/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/140704.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, July 4, 2014, Vol. 15, No. 131 Headlines C Y P R U S FINTEST TRADING: S&P Lowers CCR to 'CC'; Outlook Negative F I N L A N D STORA ENSO: Fitch Plans to Withdraw 'BB-' Issuer Default Rating F R A N C E SPIE BONDCO: Moody's Hikes Corporate Family Rating to 'B1' I R E L A N D DA VINCI SYNTHETIC: Fitch Affirms 'Dsf' Rating on Class C Notes PARIS BAKERY: High Court Appoints Official Liquidator K A Z A K H S T A N SUNKAR RESOURCES: Faces Insolvency if Sun Avenue Takeover Fail L U X E M B O U R G PATAGONIA FINANCE: Moody's Hikes Rating on EUR453MM Notes to Caa3 * Luxembourg Bankruptcy Rate Down 20% in First Six Months of 2014 N E T H E R L A N D S FAXTOR ABS 2003-1: S&P Raises Ratings on 2 Note Classes to 'BB-' R O M A N I A GARANTI BANK: Fitch Lowers LT Issuer Default Rating to 'BB+' R U S S I A ACRON JSC: Fitch Affirms 'B+' IDR & Revises Outlook to Positive ALFA-BANK: Moody's Affirms 'Ba1' Long-Term Debt & Deposit Ratings ENERGOGARANT JSIC: S&P Affirms 'BB-' Rating; Outlook Stable GAZPROMBANK: Moody's Confirms 'Ba3' FC Subordinated Rating S P A I N GRUPO ANTOLIN: S&P Assigns 'BB-' CCR; Outlook Stable NCG BANCO: Moody's Cuts Rating on Mortgage Covered Bonds to 'Ba2' U N I T E D K I N G D O M ENTERPRISE INNS: Moody's Raises Corp. Family Rating to 'B2' GLOBAL MP: In Administration; Around 15 Jobs Affected GOALS SOCCER: In Talks Over GBP42.5 Million Loan Facility SHERWOOD AGENCIES: In Administration; Around 20 Jobs Affected SYNTECH SW: In Administration; 85 Jobs Affected WOODBERRY BROS: In Administration; Buyer Sought X X X X X X X X * Losses Likely for EMEA CMBS Loans Maturing in 3Q14, Fitch Says * BOOK REVIEW: The First Junk Bond ********* =========== C Y P R U S =========== FINTEST TRADING: S&P Lowers CCR to 'CC'; Outlook Negative --------------------------------------------------------- Standard & Poor's Ratings Services lowered its long-term corporate credit rating on Cyprus-registered Fintest Trading Co. Ltd., the holding company of Ukraine-based Donetsk Steel Group, to 'CC' from 'CCC'. The outlook is negative. The downgrade reflects that Fintest Trading has entered in negotiations for a standstill agreement on its debt repayments with its banks that S&P expects to close in the following weeks. S&P projects that the company will work with its creditors thereafter to restructure its debt. The company has more than $100 million in debt maturing in the second half of 2014, and S&P don't anticipate that it will be able to repay it. S&P bases its assumptions on Fintest Trading's "weak" liquidity, notably limited free operating cash flows (FOCF), and no access to new bank financing. S&P expects that the company's cash flows will remain weak in the second half of 2014 because of low coking coal prices that are hovering near US$110 per ton FOB Australia. S&P also sees high business disruption risks for the company given that its assets and head office are located in the currently politically unstable Donetsk region. Nevertheless, S&P understands from management that its operations, exports, and payments have not been affected so far. The negative outlook reflects that S&P could lower its rating on Fintest Trading to 'D' (default) in the coming weeks if the company signs a standstill agreement or defaults on its upcoming debt maturities. Once the capital restructuring is finalized, S&P will revise its rating on Fintest Trading to reflect the company's liquidity and debt maturity schedule. ============= F I N L A N D ============= STORA ENSO: Fitch Plans to Withdraw 'BB-' Issuer Default Rating --------------------------------------------------------------- Fitch Ratings expects to withdraw its ratings of Stora Enso Oyj after a 30-day period beginning as they are no longer considered by Fitch to be relevant to the agency's coverage. Fitch will continue to maintain coverage of Stora Enso prior to withdrawal. Fitch's ratings on Stora Enso are unsolicited and have been provided by the rating agency as a service to investors. Fitch reserves the right in its sole discretion to withdraw or maintain any rating at any time for any reason it deems sufficient. Fitch may elect to maintain coverage based on investor feedback. Fitch will only provide ratings where it has sufficient information to rate the issuer or transaction. This advance notice is provided to permit further investor feedback to Fitch and for the benefit of users in managing their use of Fitch's ratings. Fitch rates Stora Enso as follows: Long-term Issuer Default Rating (IDR): 'BB-'; Outlook Stable Senior unsecured rating: 'BB-' =========== F R A N C E =========== SPIE BONDCO: Moody's Hikes Corporate Family Rating to 'B1' ---------------------------------------------------------- Moody's Investors Service upgraded the ratings of Spie BondCo 3 S.C.A., including the corporate family rating (CFR) to B1 from B2, probability of default rating (PDR) to B1-PD from B2-PD, the rating of Spie's senior notes due 2019 to B3 from Caa1 and the rating of debt facilities borrowed by Clayax Acquisition 4 SAS to B1 from B2. The outlook on all ratings is stable. Ratings Rationale The ratings upgrade reflects the company's strong operating performance in line with expectations. Spie achieved 11% year-on year sales growth in 2013, driven primarily by acquisitions. However, Moody's notes continued weakness in the company's main division, MRS-France, although the decline of 3% in full-year 2013 slowed down in the last quarter to -0.5%. Without the acquisition of Hochtief Service Solutions (HSS) in September 2013 (renamed Spie GmbH) the company's sales increased by 5%, with growth demonstrated by all divisions outside of MRS-France. Management's EBITDA margin improved year-on-year to 7.2% from 6.9%, despite a dilutive effect from Spie GmbH's acquisition. Profitability in MRS-France remained stable as a result of Spie's competitive position in this core market, such as leading market share, density of network and focus on profitability in the competitive bidding processes. The contribution from Spie GmbH during the first four months of 2013 amounted to EUR15.6 million, resulting in a 6.4% EBITDA margin. Spie's strong performance continued during Q1 2014, with year-on-year management EBITDA growth of approximately 15%. Despite the growth in EBITDA, Spie's Moody's adjusted leverage increased to approximately 5.9x as of the end of 2013, from 5.5x at the end of 2012. This was in line with the rating agency's expectations and driven by the acquisition of HSS in September 2014 (primarily debt-financed). Leverage is expected return towards 5.5x by the end of 2014 owing to the full-year contribution from the acquisitions made during 2013. The company generated EUR82 million free cash flow (FCF) during 2013 (as calculated by Moody's), supported by working capital release as well as reduced restructuring costs. The company's liquidity is good, consisting of EUR284 million cash and cash equivalents on balance sheet, a EUR200 million undrawn revolving credit facility and a EUR100 million acquisition/capital expenditure facility, under which EUR35 million remain undrawn as of 31 December 2013. The acquisition spend and integration of the newly acquired businesses remain the key risks for the business assessment, given the fragmented nature of the industry. The company's annual spending on acquisitions averaged EUR40 million in both 2011 and 2012, which was covered by Spie's cash generation. However, acquisition capex significantly increased in 2013 as a result of the acquisition of HSS in Germany and several other businesses outside of France , with a total turnover of close to EUR921 million on a full-year basis. Moody's understands that in 2014 the company will focus on the integration of the businesses acquired in 2013 without a significant deviation from the capex spent prior to 2013. Rationale For The Stable Outlook The stable outlook reflects Moody's expectation of the business continuing to deleverage at a steady pace, despite the acquisition growth strategy. What Could Change The Rating Up/Down Positive rating pressure could arise if the company (1) de-levers its balance sheet leading to a Moody's adjusted gross debt/EBITDA substantially below 5.0x on a sustainable basis; (2) improves its (EBITDA-capex)/interest towards 3.0x; and (3) FCF/debt ratio close to 10%. Conversely, negative pressure could arise if (1) gross Moody's adjusted gross debt/EBITDA ratio approaches 6.0x; (2) (EBITDA- capex)/interest declines substantially below 2.0x; or (3) Free Cash Flow deteriorates. Any significant debt-financed acquisition may also put negative pressure on the ratings. The principal methodology used in these ratings 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 France, Spie is a leading European multi- technical services provider serving both the private and public sector. The company specializes in electrical and mechanical engineering, and heating, ventilation and air conditioning (HVAC) services, accounting for majority of its sales, as well as specialized services to the Oil & Gas, Communications, and Nuclear sectors. Spie operates in nearly 400 locations in 30 countries, with France as its largest market, accounting for 54% of its production in 2013. ============= I R E L A N D ============= DA VINCI SYNTHETIC: Fitch Affirms 'Dsf' Rating on Class C Notes --------------------------------------------------------------- Fitch Ratings has affirmed Da Vinci Synthetic plc's notes, as follows: EUR6.37m Class B: affirmed at 'CCCsf'; Recovery Estimate 90%. EUR7.74m Class C: affirmed at 'Dsf'; Recovery Estimate 0% The transaction is a synthetic securitization of a portfolio of financial leases and loans secured on aircrafts and associated aircraft collateral. Merrill Lynch International Bank entered into a credit default swap with Intesa Sanpaolo under which it sells protection on a reference portfolio of up to USD650 million. All financial leases or loan obligations (the reference portfolio) relate to the financing or refinancing of aircrafts. KEY RATING DRIVERS The affirmation is based on the current composition of the reference claims and that no credit events have occurred in the past 12 months. Only one credit event has occurred since the transaction closed in 2006. Fitch believes that the operating environment for the aviation sector is challenging, in particular for European flagship carriers. This transaction is exposed to concentration risk as the current portfolio contains 12 reference claims involving five airlines in five countries. The top two airlines represent 61% of the total notional amount outstanding. This number is expected to further increase by the end of October when all the obligations related to one airline are repaid. RATING SENSITIVITIES If a credit event occurs and is called on two obligors, the class B notes could experience a default. Non-payments from more obligors could result in a downwards revision of the recovery estimate. If no credit event occurs in the next year and the reference obligation continues to reduce, this may result in positive rating action. PARIS BAKERY: High Court Appoints Official Liquidator ----------------------------------------------------- RTE News reports that the High Court has wound-up well-known Dublin city centre bakery and restaurant Paris Bakery, which had been the scene of a sit-in by workers over unpaid wages. RTE News relates that an official liquidator was appointed to Paris Bakery and Pastry Ltd, which had operated in Moore Street until its closure in May. The Revenue Commissioners petitioned the court to wind up the company after it failed to satisfy a demand for EUR117,000 in unpaid taxes, according to the report. The Revenue served a demand on the company last April, RTE News recalls. According to the report, Dermot Cahill BL for Revenue said while a sum of more than EUR52,000 had been paid, the outstanding amount owed was not paid. The company was clearly insolvent and unable to pay its debts, counsel said, RTE News relates. RTE News says the court heard the company's workforce of an estimated 25 people, most of whom are foreign nationals, are owed about EUR158,000 in unpaid wages. The workers, several of whom were present in court, staged a 20-day sit-in after the business ceased trading, the report says. As result of the court's decision, the workers will now be able to avail of the Insolvency Payments Scheme, according to RTE News. RTE News adds the court also ordered that the company's two directors, Yannick Forel, Swiftbrook Glen, Ballyjamesduff Road, Virginia, Co Cavan and Ruth Savill of Springfield House, Kilbride, Co Wicklow file statements of affairs within 21 days. The judge made the matter returnable before the Examiner's Court in October, the report notes. =================== K A Z A K H S T A N =================== SUNKAR RESOURCES: Faces Insolvency if Sun Avenue Takeover Fail -------------------------------------------------------------- StockMarketWire.com reports that Sunkar Resources announced post- tax losses halved in 2013 to $4.4 million but said if a recommended offer of 1.835p per share from its majority shareholder Sun Avenue Partners Corporation (SAPC) does not go through it could be declared insolvent. StockMarketWire.com relates that Sunkar said: "If the Offer does not complete by 16 August 2014 and the Letter of Support is withdrawn and SAPC does not provide further funding to the Company, the Board would immediately have to seek alternative sources of funding to meet its working capital requirements, which the Board, having previously investigated such alternative sources of financing, does not believe would be available to the Company. This would, in the view of the Board, lead to the suspension of the admission of the ordinary shares to trading on AIM and the announcement of an administration/insolvency process." Sunkar Resources is a Kazakh phosphate producer. =================== L U X E M B O U R G =================== PATAGONIA FINANCE: Moody's Hikes Rating on EUR453MM Notes to Caa3 ----------------------------------------------------------------- Moody's Investors Service has upgraded the rating on the following notes issued by Patagonia Finance S.A.: EUR453.2115M (currently outstanding balance of EUR324,730,600) Senior Zero coupon notes, Upgraded to Caa3; previously on May 15, 2013 Downgraded to Ca This transaction represents a repackaging of Banca Monte dei Paschi di Siena S.p.A subordinate bonds, where the fixed coupon is reinvested to match the accretion of the zero coupon notes. Ratings Rationale Moody's explained that the rating action taken is the result of a rating action on the subordinate rating of Banca Monte dei Paschi di Siena S.p.A, which was upgraded to Caa3 from Ca on June 26, 2014. Methodology Underlying the Rating Action: The principal methodology used in this rating was "Moody's Approach to Rating Repackaged Securities" published in April 2010. Factors that would lead to an upgrade or downgrade of the rating: This rating is essentially a pass-through of the rating of the underlying securities. Noteholders are exposed to the credit risk of Banca Monte dei Paschi di Siena S.p.A. and therefore the rating moves in lock-step. Moody's notes that this transaction is subject to a high level of macroeconomic uncertainty, which could negatively impact the ratings of the notes, as evidenced by (1) uncertainties of credit conditions in the general economy especially as the transaction is exposed to an obligor located in Italy, and (2) more specifically, any uncertainty associated with the underlying credits in the transaction could have a direct impact on the repackaged transaction. * Luxembourg Bankruptcy Rate Down 20% in First Six Months of 2014 ----------------------------------------------------------------- Luxemburger Wort reports that the number of companies declared bankrupt in Luxembourg over the first six months of this year was significantly below 2013 figures, seeing a drop of over 20%. Between January and the end of June, 398 businesses were declared insolvent by the Luxembourg and Diekirch courts, the report says. Most of them (293) were from the service sector, followed by commerce (167), construction (55) and manufacturing (7), Luxemburger Wort discloses. Over the same time last year, 522 businesses were declared bankrupt, marking a 23.75 percent decrease between 2013 and 2014, says Luxemburger Wort. Businesses older than five years meanwhile were more affected, making up 236 of bankruptcies so far this year. Despite the overall decline, however, the percentage of younger companies folding increased over the past year, according to Luxemburger Wort. While in 2013, companies younger than five years accounted for just over 28 percent of bankruptcies, this year the rate was at 40 percent, the report notes. According to Luxemburger Wort, the statistics for the first six months of 2014 are the lowest since 2011, when 452 businesses folded between January and June, increasing to 571 over the same time in 2012. The last time the numbers were below 400 for the first half of the year was in 2010, when 363 companies were declared bankrupt, the report notes. ===================== N E T H E R L A N D S ===================== FAXTOR ABS 2003-1: S&P Raises Ratings on 2 Note Classes to 'BB-' ---------------------------------------------------------------- Standard & Poor's Ratings Services raised its credit ratings on FAXTOR ABS 2003-1 B.V.'s class A-2 E, A-2 F, A-3 E, and A-3 F notes. At the same time, S&P has affirmed its ratings on the class B E and B F notes. S&P has also withdrawn its rating on the class A-1 E notes. The rating actions follow S&P's credit and cash flow analysis of the transaction using data from the trustee report dated May 6, 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. 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 that we considered to be appropriate. We incorporated various cash flow stress scenarios using our standard and additional default patterns and levels for each rating category assumed for each class of notes, combined with different interest stress scenarios as outlined in our corporate collateralized debt obligation (CDO) criteria," S&P said. The transaction's reinvestment period ended in May 2013. Since S&P's previous review on May 20, 2013, the class A-1 E, A-2 E, and A-2 F notes have amortized by approximately EUR46 million. According to S&P's cash flow results, the available credit enhancement for all of the class A-1 and A-2 notes has significantly increased since its previous review. In S&P's view, this has resulted from the significant deleveraging of the class A-1 E, A-2 E, and A-2 F notes. S&P has therefore raised to 'A- (sf)' from 'BBB (sf)' its ratings on the class A-2 E and A-2 F notes. S&P's analysis indicates that the available credit enhancement for all of the class A-3 notes is commensurate with higher ratings than previously assigned. In S&P's view, this is mainly due to the amortization of the class A-1 E and A-2 notes since its previous review. As a result, S&P has raised to 'BB- (sf)' from 'B+ (sf)' its ratings on the class A-3 E and A-3 F notes. The level of available credit enhancement for the class B E and B F notes has increased since S&P's previous review. As a result, S&P's credit and cash flow results indicate that the BDRs exceed the scenario default rates (which represent the expected level of defaults at each rating level) at higher rating levels than those currently assigned. However, the maximum ratings that these classes of notes can achieve under S&P's supplemental stress tests is 'CCC-(sf)'. Hence, S&P has affirmed its 'CCC- (sf)' ratings on the class B E and B F notes. S&P has withdrawn its 'A+(sf)' rating on the class A-1 E notes as they have fully redeemed. FAXTOR ABS 2003-1 is a cash flow collateralized debt obligation (CDO) of mezzanine asset-backed securities transaction, which closed in May 2003. The reinvestment period ended in May 2008. RATINGS LIST Class Rating Rating To From FAXTOR ABS 2003-1 B.V. EUR308 Million Asset-Backed Fixed- and Floating-Rate Notes Ratings Raised A-2 E A- (sf) BBB (sf) A-2 F A- (sf) BBB (sf) A-3 E BB- (sf) B+ (sf) A-3 F BB- (sf) B+ (sf) Ratings Affirmed B E CCC- (sf) B F CCC- (sf) Rating Withdrawn A-1 E NR A+ (sf) NR-Not rated. ============= R O M A N I A ============= GARANTI BANK: Fitch Lowers LT Issuer Default Rating to 'BB+' ------------------------------------------------------------ Fitch Ratings has downgraded Garanti Bank S.A's (Garanti Romania) Long- and Short-term Issuer Default Ratings to 'BB+' and 'B', from 'BBB-' and 'F3', respectively. The Outlook is Stable. Fitch has also downgraded the Support Rating to '3' from '2'. The Viability Rating of Garanti Romania of 'b' was not affected by this rating action. KEY RATING DRIVERS: IDRs AND SUPPORT RATING The rating actions follow the downgrade of Garanti Romania's ultimate parent Turkiye Garanti Bankasi A.S.'s (TGB; BBB-/Stable) Long-term IDR. The IDRs and Support Rating of Garanti Romania are underpinned by Fitch's view that the bank is a strategically important subsidiary of TGB. Garanti Romania shares the parent's brand and IT systems, and sources top management and board members from TGB. Fitch believes the parent has a strong propensity to support Garanti Romania, given their strong integration and the high reputational risk to TGB in allowing its subsidiary to default. The Stable Outlook assigned to Garanti Romania's Long-Term IDR reflects the Outlook assigned to TGB. KEY SENSITIVITIES: IDRs AND SUPPORT RATING Garanti Romania's IDRs are sensitive to a change in the IDR of TGB. Given the recent downgrade of TGB's IDR and its Stable Outlook, an upgrade is unlikely in the short- to medium-term. Additionally, Garanti Romania's IDR could come under downward pressure should Fitch adversely change its view on TGB's ability or propensity to support Garanti Romania. =========== R U S S I A =========== ACRON JSC: Fitch Affirms 'B+' IDR & Revises Outlook to Positive --------------------------------------------------------------- Fitch Ratings has affirmed JSC Acron's Long-term foreign and local currency Issuer Default Ratings (IDR) at 'B+'. The Outlook on the Long-term IDRs has been revised to Positive from Stable. The Positive Outlook reflects Fitch's view that Acron's operational profile has fundamentally improved as a result of the ramp up of the Oleniy Ruchey phosphate mine to levels sufficient to cover the group's internal needs. Acron's lack of vertical integration and full reliance on monopolistic producer OAO Apatit had been a key constraint on the rating. The Positive Outlook also reflects our opinion that Acron's credit metrics will improve in the next two years as a result of the material reduction in its potash plan. This contrasts with previous assumptions that net leverage would be sustained at around 3.0x due to the group's investment program. Fitch's base case now assumes a moderate but gradual improvement in pricing conditions from current challenging levels and we project 2016 funds from operations (FFO) net adjusted leverage (leverage) below the 2.5x positive rating guideline we had previously set. KEY RATING DRIVERS Phosphate Self-Sufficiency The open-pit mine at Oleniy Ruchey continues to ramp up to full production with 900mtpa expected by end-2014. The mine was commissioned in 1H12 and is meeting Acron's internal phosphate needs in 2014. The group's production requires 700ktpa. This is a critical and credit enhancing step for Acron who had previously depended on monopolistic supplier OAO Apatit for its phosphate concentrate. Improvement in Debt Metrics Fitch's base case forecasts a gradual improvement in net FFO leverage, to below 2.0x by end-2016 from 2.7x at end-2013 (vs. 3.0x previously forecast). This will be driven by a material reduction in capex following the group's decision to delay the start of the works at the Talitsky potash mine. Under S&P's base case, free cash flow (FCF) is neutral or marginally negative from 2015 onwards. Downside Risk from Opportunistic Strategy The risks to our rating base case include Acron's opportunistic strategy as well as aggressive shareholder distributions. In 2014, cash dividends will increase to RUB6.2 billion from RUB2.6 billion in 2013. This departs from the group's conservative stance, particularly in light of the current challenges in the sector. While the effect on FCF is partly offset by the reduction in capex, we stress that our base case assumes a return to historical dividend payout levels by 2015-2016. Acron also increased its stake in Polish fertilizer producer Azoty Tarnow (ZAT) to 20% (regulatory cap on voting rights) from 15.3% in June 2014. Fitch's rating case assumes no further outflows towards ZAT or other M&A activity. Material Reduction in Investments Fitch's base case assumes capex of RUB35 billion in total over 2013-2015 compared with RUB52 billion previously forecast. Acron delayed the development of its USD2 billion Talitsky potash project after obtaining an extension of its license for the mine. This gives the group flexibility to start production in 2021 instead of 2016 under the previous agreement and considerably reduces its external funding needs in the medium term. Acron's resources are now earmarked for its 700ktpa ammonia plant (commissioning in 2015) and for the development of its underground phosphate mine at Oleniy Ruchey. Fitch's believes that the phosphate expansion program offers further flexibility to preserve cash should market conditions remain challenging. Base Case Conservative on Prices Fitch's base case forecasts a low single digit reduction in sales in 2014 reflecting the challenging pricing environment and a slight reduction in volumes yoy. Those trends are partly offset by the weakening of the RUB against the USD, which also supports Acron's competitiveness in its export markets. Demand is improving and the feared flood of Chinese urea has not materialized during the export window. The pricing outlook remains cloudy with pressure from low potash and urea prices. Fitch do not assume any material improvement in prices in 2015 but project revenue growth of 12%-15% as demand increases from the current lows and as new ammonia capacity ramps up. Profitability compares favorably with our previous assumptions as it factors in the full benefit of the recent freeze in natural gas prices in Russia and weaker rouble. Fitch forecasts EBITDA margins at around 23-25% over 2014-2015. Adequate Liquidity Liquidity is adequate with cash balances of RUB19.1 billion at end-1Q14 compared with short-term debt of RUB22.9 billion. In February 2014, cash flow generation was boosted by proceeds of RUB6.7 billion from the sale of a 19.9% stake in the Talitsky potash project. Additional flexibility could be offered by the group's registered rouble bond program and by the minority stake in Uralkali ('BBB-'/Negative), valued at RUB8.1 billion at end- 1Q14. In May 2014, Acron redeemed RUB2bn out of its RUB4.1 billion rouble bond issues (series 04, 05). Fitch forecasts negative RUB6.9 billion FCF level under our 2014 base case, after the payment of RUB6.2 billion dividends. Fitch assumes that Acron will continue to have access to external funding. RATING SENSITIVITIES Positive: Future developments that could lead to positive rating action include: -- Evidence of moderation in capex and shareholder distributions resulting in leverage maintained below 2.5x on a sustained basis could lead to an upgrade. The current rating Outlook is Positive. Consequently, Fitch's sensitivity analysis does not currently anticipate developments with a material likelihood, individually or collectively, of leading to a downgrade. However, future developments that may, individually or collectively, lead to a stabilization of the Outlook or to a downgrade include: -- Aggressive capex or shareholder distributions resulting in leverage above 3.0x -- Sustained materially negative FCF (excluding funding of the potash project) -- A sharp deterioration of market conditions or Acron's cost position with a sustained drop in EBITDAR margin below 20%. The rating actions are as follows: JSC Acron -- Long-term local and foreign currency IDR affirmed at 'B+'; Outlook revised to Positive from Stable -- Long-term National Rating affirmed at 'A (rus)'; Outlook revised to Positive from Stable -- Short-term foreign currency IDR affirmed at 'B'; -- Local currency senior unsecured rating affirmed at 'B+' for the RUB3.75bn (series 04), RUB3.75bn (series 05) and RUB5bn (BO-01 series) bond issues, Recovery Rating 'RR4'; -- Local currency senior unsecured rating of' B+'/RR4 assigned to the three-year RUB15bn exchange-traded rouble bond program. ALFA-BANK: Moody's Affirms 'Ba1' Long-Term Debt & Deposit Ratings ----------------------------------------------------------------- Moody's Investors Service has affirmed the long-term debt and deposit ratings of Alfa-Bank at Ba1 and its standalone bank financial strength rating (BFSR) of D, corresponding to the standalone baseline credit assessment (BCA) of ba2. The rating affirmations reflect the continued incorporation of one notch of uplift in the long-term ratings of Alfa-Bank due to systemic support assumptions, and its resilient credit profile, robust capital ratios and sustainable core profitability. The outlook on all long-term ratings and the BFSR is stable. Ratings Rationale BFSR In affirming the bank's standalone BFSR at the current level, Moody's says that Alfa's resilient credit profile, robust capital ratios and sustainable core profitability imply that its franchise is able to withstand the challenging operating environment in Russia and asset-quality pressures that are expected in the current year. Alfa's standalone BFSR is supported by its established franchise as the fifth-largest banking group in Russia with a growing branch network and customer base. The bank's problem loans were 3.5% of total gross loans at end-2013 compared to its Russian peers (5%-7% problem loan ratios on average), which Moody's attributes to Alfa's efficient problem-loan workout procedures. Due to its conservative provisioning policy (provisioning expenses at 1.8% of the loan book for 2013) Alfa-Bank maintains above 100% coverage of existing problem loans, thus reducing pressure on the bank's capital. Moody's notes that the bank's capital adequacy has improved, despite pressure due to new lending growth over recent years, as the bank maintains a high rate of capital retention. Total CAR (Basel I) stood at 16.7% at year-end 2013, with Tier 1 at 11.7% (2012: 15.6% and 10.2%, respectively). Moody's considers Alfa's liquidity buffer as adequate in the context of its customer-driven deposit funding base. Its international wholesale funding refinancing risk remains low (less than 3% of total liabilities) over a one year horizon and a larger portion of its Interbank funding represents collateralized transactions with the Central Bank of Russia. Supported Long-Term Debt and Deposit Ratings Moody's continues to incorporate one notch of uplift in the long- term ratings of Alfa due to systemic support assumptions. The bank's relatively sizeable 3% market share in retail deposits (compared with other privately-owned peers) in Russia is a key driver behind the current uplift. The bank also has a track- record of benefiting from government-related subordinated debt funding during the 2009 downturn. The current level of uplift would be resilient to a potential one-notch downgrade of the sovereign rating, thus supporting the stable outlook on the long- term ratings. What Could Change the Rating UP/DOWN Any positive developments would require one or more of the following (1) the ongoing ability to maintain overall profitability and a capital buffer commensurate with the credit risks that the current deteriorating operating environment poses; and (2) a marked improvement in the bank's risk profile, reflected in decreased concentration levels in loans and related- party exposures. A significant deterioration of the bank's asset quality, capitalization and/or liquidity position (including refinancing risk) could have a negative impact on its BCA, as could a weakening market position and a material loss of market share. The escalation of international sanctions related to the on-going political crisis in Ukraine could lead to further deterioration of the operating environment leading to increased negative pressure on bank's ratings. Alfa-Bank's senior debt/deposit ratings could be downgraded in the event of (1) a downgrade of the bank's BFSR; or (2) a multi-notch downgrade of the Russian sovereign rating; and/or (3) if Moody's re-assesses downwards its current views on the probability of systemic support being available to Alfa-Bank. List of Affected Ratings Issuer: Alfa-Bank Adjusted Baseline Credit Assessment, maintained at ba2 Baseline Credit Assessment, maintained at ba2 Bank Financial Strength Rating, Affirmed D STA Long-term Deposit Ratings, Affirmed Ba1 STA Short-term Deposit Ratings, Affirmed NP Senior Unsecured Regular Bond/Debenture, Affirmed Ba1 STA Backed Senior Unsecured Regular Bond/Debenture, Affirmed Ba1 STA Subordinate Regular Bond/Debenture, Affirmed Ba3 STA Backed Subordinate Regular Bond/Debenture, Affirmed Ba3 STA Outlook, Stable Issuer: Alfa MTN Invest Ltd Backed Senior Unsecured Medium-Term Note Program, Affirmed (P)Ba1 Outlook, Stable Issuer: Alfa MTN Issuance Limited Backed Senior Unsecured Regular Bond/Debenture, Affirmed Ba1 STA Backed Senior Unsecured Medium-Term Note Program, Affirmed (P)Ba1 Backed Short-term Medium-Term Note Program, Affirmed (P)NP Outlook, Stable Issuer: Alfa MTN Markets Limited Backed Senior Unsecured Medium-Term Note Program, Affirmed (P)Ba1 Backed Short-term Medium-Term Note Program, Affirmed (P)NP Outlook, Stable Issuer: Alfa MTN Projects Limited Backed Senior Unsecured Medium-Term Note Program, Affirmed (P)Ba1 Outlook, Stable The principal methodology used in these ratings was Global Banks published in May 2013. ENERGOGARANT JSIC: S&P Affirms 'BB-' Rating; Outlook Stable ----------------------------------------------------------- Standard & Poor's Ratings Services said that it has affirmed its 'BB-' long-term counterparty credit and financial strength ratings on Russia-based insurer Energogarant JSIC. The outlook is stable. At the same time, S&P affirmed its 'ruAA-' Russia national scale rating on the company. "The ratings reflect our view of Energogarant's vulnerable business risk profile, owing to a less-than-adequate competitive position, and its weak financial risk profile. The company's capital and earnings have deteriorated to lower-adequate levels, due to business growth and elevated losses from the motor segment. This is offset, however, by a change in investment policy, implying a more prudent approach toward investments. The company's average investment credit quality is in the 'BB' category, which is marginal in the international context, but compares well with that of local peers that have a similar size and business focus. Our anchor for Energogarant is 'bb-'. We do not make any adjustments to the anchor because we regard the company's enterprise risk management (ERM) as adequate, and management and governance as fair," S&P said. "In our view, Energogarant is exposed to moderate industry and country risks, reflecting our assessment of Russia's property/casualty insurance sector. We view Energogarant's competitive position as less than adequate, primarily based on the company's relatively small size: Its gross premiums written (GPW) totaled Russian ruble (RUB) 9.2 billion (approximately $270 million) in 2013. We believe the company faces increasing competition, particularly from large insurance companies that are targeting profitable corporate business. Notwithstanding its small size, Energogarant's portfolio is relatively diverse. In 2013, the insurance portfolio mix was split among motor (47%), voluntary medical (18%), property (16%), personal accident (7%), cargo (3%), and other lines (9%)," S&P noted. "We have revised our assessment of Energogarant's capital and earnings to lower adequate from upper adequate. The company demonstrated quite substantial business growth in 2013 (17% increase in GPW), but this was accompanied by a rise in the net combined (loss and expense) ratio to 106% from 101% (a ratio higher than 100% denotes an underwriting loss) on average in 2008-2012. The deterioration was mainly owing to an increase in the net loss ratio to 65% in 2013 from 55% the previous year, mostly due to losses in the motor segment. We believe this weakening of loss ratios has affected most of Russia's insurance sector, however. In addition, we still consider Energogarant's expense ratio (at 43% in 2013) to be relatively high, mainly owing to high distribution costs. We expect the company to post a combined ratio of 102%-106% and a return on equity of 3%-8% in 2014 to 2016. At the same time, we believe the company will likely report a higher loss ratio in 2014 than historical averages, but keep the expense ratio at manageable levels. We expect the loss ratio to go down gradually starting from 2015, in line with market trends," S&P added. "In our view, the risk from Energogarant's investment portfolio has decreased; therefore we have revised our assessment of its risk position to moderate risk from high risk. The investment portfolio consists largely of bank deposits and promissory notes. After a series of banking license withdrawals in Russia in fourth-quarter 2013, Energogarant revised its investment approach, significantly reducing the number of banks it cooperates with and imposing stricter investment rules. Consequently, the concentrations in the portfolio have somewhat decreased, and the share of 'BBB' rated assets rose to 37% of total assets in 2013, compared with 31% in 2012. Nevertheless, although we consider the investment portfolio composition to be generally prudent, the credit quality of banks Energogarant is exposed to remains in the relatively low 'BB' category," S&P said. The stable outlook reflects S&P's opinion that Energogarant's capital will remain at least adequate through 2015-2016, and that the company will maintain its competitive position and, consequently, its market share in corporate lines, while gradually diversifying into personal lines. S&P expects investment quality to stay at least marginal. S&P could take a negative rating action if Energogarant's capitalization fell below what we consider lower adequate. This could occur through significant deterioration of earnings, due to sizable underwriting or investment losses, or business growth that markedly exceeds S&P's current expectations, namely more than 10% annual GPW growth. S&P could also lower the ratings if the quality of the company's investment portfolio weakened, with the average credit quality of investments falling to the 'B' category. An upside scenario is a very remote possibility at this stage. S&P could consider an upgrade if Energogarant's competitive position noticeably strengthened or its capitalization improved to a level that S&P considers to be strong. GAZPROMBANK: Moody's Confirms 'Ba3' FC Subordinated Rating ---------------------------------------------------------- Moody's Investors Service has confirmed the supported long-term debt, issuer and deposit ratings of six Russian financial institutions -- Sberbank, Bank VTB JSC, Gazprombank, Russian Agricultural Bank (RusAg), Agency for Housing Mortgage Lending OJCS (AHML), and Vnesheconombank (VEB) -- following the rating agency's confirmation of Russia's Baa1 government bond rating with a negative outlook on June 27, 2014. The confirmation of the sovereign rating means that the level of systemic support that Moody's incorporates into the six financial institutions' affected ratings remains unchanged, thus prompting the confirmation of their supported long-term ratings. This rating action concludes the review of these ratings initiated by Moody's in April 2014. Ratings Rationale Senior Debt And Deposit Ratings The confirmation of the government debt rating at Baa1 with a negative outlook has prompted the confirmation of the relevant financial institutions' supported ratings. These ratings incorporate systemic support uplift that is informed by Russia's government debt rating. Moody's also considers that the Russian government's willingness to support the large systemically important financial institutions has remained unchanged and the current support assumptions and uplifts are adequate in the current environment. Sberbank Sberbank's long-term debt and deposit ratings of Baa1 were confirmed with a negative outlook, maintaining a two-notch uplift from its standalone baseline credit assessment (BCA) of baa3. The uplift reflects the fact that as the largest majority government- owned franchise in the country, the likelihood of systemic support from the Russian government remains high in case of need. The negative outlook on the bank's long-term ratings reflects the similar outlook on the sovereign rating. The bank's BFSR of D+ (stable) which maps to a BCA of baa3 is not affected by this rating action. VTB VTB's long-term debt and deposit ratings of Baa2 were confirmed with a negative outlook, maintaining a four-notch uplift from its standalone BCA of ba3. VTB is the country's second-largest franchise with systemically important market shares in international corporate and trade finance activities for the Russian economy. The track-record of the government's support for this institution supports the future high likelihood of systemic support from the Russian government, in case of need. The bank's BFSR of D- (negative) which maps to a BCA of ba3 is not affected by this rating action. Gazprombank Gazprombank's long-term debt and deposit ratings of Baa3 were confirmed with a negative outlook, maintaining a three-notch uplift from its standalone BCA of ba3. This degree of uplift is supported by the bank's importance to the economy and banking system as a whole, as the third-largest bank in Russia servicing the country's leading companies, including the Russian energy conglomerate OAO Gazprom, as well as the Russian authorities' effective ultimate control of Gazprombank. See below the ratings rationale regarding the affirmation of the Gazprombank's BFSR at D- with a negative outlook. Russian Agricultural Bank (RusAg) RusAg's long-term debt and deposit ratings of Baa3 were confirmed with a negative outlook, maintaining a six-notch uplift from its BCA of b3. This very sizeable degree of uplift is underpinned by the bank's full ownership by the Russian government, its policy role as the main agribusiness lender in Russia, and a track- record of government support since 2000. The bank's BFSR of E+ (negative) which maps to a BCA of b3 is not affected by this rating action. Agency for Housing Mortgage Lending (AHML) AHML's issuer rating of Baa1 was confirmed with a negative outlook. As a fully government-owned institution, its rating is supported by its unique policy role as the government's main vehicle for mortgage market development. The government has demonstrated a track-record of funding and capital support for AHML. Vnesheconombank (VEB) VEB's issuer rating was confirmed at Baa1 with a negative outlook. This rating positioning at the same level as the sovereign debt rating is supported by the bank's exclusive role as a fully government-owned development bank. VEB is closely linked to the government, which gives the bank good access to state funding and capital when needed to finance various projects of government importance. Rationale For Affirming Gazprombank's BFSR Moody's has affirmed Gazprombank's D- BFSR (BCA of ba3) to reflect (1) the bank's low levels of problem loans and ample provisioning (above 160% of problem loans); and (2) its adequate liquidity position coupled with low refinancing requirements (wholesale funding to be repaid in 2014 of 3% of total liabilities). The negative outlook on the BFSR reflects Moody's expectations that the bank's capital will be negatively affected by worsening asset quality due to (1) deterioration in the operating environment in Russia; and (2) pressure on asset quality stemming from lending exposures to borrowers in Ukraine. While the bank's asset quality has historically been better than the system average -- because of the bank lending to the Russian economy's core industries -- the moderate capitalisation (Tier 1 ratio at around 9% as of Q1, 2014) constrains the bank's capacity to absorb significant asset-quality deterioration. Additionally, Moody's notes that Gazprombank has borrowings to Ukrainian companies, which together account for approximately 40% of the bank's Tier 1 capital as at year-end 2013. These companies remain highly exposed to operational and systemic risks resulting from current geopolitical tensions. However, the credit risk that these exposures carry is partially mitigated by the fact that a substantial part of the loans to Ukrainian enterprises represents the non-payment risk of OAO Gazprom. What Could Move The Ratings Up/Down Moody's says that the negative outlook on Russia's Baa1 government bond rating means that upward pressure on the supported ratings of the affected banks is unlikely in the near term. Further downward pressure on the long-term ratings of the six Russian financial institutions would be likely if Moody's lowers Russia's government bond rating. Further deterioration of the already challenging operating environment and financial fundamentals of these systemically important banks could increase the downward pressure on their standalone assessments and, consequently, supported ratings. Concerns in this area led to assigning negative outlooks to the standalone assessments of a number of Russian banks in April, 2014. List of Affected Ratings The following ratings have been confirmed and all long-term ratings were placed on negative outlook: - Sberbank's Senior LC/FC Unsecured debt and deposit ratings at Baa1 and Backed subordinated rating and backed Subordinated MTN at Baa3/(P)Baa3; Backed Senior Unsecured Baa1 and Backed Senior Unsecured MTN (P)Baa1; - Bank VTB, JSC's LC/FC Senior Unsecured debt and LC/FC deposit ratings at Baa2; Senior Unsecured MTN (P)Baa2, LC Senior Unsecured bank credit facility Baa2, FC subordinated rating at Ba1; Subordinated MTN (P)Ba1, Backed Senior Unsecured Baa2, Backed Senior Unsecured MTN (P)Baa2. Short-term LC/FC deposit rating and Short-term program ratings were confirmed at Prime-2 and (P)P-2 respectively. - VTB Capital S.A. -- FC Senior unsecured and Senior secured rating at Baa2; - Gazprombank's LC/FC Senior Unsecured debt ratings and deposit ratings at Baa3; Senior Unsecured MTN -- (P)Baa3, Backed Senior Unsecured Baa3. Short-term deposit rating was confirmed at Prime-3; - Gazprombank's BFSR Affirmed D- NEG / BCA of ba3 - Russian Agricultural Bank's LC/FC Senior Unsecured debt ratings and deposit ratings at Baa3; FC Senior Unsecured MTN -- (P)Baa3, FC subordinated rating -- Ba3 and FC subordinated MTN rating -- (P)Ba3. LC/FC short-term deposit ratings were confirmed at Prime-3; - Agency for Housing Mortgage Lending OJSC's LC/FC issuer ratings and Senior Unsecured debt ratings at Baa1, Backed Senior Unsecured at Baa1; - Vnesheconombank's issuer rating at Baa1. Principal Methodologies The principal methodology used in rating Agency for Housing Mortgage Lending OJSC and Vnesheconombank was Government-Related Issuers: Methodology Update published in July 2010. The principal methodology used in rating Bank VTB JSC, VTB Capital S.A., Gazprombank, Sberbank and Russian Agricultural Bank was Global Banks published in May 2013. ========= S P A I N ========= GRUPO ANTOLIN: S&P Assigns 'BB-' CCR; Outlook Stable ---------------------------------------------------- Standard & Poor's Ratings Services said it has assigned its 'BB-' long-term corporate credit rating to Spain-based auto supplier Grupo Antolin Irausa S.A. The outlook is stable. At the same time, S&P assigned its 'BB-' issue rating to the EUR400 million senior secured notes issued by Grupo Antolin Dutch B.V. The recovery rating on these notes is '3', indicating S&P's expectation of good (50%-70%) recovery prospects in the event of a payment default. These ratings are unchanged from the preliminary ratings S&P assigned on March 11, 2014. The rating on Antolin reflects S&P's view that the company has a "fair" business risk profile and a "significant" financial risk profile, as S&P's criteria define these terms. Antolin designs and produces interior auto parts, which include overheads, door trims and mechanisms, seating, and lighting products. The company reported revenues of about EUR2 billion in 2013. In S&P's view, Antolin's exposure to the cyclical auto market, lack of after-market exposure, and sales concentration in the interior segment constrain its business risk profile. However, S&P believes that these risks are mitigated by the low historical volatility of the company's operating margin, which is in the average range for global auto suppliers that S&P rates. Antolin's ratio of funds from operations (FFO) to debt of about 20%, by S&P's projection, constrains its view of the company's financial risk as "significant." The ratio at this level would be at the lower end of S&P's range for the "significant" category. Still, Antolin's stronger debt-to-EBITDA ratio supports its financial risk profile. S&P believes that Antolin will maintain debt to EBITDA at 3.0x-3.5x, in line with past levels. Antolin's adjusted EBITDA margin was about 10% in 2013, close to 2012's. Antolin is a family-owned group. So far, the family has not been overly aggressive in its financial policy, in S&P's view, and it has backed managerial continuity. However, in S&P's opinion, the sole limitations to the decision power of the family shareholder are the clauses included in the proposed debt documentation that limit shareholder remuneration, asset sales, and early debt repayments. "We apply a one-notch negative adjustment to the rating on Antolin for our "comparable ratings analysis" under which we review an issuer's credit characteristics in aggregate. We view this factor as negative because we believe that the FFO-to-debt ratio has been and is going to stay at the lower end of our 20%- 30% indicative range for a financial risk profile descriptor of "significant" in 2014-2015. What's more, we forecast that free operating cash flow (FOCF) to debt will stay below the 10%-15% indicative range for our financial risk assessment," S&P said. In S&P's base-case scenario for Antolin over 2014-2015, it assumes: -- Real GDP growth of 0.9% in 2014 and 1.3% in 2015 in Europe, 3% in 2014 and 3.3% in 2015 in the U.S., and 7.4% in 2014 and 7.2% in 2015 in China; -- Light vehicle sales increasing globally by 5% in 2014 and 6% in 2015, including 3.3% in 2014 and 2.2% in 2015 in North America, 2.8% in 2014 and 3.8% in 2015 in Europe, and about 11% in China in both years; -- Revenue growth of about 3%-5% in 2014 and near 5% in 2015; -- Reported EBITDA margin of 10%-11% for both years; -- Capital expenditures at about 6.5% of total revenues; and -- No dividend in 2014 and a dividend of EUR6 million maximum in 2015, as per the documentation. Based on these assumptions, S&P arrives at the following credit measures for Antolin: -- FFO to debt at about 20% in 2014 and just slightly above 20% in 2015; -- Debt to EBITDA at approximately 3.0x-3.5x in both years; and -- Free cash flow to debt in the 5%-10% range in both years. The stable outlook reflects S&P's view that Antolin will maintain a reported operating margin of 10%-11%, in line with historical levels, and revenue growth of 3%-5% in 2014. S&P also believes Antolin will maintain FFO to debt commensurate with its view of the company's financial risk profile as "significant," at above 20%, although this ratio could be just about this level in 2014. The debt-to-EBITDA ratio should be approximately 3.0x-3.5x under S&P's base-case forecast. Lastly, S&P expects Antolin to continue to generate positive FOCF. A negative rating action on Antolin could follow the combination of adverse market conditions that trigger cancellations or delays of programs, and loss of market share, with concurrent deterioration in the operating margin and in credit ratios to below the levels indicated above. A negative rating action could likewise result if shareholder remuneration became aggressive or the company carried out debt-financed acquisitions. S&P could consider a positive rating action if Antolin maintained FFO to debt at about 25%, debt to EBITDA at approximately 3x, and FOCF to debt in the 10%-15% range. NCG BANCO: Moody's Cuts Rating on Mortgage Covered Bonds to 'Ba2' ----------------------------------------------------------------- Moody's Investors Service has downgraded to Ba2 from Ba1 on review for downgrade the mortgage covered bonds issued by NCG Banco S.A. (deposits Caa1 negative, bank financial strength rating (BFSR) E /adjusted baseline credit assessment (BCA) caa2), following the rating agency's decision to downgrade the issuer's respective bank ratings. Ratings Rationale The rating action is prompted by Moody's decision to downgrade NCG Banco S.A.'s long-term debt and deposit ratings to Caa1 from B3 on review for downgrade. The downgrade of the issuer ratings follows the transfer on June 25 of NCG Banco S.A.'s ownership to Banesco Group (unrated) from a majority ownership by the Spanish government via the Fund for Orderly Bank Restructuring (FROB), and reflects Moody's assessment of a lower probability of systemic support following the exit of the FROB from the bank's capital. Key Rating Assumptions/Factors Moody's determines covered bond ratings using a two-step process; an expected loss analysis and a TPI (timely payment indicator) framework analysis. EXPECTED LOSS: Moody's uses its Covered Bond Model (COBOL) to determine a rating based on the expected loss on the bond. COBOL determines expected loss as (1) a function of the probability that the issuer will cease making payments under the covered bonds (a CB anchor event); and (2) the stressed losses on the cover pool assets following a CB anchor event. The CB anchor for this program is the senior unsecured/deposit rating (SUR) plus 0 notches, given that the debt ratio is below 5%. The cover pool losses for this program are 31.3%. This is an estimate of the losses Moody's currently models following a CB anchor event. Moody's splits cover pool losses between market risk of 16.5% and collateral risk of 14.7%. Market risk measures losses stemming from refinancing risk and risks related to interest-rate and currency mismatches (these losses may also include certain legal risks). Collateral risk measures losses resulting directly from cover pool assets' credit quality. Moody's derives collateral risk from the collateral score, which for this program is currently 22%. The over-collateralization (OC) in the cover pool is 139.8%, of which the issuer provides 25% on a "committed" basis. The minimum OC level that is consistent with the Ba1 rating target is 8.5%. These numbers show that Moody's is not relying on "uncommitted" OC in its expected loss analysis. All numbers in this section are based on the most recent Performance Overview (based on data, as of Q1 2014). TPI FRAMEWORK: Moody's assigns a TPI, which indicates the likelihood that the issuer will make timely payments to covered bondholders in the event of an issuer default. The TPI framework limits the covered bond rating to a certain number of notches above the CB anchor. For these programs, Moody's has assigned a TPI of "Probable". Factors that would lead to an upgrade or downgrade of the rating: The CB anchor is the main determinant of a covered bond program's rating robustness. A change in the level of the CB anchor could lead to an upgrade or downgrade of the covered bonds. The TPI Leeway measures the number of notches by which Moody's might lower the CB anchor before the rating agency downgrades the covered bonds because of TPI framework constraints. The TPI assigned to NCG Banco S.A.'s mortgage covered bond program is Probable. The TPI Leeway for this program is limited, and thus any reduction of the CB anchor may lead to a downgrade of the covered bonds. A multiple-notch downgrade of the covered bonds might occur in certain limited circumstances, such as (1) a sovereign downgrade negatively affecting both the issuer's senior unsecured rating and the TPI; (2) a multiple notch downgrade of the issuer; or (3) a material reduction of the value of the cover pool. Rating Methodology The principal methodology used in this rating was "Moody's Approach to Rating Covered Bonds", published in March 2014. =========================== U N I T E D K I N G D O M =========================== ENTERPRISE INNS: Moody's Raises Corp. Family Rating to 'B2' ----------------------------------------------------------- Moody's Investors Service upgraded Enterprise Inns plc's (ETI) corporate family rating (CFR) to B2 from B3, the probability of default rating (PDR) to B3-PD from Caa1-PD, and the instrument rating of its GBP275 million senior secured fixed-rate notes due 2031 to B1 from B2. The CFR is assigned to the unconsolidated parent company. The outlook on all ratings is stable. Ratings Rationale The upgrade of Enterprise Inns' CFR to B2 reflects Moody's belief that the company's like-for-like net income has stabilized and is on the cusp of returning to growth. Pub attendance is affected by consumer confidence, which has improved over the past year. Moody's is also forecasting 2%-3% real GDP growth in 2014 in the UK and the labor market is recovering more quickly than the rating agency had previously anticipated. These factors should have a positive effect on the pub industry. Moody's notes that the company's return to like-for-like growth in net income (1.1%) in the first-half (H1) 2014 (ending 31 March) has not yet led to a meaningful change in the company's financial metrics, although they have begun to strengthen. For the last 12 months to 31 March 2014, leverage, as measured by adjusted net debt/EBITDA, remains high at 8.3x, but is down from a high point of 8.6x in the financial year (FY) 2010 (ending 30 September). Fixed charge coverage, as measured by adjusted EBITDA/interest expense + ground rent, is also still fairly weak, but more recently increased to 1.8x for the last 12 months to 31 March 2014 from 1.64x for in FY2013. More positively, Enterprise Inns' ratings are supported by its active management of a predominantly high-quality portfolio of freehold public houses. Around half of the company's gross profit is generated from rental income, with the other half from the wholesale profits earned by supplying beer and other drinks to its tenants under various tied leasing arrangements and income from amusement and other gaming machines. The company is exposed to industry concentration risk, but benefits from the wide geographic diversification of its pub portfolio across the UK. The B2 rating also reflects ETI's improved liquidity profile, following successive years of debt reduction through the application of its free cash flow, having cut the dividend, and the net proceeds of its asset sales program. The value and saleability of the company's assets have been proven in a stressed environment, thereby enabling the company to address liquidity requirements in a timely manner. However, the company is still reliant on asset sales to fund debt amortization as well as capital expenditure. Enterprise Inns' CFR is assigned to the company's unconsolidated parent company, but Moody's ratings take into account the financial stature of the consolidated entity because this is a homogenous business that is operated without regard to which corporate entity the assets belong. Furthermore, the unconsolidated parent company, Enterprise Inns, is reliant upon Unique Pubs to upstream dividends in order to comply with its bank financial covenants. The CFR is an expression of expected loss and is one notch higher than the PDR. This is because Moody's assumes an overall recovery of 65% in an event of default, which is higher than the 50% average recovery level for rated non-financial corporates. The GBP275 million senior secured bond, due 2031, is rated one notch above the CFR because Moody's expects a stronger level of recovery for these notes compared with the overall recovery rate for the company. This is because the notes benefit from a first fixed charge over specific security, with a minimum asset coverage covenant of 167% and an interest coverage covenant of not less than 2.0x. Stable Outlook The stable outlook reflects Moody's belief that ETI's net income is on the cusp of returning to growth, owing to the pick-up in economic conditions and consumer sentiment in the UK which will positively effect on the pub industry. However, it is likely to take some time before this feeds through to a notable strengthening of the company's financial metrics. The outlook also reflects ETI's improved liquidity profile and the lower level of asset sales now needed to supplement internally generated cash flow in order to cover ETI's cash requirements. What Could Change The Rating Up/Down A rating upgrade could occur if (1) a recovery in revenues and operating profits feeds through to improved financial metrics, with consolidated net debt/EBITDA approaching 7.5x and fixed charge coverage rising to around 2.0x, both on a sustainable basis; and (2) the company improves its liquidity profile such that asset sales are no longer required to maintain sufficient liquidity at all times along with ample headroom under its various financial covenants. Conversely, downward pressure on the ratings could arise from (1) a deterioration in Enterprise Inns' like-for-like net income and/or profitability that puts pressure on its leverage or fixed charge coverage such that consolidated net debt/EBITDA rises materially above 8.0x or fixed charge coverage falls below 1.6x; or (2) a weakening of the company's liquidity profile, including any concerns over headroom tightening under any of the various financial covenants. Principal Methodology The principal methodology used in this rating was the Global Rating Methodology for REITs and Other Commercial Property Firms published in July 2010. Headquartered in Solihull, Enterprise Inns plc is the largest operator of leased and tenanted pubs in the UK. Enterprise Inns and its wholly-owned subsidiary Unique Pub Company have a large estate of 5,459 tenanted pubs in England and Wales with a value of GBP3.92 billion at March 31, 2014. GLOBAL MP: In Administration; Around 15 Jobs Affected ----------------------------------------------------- Chris Ratten -- chris.ratten@bakertilly.co.uk -- and Jeremy Woodside -- Jeremy.woodside@bakertilly.co.uk -- from Baker Tilly have been appointed Joint Administrators to Global MP Ltd. Global MP was established in September last year, following Cogent B2B's acquisition of the St. Ives Direct Bradford Ltd. business from the St. Ives Group. Despite the best efforts of the Director to secure a sale of the company as a going concern, this was ultimately not possible. As a result, the Director had no alternative but to appoint Administrators. The company, based in Battye Street in Laisterdyke, Bradford has now ceased to trade and around 150 staff have been made redundant. Mr. Ratten said: "Despite securing a new working capital facility earlier this year, the cash flow issues at the company were such that Administration was the only option to protect the remaining assets for the benefit of creditors. Regrettably we have had to make a number of people redundant [Wednes]day, and our specialist employee team will be assisting them to make the relevant claims with the Redundancy Payments Service. Our role now will be to maximise recoveries for the company's creditors." Interested parties are invited to contact David Shaw at Baker Tilly on 0161 830 4000. Global MP Ltd. Bradford-based printing and direct marketing company. GOALS SOCCER: In Talks Over GBP42.5 Million Loan Facility --------------------------------------------------------- Gareth Mackie at The Scotsman reports that Goals Soccer Centres is in "advanced" talks over a new GBP42.5 million loan facility that will help to reduce interest charges on its debt by more than GBP1 million a year. However, the East Kilbride-based firm said the debt restructuring would lead to would lead to one-off costs of GBP3.2 million, including a GBP2.7 million liability from its interest rate swap, The Scotsman relates. According to The Scotsman, details of the refinancing came as Goals, which has 44 sites across the UK and one in Los Angeles, said total sales in the six months to the end of June grew 3% to GBP17 million, in line with the board's expectations. The company is due to report its interim results on Sept. 3, The Scotsman notes. Goals Soccer Centres is a five-a-side football pitch operator. SHERWOOD AGENCIES: In Administration; Around 20 Jobs Affected ------------------------------------------------------------- Adam Jupp at Manchester Evening News reports that Sherwood Agencies has gone into administration. According to Manchester Evening News, the company has been hit by a downturn in trade, as retail clients have sourced their own products directly. Accountants and business advisers Beever and Struthers has been appointed administrators of the company, which has ceased trading, leading to the loss of around 20 jobs, Manchester Evening News relates. Records show Sherwood has sales of around GBP38 million in the year to May 31, 2006 but they have steadily declined, dropping to GBP25.7 million in 2009, GBP15.3 million in 2009 and GBP12.2 million in 2010. In 2011, they fell to GBP11.3 million, while in the financial year to the end of May 2012, it posted a pre-tax loss of GBP685,184 on revenues of just under GBP10 million. Sherwood is an importer and wholesaler of goods ranging from electrical products and garden furniture to inflatable costumes and children's toys. The company is based in Sherwood House, Mutual Mills, Heywood. SYNTECH SW: In Administration; 85 Jobs Affected ----------------------------------------------- Herald Express reports that Syntech SW Limited has gone into administration. According to Herald Express, the company has ceased trading after sale of the business fell through at the last minute. Andrew Sheridan -- andrew.sheridan@frpadvisory.com -- and Gareth Morris -- gareth.morris@frpadvisory.com -- of FRP Advisory have been appointed administrators to handle the collapse of the business which once enjoyed a GBP10 million turn over, Herald Express relates. Mr. Sheridan said the electronics manufacturing firm, had found trading extremely difficult over the past two months and despite offer of a takeover had not been able to secure a buyer, Herald Express relays. FRP Advisory, as cited by Herald Express, said Syntech had not weathered the recession well and been struggling with unsustainable cash-flow pressures and its directors had been actively seeking investment and buyers for the business for the past two months. Interest was expressed by several parties resulting in a contract being issued for a sale of the business and assets but unfortunately negotiations collapsed at the last minute, leaving the directors with no alternative but to place the Company into administration, Herald Express recounts. The joint administrators said they had to cease trading the business with immediate effect, resulting in the entire workforce of 85 staff being made redundant, Herald Express notes. Syntech SW Limited is a high tech firm based in Paignton. Its components are used in products ranging from Inmarsat satellite tracking systems, to DAS repeaters for hospitals and large buildings, 4G LTE latest generation mobile phone base stations, medical laser drivers and many other telecoms systems. WOODBERRY BROS: In Administration; Buyer Sought ----------------------------------------------- According to Business Sale Report's Hanna Sharpe, Woodberry Bros & Haines has been placed into administration following financial difficulties and failing to find a buyer or new investment. Many of the 175 jobs have been lost after the administrators Ross Connock -- ross.d.connock@uk.pwc.com -- and Matthew Hammond -- Matthew.hammond@uk.pwc.com -- of PricewaterhouseCoopers had to halt operations at the business, Business Sale Report discloses. Late last week, a trade supplier had issued a winding-up petition for the company, which led to the directors seeking administration to protect the business, Business Sale Report recounts. Despite its location and good employees, customers and suppliers, the administrators had to close the operations down straight away, with many jobs being lost, Business Sale Report notes. The administrators expect to enter talks with the main shareholders and potential buyers as part of this process, Business Sale Report says. Woodberry Bros & Haines is a furniture maker based on the Walrow Industrial Estate in Highbridge, Somerset. =============== X X X X X X X X =============== * Losses Likely for EMEA CMBS Loans Maturing in 3Q14, Fitch Says ---------------------------------------------------------------- Fitch Ratings says in a new report that six of the 10 EMEA CMBS loans maturing in the third quarter of 2014 have a Fitch loan-to- value ratio (LTV) above 100% and the percentage of loans formally in default/special servicing continues to increase as loans hit maturity. "Among the loans maturing in the third quarter, losses will likely be incurred barring restructuring or injection of sponsor equity," said Mario Schmidt, Associate Director in Fitch's Structured Finance team. Two maturing loans, both with Fitch LTVs in excess of 100%, are already in special servicing as a result of technical or payment default. Three maturing loans were extended previously, for between six and 18 months. In two of these cases, Fitch believes that the exit position has improved sufficiently to envisage full repayment. Six loans are in CMBS transactions that have tail periods of three years or less. This restricts the range of options available to servicers in case of loan default. Fitch's maturity repayment index improved to 59.8% for 2Q14 from 59.0% during the previous quarter. The EMEA Commercial Mortgage Market Index is part of Fitch's quarterly structured finance index reports. * 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. In 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 130King 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. A list of Meetings, Conferences and Seminars appears in each Thursday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/booksto order any title today. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Europe is a daily newsletter co- published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA. Valerie U. Pascual, Marites O. Claro, Rousel Elaine T. Fernandez, Joy A. Agravante, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2014. All rights reserved. ISSN 1529-2754. This material is copyrighted and any commercial use, resale or 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 * * *