EUR16.3 million, which
was slightly above the latest market valuation. These proceeds
were applied to pay down the notes on the April 2014 IPD.
The remaining properties are currently 96.9% occupied. As of the
April 2014 IPD, the loan's securitized LTV ratio was 89.0%, based
on a February 2014 valuation.
S&P has assumed no losses on the loan in its expected-case
scenario.
SCHMEING LOAN (4% OF THE POOL)
The loan is secured by three retail properties in Germany
(Borken, Hamburg, and Recklinghausen). The loan failed to repay
on the scheduled maturity date in October 2012 and entered
special servicing.
The special servicer entered into a loan sale agreement with
affiliates of the borrower on Feb. 20, 2014, for a total purchase
price of EUR7.5 million. The loan sale was scheduled to be
completed on April 15, 2014. However, the purchasers failed to
deliver certain necessary closing documents by April 15, 2014.
The special servicer is deciding whether to extend the sale's
closing period until the July 2014 IPD.
S&P has assumed losses on the loan in its expected-case scenario.
INTEREST SHORTFALLS
Interest shortfalls on the class B to H notes first occurred on
the October 2012 IPD. These shortfalls were due to the
revaluation of the Karstadt Kompaktloan, which triggered an
appraisal reduction and meant that the amount that could be drawn
under the liquidity facility at each IPD is limited. Therefore,
when there are insufficient funds from asset sales to pay the
interest due on the loan, the issuer is not able to draw for the
full shortfall amount. As a result interest shortfalls have
occurred on the notes.
The shortfalls on the class B to G notes were subsequently repaid
by the July 2013 IPD. This is due to the fact that there have
been sale proceeds collected every quarter since Q1 2013 from the
Karstadt loan which have been partially used to pay interest on
the loan and in turn on the notes. Currently, only the class H
notes are experiencing interest shortfalls. However, there is
still the risk of cash flow disruptions to all classes of notes
since interest payment on the loan (and in turn on the notes) is
reliant on property sales since the the use of the liquidity
facility is limited.
RATING ACTIONS
S&P's ratings in DECO 7 - Pan Europe 2 address the timely payment
of interest and ultimate payment of principal no later than the
legal final maturity date in January 2018.
Following the Tiago loan's repayment, the cash manager used the
funds to fully repay the class A2 notes and to partially repay
the class B notes. S&P has therefore withdrawn its 'BB+ (sf)'
rating on the class A2 notes.
Although the credit enhancement to the class B notes has
increased, S&P's rating on the class B notes is constrained at
'BB- (sf)' due to the potential risk of cash flow disruptions.
S&P has therefore affirmed its 'BB- (sf)' rating on the class B
notes.
S&P's analysis indicates that the available credit enhancement
for the class C notes is sufficient to address its principal loss
expectations under a 'B- (sf)' rating stress scenario. S&P has
therefore affirmed its 'B- (sf)' rating on this class of notes.
S&P has affirmed its 'CCC- (sf) rating on the class D notes and
its 'D (sf)' rating on the class E to H notes. This is because
S&P's ratings on these notes already reflect its principal loss
expectations and previous interest shortfalls.
RATINGS LIST
DECO 7 - Pan Europe 2 PLC
EUR1.556 bil commercial mortgage-backed variable-
and floating-rate notes
Rating
Class Identifier To From
A2 243575AB3 NR BB+ (sf)
B 243575AD9 BB- (sf) BB- (sf)
C 243575AE7 B- (sf) B- (sf)
D 243575AF4 CCC- (sf) CCC-
(sf)
E 243575AG2 D (sf) D (sf)
F 243575AH0 D (sf) D (sf)
G 243575AJ6 D (sf) D (sf)
H 243575AK3 D (sf) D (sf)
NR-Not Rated.
WINDERMERE VII: S&P Lowers Ratings on Two Note Classes to 'D'
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Standard & Poor's Ratings Services lowered to 'D (sf)' its credit
ratings on Windermere VII CMBS PLC's class E and F notes.
The downgrades reflect the issuer's principal loss allocation to
the class E and F notes following the Redleaf I loan's
liquidation.
The underlying pool initially comprised 12 loans secured on real
estate assets in Germany, France, Spain, and Sweden. On the
April 2014 interest payment date (IPD), three loans remained,
with a total securitized loan balance of EUR111.3 million. The
remaining loans are secured on 15 offices; two of them are
located in Germany and 13 are located in France.
Following the February 2014 sale of the properties backing the
EUR24.5 million Readleaf I loan, the issuer applied on the April
2014 IPD a total of EUR19.2 million in principal losses to the
notes in reverse sequential order. As a result, the issuer has
entirely written off the class F notes and the class E notes have
been allocated EUR2.8 million in principal losses.
S&P's ratings in Windermere VII CMBS address the timely payment
of interest and the payment of principal by the legal final
maturity date in April 2016. As a result of the issuer's
principal loss allocation, S&P has lowered to 'D (sf)' its
ratings on the class E and F notes, in line with its relevant
criteria.
Windermere VII CMBS is a 2006-vintage European multi-loan
commercial mortgage-backed securities (CMBS) transaction. It was
originally secured on 12 loans, of which nine have repaid.
RATINGS LIST
Windermere VII CMBS PLC
EUR782.25 mil commercial mortgage-backed floating-rate notes
Rating Rating
Class Identifier To From
E 973224AG3 D (sf) B- (sf)
F 973224AH1 D (sf) CCC- (sf)
WINDERMERE X: S&P Lowers Ratings on Three Note Classes to 'D'
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Standard & Poor's Ratings Services lowered its credit ratings on
Windermere X CMBS Ltd.'s class A, B, C, and D notes. At the same
time, S&P has affirmed its 'D (sf)' ratings on the class E and F
notes.
The rating actions follow S&P's review of the credit quality of
the six remaining loans under our European commercial mortgage-
backed securities (CMBS) criteria.
Following updated market valuations that the servicer received
for the properties secured by the Bridge loan, the IFB and Pavia
Fortress I loan, and the Naples Enel Tower Fortress II loan, S&P
has reviewed the credit quality of the assets securing these
loans.
S&P's review also reflects the completion of the Tresforte loan's
workout. This loan repaid on the April 2014 interest payment
date (IPD), with principal losses of EUR31.9 million that the
issuer applied to the class D and E notes. A EUR1.0 million loan
balance remains outstanding for this loan in order to protect net
sales proceeds received from potential speculative claims from
shareholders of the borrower.
THE BRIDGE LOAN (44.9% OF THE POOL)
The Bridge loan is the largest remaining loan and comprises an
A/B note structure with only the senior loan securitized within
this transaction. The loan failed to repay at maturity in
January 2014. The loan is currently in special servicing, but
all debt service payments continue to be made. A workout
strategy in relation to the asset management and properties'
disposal is currently being formulated by the special servicer.
The loan is secured by six office premises in Germany, with three
assets in Berlin, Frankfurt, and Dusseldorf.
The servicer received an updated valuation for the Bridge loan
properties in November 2013, with a valuation date in September
2013. The market value for the assets was reported as EUR325.0
million reflecting a 34.2% decrease from the EUR493.7 million
valuation at origination. The current outstanding securitized
loan balance is EUR336.2 million. As of the April 2014 IPD, the
current whole-loan loan-to-value (LTV) ratio is 114.0% with a
senior loan LTV ratio of 103.4%. This is based on the updated
September 2013 market valuation.
S&P has assumed losses on the loan in its expected-case scenario.
TOUR ESPLANADE LOAN (36.0% OF THE POOL)
The Tour Esplanade loan is a performing loan with a loan maturity
date in October 2016.
The loan is secured by substantial, high-quality office premises
in the La Defense submarket of Paris. Following the departure of
the previous tenant, the property is vacant, with an extensive
capital expenditure program being undertaken by the borrower.
The French government has signed a new lease, reflecting market
standards, to fully occupy the property for a 13.5-year term,
beginning in July 2014.
The current LTV ratio for this loan is 81.9%, based upon a market
valuation dated June 2011.
S&P do not anticipate losses on this loan in its expected-case
scenario.
IFB AND PAVIA FORTRESS I LOAN (8.4% OF THE POOL)
The IFB and Pavia Fortress I loan and the Naples Enel Tower
Fortress II loan together comprise the Fortezza loan. Both of
these loans are cross-collateralized and cross-defaulted. The
IFB and Pavia Fortress I loan is the pool's third-largest with a
loan balance of EUR59.6 million.
The loan was originally due to mature in January 2014. However,
the servicer has subsequently extended the maturity date to
April 15, 2015, which, subject to further conditions being met,
could be further extended to Jan. 15, 2016. The loan is current
and all debt service payments have been made.
The loan is secured by five secondary office properties in Italy.
Two of the properties are in Milan, with further assets located
in Lecco, Pavia, and Grosseto. According to the April 2014
servicer report, the property portfolio produces a current gross
annual rental income of EUR5.5 million. The vacancy rate is 5.0%
and the weighted-average unexpired lease term is 5.5 years.
The property assets were subject to a revaluation in June 2013
where a market value of EUR47.1 million was determined. This
updated valuation reflected a 46.3% decrease from the EUR87.8
million valuation at origination. As a result, the current
securitized LTV ratio is 126.6%.
S&P has assumed losses on the loan in its expected-case scenario.
NAPLES ENEL TOWER FORTRESS II LOAN (6.0% OF POOL)
The Naples Enel Tower loan has a loan balance of EUR43.1 million
and is cross-collateralized and cross-defaulted with the IFB and
Pavia Fortress I loan. As with the IFB and Pavia Fortress loan,
the Naples Enel Tower loan has an extended loan maturity date of
April 15, 2015, which the servicer could further extend to
Jan. 15, 2016.
The loan is secured by a single, modern, city center Naples
office property. It is entirely let to a single tenant, Enel Ape
S.r.l. Based on information from the April 2014 servicer report,
the property produces a gross contractual rental income of
EUR4.7 million per year. The existing lease has an unexpired
term of 4.0 years.
The servicer received an updated valuation for the single
property in November 2013, with a valuation date of June 2013.
The market value for the asset was reported as EUR32.7 million,
reflecting a 46.7% decrease from the EUR61.4 million valuation at
origination. As of the April 2014 IPD, the LTV ratio is 131.8%.
S&P has assumed losses on the loan in its expected case scenario.
REMAINING LOANS (2.6% OF POOL)
The two remaining loans in the transaction (the Built loan and
Lightning Dutch loan) have a combined total current securitized
balance of EUR18.5 million. Both loans are in special servicing
and have reached maturity. The current LTV ratio for the Built
loan is 113.8%, based on a June 2013 market valuation. The
Lightning Dutch loan has a current LTV ratio of 83.8%, based on a
market valuation dated August 2012. Under S&P's expected case
scenario, it has assumed principal losses for each of these
loans.
RATING ACTIONS
S&P's ratings in Windermere X CMBS address the timely payment of
interest and ultimate payment of principal no later than the
legal final maturity date in October 2019.
In S&P's view, the class A, B, and C notes' credit quality has
deteriorated. S&P do not consider the available credit
enhancement to be sufficient to absorb the amount of losses that
the underlying properties would suffer at their currently
assigned rating levels. S&P has therefore lowered to 'BBB (sf)'
from 'A- (sf)' its rating on the class A notes. In addition, S&P
has lowered to 'BB(sf)' from 'BBB (sf)' its rating on the class B
notes.
Following S&P's review, it believes the class C notes are
vulnerable to principal losses under its expected case scenario.
S&P has therefore lowered to 'B- (sf)' from 'BB+ (sf)' its rating
on the class C notes.
S&P has also lowered to 'D (sf)' from 'B- (sf)' its rating on the
class D notes. This class of notes experienced principal losses
in April 2014 following the Tresforte loan's liquidation. The
issuer applied EUR31.9 million in principal losses to the class D
and E notes.
S&P has affirmed its 'D (sf)' ratings on the class E and F notes
as they experienced principal losses on prior payment dates.
Windermere X CMBS is a 2007-vintage CMBS transaction with a legal
final maturity in October 2019. The transaction is secured by
six remaining loans backed by commercial real estate properties
in Germany, France, the Netherlands, and Italy.
RATINGS LIST
Windermere X CMBS Ltd.
EUR1.497 bil commercial mortgage-backed floating-rate notes
Rating Rating
Class Identifier To From
A 973226AA1 BBB (sf) A- (sf)
B 973226AC7 BB (sf) BBB (sf)
C 973226AD5 B- (sf) BB+ (sf)
D 973226AE3 D (sf) B- (sf)
E 973226AF0 D (sf) D (sf)
F 973226AG8 D (sf) D (sf)
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I R E L A N D
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PARIS BAKERY: Revenue to Step in on Bakery Worker Dispute
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breakingnews.ie reports that revenue has emerged as an unlikely
saviour of a well-known Dublin bakery.
According to the report, 30 former workers at the Paris Bakery
claim they are owed over EUR100,000 in payments after the Moore
Street store closed almost two weeks ago.
A rally to support the workers took place outside Leinster House
June 4, the report relays.
breakingnews.ie says revenue is expected to step in and liquidate
the restaurant giving the workers access to the state insolvency
fund.
However, employees still face a wait for owed pay, as in the
event of a liquidation a creditors' meeting must first be called,
the report notes.
SHOE RACK: Examiner Gains More Time to Draw Up Survival Plan
------------------------------------------------------------
BreakingNews.ie reports that the examiner appointed to Shoe Rack
has been given more time to draw up a survival plan for the
business.
The insolvent company went into examinership last April after
struggling with boom time rents, BreakingNews.ie recounts.
High Court protection will now remain in place until July 8,
BreakingNews.ie discloses.
Shoe Rack is an Irish footwear chain. The company has 10 stores
in Ireland and employs around 70 staff.
=========
I T A L Y
=========
AERADRIA SPA: July 14 Tender Offer Deadline Set
-----------------------------------------------
Aeradria S.p.A., with registered office in Rimini (Italy), via
Flaminia 409, was the formerly licensee of the operations of
Rimini Airport and was declared bankrupt by the Court of Rimini
on November 26, 2013. It is still temporarily operating the
airport up to October 31, 2014, since it is the owner of unfixed
assets, equipment, intangible properties, business and employment
contracts. The use of runway, buildings and all other real
estate properties, since built on government land, is ruled on a
thirty-year concession to be signed with Italian Civil Aviation
Authority (ENAC).
For the above mentioned reasons, to fully operate the Rimini
Airport two tenders have been combined: the first by ENAC, whose
purpose is the license on a thirty year basis of the total
organization of the airport, and the second by the bankruptcy
procedure, whose object is the sale of all assets representing
the Firm.
Only the purchase of the Firm together with the award of the
thirty year concession by ENAC, will allow the winner to the run
the airport with no interruption.
Here follows a brief summary of both tenders:
Tender by Enac
Procedure: open as of art. 704 of Italian Navigation Code.
Tender rules and the draft of license contract (in Italian) can
be found at: http://www.enac.gov.it
Additional information together with the scheme of the license
agreement may be asked to Dott.ssa Elisabetta Bergamini,
Direzione Sviluppo Aeroporti, Tel. + 390644596556, Fax
+390644596401, e-mail: gestione.apt@enac.gov.it
Object: 30-year license of the total organization of the Rimini
airport, excluding those areas, buildings and plants already
entrusted to the Republic of San Marino.
Requirements for admission: all national and EC corporate
entities, including temporary consortium, with some minimal
capital requirement. Non EC entities are allowed to participate
provided that they will have to establish a secondary office at
the Rimini Airport within thirty days from the award and that
their state of origin allows Italian entities to do business at
reciprocal conditions. Minimum share capital of the bidder is
fixed to EUR120,000 to be increased to EUR3,098,741 in case of
award and the corporate objective will have to cover development,
design, construction, operation, maintenance and use of the
facilities for airport activity.
Award procedure: the operations will be awarded to the bidder
showing the best percentage score over the following items:
1. The organizational structure that will be proposed by the
bidder for the management of the airport under license (max
30 points)
2. Corporate strategies focused to the airport's development and
traffic forecasts for the license period (max 20 points)
3. Investment plan (max 20 points)
4. Business and financial plan (max 15 points)
5. Refund for the non amortized investment carried out by the
previous airport operator (Aeradria) up to a maximum of
EUR6,653,977.33 (max 15 points).
Expiration date: The envelope containing the offer will have to
be delivered no later than 13,00 hours of July 14, 2014 at
ENAC -- Direzione Centrale Sviluppo Economico -- Direzione
Sviluppo Aeroporti -- Viale del Castro Pretorio, n. 118 00185
Roma. The envelope shall include sub A. documents for admission;
sub B technical offer and sub C refund for the non amortized
investment (to be presented even if in case of no refund
awarded). Please strictly follow tender documents for the
declarations of the content of the offer.
Provisional deposit: EUR10,000,00, together with the commitment
of a guarantor to issue, in case of award of the license,
suitable performance bond in accordance with the provisions of
art. 18 of the scheme of the Convention Mandatory visit: Bidders
must necessarily carry out a visit of the areas of airport
infrastructure. To this end, reference can be made to the ENAC
authority at the Rimini Airport, Tel +390541373244; Fax
+390541375259, e-mail aero.rimini@enac.gov.it
Tender by Aeradria Bankruptcy procedure
Procedure: competitive as of art. 104ter, sixth paragraph and
art. 107 Italian Bankruptcy Law (IBL). The tender documents are
also available in English at the website www.riminiairport.com
Any clarification on the procedure and on the notice must be
requested by email to the Trustee renatosantini@legalmail.it or
f70.2013rimini@pecfallimenti.it
Object: the Firm made up by the following assets and rights:
plant and equipment, ramp equipment, furnishings and furniture,
electrical and electronic machinery, website, goodwill, refund
for the non amortized investment (up to a maximum of
EUR6,653,977.33), commercial and employees contracts.
Requirements for admission: same as those for ENAC tender
Content of the offer: The offer will have to include:
1. The fully compiled form with generalities of the bidders and
the copy of their identification documents (passports or ID);
2. A declaration of possession of subjective requirements;
3. The commitment to keep the offer compelling up to March 31st
2015;
4. The commitment to employ a certain number of employees to be
specified, according to labor agreements currently in place
5. A chamber of commerce certificate (if Italian) for any member
of eventual temporary consortium Award procedure: the award will
be made on July 22nd, 2014 at the headquarters of Rimini Airport,
at the presence of the Public Notary. In case of more
applications, the bid will start from the highest offer, with
minimum increase of EUR100,000.00; at the same price level the
bidder who will take the greatest number of employees shall
prevail. The award of ENAC tender will be a condition precedent
to the delivery of the operating company.
Expiration date: The envelope containing the offer will have to
arrive no later than 13:00 hours of July 14, 2014 (same as ENAC
tender) at Public Notary Giorgia Dondi Via Sigismondo Pandolfo
Malatesta n. 27, 47921 Rimini (RN)
Auction starting price: EUR10,000,000
Provisional deposit: EUR500,000 or a first demand bank guarantee
Compensation with the refund for non amortized investment: The
winner of the tender shall be entitled to compensate any eventual
refund offered within the ENAC tender with a special credit
arising within the operating company
Payment: within 30 days from the date of ENAC award the winner
will have to deliver to the Trustee a first demand bank guarantee
for 50% of the award price, net of provisional deposit. Within
30 days from the last certification by ENAC, the winner will have
to pay 100% of the award price.
ITALFINANCE SECURITISATION: Moody's Lifts Rating on D Notes to B2
-----------------------------------------------------------------
Moody's Investors Service has upgraded by one to three notches
the ratings on the senior and mezzanine tranches issued by
Italfinance Securitisation Vehicle S.r.l. (ITA 8), Italfinance
Securitisation Vehicle 2 S.r.l. (ITA 9) and Leasimpresa Finance
S.r.l. (LF 2). At the same time, Moody's affirmed the ratings on
the notes issued by Italease Finance S.p.A. Series 2005-1 (ITA
7). The actions are due primarily to (1) an improvement in the
creditworthiness of the originator and servicer, Banca Italease
S.p.a (Banca Italease, deposits Ba3 negative, bank financial
strength rating E+/baseline credit assessment b3), which supports
the transactions through its obligation to repurchase defaulted
loans in ITA 8, ITA 9 and LF 2 at a minimum price; and (2) an
increase of credit enhancement for the notes as a result of
deleveraging.
These four transactions are asset-backed securities transactions
backed by small ticket leases originated by Banca Italease .
Issuer: Italease Finance S.p.A. Series 2005-1 (ITA 7)
EUR447.9M Class A2 Notes, Affirmed A2 (sf); previously on
Jul 12, 2013 Affirmed A2 (sf)
EUR45.4M Class B Notes, Affirmed A2 (sf); previously on
Jul 12, 2013 Affirmed A2 (sf)
EUR18.7M Class C Notes, Affirmed A3 (sf); previously on
Jul 12, 2013 Affirmed A3 (sf)
Issuer: Italfinance Securitisation Vehicle S.r.l. (ITA 8)
EUR959M Class A Notes, Affirmed Baa2 (sf); previously on
Jul 12, 2013 Downgraded to Baa2 (sf)
EUR83M Class B Notes, Upgraded to Ba2 (sf); previously on
Jul 12, 2013 Downgraded to Ba3 (sf)
EUR56M Class C Notes, Upgraded to Ba3 (sf); previously on
Jul 12, 2013 Downgraded to B2 (sf)
EUR18.5M Class D Notes, Upgraded to Ba3 (sf); previously on
Jul 12, 2013 Confirmed at B3 (sf)
Issuer: Italfinance Securitisation Vehicle 2 S.r.l. (ITA 9)
EUR1442.4M Class A Notes, Affirmed Baa3 (sf); previously on
Jul 12, 2013 Downgraded to Baa3 (sf)
EUR125M Class B Notes, Upgraded to Ba2 (sf); previously on
Jul 12, 2013 Downgraded to Ba3 (sf)
EUR84.3M Class C Notes, Upgraded to B1 (sf); previously on
Jul 12, 2013 Downgraded to B2 (sf)
EUR27.9M Class D Notes, Upgraded to B2 (sf); previously on
Jul 12, 2013 Downgraded to B3 (sf)
Issuer: Leasimpresa Finance S.r.l. (LF 2)
EUR931.5M Class A Notes, Upgraded to A3 (sf); previously on
Jul 12, 2013 Downgraded to Baa2 (sf)
EUR57.2M Class B Notes, Upgraded to Baa2 (sf); previously on
Jul 12, 2013 Downgraded to Ba1 (sf)
EUR10.3M Class C Notes, Upgraded to Baa3 (sf); previously on
Jul 12, 2013 Downgraded to Ba2 (sf)
Ratings Rationale
The rating downgrade primarily reflects the upgrade of Banca
Italease to Ba3 from B2 on April 29, 2014 and the increase of
credit enhancement for the notes as a result of deleveraging
since the previous rating action.
-- Notes' Ratings Are Linked To Banca Italease's Ratings
Through Its Obligation To Repurchase Defaulted Loans
ITA 8, ITA 9 and LF 2 have a strong linkage with the originator,
Banca Italease. The observed performance of these transactions,
which is so far in line with Moody's assumptions, is conditioned
by the obligation of the originator to repurchase defaulted loans
(for a minimum price of 75% of their outstanding amount).
Following the two-notch upgrade of Banca Italease on 29 April
2014, the likelihood of the repurchase performance increased,
resulting in a rating impact on the tranches listed above.
When modelling cash flows, Moody's maintained the recovery rate
assumptions of ITA 8, ITA 9 and LF 2 at 75% based on Banca
Italease's repurchase obligation. However, Moody's assumed that
the recovery rate would go down to 15% upon Banca Italease's
default. Legal uncertainty regarding the rights of the special
purpose vehicles to recover amounts on the lease contracts upon
originator's default drives this assumption. This feature
increases the dependence of the notes' ratings on Banca
Italease's rating.
Moody's analysis also took into account borrower concentration
given that the 10 biggest debtors represent 10% to 20% of the
pool balance in these three transactions.
In ITA 7, the credit enhancement available in the form of
subordination and reserve fund under tranche A2 (82.0%), tranche
B (78.2%) and tranche C (76.6%) is sufficient to support the
current rating levels, despite large borrower concentrations in
the pool (top borrower accounts for 6.3%, top 10 for 34.4%). In
addition, in ITA 7, the ratings on the notes are less linked to
the rating of the originator, owing to the lack of a repurchase
obligation of defaulted loans as described above.
-- Moody's Maintains Key Collateral Assumptions As The
Transactions Perform As Expected
Moody's maintained its default, recovery rate and coefficient of
variation (CoV, a measure of default rate volatility) assumptions
for these transactions because the transactions are performing in
line with expectations.
In ITA 7, cumulative defaults stand at 8.5% of the total
securitized pool, total delinquencies stand at 3.3%; and the pool
factor is 3.5%. This compares to a default assumption of 8.8%
over the life of the transaction. Moody's current default
assumption is 7.0% of the current portfolio; its fixed recovery
rate assumption is 50.0%; and its CoV assumption is 93.2%.
Combined, these assumptions result in a portfolio credit
enhancement of 20%.
In ITA 8, cumulative defaults stand at 10.2% of the original
balance plus replenishments; total delinquencies stand at 2.7%;
and the pool factor is 5.9%. This compares to a default
assumption of 11.0% over the life of the transaction.Moody's
current default assumption is 13.0% of the current portfolio; its
fixed recovery rate assumption is 75.0% (based on the originator
repurchase obligation); and its CoV assumption is 63.7%.
Combined, these assumptions result in a portfolio credit
enhancement of 21%. Moody's notes that the transaction is subject
to material borrower concentrations, with the top borrower
accounting for 3.6% of the pool balance and the top 10 borrowers
accounting for 20.5%. Moody's has taken these borrower
concentrations into account by running sensitivity scenarios.
Credit enhancement available for class A, B, C and D are 37.6%,
26.2%, 18.6% and 16.0% respectively.
In ITA 9, cumulative defaults stand at 9.6% of the original
balance plus replenishments; total delinquencies stand at 3.4%;
and the pool factor is 13.6%. This compares to a default
assumption of 10.8% over the life of the transaction. Moody's
current default assumption is 14.0% of the current portfolio; its
fixed recovery rate assumption is 75.0% (based on the originator
repurchase obligation); and its CoV assumption is 74.0%.
Combined, these assumptions result in a portfolio credit
enhancement of 22.5%. The top borrower and top 10 borrowers
account for 1.5% and 11.7% of the pool balance respectively.
Credit enhancement available for class A, B, C and D are 32.2%,
18.8%, 9.8% and 6.9% respectively.
In LF 2, cumulative defaults stand at 5.4% of the original
balance plus replenishments; total delinquencies stand at 3.4%;
and the pool factor is 9.7%. This compares to a default
assumption of 6.0% over the life of the transaction. Moody's
current default assumption is 10% of the current portfolio; its
fixed recovery rate assumption is 75.0% (based on the originator
repurchase obligation); and its CoV assumption is 83.3%.
Combined, these assumptions result in a portfolio credit
enhancement of 20%. The top borrower and top 10 borrowers account
for 1.8% and 14.4% of the pool balance respectively. Credit
enhancement available for class A, B and C are 28.3%, 19.0% and
17.3% respectively.
-- Moodys Has Considered Exposure To Counterparty Risks
During its review, Moody's also considered potential risk arising
from counterparties to the transaction in the role of the issuer
account bank and swap provider, which is BNP Paribas (deposits A1
negative, bank financial strength rating C-/baseline credit
assessment baa1). None of the reviewed transactions are currently
exposed to further risk arising from the counterparties acting in
these roles.
The risk of servicing disruption decreased following the upgrade
of Banca Italease to Ba3/Not-Prime from B2/Not-Prime. In
addition, the presence of Selmabipiemme S.p.A acting as backup
servicer and the significant liquidity available in the form of
cash reserve or liquidity facility in each transaction mitigate
this risk.
Factors that would lead to an upgrade or downgrade of the
ratings:
Factors that could cause an upgrade of the ratings include an
increase in credit enhancement of the notes, further improvements
in credit quality of the originator and improvement in the
collateral performance of the pool.
Factors that could cause a downgrade of the ratings include a
deterioration in the credit quality of the originator and a
decline in the overall performance of the pool.
The principal methodology used in this rating was "Moody's
Approach to Rating ABS backed by Equipment Lease and Loans"
published in December 2013.
UNIPOLSAI ASSICURAZIONI: Moody's Rates Junior Bonds 'Ba2(hyb)'
--------------------------------------------------------------
Moody's Investors Service has assigned a Ba2(hyb) rating to the
junior undated subordinated bonds to be issued by UnipolSai
Assicurazioni S.p.A. (UnipolSai Assicurazioni, rated Baa2 for
insurance financial strength rating, stable outlook). Moody's has
also assigned a (P)Baa3 senior rating, a (P)Ba1-dated
subordinated rating and a (P)Ba2 junior undated subordinated
rating to UnipolSai Assicurazioni's new Euro Medium Term Note
(EMTN) program.
All these ratings are based on the expectation that there will be
no material difference between current and final documentation.
UnipolSai Assicurazioni is the second largest Italian insurance
company. The company is the result of the merger by incorporation
of Unipol Assicurazioni, Milano Assicurazioni, Premafin HP in
Fondiaria-Sai in January 2014 and is 63.66% owned by Unipol
Gruppo Finanziario S.p.A. (UGF, Ba2 stable).
Ratings Rationale
The Ba2(hyb) rating of the bonds to be issued is three notches
below UnipolSai Assicurazioni's insurance financial strength
rating and reflects the combination of (i) the junior
subordination of the bonds (ii) the optional and mandatory weak
coupon deferral mechanisms, (iii) the cumulative nature of
deferred coupons, in case of deferral, (iv) the temporary loss
absorption features of the bond and (v) the variation and
substitution language included in the documentation.
The new bonds are undated junior subordinated bonds. They will
rank junior to senior bonds and to all dated subordinated bonds,
and senior to all classes of shares. In case of liquidation, they
will also rank senior to the outstanding EUR134.3 million
mandatory convertible securities issued by UnipolSai
Assicurazioni in April 2014.
Moody's indicates that the new instrument allows the issuer to
defer interest payment on any interest payment date notably if,
during the previous 6-month period, no dividend on any class of
shares was declared or paid or any class of shares was
repurchased and if no coupon was paid on pari passu securities.
The instrument also contains mandatory interest deferral
triggers, notably based upon breach of solvency requirements.
However, any deferred interest payment, optional or mandatory,
will constitute arrears of interest and remains due by UnipolSai
Assicurazioni at a future date (cumulative coupon deferral
mechanism).
The new bonds also include a temporary principal write-down
mechanism, according to which, if the solvency ratio of UnipolSai
Assicurazioni falls below 100% after losses, UnipolSai
Assicurazioni's obligation to repay the principal would be
suspended or reduced down to a level enabling the solvency ratio
to be restored at 100%. The obligation to repay principal would
then be reinstated progressively if the solvency ratio increased
again or at liquidation of the company. Interest will continue to
accrue on the nominal value of the bonds.
Furthermore, the documentation of the bonds allows UnipolSai
Assicurazioni to redeem, exchange or vary the terms of the
securities under certain circumstances, including the situations
where, as a result of change in regulation, the instrument would
no longer qualify as regulatory capital under Solvency I (for up
to 50%), or if the newly issued instrument would not be
recognized as Tier 1 capital under the grandfathering provisions
of the Solvency II framework. While according to the currently
proposed guidelines for grandfathering subordinated debts, the
bonds should be grandfathered as Tier 1 capital under Solvency
II, Moody's notes that these provisions are not definitive.
Moody's mentions that, according to the documentation, in case of
exchange or substitution, the terms cannot be changed in a way
that is materially adverse to the investor, after consultation of
an independent investment bank. Nonetheless, UnipolSai
Assicurazioni would be allowed to include a new principal write-
down or conversion into shares mechanism based on an objective
and measurable trigger. Moody's believes that the new capital
requirements under Solvency II could represent a basis for such
an objective and measurable trigger.
The proceeds of the issuance will be used by UnipolSai
Assicurazioni to repay existing hybrid loans with Mediobanca. As
such, Moody's expects the impact on UnipolSai Assicurazioni's
financial leverage of this new issuance to remain limited.
Furthermore, the issuance will enable the issuer to comply with
one of the requirements of the Italian antitrust authority, which
authorised the acquisition by UGF of the control over the
Premafin -- Fondiaria-Sai group under certain conditions,
including the reduction of the financial exposure of the UGF
group towards Mediobanca.
Commenting on the UnipolSai Assicurazioni's new EMTN program,
Moody's says that the (P)Baa3 rating for the senior bonds to be
issued under this program is one notch below the insurance
financial strength rating of the issuer, which is in line with
Moody's guidelines for the rating of senior securities issued by
an insurance company. Moody's adds that the (P)Ba1 and (P)Ba2
ratings for respectively the dated subordinated and the junior
undated subordinated bonds to be issued under the program reflect
the relative ranking of these bonds and their respective expected
deferral coupon mechanisms and variation and substitution
language. Nonetheless, ratings on individual bonds issued under
the program will be subject to Moody's review of the terms and
conditions of the notes.
What Could Change The Rating Up/Down
Commenting on what could change the debt ratings up or down,
Moody's mentions that, as these debts are notched down from
UnipolSai Assicurazioni's insurance financial strength rating,
any change in this rating would affect the debt ratings.
Upwards pressure on UnipolSai Assicurazioni's insurance financial
strength rating could develop following an improvement in the
credit profile of Italy.
Downwards pressure on UnipolSai Assicurazioni's ratings could
develop following (1) a deterioration in the credit profile of
Italy; (2) any unexpected significant assets impairments and
costs associated with the integration process of Premafin --
Fondiaria-Sai within UGF, including legal and compensatory
expenses; and/or (3) any significant loss of market share, in
excess of the reduction related to the assets' disposal required
by the Italian antitrust authority.
Rating List
The following rating has been assigned with a stable outlook:
UnipoSai Assicurazioni S.p.A.
-- junior undated subordinated rating at Ba2(hyb).
The following ratings have been assigned:
UnipoSai Assicurazioni S.p.A.
-- provisional senior EMTN rating at (P)Baa3;
UnipoSai Assicurazioni S.p.A.
-- provisional dated subordinated EMTN rating at (P)Ba1;
UnipoSai Assicurazioni S.p.A.
-- provisional undated junior subordinated EMTN rating at
(P)Ba2.
Principal Methodologies
The methodologies used in this rating were Global Property and
Casualty Insurers published in December 2013, and Global Life
Insurers published in December 2013.
===================
L U X E M B O U R G
===================
GSC EUROPEAN I-R: S&P Raises Rating on Class E Notes to 'BB-'
-------------------------------------------------------------
Standard & Poor's Ratings Services raised its credit ratings on
GSC European CDO I-R S.A.'s class A1, A2B, A3, B, C1, C2, D, and
E notes. At the same time, S&P has affirmed its 'AAA (sf)'
rating on the class A2A notes.
The rating actions follow S&P's credit and cash flow analysis of
the transaction using data from the trustee report dated April
15, 2014 and the application of S&P's relevant criteria.
"We conducted our cash flow analysis to determine the break-even
default rate (BDR) for each rated class of notes at each rating
level. The BDR represents our estimate of the maximum level of
gross defaults, based on our stress assumptions, that a tranche
can withstand and still fully repay the noteholders. We used the
portfolio balance that we consider to be performing, the reported
weighted-average spread, and the weighted-average recovery rates
calculated in accordance with our 2009 criteria for corporate
collateralized debt obligations. We applied various cash flow
stress scenarios using our standard default patterns and timings
for each rating category assumed for each class of notes,
combined with different interest stress scenarios as outlined in
our 2009 corporate CDO criteria," S&P said.
The transaction's post-reinvestment period began in December
2012. The class A notes have amortized by about EUR129 million
since S&P's previous review on Feb. 1, 2012. This increased the
available credit enhancement for the class A notes. The results
of S&P's cash flow analysis indicate that they are able to
sustain defaults at a 'AAA' rating level. S&P has therefore
raised to 'AAA (sf)' from 'AA+ (sf)' its ratings on the class A1,
A2B, and A3 notes. At the same time, S&P has affirmed its 'AAA
(sf)' rating on the class A2A notes.
The class A notes' high deleveraging has in turn significantly
increased the available credit enhancement for all of the other
classes of notes. The overcollateralization (OC) tests are all
passing, with higher cushions than in S&P's previous review.
In addition, S&P has observed a positive rating migration in the
portfolio. The proportion of assets rated 'BBB' has increased to
about 4% from 0% in S&P's previous review, which has reduced the
scenario default rates (SDRs). The portfolio's weighted-average
life has decreased to 4.15 years from 4.24 years.
In light of the class A notes' amortization, lower SDRs, and the
shorter weighted-average life, S&P considers the available credit
enhancement for the class B, C1, C2, D, and E notes to be
commensurate with higher ratings. S&P has therefore raised its
ratings on these classes of notes.
The application of the largest obligor default test did not
constrain S&P's ratings on any of the tranches. This test is a
supplemental stress test that S&P introduced in its 2009
corporate CDO criteria.
GSC European CDO I-R is a cash flow collateralized loan
obligation (CLO) transaction that securitizes loans granted to
primarily speculative-grade corporate firms.
RATINGS LIST
Class Rating Rating
To From
GSC European CDO I-R S.A.
EUR371 Million Floating- And Fixed-Rate Notes
Ratings Raised
A1 AAA (sf) AA+ (sf)
A2B AAA (sf) AA+ (sf)
A3 AAA (sf) AA+ (sf)
B AAA (sf) A+ (sf)
C1 AA (sf) BBB- (sf)
C2 AA (sf) BBB- (sf)
D BBB- (sf) B+ (sf)
E BB- (sf) CCC+ (sf)
Rating Affirmed
A2A AAA (sf) AAA (sf)
=============
R O M A N I A
=============
OTEL GALATI: Second-Richest Romanian Businessman Arrested
---------------------------------------------------------
Associated Press reports that Romania's second-richest
businessman has been arrested on charges that he bribed judges to
rule in his favor in court cases.
According to the news agency, anti-corruption prosecutors said
Dan Adamescu instructed his lawyer and others to pay bribes of
EUR20,000 (US$27,200) to two judges in December 2013 over several
insolvency cases involving his companies. The judges were
arrested earlier on charges of taking bribes, the AP relates.
AP relates that prosecutors said Mr. Adamescu's lawyer provided
information about the case.
Mr. Adamescu owns the Otel Galati football club, the influential
Romania Libera newspaper, an insurance company and a shopping
center in Bucharest. Reports estimate he was worth EUR950 million
last year.
In May, the lawyer reportedly threw himself in front of a subway
train after the judges' arrest, the report notes.
* ROMANIA: Insolvencies Fell 14% in the First 4 Months of 2014
--------------------------------------------------------------
The Diplomat Bucharest, citing Mediafax, reports that the number
of companies that became insolvent in the first four months of
2014 fell by 14.36 per cent to 8,889, from 10,379 in the same
period last year, according to the National Trade Register Office
(ONRC).
In April, about 2,089 companies became insolvent, compared to
2,115 in March, 2,631 in February and 2,054 in January, the
report relays. Moreover, Bucharest, Prahova and Bihor recorded
the most insolvencies in the first four months of the year
"respectively 1,566 (an increase of 7.04 per cent compared to
2013), 565 (12.1 per cent more than in January-April last year)
and 455 companies (up by 63.08 per cent). Nationally, The
Diplomat relates, 27 counties recorded decreases in the number of
insolvencies, with percentages from 5.31 per cent to 74.18 per
cent.
According to the report, Calarasi, Neamt and Salaj reported the
fewest companies to become insolvent in the first four months --
35, 57 and respectively 52 cases. Moreover, according to ONRC,
the most companies with financial difficulties are still those
active in the trade field, 3,353 firms entering into insolvency,
down from 3,625 in 2013, in constructions -- 1,181 compared to
1,447 in the first four months of last year, and in
manufacturing -- 953, down from 1,162, the report discloses. Last
year, over 29,500 companies became insolvent, thus, since the
crisis, the number has reached approximately 130,000 companies
which are unable to pay their debts, adds The Diplomat.
===========
R U S S I A
===========
ALLIANCE OIL: S&P Keeps 'B-' CCR on CreditWatch Negative
--------------------------------------------------------
Standard & Poor's Ratings Services said that it had kept its 'B-'
corporate credit rating and 'ruBBB' Russia national scale rating
on the Russia-based oil company Alliance Oil on CreditWatch with
negative implications, where it had placed them on Feb. 10, 2014.
"We then withdrew our ratings on Alliance Oil and its debt at
Alliance Oil's request," S&P said.
S&P sees continuing uncertainty regarding Alliance Oil's
liquidity, following the shareholders' buyout of outstanding
stock and the creation of a new joint venture with Independent
Oil and Gas Company (NNK). S&P still don't have sufficient
information about the structure and maturity of debt at the level
of Alliance Oil's shareholders and joint-venture partners. For
this reason, S&P did not resolve the CreditWatch before
withdrawing the ratings.
At the time of withdrawal, S&P's CreditWatch reflected potential
pressures on Alliance Oil's liquidity, strategy, governance, and
financial policy. S&P assessed Alliance Oil's business risk
profile as "weak," based on the company's position as a small
private player in the Russian oil and gas industry. S&P's
opinion of Alliance Oil's liquidity was "less than adequate"
under its criteria.
At the time of withdrawal, the CreditWatch negative reflected the
potential squeeze on Alliance Oil's liquidity, due to the $1.2
billion in shareholder-level debt raised to buy out all then-
outstanding shares in the company in late 2013, or the financial
needs of members of the new joint venture.
===============
S L O V E N I A
===============
ENGROTUS: Celje District Court Launches Restructuring Procedure
---------------------------------------------------------------
The Slovenia Times reports that the Celje District Court launched
preventive restructuring procedure at grocer Engrotus, its owner
Tus Holding and the real estate division Tus nepremicnine on
Wednesday.
Restructuring only concerns financial claims contained in the
basic list of claims, The Slovenia Times says, citing the notice
on the AJPES public company registry portal.
The bankruptcy protection was launched after the shareholders'
meeting of Engrotus endorsed transformation into a limited
company, form a joint-stock company at the end of May, The
Slovenia Times relates.
The capital remains the same at EUR55.54 million, while stocks
transformed into share capital, and Tus Holding remains the
owner, The Slovenia Times notes. The company has three
directors: Mirko Tus, Tanja Tus and Ivo Svrljuga, The Slovenia
Times discloses.
Engrotus's core business is retail, while it also comprises a
chain of cinemas Planet Tus, a chain of cosmetics shops Tus
drogerije, a catering division, bowling centres, billiard clubs
and kid playrooms.
Engrotus is part of Tus Holding, which also includes the real
estate division Tus nepremicnine and mobile services provider
Tusmobil.
=========
S P A I N
=========
PESCANOVA SA: Creditor Banks to Commence Insolvency of Units
------------------------------------------------------------
FIS reports that the group of Pescanova S.A.'s creditor banks
known as G7 intends to start express insolvency this week in the
Spanish Galician multinational firm's subsidiaries.
According to FIS, sources close to the bank, as cited by Faro De
Vigo, said it is necessary to carry out this process "soon".
For the banks, the documentation is "almost ready" for all the
Spanish subsidiaries -- except for Insuina SL and Semolas del
Noroeste SA (HASENOSA) -- to be declared as undergoing creditors'
meeting, FIS discloses.
The Spanish subsidiaries will undergo express insolvency because
it is set in the agreement drafted by the brewery firm Damm and
the investment fund Luxempart, which has been inherited by the
banks, FIS says.
If Pescanova does not meet its obligations to banks, any bank
could encourage the liquidation of the company, FIS notes.
An injection amounting to EUR125 million, plus further
EUR25 million capital increase are expected to restructure the
company's debt, FIS states.
In addition, so far Pescanova has reduced 1,353 jobs,
representing about 12% of its workforce, FIS relays.
About Pescanova SA
Pescanova SA is a Galicia-based fishing company. The company
catches, processes, and packages fish on factory ships. It is
one of the world's largest fishing groups.
Pescanova filed for insolvency on April 15, 2013, on at least
EUR1.5 billion (US$2 billion) of debt run up to fuel expansion
before economic crisis hit its earnings. The Pontevedra
mercantile court in northwestern Galicia accepted Pescanova's
insolvency petition on April 25. The court ordered the board of
directors to step down and proposed Deloitte as the firm's
administrator.
=====================
S W I T Z E R L A N D
=====================
GATEGROUP HOLDING AG: Moody's Affirms 'B1' Corp. Family Rating
--------------------------------------------------------------
Moody's Investors Service changed the outlook on the ratings of
gategroup Holding AG to stable from negative. Moody's has also
affirmed the company's B1 corporate family rating (CFR), B1-PD
probability of default rating (PDR) and the B1 rating of EUR350
million senior notes due 2019 issued by Gategroup Finance
(Luxembourg) S.A.
Ratings Rationale
The change in outlook reflects the company's improved credit
metrics in 2013, with Moody's-adjusted leverage falling to 4.2x
as of December 31, 2013,from 4.9x in 2012 to 4.2x, incorporating
improved EBITDA underpinned by cost savings from a restructuring
program. The outlook stabilization also incorporates improved
airline industry growth prospects, combined with the renewal of
large, high volume contracts that enhance revenue visibility.
Despite flat growth in revenue at CHF3 billion in 2013,
gategroup's Moody's-adjusted EBITDA rose to CHF194 million from
CHF175 million, with EBITDA margin rising to 6.5% from 5.9%.
EBITDA margin improvement was driven by the restructuring program
in Europe with CHF25m savings. Additionally, free cash flow
generation turned marginally positive following improvements in
working capital management, and in the absence of dividend
payments. In addition to the deleveraging, EBITDA-Capex to
Interest Expense rose to 1.8x from 1.3x.
The change in outlook is despite somewhat weak performance in Q1
2014, as performance was impacted by several factors including,
adverse currency exchange movements, higher than expected
restructuring costs and extreme weather conditions in the US.
Moody's notes that the company's reported numbers remain impacted
by foreign exchange variations against the Swiss Franc.
Gategroup's recent contract extensions and renewals with Delta,
the IBERIA group, Swiss International Airlines and EasyJet in
2013 are further positive developments. Moody's also expects the
airline industry to exhibit modest improvement, fuelled by steady
economic growth in the US and signs of slow recovery in Europe.
The group's liquidity remains good, including about CHF132
million cash on balance sheet and fully undrawn CHF120 million
(EUR100 million) revolving credit facility, maturing in 2016.
There is no scheduled debt amortization until the bond maturity
in 2019.
What Could Change the Rating -- UP
A ratings upgrade would require gross adjusted Debt / EBITDA to
fall towards 3.5x, free cash flow to stay positive, and (EBITDA -
Capex) / Interest expense ratio to be sustained well above 2.0x.
Additionally, Moody's will consider the extent to which the
company has increased its geographical and customer
diversification.
What Could Change the Rating -- DOWN
Negative pressure would likely be exerted on the rating if
gategroup's gross adjusted Debt/EBITDA rises above 4.5x, free
cash flow turns negative, or the (EBITDA -- Capex) / Interest
expense ratio falls below 1.5x. A material deterioration in the
liquidity position of the company or a sizeable debt funded
acquisition would also be negative for the company's rating.
The principal methodology used in rating gategroup was the Global
Business & Consumer Service Industry Rating Methodology published
in October 2010. Other methodologies used include Loss Given
Default for Speculative-Grade Non-Financial Companies in the
U.S., Canada and EMEA published in June 2009.
Headquartered in Zurich, gategroup Holding AG is the leading
independent airline caterer and hospitality and logistic services
provider in the world.
===========================
U N I T E D K I N G D O M
===========================
HEARTS OF MIDLOTHIAN: Officially Exits Administration
-----------------------------------------------------
Stuart Bathgate at The Scotsman reports that the rebuilding of
the Hearts of Midlothian Football Club will pick up speed in the
coming days after the Tynecastle club finally exited
administration on Wednesday, June 11 -- exactly 51 weeks after
the collapse of the Vladimir Romanov regime.
The period of nearly a year in which the club's very existence
had been under threat at last came to an end on Wednesday
afternoon, when Bryan Jackson of administrators BDO lodged the
final papers with the Court of Session in Edinburgh, The Scotsman
relates.
The Foundation of Hearts, the supporters' umbrella body that was
named preferred bidder last August, had to hold its nerve in the
face of repeated suggestions from the club's Lithuanian
shareholders that it should put more money into its Company
Voluntary Arrangement (CVA), The Scotsman recounts. Foundation
chairman Ian Murray insisted that putting any more cash into the
CVA would compromise the future financial stability of the club,
and he was vindicated as both Ubig and Ukio eventually agreed to
the deal, The Scotsman relays.
The Foundation, funded by the monthly direct debits of more than
8,000 members, will have to keep repaying Ann Budge, whose
company Bidco has taken over Hearts on behalf of the Foundation,
for several years after she put up the money needed to fund the
CVA, The Scotsman notes.
About Hearts of Midlothian
Hearts of Midlothian Football Club, more commonly known as
Hearts, is a Scottish professional football club based in Gorgie,
in the west of Edinburgh.
Hearts went into administration after the Scottish FA opened
disciplinary proceedings against the club. BDO was appointed
administrators on June 19, 2013.
JACOB H: High Court Winds Up LGV Training Company
-------------------------------------------------
Jacob H Ltd, a company that claimed to offer LGV ("Large Goods
Vehicle") training courses, was wound up in the public interest
by the High Court on May 14 for taking advance payments from
customers, yet failing to deliver any courses.
The winding up follows an investigation by the Insolvency
Service.
Commenting on the case, David Hill, an Investigations Supervisor,
with the Insolvency Service, said:
"This company appeared to have no intention of providing the
services it claimed it could and instead duped customers into
paying for service they were never likely to receive and winding
it up protects the public from losing more money in this way.
"The winding up should serve as a warning that the Insolvency
Service will take action to remove rogue companies from the
business environment."
The company on average took GBP920 in advance fees per customer,
and, in a number of cases, agreed to pay for refunds in instances
where it acknowledged that no service had been provided. Even in
these cases, the company failed to provide any refunds due to
those customers.
The company is known to have taken over GBP130,000 from
unsuspecting customers, and has failed to account for any of that
money. Over 40 complaints had been made to Islington Trading
Standards against the company, mostly concerning the non
provision of services paid for.
The investigation found that Jacob H Ltd offered its services via
the websites www.jacobholding.co.uk and http://become-a-bus-
driver.co.uk, both now defunct and both of which drew their
contents from those of legitimate driving course providers. The
company abandoned its last known contact addresses at Unit P1,
Bow Wharf, London, E3 5SN and 19 Hamilton Park, London, N5 1SH.
The company has failed to file accounts and has no current
appointed director, which are breaches of Companies Act
regulations. Former company directors included Hussain Ahmed and
Mohammed Khaled.
Jacob H Ltd was incorporated on Feb. 20, 2012. Its registered
office is at 20 Paynell Court, Lawn Terrace, London, SE3 9LW. The
company is not known to have any trading presence at that
address.
The petition to wind up the company was presented in the High
Court on March 10, 2014, under the provisions of section 124A of
the Insolvency Act 1986 following confidential enquiries by
Company Investigations under section 447 of the Companies Act
1985, as amended.
LCP PROUDREED: S&P Withdraws 'B' Ratings on Two Note Classes
------------------------------------------------------------
Standard & Poor's Ratings Services withdrew its credit ratings on
LCP Proudreed PLC's class A, B, C, and D notes following their
full redemption.
The withdrawals follow S&P's receipt of the May 2014 cash
manager's report, which confirms that all classes of notes fully
repaid on the May 2014 interest payment date, following the
repayment of the LCP loan and the Proudreed loan.
LCP Proudreed was a 2005-vintage secured loan transaction backed
by two loans secured on U.K. commercial real estate.
RATINGS LIST
LCP Proudreed PLC
GBP322 mil commercial mortgage-backed secured floating-rate notes
Rating Rating
Class Identifier To From
A XS0233008936 NR BBB (sf)
B XS0233010163 NR BB (sf)
C XS0233010676 NR B (sf)
D XS0233011054 NR B (sf)
NR-Not Rated.
MERGERMARKET GROUP: S&P Affirms 'B' CCR; Outlook Stable
-------------------------------------------------------
Standard & Poor's Ratings Services affirmed its 'B' long-term
corporate credit rating on global financial information services
provider MergerMarket USA, Inc. (MergerMarket Group). The
outlook is stable.
At the same time, S&P assigned its issue rating of 'B' to the
proposed U.S. dollar-equivalent GBP25 million incremental first-
lien term loan to be raised by MergerMarket Group. The recovery
rating on this loan is '3', reflecting S&P's expectation of
meaningful (50%-70%) recovery in the event of a payment default.
In addition, S&P affirmed its existing issue rating of 'B' on the
U.S. dollar-equivalent GBP164.9 million first-lien term loan and
US$40 million-equivalent, multiple currency, five-year revolving
credit facility (RCF). The recovery rating is '3', reflecting
S&P's expectation of meaningful (50%-70%) recovery in the event
of a payment default.
Finally, S&P affirmed its issue rating of 'CCC+' on the existing
GBP64 million second-lien term loan. The recovery rating on this
loan is '6', reflecting S&P's expectation of negligible (0%-10%)
recovery in the event of a payment default.
The affirmation follows MergerMarket Group's definitive agreement
to acquire Perfection Information Ltd. (PI) from Centaur Media
PLC (Centaur). The acquisition will expand MergerMarket Group's
subscription-based financial information portfolio. Although S&P
do not believe the acquisition adds sufficient product diversity
for S&P to revise the group's business risk profile upward to
"fair" from "weak," the acquisition will add another recurring
revenue stream in a niche market segment, with a possibility of
cross-selling PI products to MergerMarket Group's existing
customer base.
PI is a leading provider of corporate finance and capital markets
documents to a subscriber base including global investment banks,
corporate law firms, financial services consultancies, and
accountancy firms. MergerMarket Group intends to acquire PI for
GBP26 million, which equates to more than 8x its EBITDA of GBP3
million. MergerMarket Group is seeking to raise a U.S. dollar-
equivalent GBP25 million incremental first-lien term loan to
finance the acquisition of PI.
S&P believes that the acquisition will not have a significant
impact on MergerMarket Group's credit metrics -- S&P sees it as
neutral to modestly positive for leverage under some scenarios.
S&P bases its view on the size and profitability of PI, the
fairly predictable subscription-based nature of both PI's and
MergerMarket Group's businesses, and the continued robust
performance of MergerMarket Group's existing business.
S&P anticipates that despite the increase in debt to finance this
acquisition, positive free operating cash flow and incremental
EBITDA growth will lead to stable to slightly improved credit
metrics. That said, S&P forecasts that Standard & Poor's-
adjusted leverage will remain above 12x on a pro forma basis.
"Our 'B' rating on MergerMarket Group derives from our anchor of
'b', which in turn is based on our "weak" business risk and
"highly leveraged" financial risk profile assessments for the
group. The combination of these assessments leads to an anchor
of 'b' or 'b-' under our criteria. We choose the higher of the
two anchor options because of the comparative strength of
MergerMarket Group's financial risk profile, underpinned by
strong free operating cash flow generation," S&P said.
S&P's assessment of MergerMarket Group's business risk profile as
"weak" reflects its small scale, which leaves it vulnerable to
changes in the competitive landscape. S&P's assessment is also
based on the group's reliance on two key products, MergerMarket
and Debtwire, which account for approximately two-thirds of
invoiced sales.
"On the positive side, we also incorporate MergerMarket Group's
market leadership in the niche markets of merger and acquisition
news, credit news, and intelligence services. The group's niche
focus means that it has limited direct competition globally.
MergerMarket Group also benefits from a loyal customer base
operating in different segments of the financial services
industry, with renewal rates of over 95%. We anticipate that
MergerMarket Group should continue to post moderate revenue and
EBITDA growth over the next few years, based on the increase in
its global subscriber base. We also consider that the
specialized nature of MergerMarket Group's offerings will
somewhat guard it from direct competition from larger players in
the global financial data, information, and analytics market,"
S&P added.
MergerMarket Group's "highly leveraged" financial risk profile
reflects S&P's view of its leveraged capital structure and
ownership by the private equity firm BC Partners. Following the
acquisition of MergerMarket Group by BC Partners from Pearson PLC
for GBP382 million, the group's adjusted debt includes GBP229
million of term loans and over GBP162 million of payment-in-kind
(PIK) shareholder loans and preference shares.
Mitigating MergerMarket Group's highly leveraged capital
structure is S&P's assessment of its liquidity as "adequate."
This assessment is supported by MergerMarket Group's lack of
material debt amortization requirements, limited capital
expenditure (capex), and limited working capital needs. S&P
believes that positive free operating cash flows will enable the
group to gradually reduce the incremental debt through ongoing
cash sweeps. That said, this is unlikely to meaningfully reduce
the group's total adjusted leverage because of the PIK nature of
the shareholder loans. Although these shareholder loans are
outside the banking group, S&Ps treat them as debt in its
adjusted credit metrics.
S&P's base-case operating scenario for MergerMarket Group after
the PI acquisition assumes:
-- Mid-to-high single-digit top-line growth, based on a
growing subscriber base and some cross selling;
-- EBITDA growth, fueled by operating efficiencies and top-
line growth, which, combined with moderate capex, will
result in continued positive free operating cash flow; and
-- Excess cash of around GBP10 million-GBP12 million, which
the group will use to pay down the first-lien term loan.
Based on these assumptions, S&P arrives at the following credit
measures:
-- Adjusted debt to EBITDA of above 12x following the
acquisition. On a fully adjusted basis, S&P do not see
leverage decreasing meaningfully due to the PIK nature of
the shareholder loans.
-- Excluding the shareholder loan, MergerMarket Group's
adjusted leverage ratio would be about 7x, according to
S&P's projections. Based on S&P's forecasts, this could
decrease to about 6x over the next two years, through cash
sweeps from excess cash and a prudent financial policy.
-- EBITDA cash interest coverage of around 2.5x (1x adjusted
EBITDA interest coverage) on an ongoing basis.
The stable outlook mainly reflects S&P's view that MergerMarket
Group should continue to post moderate revenue and EBITDA growth
over the next few years, based on its business model's favorable
dynamics. S&P assumes that the competitive landscape will not
change materially and that the group will maintain "adequate"
liquidity. S&P believes that positive free operating cash flows
will enable the group to gradually reduce its debt through
ongoing cash sweeps. That said, this is unlikely to meaningfully
reduce total adjusted leverage due to the PIK nature of the
shareholder loans.
Downside scenario
S&P could lower the ratings if MergerMarket Group does not grow
its revenue and EBITDA, or if it increases its spending, leading
to negative free cash flow or weakened liquidity. Specifically,
S&P could lower the ratings if EBITDA cash interest coverage
drops to less than 1.5x. More direct and persistent competition
from larger players in the global financial data, information,
and analytics market could also cause S&P to lower its assessment
of the group's business risk profile, potentially leading to a
downgrade.
Although S&P do not anticipate any further acquisitions in the
near term, material debt-funded acquisitions that increase
leverage could cause downward rating pressure.
Upside scenario
Currently, S&P sees the likelihood of an upgrade as limited
because of Mergermarket Group's highly leveraged capital
structure and S&P's expectation that adjusted total leverage
(including shareholder loans) will remain high. Notwithstanding
the positive free operating cash flows and a certain amount of
revenue growth built into S&P's base-case scenario for the group,
any meaningful debt deleveraging will be unlikely in the near
term, due to the PIK nature of the shareholder loans.
PIPE HOLDINGS: S&P Withdraws 'BB' Corporate Credit Rating
---------------------------------------------------------
Standard & Poor's Ratings Services affirmed its 'BB' long-term
corporate credit rating on U.K.-based plastic pipe manufacturer
Pipe Holdings PLC.
S&P subsequently withdrew the rating at the company's request.
At the time of the withdrawal, the outlook was stable.
At the time of withdrawal, the ratings on Polypipe reflected
S&P's view of its financial risk profile as "intermediate" and
its business risk profile as "weak."
The ratings also reflected S&P's belief that, following the
recent IPO, Polypipe will maintain a more moderate financial
policy as a publicly traded company.
The company has repaid its GBP150 million senior secured notes,
due 2015, and its senior bank facilities.
S&P's assessment of Polypipe's business risk profile as "weak,"
owed to the group's small scale and scope; about 75% of revenues
were generated in the U.K. in the financial year ended Dec. 31,
2013. The group is exposed to cyclical construction end markets
and volatile input costs. However, S&P noted that Polypipe
generates more than one-third of its revenues from its "repair,
maintain, and improve" segment, which S&P sees as somewhat less
cyclical than its construction segment.
UK COAL: Hargreaves Services Withdraws Loan Plan
------------------------------------------------
James Wilson and Chris Tighe at The Financial Times report that
Hargreaves Services has pulled out of a plan to provide a loan to
UK Coal, throwing into doubt the goal of a managed wind-down of
two of Britain's last remaining deep coal mines.
According to the FT, Aim-quoted Hargreaves had been expected to
put GBP5 million into a GBP20 million package of commercial loans
to UK Coal, which has been struggling because of low coal prices.
With the loans UK Coal hoped to stave off the threat of immediate
insolvency, with potentially 2,000 job losses, and instead manage
an 18-month wind-down of its business, the FT says.
UK Coal called Hargreaves' decision "disappointing" and said it
was looking at alternative ways to secure the managed closure
plan, the FT relates.
Hargreaves, which operates nine surface coal mines in the UK and
is also the country's largest independent coal importer, said it
was pulling out because no plan had been secured that it could
support, though it gave no details, the FT relays.
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.
===============
X X X X X X X X
===============
* BOOK REVIEW: Risk, Uncertainty and Profit
-------------------------------------------
Author: Frank H. Knight
Publisher: Beard Books
Softcover: 381 pages
List Price: $34.95
Review by Gail Owens Hoelscher
134Order your personal copy today at
http://www.beardbooks.com/beardbooks/risk_uncertainty_and_profit.
html
The tenets Frank H. Knight sets out in this, his first book,
have become an integral part of modern economic theory. Still
readable today, it was included as a classic in the 1998 Forbes
reading list. The book grew out of Knight's 1917 Cornell
University doctoral thesis, which took second prize in an essay
contest that year sponsored by Hart, Schaffner and Marx. In it,
he examined the relationship between knowledge on the part of
entrepreneurs and changes in the economy. He, quite famously,
distinguished between two types of change, risk and uncertainty,
defining risk as randomness with knowable probabilities and
uncertainty as randomness with unknowable probabilities. Risk,
he said, arises from repeated changes for which probabilities
can be calculated and insured against, such as the risk of fire.
Uncertainty arises from unpredictable changes in an economy,
such as resources, preferences, and knowledge, changes that
cannot be insured against. Uncertainty, he said "is one of the
fundamental facts of life."
One of the larger issues of Knight's time was how the
entrepreneur, the central figure in a free enterprise system,
earns profits in the face of competition. It was thought that
competition would reduce profits to zero across a sector because
any profits would attract more entrepreneurs into the sector and
increase supply, which would drive prices down, resulting in
competitive equilibrium and zero profit.
Knight argued that uncertainty itself may allow some
entrepreneurs to earn profits despite this equilibrium.
Entrepreneurs, he said, are forced to guess at their expected
total receipts. They cannot foresee the number of products they
will sell because of the unpredictability of consumer
preferences. Still, they must purchase product inputs, so they
base these purchases on the number of products they guess they
will sell. Finally, they have to guess the price at which their
products will sell. These factors are all uncertain and
impossible to know. Profits are earned when uncertainty yields
higher total receipts than forecasted total receipts. Thus,
Knight postulated, profits are merely due to luck. Such
entrepreneurs who "get lucky" will try to reproduce their
success, but will be unable to because their luck will
eventually turn.
At the time, some theorists were saying that when this luck runs
out, entrepreneurs will then rely on and substitute improved
decision making and management for their original
entrepreneurship, and the profits will return. Knight saw
entrepreneurs as poor managers, however, who will in time fail
against new and lucky entrepreneurs. He concluded that economic
change is a result of this constant interplay between new
entrepreneurial action and existing businesses hedging against
uncertainty by improving their internal organization.
Frank H. Knight has been called "among the most broad-ranging
and influential economists of the twentieth century" and "one of
the most eclectic economists and perhaps the deepest thinker and
135scholar American economics has produced." He stands among the
giants of American economists that include Schumpeter and Viner.
His students included Nobel Laureates Milton Friedman, George
Stigler and James Buchanan, as well as Paul Samuelson. At the
University of Chicago, Knight specialized in the history of
economic thought. He revolutionized the economics department
there, becoming one the leaders of what has become known as the
Chicago School of Economics. Under his tutelage and guidance,
the University of Chicago became the bulwark against the more
interventionist and anti-market approaches followed elsewhere in
American economic thought. He died in 1972.
*********
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
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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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* * * End of Transmission * * *