/raid1/www/Hosts/bankrupt/TCREUR_Public/141001.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
E U R O P E
Wednesday, October 1, 2014, Vol. 15, No. 194
Headlines
F I N L A N D
TALVIVAARA MINING: Administrator Proposes Restructuring Plan
G E R M A N Y
FTE VERWALTUNGS: Moody's Lowers CFR to 'B2'; Outlook Stable
HYPO REAL ESTATE: Former Chief Faces Charges Over 2008 Collapse
G R E E C E
FREESEAS INC: Sells Vessel for US$3.6 Million
I R E L A N D
BACCHUS 2006-1: Moody's Affirms 'B2' Rating on Class E Notes
CORNERSTONE TITAN 2007-1: Moody's Cuts Ratings on 4 Notes to 'C'
MERCATOR CLO I: Moody's Affirms 'B1' Rating on Class B-2 Notes
L U X E M B O U R G
AGEAS HYBRID: Fitch Affirms 'BB+' Capital Instruments Rating
N E T H E R L A N D S
DLK GROUP: Moody's Assigns Definitive 'B2' CFR; Outlook Stable
SENSATA TECHNOLOGIES: Moody's Confirms 'Ba2' Corp. Family Rating
R O M A N I A
FLY ROMANIA: Files for Insolvency in Bucharest Court
R U S S I A
ESIBANK: Central Bank Revokes License
PRIORITET BANK: Central Bank Revokes License
RUSSNEFT OJSC: S&P Revises Outlook to Stable & Affirms 'B' CCR
SOYUZPROMBANK: Central Bank Revokes License
S L O V A K R E P U B L I C
VAHOSTAV-SK: Seeks Creditor Protection to Avert Bankruptcy
U N I T E D K I N G D O M
ALU HOLDCO 1: S&P Assigns Preliminary 'B' CCR; Outlook Stable
EUROGLAZE SYSTEMS: Bought Out of Administration
ODEON & UCI: S&P Lowers CCR to 'CCC+' on Weak Performance
PHONES 4U: Will Not Refund iPhone 6 Pre-orders
PUNCH TAVERNS: Debt Deal Uncertainty Casts Going Concern Doubt
UTOPIAN LEISURE: In Administration, Cuts 220 Jobs
X X X X X X X X
* S&P Takes Various Rating Actions on European Bank Hybrids
*********
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F I N L A N D
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TALVIVAARA MINING: Administrator Proposes Restructuring Plan
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Jussi Rosendahl at Reuters reports that Talvivaara Mining Co.
said on Tuesday it lacks the long-term financing needed to avoid
bankruptcy after an administrator proposed an eight-year
restructuring plan that includes slashing its debts by up to 99%.
The administrator on Sept. 30 proposed Talvivaara's unsecured
debts of around EUR1.4 billion (US$1.8 billion), including group
internal debt, be cut by 97% to 99%, Reuters relates. The plan
could involve a share issue, which the administrator warned could
dilute the company's shares, Reuters says.
The company lamented on Sept. 30 that implementing the plan would
need funds and creditor support, which is does not have, Reuters
notes.
"In order to ramp-up the Talvivaara group's mining operations to
full scale, a significant amount of new financing for the
operative activities is required immediately," Reuters quotes the
company as saying in a statement.
The government has invested EUR150 million in Talvivaara, and
economy minister Jan Vapaavuori hinted on Sept. 30 that it could
give more, but that a bailout would need the participation of a
private investor or industrial partner, Reuters discloses.
"The state does not rule out a possibility to participate in a
market-based financing of the company," Mr. Vapaavuori, as cited
by Reuters, said in a statement.
Talvivaara has not said how much it needs, but analyst
Jukka Oksaharju at brokerage Nordnet estimated a long-term
solution would require several hundred million euros, Reuters
relays.
According to Bloomberg News' Kasper Viita, the government said in
an e-mailed statement that Talvivaara's restructuring proposal
offers tool to continue mining activity in sustainable way.
Conditions for government financing are introduction of "new
industrial or other stable party" bringing resources, knowledge,
credibility; handling of environmental issues; and a credible
business plan, Bloomberg discloses.
Talvivaara administrator Pekka Jaatinen said the company's
supplemented restructuring program will be presented by Dec. 1,
Bloomberg notes.
About Talvivaara Mining
Talvivaara Mining Co. Ltd. is a Finnish nickel producer. It
filed for a corporate reorganization on Nov. 15, 2013, to raise
funds and avoid bankruptcy. The company suffered from falling
nickel prices and a slow ramp-up at its mine in northern Finland,
forcing it to seek fundraising help from investors and creditors.
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G E R M A N Y
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FTE VERWALTUNGS: Moody's Lowers CFR to 'B2'; Outlook Stable
-----------------------------------------------------------
Moody's Investors Service downgraded to B2 from B1 the Corporate
Family Rating (CFR) and to B2-PD from B1-PD the Probability of
default Rating assigned to FTE Verwaltungs GmbH. At the same time
the rating assigned to the company's EUR263.3 million senior
secured notes has been downgraded to B2 from B1 and the rating
assigned to FTE's EUR42.5 million super senior revolving credit
facility has been downgraded to Ba2 from Ba1. The outlook on the
ratings is stable.
List of affected ratings
Downgrades:
Issuer: FTE Verwaltungs GmbH
Corporate Family Rating, Downgraded to B2 from B1
Probability of Default Rating, Downgraded to B2-PD from B1-PD
EUR42.5M Senior Secured BANK CREDIT Facility (Local Currency),
Downgraded to Ba2 from Ba1
EUR263.3M 9% Senior Secured Regular Bond/Debenture (Local
Currency) Jul 15, 2020, Downgraded to B2 from B1
Outlook Actions:
Issuer: FTE Verwaltungs GmbH
Outlook, Remains Stable
Ratings Rationale
With the rating already weakly positioned after the distribution
of an extra dividend used to repay part of a shareholder loan
outside of the restricted group, financed by a EUR23.3 million
tap issue in November 2013, the rating action was triggered by
(1) a 3.7% year-on-year revenue decline during the first six
months of 2014 against a mid-to-high single digit organic growth
reported by other suppliers to the automotive industry, (2) a
3.1% decline in EBITDA (adjusted by FTE for one-time effects),
(3) a material negative free cash flow, (4) all of that leading
to a leverage ratio well above the 5.0x DEBT/EBITDA maximum level
set for the B1 rating category and (5) Moody's expectation that
FTE will therefore be quite challenged to meet the triggers set
to maintain a B1 CFR in the near future. In addition, while the
recently announced acquisition of certain activities from
Scandinavian Brake Systems A/S, Denmark, is expected to have an
only marginal impact on FTE's credit metrics, it aggravates the
impression of a more aggressive management of its capital
structure than initially expected.
The B2 corporate family rating (CFR) is supported by (i) the
group's clear BUSINESS STRATEGY focused on mission-critical
powertrain components and sub-systems with a product pipeline
which should benefit from overall market trends and OEM
requirements for weight, fuel and CO2 reductions; (ii) a
relatively broad client base with strong key customer
relationships and high repeat business with an average renewal
rate on bids for successor platforms of around 90% between 2008
and 2013 according to the company, (iii) the group's strong
global market presence in manual clutch actuation systems as
around 40% of all hydraulic manual transmission cars produced
worldwide in 2013 included FTE's products, (iv) a fairly high
profitability with Moody's adjusted EBITA margins of around 10%
in four out of the last five years prior to the acquisition by
Bain Capital mid-2013 and a resilient performance in 2009 during
the financial crisis with a positive EBITA margin of 4% and (v)
good revenue and earnings visibility thanks to a high percentage
of revenues already contracted under framework agreements with
the OEMs, which, however, is subject to continued positive
development for new car registrations globally, and the
acceptance of FTE's new dual clutch transmission (DCT) system.
Negatively weighing on the rating are FTE's (i) fairly high
leverage of around 5.8x DEBT/EBITDA reflecting the newly
implemented capital structure per end of December 2013, and which
Moody's estimate to be roughly unchanged per year end 2014,
contrary to Moody's initial expectations, and taking into account
the volatility of the industry as well as recent payouts of EUR25
million to partially repay a shareholder LOAN, (ii) the group's
high reliance on its passenger car segment (approximately 90% of
revenues) in general and on one key customer in particular (which
accounts for approximately 30% of revenues), (iii) the relatively
late market entry with regard to the first generation dual clutch
transmission products and significant investment needs to support
the future growth of the DCT business and to sustain competitive
advantages in the existing manual clutch actuation business, (iv)
a weak competitive position in brake components and systems and
(v) the fairly small size of the organization, despite a global
footprint, with significant organizational risks in particular
given ambitious and required growth plans including product and
footprint extension.
The stable outlook reflects Moody's expectation that FTE can
reverse the negative trend in terms of revenues and
profitability, seen during the first six months of 2014 despite
of the tailwind of a benign industrial environment. It also
incorporates the expectation that no further increase in Moody's
adjusted net debt (EUR336 million as of June 2014 pro-forma
completion of the acquisition of certain activities from
Scandinavian Brake Systems A/S, Denmark) has to be recorded, so
that leverage can be held well below 6.0x Debt/EBITDA.
What Could Change the Rating UP/DOWN:
The rating would come under pressure in a period of (i)
sustainably negative free cash flow generation, if (ii) leverage
increases above 6.0 times based on Moody's adjusted debt/EBITDA
or if (iii) the group's liquidity deteriorated significantly.
FTE's rating could be upgraded if (i) the group was able to
generate substantial positive free cash flow as defined by
Moody's which would be applied to DEBT REDUCTION and would (ii)
lead to a sustainably lower leverage as reflected in an adjusted
debt/EBITDA ratio below 5.0 times. Moreover, an upgrade would
require (iii) visibility of successful introduction of the
double-clutch product and (iv) a significant cushion in the
group's liquidity to fund working capital swings, capex and other
cash needs.
The principal methodology used in this rating was Global
Automotive Supplier Industry published in May 2013. Other
methodologies used include Loss Given Default for Speculative-
Grade Non-Financial Companies in the U.S., Canada and EMEA
published in June 2009.
FTE Verwaltungs GmbH is the result of the merger between Falcon
(BC) Germany Holding 3 GmbH and FTE Verwaltungs GmbH following
the successful completion of the group's acquisition. Since mid-
2013, Bain Capital is the ultimate majority owner of FTE.
Headquartered in Ebern, Germany, FTE is a global Tier 1
automotive supplier specialized in the niche of advanced clutch
actuation components for powertrain systems (64% of revenues in
2013) and components for brake systems (22% of revenues) with
aggregated revenues of EUR 448 million in 2013 (EUR431 million in
2012).
The Company's products help improve vehicle performance, fuel
efficiency, stability and air quality and are primarily sold to
original equipment manufacturers (OEMs). In addition, the Company
also sells its products to the automotive aftermarket (~26% of
sales in 2013), which is in general less cyclical compared to the
OEM business. FTE has a broad customer base and is present in all
major markets: in 2013, Europe represented 72% of group sales,
the Americas 19% and Asia 9%. In 2013, the Company had
approximately 3,500 employees (of which 2,267 in Germany), nine
production sites and numerous TECHNICAL SUPPORT offices
worldwide.
HYPO REAL ESTATE: Former Chief Faces Charges Over 2008 Collapse
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Jack Ewing at The New York Times reports that German prosecutors
said on Sept. 29 they had filed criminal charges against
George Funke, the former chief executive of Hypo Real Estate, and
the former management board of the bank, accusing them of
misleading investors in 2008 during what proved to be the
country's most costly bank failure.
Mr. Funke and seven former management board members are accused
of misleading investors about risks facing the bank ahead of its
collapse in September 2008, The New York Times relates.
The office of the Munich public prosecutor, however, said it had
decided not to pursue charges of fraud in Hypo Real Estate's
acquisition in 2007 of Depfa, a bank in Ireland that played a
major role in the parent bank's collapse, The New York Times
relays. The other charges have been submitted to a judge in
Munich, who must approve them in order for the case to go to
trial, The New York Times discloses.
Wolfgang Kreuzer, a Munich lawyer who represents Mr. Funke, said
his client will contest the remaining accusations, The New York
Times notes.
The failure of Hypo Real Estate led to by far the biggest
taxpayer-financed bailout in Germany during the financial crisis,
The New York Times states. The government supplied EUR9.8
billion, or US$12.4 billion, in capital and issued EUR124 billion
in guarantees for debt issued by the bank, which was
nationalized, The New York Times recounts. Its remaining assets
are being wound down, The New York Times says.
In a statement on Sept. 29, prosecutors in Munich said Hypo Real
Estate had knowingly falsified the bank's financial report for
2007 and the first half of 2008, concealing its exposure to risk,
The New York Times relates. If convicted, the members of the
management board would face maximum sentences of three years in
prison, The New York Times states.
According to The New York Times, Mr. Kreuzer, the lawyer for
Mr. Funke, said financial reports issued in 2008 were accurate
and that no one had predicted the collapse of Lehman Brothers and
its effect on financial markets.
About Hypo Real Estate
Germany-based Hypo Real Estate Holding AG (FRA:HRXG) --
http://www.hyporealestate.com/-- is a German holding company for
the Hypo Real Estate Group. It is an international real estate
financing company, combining commercial real estate financing
products with investment banking. The Company divides its
operations into three business units: Commercial Real Estate,
which provides real estate financing on the international and
German market; Public Sector & Infrastructure Finance, and
Capital Markets & Asset Management. Hypo Real Estate Group
operates through a number of subsidiaries, including, among
others, Hypo Real Estate Bank International AG that focuses on
Pfandbrief-based commercial real estate financing in all
international markets, and offers large-volume investment banking
and structured finance transactions; Hypo Real Estate Bank AG
that focuses on the commercial real estate financing and
refinancing business in Germany, and DEPFA Bank plc in Dublin,
Ireland, which is a provider of public finance.
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G R E E C E
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FREESEAS INC: Sells Vessel for US$3.6 Million
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FreeSeas Inc. announced that it has sold to unrelated third
parties the M/V 'Free Impala', a 1997-built, 24,111 dwt Handysize
dry bulk carrier for a sale price of US$3.6 million.
Substantially all the proceeds have been used to reduce
outstanding indebtedness with the National Bank of Greece (NBG),
which had a mortgage on the vessel.
Mr. Ion Varouxakis, the Company's Chairman, president and CEO
stated, "We are pleased to announce the sale of the only laid-up
vessel of our fleet in order to reduce outstanding indebtedness.
The transaction is one more step in the direction of the
Company's plan to reduce bank debt and increase operational
leverage. We aspire to keep reducing outstanding bank debt and
to capitalize on NBG's offer to forgive approximately US$4.7
million of debt against repayment of US$22 million, while
creating the conditions for the acquisition of additional vessels
in order to increase our income and earnings."
Mr. Varouxakis added: "The payment of US$3.3 million, in
conjunction with the payment of a further US$2.7 million a few
days ago, brings total payments to US$6 million. NBG is our last
outstanding lender, and the latest payments bring the conditions
for the offered debt forgiveness much closer to fruition, which
would extinguish our bank debt. This is a marked improvement
compared to US$90 million of outstanding bank debt less than a
year ago."
About FreeSeas Inc.
Headquartered in Athens, Greece, FreeSeas Inc., formerly known as
Adventure Holdings S.A., was incorporated in the Marshall Islands
on April 23, 2004, for the purpose of being the ultimate holding
company of ship-owning companies. The management of FreeSeas'
vessels is performed by Free Bulkers S.A., a Marshall Islands
company that is controlled by Ion G. Varouxakis, the Company's
Chairman, President and CEO, and one of the Company's principal
shareholders.
The Company's fleet consists of six Handysize vessels and one
Handymax vessel that carry a variety of drybulk commodities,
including iron ore, grain and coal, which are referred to as
"major bulks," as well as bauxite, phosphate, fertilizers, steel
products, cement, sugar and rice, or "minor bulks." As of
Oct. 12, 2012, the aggregate dwt of the Company's operational
fleet is approximately 197,200 dwt and the average age of its
fleet is 15 years.
FreeSeas Inc. reported a net loss of US$48.70 million in 2013, a
net loss of US$30.88 million in 2012 and a net loss of US$88.19
million in 2011. The Company's balance sheet at March 31, 2014,
showed US$79.78 million in total assets, US$77.41 million in
total liabilities, all current, and US$2.37 million in total
shareholders' equity.
RBSM LLP, in New York, issued a "going concern" qualification on
the consolidated financial statements for the year ended Dec. 31,
2013. The independent auditors noted that the Company has
incurred recurring operating losses and has a working capital
deficiency. In addition, the Company has failed to meet
scheduled payment obligations under its loan facilities and has
not complied with certain covenants included in its loan
agreements. Furthermore, the vast majority of the Company's
assets are considered to be highly illiquid and if the Company
were forced to liquidate, the amount realized by the Company
could be substantially lower that the carrying value of these
assets. These conditions among others raise substantial doubt
about the Company's ability to continue as a going concern.
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I R E L A N D
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BACCHUS 2006-1: Moody's Affirms 'B2' Rating on Class E Notes
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Moody's Investors Service has announced that it has taken the
following rating action on the following notes issued by Bacchus
2006-1 plc:
EUR195.8M (currently EUR22.9M outstanding) Class A-1 Senior
Secured Floating Rate Notes due 2022, Affirmed Aaa (sf);
previously on Jan 23, 2014 Affirmed Aaa (sf)
EUR67.5M (currently EUR1.3M outstanding) Class A-2A Senior
Secured Floating Rate Notes due 2022, Affirmed Aaa (sf);
previously on Jan 23, 2014 Affirmed Aaa (sf)
EUR7.5M Class A-2B Senior Secured Floating Rate Notes due 2022,
Affirmed Aaa (sf); previously on Jan 23, 2014 Affirmed Aaa (sf)
EUR34M Class B Senior Secured Floating Rate Notes due 2022,
Affirmed Aaa (sf); previously on Jan 23, 2014 Upgraded to Aaa
(sf)
EUR25.54M Class C Senior Secured Deferrable Floating Rate Notes
due 2022, Upgraded to Aa1 (sf); previously on Jan 23, 2014
Upgraded to A2 (sf)
EUR19.66M Class D Senior Secured Deferrable Floating Rate Notes
due 2022, Upgraded to Baa3 (sf); previously on Jan 23, 2014
Upgraded to Ba1 (sf)
EUR10M Class E Senior Secured Deferrable Floating Rate Notes due
2022, Affirmed B2 (sf); previously on Jan 23, 2014 Upgraded to B2
(sf)
EUR5M Class W Combination Notes, Affirmed Aa3 (sf); previously
on Jan 23, 2014 Upgraded to Aa3 (sf)
EUR69M Class Y Combination Notes, Upgraded to A2 (sf);
previously on Jan 23, 2014 Upgraded to Baa2 (sf)
EUR5.386M Class Z Combination Notes, Affirmed Aa1 (sf);
previously on Jul 19, 2013 Affirmed Aa1 (sf)
Bacchus 2006-1 PLC, issued in March 2006, is a collateralized
loan obligation ("CLO") backed by a portfolio of mostly high-
yield senior secured European and US LOANS. The portfolio is
managed by IKB Deutsche Industriebank AG. The transaction's
reinvestment period ended in April 2012.
Ratings Rationale
The rating actions on the notes are primarily a result of
significant deleveraging of the Class A notes and subsequent
improvement of the overcollateralization ratios. Moody's notes
that Class A notes have been paid down by approximately EUR49.9M
(18.44% of the original balance) since the last rating action in
January 2014, and EUR239M (88.26% of the original balance) since
closing. As of the trustee report dated August 2014, the Class
A/B, C, D and E notes overcollateralization ratios are reported
at 200.86%, 144.69%, 119.06% and 109.22% ,respectively, as
compared to 158.34%, 129.71%, 113.86% and 107.20% in November
2013. Moody's expects the Class A to be fully redeemed on the
next payment date given there are EUR49.8M of cash available.
The ratings of the combination notes address the repayment of the
rated balance on or before the legal final maturity. The rated
balance at any time is equal to the principal amount of the
combination note on the issue date minus the sum of all payments
made from the issue date to such date, of either interest or
principal. The rated balance will not necessarily correspond to
the outstanding notional amount reported by the trustee.
The key model inputs Moody's uses in its analysis, such as par,
weighted average rating factor, diversity score and the weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool as having a
performing par and principal proceeds balance of EUR130.4M,
defaulted par of EUR 4.2M, a weighted average default probability
of 25% (consistent with a WARF of 4011), a weighted average
recovery rate upon default of 47.73% for a Aaa liability target
rating, a diversity score of 14 and a weighted average spread of
3.81%.
The default probability derives from the credit quality of the
collateral pool and Moody's expectation of the remaining life of
the collateral pool. The estimated average recovery rate on
future defaults is based primarily on the seniority of the assets
in the collateral pool. For a Aaa liability target rating,
Moody's assumed a recovery of 50% of the 93.51% of the portfolio
exposed to first-lien senior secured corporate assets upon
default and of 15% of the remaining non-first-lien LOAN corporate
assets upon default. In each case, historical and market
performance and a collateral manager's latitude to trade
collateral are also relevant factors. Moody's incorporates these
default and recovery characteristics of the collateral pool into
its cash flow model analysis, subjecting them to stresses as a
function of the target rating of each CLO liability it is
analyzing.
Methodology Underlying the Rating Action:
The principal methodology used in this rating was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
February 2014.
Factors that would lead to an upgrade or downgrade of the rating:
In addition to the base-case analysis, Moody's conducted
sensitivity analyses on the key parameters for the rated notes,
for which it assumed lower credit quality in the portfolio to
address refinancing risk. LOANS to European corporates rated B3
or lower and maturing between 2014 and 2015 make up approximately
2.6% of the portfolio, which could make refinancing difficult.
Moody's ran a model in which it raised the base case WARF to 4104
by forcing ratings on 50% of the refinancing exposures to Ca; the
model generated outputs that were within one notch of the base-
case results.
This transaction is subject to a high level of macroeconomic
uncertainty, which could negatively affect the ratings on the
note, in light of 1) uncertainty about credit conditions in the
general economy 2) the concentration of lowly-rated DEBT maturing
between 2014 and 2015, which may create challenges for issuers to
refinance. CLO notes' performance may also be impacted either
positively or negatively by 1) the manager's INVESTMENT STRATEGY
and behavior and 2) divergence in the legal interpretation of CDO
documentation by different transactional parties because of
embedded ambiguities.
Additional uncertainty about performance is due to the following:
* Portfolio amortization: The main source of uncertainty in
this transaction is the pace of amortization of the underlying
portfolio, which can vary significantly depending on market
conditions and have a significant impact on the notes' ratings.
Amortization could accelerate as a consequence of high loan
prepayment levels or collateral sales by the liquidation
agent/the collateral manager or be delayed by an increase in loan
amend-and-extend restructurings. Fast amortization would usually
benefit the ratings of the notes beginning with the notes having
the highest prepayment priority.
* Around 50.60% of the collateral pool consists of debt
obligations whose credit quality Moody's has assessed by using
credit estimates. As part of its base case, Moody's has stressed
large concentrations of single obligors bearing a credit estimate
as described in "Updated Approach to the Usage of Credit
Estimates in Rated Transactions," published in October 2009.
* Recovery of defaulted assets: Market value fluctuations in
trustee-reported defaulted assets and those Moody's assumes have
defaulted can result in volatility in the deal's over-
collateralization levels. Further, the timing of recoveries and
the manager's decision whether to work out or sell defaulted
assets can also result in additional uncertainty. Moody's
analyzed defaulted recoveries assuming the lower of the market
price or the recovery rate to account for potential volatility in
market prices. Recoveries higher than Moody's expectations would
have a positive impact on the notes' ratings.
In addition to the quantitative factors that Moody's explicitly
modelled, qualitative factors are part of the rating committee's
considerations. These qualitative factors include the structural
protections in the transaction, its recent performance given the
market environment, the legal environment, specific documentation
features, the collateral manager's track record and the potential
for selection bias in the portfolio. All information available to
rating committees, including macroeconomic forecasts, input from
other Moody's analytical groups, market factors, and judgments
regarding the nature and severity of credit stress on the
transactions, can influence the final rating decision.
CORNERSTONE TITAN 2007-1: Moody's Cuts Ratings on 4 Notes to 'C'
----------------------------------------------------------------
Moody's Investors Service has downgraded the ratings of five
classes of Notes issued by Cornerstone Titan 2007-1 p.l.c.
Moody's rating action is as follows:
Issuer: Cornerstone Titan 2007-1 p.l.c.
EUR333 million (current outstanding balance of EUR79.5M) A2
Notes, Downgraded to B2 (sf); previously on Dec 20, 2013
Downgraded to B1 (sf)
EUR75.1 million (current outstanding balance of EUR64.7M) B
Notes, Downgraded to C (sf); previously on Dec 20, 2013 Affirmed
Caa1 (sf)
EUR44.175 million (current outstanding balance of EUR0.0M) C
Notes, Downgraded to C (sf); previously on Dec 20, 2013 Affirmed
Caa2 (sf)
EUR97.185M(current outstanding balance of EUR0.0M) D Notes,
Downgraded to C (sf); previously on Dec 20, 2013 Affirmed Caa3
(sf)
EUR0.1M(current outstanding balance of EUR0.005M) X Notes,
Downgraded to C (sf); previously on Dec 20, 2013 Downgraded to
Caa1 (sf)
Moody's does not rate the Class E, Class F, Class G, Class VA and
Class VB Notes.
Ratings Rationale
The downgrade reflects (1) Moody's increased loss expectation for
the pool since its last review due to the continued weak
performance of THE LOANS; (2) a potential shortfall of interest
payments on the most senior class in the capital structure, which
would constitute a Note event of default and (3) the short time
until legal final maturity of the notes of just over two years.
The rating on the Class X Notes is downgraded because the current
rating is commensurate with the updated risk assessment. The
Class X Notes reference the underlying LOAN pool. As such, the
key rating parameters that influence the expected loss on the
referenced loan pool also influences the ratings on the Class X
Notes. The rating of the Class X Notes was based on the
methodology described in Moody's Approach to Rating Structured
Finance Interest-Only Securities published in February 2012. The
ratings on Classes C and D will be subsequently withdrawn as
these class balances have been written down to zero based on
realized losses.
Moody's downgrade reflects a base expected loss in the range of
50%-55% of the current balance, compared with 35%-40% at the last
review. Moody's derives this loss expectation from the analysis
of the default probability of the securitized loans (both during
the term and at maturity) and its value assessment of the
collateral.
Realised losses have increased to 19% from 9 % of the original
securitized balance since the last review. Moody's estimate of
the base expected loss plus realised losses is now in the range
of 20%-25% of the original pool balance.
Methodology Underlying the Rating Action:
The principal methodology used in this rating was Moody's
Approach to Rating EMEA CMBS Transactions published in December
2013.
Factors that would lead to an upgrade or downgrade of the rating:
Main factors or circumstances that could lead to a downgrade of
the rating are generally (i) a decline in the PROPERTY VALUES
that secure the underlying loans and/or higher disposal costs
resulting in lower recoveries for the loans, (ii) in relation to
German Retail Portfolio II loan, a prolonged insolvency
proceeding that would lead to no recoveries for this loan ahead
of the notes' legal final MATURITY DATE, and iii) interest
shortfall on the most senior class which will constitute note
event of default.
Main factor that could lead to an upgrade of the ratings is
generally higher than expected realized property values,
resulting in higher than expected recoveries.
Moody's Portfolio Analysis
Cornerstone Titan 2007-1 p.l.c. closed in March 2007 and
represents the securitization of initially 32 COMMERCIAL MORTGAGE
loans originated by Credit Suisse International and Capmark Bank
Europe plc. Since closing, the pool balance has decreased by 89%
to EUR144 million as at the July interest payment date (IPD) due
to the pay off of 24 loans and the allocation of realized losses
to the junior classes. A total of nine loans repaid in the last
three IPDs, six of them with losses.
THE LOAN pool currently comprises eight loans mainly located in
Germany (93% by pool balance) and Switzerland (7% by pool
balance) secured by first ranking legal mortgages over mainly
retail (50% by pool balance) and mixed use properties (31% by
pool balance).
All eight remaining loans are currently in default. Moody's
expects the full repayment of three loans and no recoveries from
one loan. As indicated in the servicer reports, the Eschborn loan
and the Steigenberger loan will repay in full at the October IPD.
Moody's expects the Star loan also to repay in full, given the
advanced stage of the sales process. No recoveries are assumed
from the Klimson loan, secured by a retail property in
Switzerland, due to the very high reported loan-to-value (LTV)
ratio of 297% and the 95% reported vacancy, which has not
improved in more than two years. It is unclear whether a
crystallized currency swap MTM amount of CHF3 million, which is
senior to payments on the notes has been paid to the swap
counterparty.
As these LOANS REPAY, the portfolio will become more
concentrated, with the three largest loans representing 93% of
the securitized balance. Moody's uses a variation of Herf to
measure diversity of loan size, where a higher number represents
greater diversity. This pool has a Herf of 3. Large multi-
borrower transactions typically have a Herf of less than 10 with
an average of around 5.
As loans continue to repay and the credit quality of the
remaining pool worsens, interest collections will decline and may
not always be sufficient to pay interests on the most senior
class due to the high special servicing fees and the high
interest amounts allocated to Class X, which may not decrease
proportionately. The increasing probability of interest shortfall
on the most senior class will expose the transaction to a higher
risk of a note event of default, although to some extent the
option to reallocate Issuer's principal collections to pay
interest mitigates this risk.
Summary of Moody's Loan Assumptions
Below are Moody's key assumptions for the 4 remaining loans.
German Retail Portfolio III loan - LTV: 268% (Whole)/ 218% (A-
Loan); Defaulted; Expected Loss 50%-60%.
THE LOAN is currently secured by the remaining 18 secondary
quality retail properties in Germany. It defaulted in Q2 2011
after three consecutive quarters of insufficient payments of
interest. Significant progress has been made during the year to
date with the sale of another 18 properties and the distribution
of EUR25.7 million net disposal proceeds at the July IPD. Moody's
expects this loan to liquidate before the legal final MATURITY
DATE of the notes.
Wolfsburg loan- LTV: 205% (Whole)/ 205% (A-Loan); Defaulted;
Expected Loss 50%-60%.
THE LOAN is currently secured by one mixed use commercial site in
Germany comprising over 89,000 square meters of lettable office,
light industrial and STORAGE SPACE, and which is 53% occupied by
multiple tenants. The loan transferred to special servicing in Q3
2013 after failure to repay at maturity. Moody's expects this
loan to liquidate before the legal final maturity date of the
notes, as demonstrated by the sale of the seven Wolfsburg assets
earlier this year that also secured the loan.
German Retail Portfolio II loan - LTV: 205% (Whole)/ 170% (A-
Loan); Defaulted; Expected Loss 50%-55%.
The loan is currently secured by ten secondary quality big-box
retail properties in Germany. It defaulted in April 2011 due to
LTV covenant breach, shortly before loan maturity. Due to the on-
going insolvency proceedings and disputes, no DEBT SERVICE was
paid on this loan since Q4 2012 and no borrower reports are
received. Advance requests have also not been available in
relation to this loan because of the lack of visibility on the
asset performance side and the uncertainty about the timing and
outcome of the insolvency proceedings. With a little over two
years remaining to the notes' legal final maturity date, Moody's
estimate of the recoveries from this loan may decrease further,
if the lack of visibility and meaningful progress of the
liquidation of this loan persists.
Stade loan - LTV: 111% (Whole)/ 108% (A-Loan); Defaulted;
Expected Loss 30%-40%.
The loan is secured by a hotel and leisure complex in Germany and
was transferred to special servicing in Q4 2011 after failure to
repay at maturity. After prolonged marketing period the special
servicer has received two non-binding offers and is currently in
discussions with the purchasers. Moody's expects this loan to
liquidate before the legal final maturity date of the notes.
MERCATOR CLO I: Moody's Affirms 'B1' Rating on Class B-2 Notes
--------------------------------------------------------------
Moody's Investors Service announced that it has upgraded the
ratings on the following notes issued by Mercator CLO I Plc:
EUR34M (currently EUR32.6M outstanding) Class A-2 Senior Secured
Floating Rate Notes due 2023, Upgraded to Aaa (sf); previously on
Jun 28, 2013 Upgraded to Aa2 (sf)
EUR24M Class A-3 Deferrable Senior Secured Floating Rate Notes
due 2023, Upgraded to Aa1 (sf); previously on Jun 28, 2013
Upgraded to A2 (sf)
EUR18M Class B-1 Deferrable Senior Secured Floating Rate Notes
due 2023, Upgraded to Baa1 (sf); previously on Jun 28, 2013
Affirmed Baa3 (sf)
Moody's affirmed the ratings on the following notes issued by
Mercator CLO I Plc:
EUR22M (currently EUR21.98M outstanding) Class B-2 Deferrable
Senior Secured Floating Rate Notes due 2023, Affirmed B1 (sf);
previously on Jun 28, 2013 Affirmed B1 (sf)
Moody's also withdrew the rating of the class A-1 notes because
the notes were repaid in full in July 2014:
EUR276M (repaid in full) Class A-1 Senior Secured Floating Rate
Notes due 2023, Withdrawn (sf); previously on Jun 28, 2013
Affirmed Aaa (sf)
Mercator CLO I plc, issued in April 2006, is a Collateralised
Loan Obligation ("CLO") backed by a portfolio of mostly HIGH
YIELDEuropean senior secured loans. The portfolio is managed by
NAC Management (Cayman) Limited. The transactions reinvestment
period ended in July 2011.
Ratings Rationale
According to Moody's, the upgrade of the notes is primarily a
result of continued deleveraging of the senior notes and
subsequent increase in the overcollateralization (the "OC
ratios"). Moody's notes that as of the July 2014 payment date
report, the Class A-1 notes have repaid in full and the class A-2
notes have amortised by approximately EUR 1.4 million (or 4.2% of
its original balance). As a result of this deleveraging, the OC
ratios of the senior notes have significantly increased. As per
the latest trustee report dated August 2014, the Class A-2, Class
A-3 and Class B-1 OC ratios are 328.46%, 189.08% and 143.43%,
respectively, versus January 2014 levels of 144.48%, 124.12% and
112.26%.
The key model inputs Moody's uses in its analysis, such as par,
weighted average rating factor, diversity score and the weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. In its base
case, Moody's analysed the underlying collateral pool as having a
performing par and principal proceeds balance of approximately
EUR 101.0 million, defaulted par of EUR 11.5 million, a weighted
average default probability of 25.27% (consistent with a WARF of
3782 with a weighted average life of 3.78 years), a weighted
average recovery rate upon default of 46.4% for a Aaa liability
target rating, a diversity score of 14 and a weighted average
spread of 3.94%.
The default probability derives from the credit quality of the
collateral pool and Moody's expectation of the remaining life of
the collateral pool. The estimated average recovery rate on
future defaults is based primarily on the seniority of the assets
in the collateral pool. For a Aaa liability target rating,
Moody's assumed that 89.8% of the portfolio exposed to senior
secured corporate assets would recover 50% upon default, while
the remainder non first-lien LOAN corporate assets would recover
15%. In each case, historical and market performance and a
collateral manager's latitude to trade collateral are also
relevant factors. Moody's incorporates these default and recovery
characteristics of the collateral pool into its cash flow model
analysis, subjecting them to stresses as a function of the target
rating of each CLO liability it is analyzing.
Methodology Underlying the Rating Action:
The principal methodology used in this rating was "Moody's Global
Approach to Rating Collateralized LOAN Obligations" published in
February 2014.
Factors that would lead to an upgrade or downgrade of the rating:
In addition to the base-case analysis, Moody's conducted
sensitivity analyses on the key parameters for the rated notes,
for which it assumed a lower credit quality in the portfolio to
address REFINANCING risk. Loans to European corporates rated B3
or lower and maturing between 2014 and 2015 make up approximately
3.4% of the portfolio, which could make refinancing difficult.
Moody's ran a model in which it raised the base case WARF to 3901
by forcing ratings on 50% of the refinancing exposures to Ca; the
model generated outputs that were within one notch of the base-
case results.
This transaction is subject to a high level of macroeconomic
uncertainty, which could negatively affect the ratings on the
notes, in light of 1) uncertainty about credit conditions in the
general economy and 2) the concentration of lowly- rated DEBT
maturing between 2014 and 2015, which may create challenges for
issuers to refinance. CLO notes' performance may also be impacted
either positively or negatively by 1) the manager's INVESTMENT
STRATEGY and behaviour and 2) divergence in the legal
interpretation of CDO documentation by different transactional
parties due to because of embedded ambiguities.
Additional uncertainty about performance is due to the following:
1) Portfolio amortisation: The main source of uncertainty in this
transaction is the pace of amortisation of the underlying
portfolio, which can vary significantly depending on market
conditions and have a significant impact on the notes' ratings.
Amortisation could accelerate as a consequence of high loan
prepayment levels or collateral sales by the collateral manager
or be delayed by an increase in loan amend-and-extend
restructurings. Fast amortisation would usually benefit the
ratings of the notes beginning with the notes having the highest
prepayment priority.
2) Recovery of defaulted assets: Market value fluctuations in
trustee-reported defaulted assets and those Moody's assumes have
defaulted can result in volatility in the deal's over-
collateralisation levels. Further, the timing of recoveries and
the manager's decision whether to work out or sell defaulted
assets can also result in additional uncertainty. Moody's
analysed defaulted recoveries assuming the lower of the market
price or the recovery rate to account for potential volatility in
market prices. Recoveries higher than Moody's expectations would
have a positive impact on the notes' ratings.
3) Around 34% of the collateral pool consists of debt obligations
whose credit quality Moody's has been assessed by using credit
estimates. As part of its base case, Moody's has stressed large
concentrations of single obligors bearing a credit estimate as
described in "Updated Approach to the Usage of Credit Estimates
in Rated Transactions," published in October 2009.
4) Long-dated assets: Moody's notes that the underlying portfolio
includes investments in securities that mature after the MATURITY
DATE of the notes. As of August, reference securities that mature
after the maturity date of the notes currently make up
approximately 3.8% of the underlying reference portfolio. These
investments potentially expose the notes to market risk in the
event of liquidation at the time of the notes' maturity.
In addition to the quantitative factors that Moody's explicitly
modelled, qualitative factors are part of the rating committee's
considerations. These qualitative factors include the structural
protections in the transaction, its recent performance given the
market environment, the legal environment, specific documentation
features, the collateral manager's track record and the potential
for selection bias in the portfolio. All information available to
rating committees, including macroeconomic forecasts, input from
other Moody's analytical groups, market factors, and judgments
regarding the nature and severity of credit stress on the
transactions, can influence the final rating decision
===================
L U X E M B O U R G
===================
AGEAS HYBRID: Fitch Affirms 'BB+' Capital Instruments Rating
------------------------------------------------------------
Fitch Ratings has upgraded Ageas' Portugal-based Ocidental-
Companhia Portuguesa de Seguros, S.A.'s (Ocidental Seguros) and
Medis -- Companhia Portuguesa de Seguros de Saude's (Medis)
Insurer Financial Strength (IFS) ratings to 'BBB' from 'BBB-'.
At the same time, Fitch has affirmed Ageas' immediate holding
company, Ageas Insurance International NV, at Long term Issuer
Default Rating (IDR) of 'A-'. The ultimate Ageas holding
company, Ageas SA/NV, has also been affirmed at Long-term IDR
'BBB+' and Short-term IDR 'F2'.
In addition, Fitch has affirmed Ageas' other operating companies:
AG Insurance, Ageas Insurance Company (Asia) Ltd (AICA) and
Ocidental-Companhia Portuguesa de Seg. de Vida, S.A. (Ocidental
Vida).
The Outlooks on the group's IFS ratings and the Long-term IDRs
are all Stable, except for Ocidental Seguros, Medis and Ocidental
Vida, which are on Positive Outlook.
Key Rating Drivers
The upgrade of Ocidental Seguros and Medis reflects their
increased importance, in Fitch's view, to Ageas following the
acquisition of full ownership by Ageas of these entities in
June 2014. The IFS ratings of Ocidental Seguros and Medis are two
notches above Portugal's sovereign rating ('BB+'/Positive) and
their standalone assessment, which is constrained by the
sovereign rating. Fitch views these operations as "Very
Important" to Ageas, according to the agency's insurance group
rating methodology.
The IFS rating of the life insurer Ocidental Vida is one notch
higher than Portugal's sovereign rating and its standalone
assessment, which is also constrained by the sovereign rating.
Ageas' stated strategy is to focus on the non-life business and
Ocidental Vida was not part of the acquisition that involved
Ocidental Seguros and Medis. Fitch views Ocidental Vida as "Very
Important" to Ageas but not as important as the non-life
companies.
The ratings of Ocidental Vida, Ocidental Seguros and Medis also
reflect their strong level of capital, robust profitability and
strong business position within the Portuguese market. The
ratings are constrained by Portugal's sovereign rating and the
related asset risk on the companies' balance sheets. The Positive
Outlooks on these ratings reflect the Positive Outlook on
Portugal's sovereign rating.
AG Insurance, being the main operating subsidiary, is viewed as
"Core" to Ageas and, as such, carries an IFS rating of 'A+',
based on a combined Ageas group assessment. Ageas, through AG
Insurance, is the largest insurer in Belgium. Access to extensive
and diversified distribution channels, including the banking
network of BNP Paribas Fortis ('A+'/Stable), is a key positive
rating factor.
The ratings of Ageas benefit from strong solvency at group
consolidated level. The group regulatory solvency margin was 203%
at end-June 2014. From a Prism factor-based capital model (Prism
FBM) perspective, Ageas scored "Very Strong" based on end-2013
results. Fitch expects solvency to remain strong, supported by
retained earnings, even after allowing for the group's continuing
share buyback programme.
Ageas' financial leverage ratio fell to 21% at end-2013, after
having been in the 25%-30% range in recent years. This reduction
reflects the redemption of the two "Nitsh-instruments" in 2013,
which more than offset the two new debt issues made by the group
during the year. Fitch views this reduction positively, as it
means debt leverage is now significantly below the agency's
median guidelines for the 'A' IFS category.
Challenging underwriting conditions in Belgium and the UK are
putting pressure on the group's earnings, and low bond yields are
limiting its investment income. Fitch expects these conditions to
persist. A mitigating factor is Ageas' business in Asia and
Turkey, which is more profitable.
Fitch views AICA as "Very Important" to Ageas, despite its fairly
small market share in Hong Kong, and rates the company one notch
above its standalone assessment. AICA's new business margin has
been improving since 2011, aided by an improved product mix.
However, its statutory solvency ratio is susceptible to a decline
in interest rates as the duration of its assets is shorter than
that of its liabilities.
The ratings of the Ageas holding companies take into account the
strong net cash position, which totalled EUR1.6 billion at end-
June 2014, after dividend distribution. There were several
transactions in 2013 outside the core insurance business, such as
group finance activities, which Fitch views as positive in terms
of cash generation and simplifying the legacy business arising
from the break-up of the Fortis group in 2009, although some
volatility remains at holding company level.
Following the restructuring of Ageas in 2008, Fitch believes that
Ageas SA/NV continues to face litigation risk from former Fortis
shareholders in Belgium and the Netherlands. Despite the
company's denial of all allegations, if the actions against Ageas
SA/NV are successful, they could eventually have a substantial
negative financial impact on the company. This litigation risk is
reflected in Ageas SA/NV's IDR being two notches lower than the
IDR of AG Insurance instead of the standard one notch.
Rating Sensitivities
Ageas's ratings could be downgraded if the group regulatory
solvency ratio falls below 175% or the Prism FBM score falls to
the "Strong" category, on a sustained basis. The ratings could
also be downgraded if the group's profitability weakens
significantly, with a return on equity (ROE) below 5% (2013: 10%)
or a return on assets (ROA) below 0.4% (2013: 0.9%).
Ageas's ratings could also be downgraded if the litigation risk
results in material losses for the group well in excess of the
provisions currently held.
An upgrade of Ageas' ratings could result from greater
diversification outside of Belgium. However, this is unlikely in
the medium term.
An upgrade of Portugal's sovereign rating could lead to an
upgrade of Ageas' Portuguese entities.
Ocidental Vida could be downgraded if its importance to Ageas, in
Fitch's view, declines.
An upgrade of AICA is unlikely in the near term, given its small
market position. Key rating triggers for downgrade include a
decline in its local statutory solvency ratio to below 200%
(2013: 598%) or financial leverage rising above 28% (2013: 30%,
but expected to reduce in 2014 as debt matures), all on a
sustained basis. The ratings would also be downgraded if Ageas
SA/NV's rating were downgraded or if the strategic importance of
AICA to Ageas diminishes, in Fitch's view.
The rating actions are as follows:
AG Insurance
IFS rating affirmed at 'A+'; Outlook Stable
Long-term IDR affirmed at 'A'; Outlook Stable
Subordinated bond affirmed at 'BBB+'
Ageas SA/NV
Long-term IDR affirmed at 'BBB+'; Outlook Stable
Short-term IDR affirmed at 'F2'
Ageas Insurance International
Long-term IDR affirmed at 'A-'; Outlook Stable
Short-term IDR affirmed at 'F2'
Ageas Finance N.V.
Senior unsecured affirmed at 'BBB'
Ageas Hybrid Financing
Hybrid capital instruments affirmed at 'BB+'
Ageasfinlux SA
Hybrid capital instruments affirmed at 'BB'
Ocidental-Companhia Portuguesa de Seguros de Vida S.A.
IFS rating affirmed at 'BBB-'; Outlook Positive
Ocidental-Companhia Portuguesa de Seguros S.A.
IFS rating upgraded to 'BBB' from 'BBB-'; Outlook Positive
Medis-Companhia Portuguesa de Seguros de Saude S.A.
IFS rating upgraded to 'BBB' from 'BBB-'; Outlook Positive
Ageas Insurance Company (Asia) Ltd
IFS rating affirmed at 'A'; Stable Outlook
Long-term IDR affirmed at 'A-'; Stable Outlook
Ageas Capital (Asia) Ltd
Senior unsecured rating affirmed at 'A-'
=====================
N E T H E R L A N D S
=====================
DLK GROUP: Moody's Assigns Definitive 'B2' CFR; Outlook Stable
--------------------------------------------------------------
Moody's Investors Service has assigned a definitive B2 Corporate
Family Rating (CFR) and a B2-PD Probability of Default Rating
(PDR) to DLK Group B.V. ('Delek'). Concurrently, Moody's has
assigned a definitive B1 rating to the EUR555 million senior
secured first-lien bank facilities and a definitive Caa1 rating
to the EUR100 million second lien facility due 2019 made
available to DLK Acquisitions B.V. The outlook remains stable.
Ratings Rationale
Moody's definitive ratings for the CFR, senior secured first lien
facilities and second lien facility are in line with the
provisional ratings assigned on July 30, 2014. Moody's rating
rationale was set out in a press release on that date. The final
terms of both facilities were in line with the drafts reviewed
for the provisional instrument rating assignments.
Rating Outlook
The stable outlook on the ratings reflects Moody's expectation
that: (1) Delek's fuel volumes will remain resilient and
management's initiatives in the non-fuel segment will yield
moderate growth in earnings; (2) the level of investment will
remain somewhat volatile without putting the company's cash flow
generation in jeopardy; and (3) the company will maintain an
adequate LIQUIDITY profile and headroom under its financial
covenants.
What Could Change The Rating Up
As Delek is rather weakly positioned within the B2 category, and
deleveraging is likely to be slow, near-term positive ratings
pressure is unlikely. However, earnings growth beyond
expectations, leading to a DEBT/EBITDA ratio falling sustainably
towards 4.5x could put positive pressure on the ratings.
What Could Change The Rating Down
Negative pressure could be exerted on Delek's ratings if: (1)
operating performance were to deteriorate e.g., due to large
declines in fuel volumes and lack of growth in the non-fuel
segment, such that leverage would exceed 6.0x on a sustained
basis; or (2) free cash flow turned negative for an extended
period of time; or (3) its LIQUIDITY profile were to weaken.
Principal Methodologies
The principal methodology used in these ratings was Global Retail
Industry published in June 2011. Other methodologies used include
Loss Given Default for Speculative-Grade Non-Financial Companies
in the U.S., Canada and EMEA published in June 2009.
Corporate Profile
Headquartered in Breda, the Netherlands, Delek is a large
independent petrol forecourt operator. It operates over 1,200
sites across the Benelux and France. It has two main segments:
fuel and non-fuel, which chiefly comprises the company's
convenience stores at its sites. For the last twelve months
ending March 31, 2014 the company reported pro-forma EBITDA of
103.9 million.
SENSATA TECHNOLOGIES: Moody's Confirms 'Ba2' Corp. Family Rating
----------------------------------------------------------------
Moody's Investors Service, confirmed Sensata Technologies B.V.'s
Corporate Family Rating at Ba2 and assigned Baa3 rating to the
company's proposed $600 million incremental term LOAN and a Ba3
rating on its proposed $400 million senior UNSECURED notes.
Proceeds from the issuance are expected to be used to fund the
US$1 billion acquisition of Schrader International also known as
August Cayman (rated B2 CFR). Concurrently, Moody's downgraded
the company's senior secured facilities (revolver and term loan)
to Baa3 from Baa2 and Speculative Grade LIQUIDITY Rating to SGL-2
from SGL-1, and confirmed the Unsecured rating at Ba3. The rating
outlook is stable. These rating actions conclude the review for
downgrade that began on August 19, 2014 following Sensata's
announcement to acquire Schrader.
Ratings Rationale
Confirmation of Sensata's Ba2 CFR reflects the company's strong
business position in the sensor market along with the expectation
that Debt to EBITDA of about 4.5 times, pro forma for the
Schrader acquisition financing, will decline over the next two
years to once again be reflective of the Ba2 rating category.
Moody's anticipates positive free cash flow of over US$300
million for the next year and EBITA margins to improve to around
23% as the company integrates Schrader and as synergies are
capitalized on. The rating confirmation considers Sensata's
multi-year track record of improving its balance sheet through
EBITDA growth and Debt Reduction. The downgrade of the senior
facilities to Baa3 from Baa2 reflects the additional first lien
debt that would share in recovery under a reorganization
scenario.
The lowered Speculative Grade Liquidity Rating of SGL-2 rating
reflects good liquidity based on only moderate availability under
the US$250 million revolver due to US$160 million initial usage
projected at transaction close, as well as expectations for
positive free cash flow for the combined entity, and good
headroom under its springing financial covenants.
Ratings confirmed:
Issuer: Sensata Technologies B.V.
Corporate Family Rating, Ba2;
Probability of Default Rating, Ba2-PD;
US$700 million Senior Unsecured Regular Bond/Debenture May 15,
2019, Ba3 (LGD-5)
US$500 million Senior Unsecured Regular Bond/Debenture Oct 15,
2023, Ba3 (LGD-5)
Ratings assigned:
Proposed Senior Secured Term Loan, Baa3 (LGD-2)
Proposed Senior Unsecured Regular Bond/Debenture, Ba3 (LGD-5)
Ratings downgraded:
US$250 million Senior Secured Revolving Credit Facility May 12,
2016, Baa3 (LGD-2)
US$475 million Senior Secured Bank Credit Facility May 12, 2019,
Baa3 (LGD-2)
Speculative Grade Liquidity Rating, SGL-2
Outlook Actions:
Outlook, Changed To Stable
The assigned ratings are subject to Moody's review of the final
terms and conditions of the proposed transaction.
The stable outlook is supported by Moody's anticipation of steady
growth in demand within Sensata's key end markets, including
automotive, should continue to be supportive of positive free
cash flow generation and deleveraging.
For positive ratings traction to occur given the company's
increased exposure to the cyclical automotive market, Sensata
would need to build a track record of conservative balance sheet
management from current levels. This would need to include DEBT
REDUCTION and an articulated strategy towards future
acquisitions, size and financing structure that supports a strong
balance sheet.
The rating could come under pressure if the company does not show
consistent progress towards deleveraging its balance sheet. A
short fall in cash flow generation and in particular free cash
flow to debt under 5% would likely pressure the rating given
Moody's anticipation for free cash flow to be over 10% of debt. A
downturn in Sensata's end markets without an adjustment in costs
to preserve the margin could also pressure the rating, especially
in the automotive sector as revenues from automotive clients in
2015 is anticipated to be over 50% of total revenues. The rating
would also come under pressure if the company makes another DEBT
FINANCED acquisition before fully integrating Schrader and
reducing leverage to below 3.5 times. Leverage over 4.5 times
would also pressure the rating.
The stable ratings outlook considers its pending $1 billion debt
financed acquisition of Schrader is anticipated to result in
temporarily elevated leverage for the rating category. The
Schrader acquisition shows a willingness to make large debt
financed acquisitions that result in higher leverage. As a
result, Moody's anticipate that positive rating traction to be
slow even though Moody's expect improving leverage metrics.
The principal methodology used in this rating was Global
Manufacturing Companies published in July 2014. Other
methodologies used include Loss Given Default for Speculative-
Grade Non-Financial Companies in the U.S., Canada and EMEA
published in June 2009.
Sensata Technologies B.V. is an indirect wholly-owned subsidiary
of Sensata Technologies Holding N.V., a globally diversified
manufacturer of sensors and controls products for mission
critical applications across a variety of end markets, including
automotive, aerospace, HVAC, and general industrial markets. The
company's products include sensors measuring pressure, force, and
speed, and thermal and magnetic-hydraulic CIRCUIT BREAKERS and
switches. LTM revenue as of 6/30/14 was approximately US$2.1
billion. Schrader International (August Cayman Intermediate
Holdco, Inc.) is a manufacturer of Tire Pressure Monitoring
Systems("TPMS"), Fluid Control Components and Tire Hardware &
Accessories for the automotive and industrial original equipment
market and aftermarket. The company generated 2013 revenue of
approximately US$455 million.
=============
R O M A N I A
=============
FLY ROMANIA: Files for Insolvency in Bucharest Court
----------------------------------------------------
ch-aviation reports that Fly Romania has filed for insolvency
with a Bucharest court.
A filing seen by ch-aviation has now called for all creditors to
lodge claims with the airline's interim trustee, Dinu Urse
Associates, with the deadline for submissions set for Oct. 30.
Doubts about the Ten Airways subsidiary's long-term viability
first surfaced in June when poor load-factors forced it to
dramatically scale down its flights, just one month after it
launched operations, ch-aviation relates.
During its brief operational period, FlyRomania had offered
budget flights between Bucharest Otopeni, Tulcea, and Timisoara
domestically as well as flights to destinations in Italy, Spain,
Germany and Turkey, according to ch-aviation.
===========
R U S S I A
===========
ESIBANK: Central Bank Revokes License
-------------------------------------
ITAR-TASS reports that the Central Bank of Russia has revoked the
license of Esibank.
According to ITAR-TASS, the bank is pursuing a highly risky
credit policy.
In 2013, a total of 32 banks were stripped of their licenses,
ITAR-TASS recounts. Banks are subjected to purging irrespective
of their ranking, ITAR-TASS notes.
Esibank is a commercial bank based in Makhachkala.
PRIORITET BANK: Central Bank Revokes License
--------------------------------------------
ITAR-TASS reports that the Central Bank of Russia has revoked the
license of Prioritet Bank.
According to ITAR-TASS, the bank is pursuing a highly risky
credit policy.
In 2013, a total of 32 banks were stripped of their licenses,
ITAR-TASS recounts. Banks are subjected to purging irrespective
of their ranking, ITAR-TASS notes.
Prioritet Bank is a commercial bank based in Samara.
RUSSNEFT OJSC: S&P Revises Outlook to Stable & Affirms 'B' CCR
--------------------------------------------------------------
Standard & Poor's Ratings Services said that it had revised its
outlook on Oil and Gas Company Russneft OJSC to stable from
positive. The 'B' long-term corporate credit rating was
affirmed.
At the same time, S&P lowered its Russia national scale rating on
Russneft to 'ruA-' from 'ruA' and removed it from UCO (under
criteria observation).
The outlook revision reflects S&P's view that Russneft's recent
increase in debt and the lack of predictability of its financial
policy limit the potential for an upgrade in the near future. In
S&P's view, any upside to the rating will require a track record
of more predictable financial policy. This is because, even if
Russneft completes its plan to convert about US$900 million of
debt and a similar amount of promissory notes into equity, it is
unlikely to offset the risks from having high debt. S&P also
understands that Russneft's merger with sister company Neftisa,
which is controlled by the same owner, Mikhail Gutseriev, is
progressing much slower than initially expected.
S&P now views Russneft's financial risk profile as "highly
leveraged," compared with "aggressive" previously. S&P expects
Russneft's FOCF to be marginally positive, but not sufficient to
support quick debt reduction.
Russneft's debt is much higher than we previously anticipated.
As of June 30, 2014, Russneft reported US$3.9 billion in debt on
the balance sheet, including about US$1.6 billion of bank debt,
roughly US$1.2 billion owed to Glencore, and about US$0.9 billion
of debt to related parties associated with Russneft's acquisition
of Azerbaijan-based assets. On top of this, Russneft guaranteed
US$1.5 billion of related-party debt, of which S&P understands
US$750 million is currently outstanding. Also, S&P understands
that in the third quarter of 2014, Russneft converted US$1.3
billion of related-party payables into long-term promissory
notes. S&P treats both the guarantee and the promissory notes as
financial debt in line with S&P's methodology, because although
related parties may not be willing to enforce the guarantee,
Russian law doesn't have a concept of subordinated debt for
corporates. As a result, S&P expects Russneft's debt-to-EBITDA
ratio (including S&P's adjustments) to exceed 6.5x by year-end
2014, and funds from operations (FFO) to debt to be lower than
12%. Even if Russneft manages to convert US$0.9 billion of its
debt to Glencore and a similar amount of promissory notes into
equity, the debt-to-EBITDA ratio will be 3.6x-4x, and FFO to debt
lower than 20%.
"We see uncertainties related to Russneft's financial risk
management, leverage, dividend requirements, and related-party
transactions, which may trigger an increase in the company's
leverage. This is reflected in our assessment of Russneft's
financial policy as negative, which results in a downward
adjustment of one notch. At the same time, we include a one-
notch upward adjustment because of Russneft's positive position
under our comparable ratings analysis. This stems from our view
that Russneft's business is profitable and not very volatile, and
a considerable portion of Russneft's adjusted debt is long-term
promissory notes to related parties that have a strategic
interest in the company and are unlikely to enforce the debt,"
S&P noted.
S&P views Russneft's business risk profile as "weak" because
Russneft is much smaller than many other rated Russian oil
companies, particularly after the sale of its Urals-based assets
in 2013, and its cost per unit is somewhat higher.
S&P's base case does not yet factor in a merger with Neftisa or
the planned debt-for-equity swap because the timing and structure
of these transactions and their potential effect on Russneft's
business and financial risk profiles are uncertain.
The stable outlook reflects S&P's expectation that Russneft's
leverage will remain relatively high, even after a debt-for-
equity swap, but liquidity will remain manageable and FOCF will
be slightly positive.
Upside to the rating is currently limited by the lack of
transparency and predictability of the company's financial
policy, as indicated by the recent large transactions that led to
a considerable increase in leverage. In the medium term, a
positive rating action would depend on Russneft's ability to
achieve a ratio of adjusted debt to EBITDA closer to 3x and
maintain a more predictable financial policy. S&P would not
consider a positive rating action if Russneft were to experience
liquidity pressure.
Rating downside could stem from weakening liquidity, which S&P
currently do not expect. It could also materialize in case of
additional large increases in debt or related-party transactions,
none of which S&P includes in its base-case scenario for
Russneft.
SOYUZPROMBANK: Central Bank Revokes License
-------------------------------------------
ITAR-TASS reports that the Central Bank of Russia has revoked the
license of Soyuzprombank.
According to ITAR-TASS, the bank is pursuing a highly risky
credit policy.
In 2013, a total of 32 banks were stripped of their licenses,
ITAR-TASS recounts. Banks are subjected to purging irrespective
of their ranking, ITAR-TASS notes.
Soyuzprombank is a commercial bank based in Moscow. The bank was
Russia's 592nd largest by assets as of Sept. 1, according to
Bloomberg.
=============================
S L O V A K R E P U B L I C
=============================
VAHOSTAV-SK: Seeks Creditor Protection to Avert Bankruptcy
----------------------------------------------------------
According to The Slovak Spectator, the SITA newswire reported on
Sept. 26 that Vahostav-SK is trying to avoid bankruptcy, and has
asked the court for protection from creditors and to launch the
restructuring process.
Vahostav said the company asked for restructuring after failing
to agree with its creditors on paying its debts, The Slovak
Spectator relates. The company said several creditors are
forcing the company into bankruptcy, The Slovak Spectator relays.
Regarding the restructuring process, Vahostav plans to complete
the contracted projects, The Slovak Spectator discloses. It does
not plan to change the number of employees significantly, The
Slovak Spectator states. It also wants to compete for new orders
on which it will be working according to signed agreements, The
Slovak Spectator notes.
The Bratislava I District Court recently started a bankruptcy
proceeding against Vahostav, based on the motion submitted by
Zilina-based Energy Pro, The Slovak Spectator relates. The
company informed on Sept. 24 that it is looking for ways to end
the bankruptcy proceeding and continue its activities in all
projects, The Slovak Spectator recounts.
According to The Slovak Spectator, SITA reported that several
creditors have recently submitted proposals to launch a
bankruptcy proceeding against Vahostav.
Vahostav-SK is a construction company based in the Slovak
Republic.
===========================
U N I T E D K I N G D O M
===========================
ALU HOLDCO 1: S&P Assigns Preliminary 'B' CCR; Outlook Stable
-------------------------------------------------------------
Standard & Poor's Ratings Services assigned its preliminary 'B'
long-term corporate credit rating to U.K.-registered holding
company Alu Holdco 1 Ltd., the parent of European aluminum
profile manufacturer Corialis. The outlook is stable.
At the same time, S&P assigned its preliminary 'B' issue rating
to the proposed new first-lien senior secured facilities to be
issued by Alu Holdco 1, including a EUR318 million term loan B,
EUR20 million revolving credit facility, and EUR40 million capex
facility. The recovery rating on these proposed debt instruments
is '3', indicating S&P's expectation of meaningful (50%-70%)
recovery in the event of a payment default.
S&P also assigned its preliminary 'CCC+' issue rating to the
proposed EUR105 million second-lien loan. The recovery rating on
this proposed loan is '6', indicating S&P's expectation of
negligible (0%-10%) recovery in the event of a payment default.
The final rating will depend on S&P's receipt and satisfactory
review of all final transaction documentation and audited
financial statements. Accordingly, the preliminary rating should
not be construed as evidence of the final rating. If Standard &
Poor's does not receive final documentation within a reasonable
time frame, or if final documentation departs from materials
reviewed, S&P reserves the right to withdraw or revise its
ratings. Potential changes include, but are not limited to,
utilization of new loan proceeds, maturity, size and conditions
of the loans, financial and other covenants, security and
ranking.
The ratings on Alu Holdco 1 reflect S&P's assessment of the
Corialis group's financial risk profile as "highly leveraged" and
business risk profile as "fair," as S&P's criteria define these
terms.
Corialis is being acquired by private equity firm Advent
International. As part of the transaction, Corialis plans to
raise a total of EUR483 million in new debt. It will use part of
the funds to repay existing debt, with the remainder to be paid
to Corialis' previous owner.
After the refinancing, the group's capital structure will include
approximately EUR94 million of preference stock and approximately
EUR124 million of shareholder loans that accrue payment-in-kind
(PIK) interest at 9%. Although S&P views these instruments as
debt under its criteria, S&P do not consider their treatment as
either equity or debt to be a key driver for the rating.
Corialis is a leading aluminum profile manufacturer in its core
markets of the U.K., France, Belgium, and Poland, with a growing
presence in the rest of Europe. The group differentiates itself
from peers with a vertically integrated, well-invested asset
base, which has enabled the group to service its core markets
with an "under one roof" hub and spoke model. The group also has
significant demand for its products from the repair, remodel, and
improve (RMI) market, which exhibits less cyclicality than the
new-build construction market.
Tempering these strengths is Corialis' partial exposure to
cyclical new-build construction end markets. This can result in
more-volatile demand for the group's products. Corialis'
absolute EBITDA has exhibited some volatility in the past and
could do so again in the future, especially if the group's
efforts to expand the business meet a sudden sharp drop in
demand. S&P forecasts that the group's Standard & Poor's-
adjusted EBITDA margin will be about 19%-20% for the financial
year ending Dec. 31, 2014. With the exception of a few large
competitors, S&P considers the group's competitive landscape to
be highly fragmented, with relatively low barriers to entry.
Corialis is also generating more revenue in higher-risk countries
such as Poland.
Corialis is undertaking sizable capital expenditure (capex) to
invest in its U.K. and Polish hubs. S&P forecasts that capex
will peak in 2014 and 2015, resulting in weak free operating cash
flows (FOCF) during these two years, before returning to normal
levels in 2016 and beyond. A continued macroeconomic recovery
and rise in demand for Corialis' products in its core markets is
crucial to the volumes S&P assumes in its base case.
S&P assess the group's management and governance as "fair,"
reflecting its experienced management team and clear organic
growth plans.
Corialis is owned by a financial sponsor, and has a tolerance for
high leverage and potential aggressive shareholder returns.
These factors are reflected in S&P's "FS-6" financial policy
modifier.
S&P's base-case operating scenario for Corialis in 2014 assumes:
-- Revenue growth of about 4%-5% to about EUR340 million;
-- An improvement in the group's EBITDA margin toward 20%-21%;
-- Capex of up to EUR21 million in 2014, and just over EUR19
million in 2015, resulting in weak free operating cash flow
until at least 2016; and
-- No major acquisitions or divestitures.
This results in these credit measures in 2014:
-- Debt to EBITDA of just above 6x excluding shareholder loans
(just above 9x including shareholder loans).
-- Cash interest coverage of more than 2x over the 12-18 month
rating horizon.
The outlook is stable. S&P believes that the slow growth
environment that currently benefits the industry should continue
through 2015, and S&P expects that Corialis will be able to grow
revenues and slightly improve its margins over the rating horizon
of 12-18 months.
S&P could lower the ratings if Corialis 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
capex in time to reduce debt prior to a potential drop in
earnings. S&P could also consider lowering the ratings if
Corialis undertakes material debt-funded acquisitions or
shareholder returns, or if its cash interest coverage were to
fall to below 2x.
S&P believes that the likelihood of an upgrade is limited at this
stage, because of Corialis' tolerance for high leverage and the
low prospect that the group will strengthen its credit metrics to
a level commensurate with an "aggressive" financial risk profile
within S&P's rating horizon. S&P notes that new private equity
sponsor ownership does bring an element of uncertainty with
regard to the potential for future releveraging, shareholder
returns, and changes to the group's acquisition or disposal
strategy.
EUROGLAZE SYSTEMS: Bought Out of Administration
-----------------------------------------------
Hanna Sharpe at Business Sale reports that Drownstan Ltd., a
window, door and conservatory maker in Barnsley, South Yorkshire,
has been successfully bought out of administration.
Drowstan Ltd, which trades as Euroglaze Systems, was taken on by
administrator Phil Booth of PR Booth & Co on September 10,
according to Business Sale.
The report notes that Mr. Booth sold the business immediately to
a newly formed company Euroglaze Ltd, having been advised by
Alice Pratt, a partner at law firm Clarion.
The business will continue trading and all 57 employees have been
transferred over to its new owner, the report relates.
The director had placed the company into administration after
suffering issues relating to the recession, which were still
having an affect despite the improvement in the economy this past
year, the report notes.
"Working closely with Clarion, we were able to swiftly conclude a
sale, rescuing the business and securing the jobs of the entire
workforce," the report quoted Mr. Booth as saying.
"The administrator needed to act quickly to preserve the value of
the business and we were happy to be able to expedite the sale
process. It is good news that the business and its workforce now
have a brighter future," Ms. Pratt of Clarion said, the report
notes.
Founded in 1979, the GBP3.9 million revenue business manufactures
uPVC doors and windows for use in the construction industry. It
has developed a range of Rehau windows and doors, featuring
toughened frames helping to deter thieves.
ODEON & UCI: S&P Lowers CCR to 'CCC+' on Weak Performance
---------------------------------------------------------
Standard & Poor's Ratings Services lowered its long-term
corporate credit rating on U.K.-based cinema operator Odeon & UCI
Cinemas Group Ltd. (Odeon) to 'CCC+' from 'B-'. The outlook is
stable.
At the same time, S&P has lowered its issue ratings on the super
senior revolving credit facility (RCF) to 'B' from 'B+' and on
the senior secured notes due 2018 to 'CCC+' from 'B-'. The
recovery ratings of '1' on the super senior RCF and '4' on the
senior secured notes are unchanged and reflect S&P's expectation
of very high (90%-100%) recovery and average (30%-50%) recovery,
respectively, in the event of default. S&P assess the senior
secured notes' recovery as being at the lower half of the range.
The downgrade reflects S&P's opinion that Odeon's capital
structure is likely to be unsustainable over the long term given
its weaker operating performance over the past five quarters. A
combination of unfavorable events in the company's main
markets -- including the U.K., Germany, and Italy -- has led to
unexpectedly weak attendance numbers and earnings. Its better-
than-expected performance in Spain so far this year has been
insufficient to offset weak trading in its other markets.
A disappointing film slate, the FIFA World Cup, and adverse
weather conditions have contributed to Odeon's Standard & Poor's
adjusted EBITDA falling to GBP203 million in the rolling 12
months (RTM) ending June 30, 2014, from GBP237 million in the
same period last year. This corresponds to a respective decline
in EBITDA without adjusting for operating leases to GBP59 million
from GBP96 million.
For the rest of 2014, S&P views a substantial rebound as unlikely
and it feels that the recovery Odeon's management anticipates for
2015 may not be rapid enough to offset recent negative events.
Although S&P anticipates the film slate for 2015-2016 will be
relatively strong, it believes it may not be sufficient to offset
the weak consumer confidence S&P forecasts in a number of the
company's markets. As S&P has seen in the U.K., a rebound in
real GDP growth is not always accompanied by similar wages growth
and consumer confidence. S&P anticipates that Odeon's
promotional activities to encourage cinema attendance will have a
muted effect on its credit metrics because of their detrimental
effect on average ticket prices.
"As a result, we forecast that adjusted debt to EBITDA will
remain higher than 10x over the next 12 months and about 7x
excluding shareholder loans. We also expect negative free
operating cash flow (FOCF) generation on a reported basis even
though the company has committed to marginally reduce its
reported capital expenditure (capex) from GBP30 million in 2013.
In turn, the GBP30 million in 2013 had been a one-quarter
reduction from the previous year; moreover, the GBP30 million
included both maintenance and growth components. In addition, we
view interest-coverage ratios as particularly weak. We forecast
EBITDAR-to-interest plus rent at consistently below 1x over the
forecast period to 2016, although we acknowledge that about
one-half of the interest expense is non-cash. On a cash basis
this ratio is 1.0x-1.1x, providing very limited headroom for
further unexpected operating stress," S&P said.
Positively, Odeon's liquidity remains adequate. By focusing
carefully on working capital management, the company has managed
to minimize an increase in reported debt so far this year against
a backdrop of declining earnings. It had posted only about GBP15
million in cash drawings on the RCF as of the end of June 2014,
compared to a GBP30 million drawing at the same date last year.
As of June 30, 2014, Odeon reported about GBP19 million cash on
hand and about GBP60 million available under its GBP90 million
RCF. S&P believes this will suffice to finance working capital
swings and negative FOCF for the next 12 months.
S&P's base case assumes:
-- Up to a 10% decline in revenues in 2014, with the negative
pricing effects of promotional activities offsetting an
anticipated improvement in paid attendance in the second
half of 2014. Low-single-digit growth thereafter on an
improved film slate and the company's promotional
activities bearing fruit.
-- Flat adjusted EBITDA for full-year 2014 at the June RTM
level, and a limited rise in adjusted EBITDA thereafter
driven by control over the cost base and improved volumes.
-- Capex in line with 2013, at about 4% of revenues.
-- S&P notes that Odeon's credit measure performances have
historically been volatile and difficult to predict.
-- S&P anticipates that the structurally subordinated
shareholder loans coming due during 2016 will be extended
by the shareholders on essentially the same terms and, in
any case, with no cash claim on Odeon.
Based on these assumptions, S&P arrives at these credit measures:
-- An adjusted EBITDA margin of about 30% in 2014 and 2015.
-- An adjusted debt-to-EBITDA of more than 10x (7x excluding
shareholder loans).
-- A ratio of EBITDAR-to-cash interest plus rent of about 1x.
The stable outlook reflects S&P's view that although Odeon's
capital structure is likely unsustainable over the long term, the
company's adequate liquidity means that it does not face a
short-term default risk. S&P views a rent-adjusted EBITDAR-to-
cash interest plus rent cover of close to 1x as commensurate with
the current rating. The rating incorporates a modest improvement
in operating performance over the next 12 months.
Downside scenario
S&P could lower the rating on Odeon if the company appeared
unable to stop the decline in its EBITDA. S&P would also
consider a downgrade if liquidity deteriorated or if Odeon
started to purchase bonds at a discounted price, which S&P may
view as a distressed exchange under its criteria. Likewise S&P
could take a negative rating action if it believed the
shareholders might raise further debt against the assets or cash
flows of the company to partially reimburse the shareholder loans
coming due in 2016.
Upside scenario
S&P might consider a positive rating action if Odeon sustainably
reversed the recent trend of deteriorating performances while
maintaining adequate liquidity. S&P views an EBITDAR-to-cash
interest plus rent cover of at least 1.2x as commensurate with a
higher rating. A positive rating action would be contingent on
resolving the 2016 shareholder loans' maturity, causing no
detriment to current debtholders. Likewise, a positive rating
action would be contingent on the near-term prospect of Odeon
generating positive FOCF.
PHONES 4U: Will Not Refund iPhone 6 Pre-orders
----------------------------------------------
Chris Martin at Tech Advisor reports that after going into
administration and closing many stores, smartphone retailer
Phones 4U has confirmed that no refunds will be given for iPhone
6 pre-orders.
The firm plunged into the situation because mobile network EE
Ltd. has decided not to renew its contract following Vodafone's
recent move of the same variety -- both of which had come a
complete shock, according to Tech Advisor.
The report notes that although some stores have been saved,
customers who placed pre-orders for an iPhone 6 will not be given
a refund.
Phones 4U initially said any orders not dispatched would be
cancelled and payments refunded, the report notes. The firm
however has now detailed that iPhone 6 pre-orders are not
included in this, the report relays.
"Unfortunately, we do not have any iPhone 6's, therefore
customers who have pre-ordered an iPhone 6 through Phones 4u will
not receive their purchase," Phones 4u said.
"Customers who have paid using credit cards should contact their
credit card company to try and seek resolution to this matter.
If you are unable to obtain a refund through your credit card
company and wish to register a claim, your claim (to the extent
you have one) will rank as an unsecured claim in the
Administration," Phones 4u added.
Phones 4u was a large independent mobile phone retailer in the
United Kingdom.
PUNCH TAVERNS: Debt Deal Uncertainty Casts Going Concern Doubt
--------------------------------------------------------------
John Ficenec at The Telegraph reports that Punch Taverns has
admitted it could be unable to continue trading as a going
concern unless an agreement can be reached with its lenders.
Punch Taverns, which owns 4,100 pubs run by semi-independent
landlords across the country, made the disclosure as it announced
a sharp fall in profits, The Telegraph relates.
According to The Telegraph, the group revealed it had net debt of
GBP2.3 billion at Aug. 17 and needs to ease the terms of two big
loans held against the pub assets of the company to avoid a
default.
The group said that failure to reach an agreement on the debt
pile could result in a default on the two loans, allowing lenders
to request early repayment of all outstanding borrowings, The
Telegraph notes.
"These circumstances represent a material uncertainty that casts
significant doubt on the ability of a significant part or
substantially all of the Group to continue as a going concern,"
The Telegraph quotes the company as saying.
However, the Punch board said it believes "a consensual
restructuring can be launched in the fourth quarter of 2013",
despite the discussions taking longer than expected, The
Telegraph relays.
Punch made a pre-tax profit of GBP17 million in the year to
Aug. 17, down from GBP52 million in the previous year, on group
revenue that was 7% lower at GBP458 million, The Telegraph
discloses.
The underlying pre-tax profits fell 32% to GBP49 million, after
adjusting for costs such as restructuring, The Telegraph states.
Punch Taverns plc is a United Kingdom-based pub company. The
Company is engaged in the operation of public houses under either
the leased model or as directly managed by the Company. The
Company operates in two business segments: punch partnerships, a
leased estate and punch pub company, a managed estate.
UTOPIAN LEISURE: In Administration, Cuts 220 Jobs
-------------------------------------------------
North East News reports that more than 200 jobs at a number of
well-known North East bars have been saved in a rescue deal
following the administration of their parent business, Newcastle-
headquartered Utopian Leisure Group (ULG).
Daniel Butters and Clare Boardman of Deloitte were appointed
joint administrators of ULG, which acted as the holding company
for four trading and two dormant subsidiary entities, according
to North East News.
The report notes that the trading subsidiaries operate the
licensed venues of Sam Jacks (Newcastle), Fat Buddha, Loveshack
(both in Durham) and Box (Belfast). The administration
appointment was regarding ULG only, not any of the trading
subsidiaries and venues, which continue to operate as usual, the
report relates.
On appointment, all of ULG's assets were sold to Hot Buddha Ltd
and Ulysses Leisure Ltd, with all 220 of ULG's employees
transferring across to one of the two purchasers, the report
discloses.
"We are pleased to have completed a sale of the trading entities
of the ULG. The structure of the transaction allows the trading
subsidiaries and the licensed venues to operate as usual and all
employees to be retained," the report quoted Mr. Butters as
saying.
"The trading performance across the venues had been poor due to a
number of venue specific issues combined with challenging market
conditions," Mr. Butters said, the report relates.
"These include restrictions on discretionary consumer spend, new
entrants into local market with ability to fund capital
expenditure investment and capital expenditure requirement for
some of the group's existing units," Mr. Butters added.
The administrators were assisted with legal advice from Paul
Dutton of Eversheds.
===============
X X X X X X X X
===============
* S&P Takes Various Rating Actions on European Bank Hybrids
-----------------------------------------------------------
Standard & Poor's Ratings Services said that it has taken various
rating actions on just under 1,200 hybrid capital instruments
issued by European financial institutions. Specifically, it has
lowered the issue credit ratings on 88% of reviewed hybrid
capital instruments and affirmed the issue credit ratings on 12%
of reviewed instruments. S&P plans to publish a list of
instruments affected by the rating actions within the next few
days.
The rating actions follow the publication of S&P's revised bank
hybrid capital criteria on Sept. 18, 2014. With S&P's criteria
review complete, it will be removing the "under criteria
observation" (UCO) identifier from the ratings affected by the
revised bank hybrid capital criteria.
In S&P's view, European regulators are adopting a tougher "bail-
in" stance (where investors share in the cost of a government's
rescue of a failing bank) toward hybrid capital instruments. S&P
believes that this increases the likelihood that European banks
will be required to use hybrid capital instruments included in
their regulatory capital base to absorb losses in the event of
material stress.
S&P anticipates that banks will suspend coupons on deferrable
instruments at an earlier stage under the Basel III/CRD (Capital
Requirements Directive) 4 buffer framework, in particular the
capital conservation buffer and those for systemically important
financial institutions. S&P has addressed this in its ratings on
European bank Tier 1 hybrid instruments by lowering the ratings
by an additional one or two notches than previously, in most
cases, to reflect the heightened risk of nonpayment on Tier 1
capital instruments that are subject to these Basel III
provisions. In addition, S&P believes that regulators within
Europe have the legislative tools and are willing to use all
forms of regulatory capital instruments -- including legacy
deferrable or non-deferrable instruments -- to cover latent
losses and restore the capital of failing banks if they reach the
point at which there is no private sector alternative to prevent
a failure and where the regulators determine that the bank is
nonviable. This has led S&P to widen the rating difference with
senior debt by a further notch on most of these instruments.
The rating actions affect the ratings on just under 1,200 hybrid
capital instruments issued by European banks and 250 subordinated
debt programs assigned to European banks and their subsidiaries.
In total, S&P has lowered the ratings on 68% of European hybrid
capital instruments that were part of its review by one notch and
20% by two notches. S&P has affirmed the ratings on 12%.
By instrument type, S&P downgraded 94% of legacy Tier 1
instruments by one or two notches (34% and 60%, respectively),
64% of Basel III-compliant, additional Tier 1 instruments by one
or two notches (57% and 7%, respectively), and 86% of
nondeferrable subordinated debt instruments by one notch.
Of the instruments that S&P has affirmed, nearly 30% according to
the criteria for rating hybrid capital instruments are at the
'CCC+' level or below. Following the criteria revision, 46 of
the 71 European hybrid capital instruments rated below 'CCC+' are
issued by banks in Southern Europe. S&P explains how it rates
these instruments in "Credit FAQ: Applying "Criteria For
Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings" To
Subordinated And Hybrid Capital Instruments," published July 16,
2014.
S&P widens its notching for ratings on Tier 1 instruments by one
notch to account for the risk of coupon nonpayment, which S&P
sees as higher for both Basel III additional Tier 1 and legacy
Tier 1 (in line with step 1b of the criteria related to standard
coupon nonpayment risk).
For legacy Tier 1 and nondeferrable subordinated debt
instruments, S&P considers that the statutory resolution and
bail-in regimes result in the equivalent of a mandatory
contingency capital feature, resulting in incremental default
risk that is reflected by another notch under step 1c of the
criteria. This is because S&P expects that these instruments
will be written down or converted into common equity in the event
of a resolution or a regulatory determination that a bank is
nonviable. Until now, S&P had only reflected this incremental
default risk related to contingent capital feature when an
instrument's documentation included a mandatory contractual
write-down or conversion feature, such as in the Basel III-
compliant additional Tier 1 and some legacy instruments. S&P
also expects that these instruments will be subject to loss
absorption prior to any receipt of government or other
international capital support for an institution.
"We observe that European authorities are taking steps to
increase the resolvability of banks and require creditors rather
than taxpayers to bear the burden of the costs of failure. We
believe that the introduction of mandatory bail-in under the BRRD
by January 2016 will likely lead to a reduction in potential
extraordinary government support provision to banks' senior
unsecured bondholders within our two-year rating horizon for
investment-grade entities. In our view, this development follows
the principles of the BRRD and the general intention to reduce
the taxpayer burden of bank failures," S&P said.
Even before the Jan. 2016 introduction of the BRRD's bail-in
powers for senior unsecured liabilities, S&P has already seen
examples in Europe of subordinated instruments, including
nondeferrable debt, bearing losses while senior unsecured debt
continued to be serviced. These examples included cases of
payment deferral on hybrid capital instruments, principal losses
on subordinated debt instruments through government expropriation
and "bad bank" restructurings, and distressed exchanges of hybrid
capital instruments as a means to recapitalize banks.
*********
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.
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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.
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