/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/141113.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 Thursday, November 13, 2014, Vol. 15, No. 225 Headlines A R M E N I A ARMECONOMBANK: Moody's Lowers Currency Deposit Ratings to 'B2' B E L A R U S BELARUSIAN NAT'L: Fitch Assigns 'B-' IFS Rating; Outlook Stable H U N G A R Y BUDAPEST CITY: Moody's Changes 'Ba1' Rating Outlook to Stable I R E L A N D IRISH BANK: Asks Supreme Court to Overturn Quinn Decision SLIEVE RUSSELL: Losses Decline to EUR544,000 in 2013 K A Z A K H S T A N HALYK BANK: Fitch Assigns 'BB(EXP)' Rating to Sr. Unsecured Bond P O R T U G A L BES FINANCE: Moody's Comments on Outstanding Rated Debt S P A I N FTPYME BANCAJA 3: S&P Affirms 'CCC' Rating on Class D Notes MAPFRE SA: Fitch Affirms 'BB' Rating on EUR700MM 5.91% Sub. Debt U N I T E D K I N G D O M BESTWAY UK: S&P Assigns 'B+' CCR & Rates GBP725MM Sr. Debt 'BB-' CONNAUGHT: Former Workers Lose Four-Year Bid for Compensation ER HEMMINGS: In Administration; 37 Jobs at Risk GEMGARTO 2012-1: S&P Raises Rating on B2 Notes to BBB- from BB INFINIS ENERGY: Moody's Assigns 'Ba3' Corporate Family Rating L M ENGINEERING: In Administration, Cuts 21 Jobs OSPREY ACQUISITIONS: Fitch Affirms 'BB' Issuer Default Rating SERCO GROUP: Faces Two More Difficult Years, CEO Says SYNCRO: Robert Maxwell's Sons Escape Bankruptcy TENZA TECHNOLOGIES: In Administration; Potential Buyers Sought TITAN EUROPE 2007-1: Fitch Cuts Ratings on 4 Note Classes to 'C' ********* ============= A R M E N I A ============= ARMECONOMBANK: Moody's Lowers Currency Deposit Ratings to 'B2' -------------------------------------------------------------- Moody's Investors Service has downgraded to B2 from B1 the long- term foreign- and local-currency deposit ratings of Armeconombank (Armenian Economy Devt Bank) (AEB). Concurrently, Moody's affirmed the bank's Not Prime short-term foreign- and local- currency deposit ratings and standalone E+ bank financial strength rating (BFSR), which is now equivalent to a baseline credit assessment (BCA) of b2 (formerly b1). The outlook on all long-term ratings is stable, while short-term ratings carry no specific outlook. Moody's assessment is primarily based on AEB's audited year-end 2013 financial statements prepared under IFRS, information received from the bank, latest available unaudited quarterly IFRS reports, as well as statutory financials. Ratings Rationale The downgrade of AEB's deposit ratings reflects the bank's (1) weak profitability in recent years and, in Moody's opinion, limited prospects for improvement in the bank's earnings over the medium- to long-term rating horizon (i.e., over the next 18 to 24 months); and (2) modest regulatory capital buffer, which has been on a downward trend in recent years. AEB has reported weak profitability in recent years (the pre- provision income-to-average equity ratio stood at 5%-11% during the period 2009-13), with credit growth exceeding the bank's internal capital generation in some of these years (including 2012, 2013, and the first three quarters of 2014). AEB's bottom- line profitability is pressured by high operating expenses that have been inflated by the bank's efforts to develop and maintain its branch network. These expenses translate into a high cost-to- income ratio, which has remained at 80%-90% since 2009, and limits the bank's loss absorption buffer. Moody's expects that, over the medium- to long-term (in the next 18 to 24 months), material improvement of AEB's operating efficiency will be constrained by intense competition in the sector, which puts pressure on the bank's revenues and requires additional investments in order to maintain its branch network. Additionally, AEB's low profitability and credit growth have resulted in decline of the bank's capital cushion in recent years. The regulatory capital adequacy ratio declined to 13.2% as at end-September 2014 from 15.5% as at year-end 2011 (YE2010: 18.9%), which is now only moderately above the minimum required level of 12%. At the same time, AEB's ratings are supported by a track record of good asset quality, with historic cost of risk not exceeding 2%. According to the bank, loans overdue more than 90 days accounted for 0.4% of the gross loan book as at end-June 2014 and were fully covered by reserves. The bank's asset quality benefits from moderate borrower concentration, which is lower than average for single-b rated banks (the top 20 loans accounted for 123% of the bank's Tier 1 capital at end-May 2014). Moody's also notes the bank's adequate liquidity profile. AEB's significant amount of liquid assets (accounting for a third of total assets as at Q3 2014) sufficiently mitigates risks stemming from maturity mismatches on the bank's balance sheet. What Could Move The Ratings UP/DOWN Moody's might consider upgrading AEB's ratings if the bank significantly enhances its loss absorption capacity (i.e., pre- provision profitability and capital cushion), while maintaining its adequate asset quality metrics and liquidity profile. Moody's would also consider any notable strengthening of the bank's market position to be a credit positive factor. Any further decline AEB's capital adequacy metrics or evidence of material asset-quality impairment and weakening of the liquidity profile will have negative rating implications for the bank. Principal Methodology The principal methodology used in this rating was Global Banks published in July 2014. ============= B E L A R U S ============= BELARUSIAN NAT'L: Fitch Assigns 'B-' IFS Rating; Outlook Stable --------------------------------------------------------------- Fitch Ratings has assigned Belarusian National Reinsurance Organization (Belarus Re) an Insurer Financial Strength (IFS) rating of 'B-'. The Outlook is Stable. KEY RATING DRIVERS The rating reflects Belarus Re's 100% state ownership, the reinsurer's exclusive position in the local reinsurance sector underpinned by legislation, and strong underwriting profitability. The rating also takes into account the relatively low quality of the reinsurer's investment portfolio. The Belarusian state has established an exclusive position for Belarus Re as the national monopoly reinsurer. The aim of this is to promote national reinsurance and raise the capacity of the local insurance sector. Although there is no formal support agreement between the state and the company, there is a track record of state support through significant capital injections at inception and in recent years. The regulation obliges local primary insurers to cede risks exceeding the permitted net retention of 20% of their equity. These obligatory cessions as well as any voluntary cessions of risks below the threshold need to be offered to Belarus Re first. The reinsurer has the right to reject both types of cessions and in practice is often involved at the primary underwriting of large risks. Belarus Re's monopoly has been introduced gradually with its share in compulsory cessions growing from 10% in 2006 to 100% in 2014. Fitch's assessment of Belarus Re's risk-adjusted capital adequacy concludes that the company is adequately capitalized for its rating. The insurer nominally maintains an exceptionally strong level of capital relative to its current business volumes with the Solvency I-like statutory ratio standing at 44x at end-6M14. However, Fitch believes that Belarus Re's economic capital adequacy is not as strong as the statutory solvency ratio implies since the regulator's formula does not take asset risk into account. Risks on the asset side of the reinsurer's balance sheet are highly concentrated and directly linked to the sovereign credit profile. Belarus Re has demonstrated strong underwriting results with the combined ratio averaging 70% in 2009-2013. Favorable claims experience and conservative pricing in most lines of business have been the key factors behind these strong results. The regulatory cap of 4% on commissions paid for inwards obligatory cessions (removed in 2014) has also helped Belarus Re to generate underwriting profit in previous years. With a cumulative inflation rate of 196% in 2011-2013 Belarus was treated as a hyperinflationary domicile under IFRS reporting. Belarus Re's hyperinflation loss on the net monetary position reached BYR166bn in 2013, almost fully offsetting the reinsurer's operating profit of BYR164bn in the same year. As the country's peak inflation rate of 108.7% in 2011 will drop out from the three-year corridor for the application of the IFRS hyperinflation standard, Fitch expects Belarus Re to demonstrate stronger net income in 2014. Belarus Re makes intensive use of retrocession with an average of 54% of premiums ceded in 2009-2013. Most cessions are made to strong international reinsurers, although select single large risks may be ceded to insurers in developing countries if the risks involve the economic interests of those countries. The effectiveness of Belarus Re's retrocession program has not been seriously tested since at least 2009, as the claims experience has been favorable. Domestic cessions are said to be monitored to limit accumulations. At the sector level, Fitch believes Belarusian insurers have significant exposure to financial risks insurance, which transfers credit risks from the banking sector and bond investors. As there is no reinsurance of high credit quality available for this kind of risks, Belarusian insurers have to spread these risks within the country. Belarus Re is also exposed to these risks (14% of GPW) in 2014, although the highest single net retention per policy under this line was less than 13% of the reinsurer's IFRS-based capital at end-2013. Most insured credit risks are also linked to the state-owned issuers. RATING SENSITIVITIES Any change in Fitch's view of the financial condition of the Republic of Belarus or any significant change in Belarus Re's relationship with the government would be very likely to have a direct impact on the company's rating. ============= H U N G A R Y ============= BUDAPEST CITY: Moody's Changes 'Ba1' Rating Outlook to Stable ------------------------------------------------------------- Moody's Investors Service has changed to stable from negative the outlook on the City of Budapest's Ba1 issuer rating. Moody's has also affirmed the Ba1 rating. The main drivers of the rating action are (1) the stabilization in the Hungarian sub-sovereign operating environment, as reflected in Moody's outlook change on Hungary's Ba1 government bond rating to stable from negative; and (2) the strong correlation between sovereign and sub-sovereign credit risk, reflected in macroeconomic and financial linkages as well as in institutional factors. The change in outlook and the affirmation follow similar actions on Hungary's government bond rating on November 7, 2014. Ratings Rationale The outlook change follows the stabilization in the Hungarian sub-sovereign operating environment, reflected by the same change in outlook on the sovereign rating. The outlook change also reflects Moody's view that the creditworthiness of Budapest is directly linked to that of the sovereign, as Hungarian local governments depend on revenues that are linked to the sovereign's macroeconomic and fiscal performance. Budapest is highly dependent on intergovernmental revenues in the form of shared taxes and central government transfers that are set at the national level and represent 78% of the city's operating revenue. Moody's expects that the improving economic outlook, both in the short and medium term, will be a positive for the city's income stream and will result in growing central government allocations for Budapest. In addition, the institutional linkages illustrate the close ties between the two levels of government, as the sovereign has the ability to change the institutional framework under which local governments operate. Rationale for Rating Affirmation The affirmation of Budapest's rating reflects the city's proven track record of prudent budgetary management, as reflected in its solid operating surplus of 12% of operating revenue in 2013, which Moody's expects will improve in 2014 to 15% following the central government's assumption of Budapest's entire debt and the elimination of debt servicing costs. In addition, Budapest's rating continues to be underpinned by its good financial performances, zero direct debt and strong cash reserves at HUF119 billion (EUR388 million) at year-end 2013, equivalent to 63% of its operating revenue, which provides sufficient spending flexibility in medium term. Moody's also notes that the Ba1 rating reflects Budapest's sound governance and management practices, as well as its strong internal budget procedures. What Could Change the Ratings UP/DOWN Upward pressure on Budapest's rating could arise from an upgrade of the sovereign rating. Downward pressure on the rating could result from a downgrade of Hungary's sovereign rating; and/or a material deterioration in the city's operating and financial performance. The sovereign action required the publication of this credit rating action on a date that deviates from the previously scheduled release date in the sovereign release calendar. Specific economic indicators as required by EU regulation are not applicable for this entity. On November 6, 2014, a rating committee was called to discuss the rating of the Budapest, City of. The main points raised during the discussion were: The systemic risk in which the issuer operates has materially decreased. The principal methodology used in this rating was Regional and Local Governments published in January 2013. The weighting of all rating factors is described in the methodology used in this rating action, if applicable. ============= I R E L A N D ============= IRISH BANK: Asks Supreme Court to Overturn Quinn Decision --------------------------------------------------------- Mary Carolan at The Irish Times reports that Irish Bank Resolution Corporation has asked the Supreme Court to overturn a decision permitting the family of bankrupt businessman Sean Quinn advance legal claims which could lead to their avoiding liability for EUR2.34 billion loans. According to The Irish Times, Patricia Quinn and her five children say they had no knowledge of activities surrounding the loans made to Quinn companies by IBRC's predecessor, Anglo Irish Bank. They claim the loans were illegal because they were used to support the bank's share price and they cannot therefore be made liable for them, The Irish Times relates. In the High Court in 2012, Mr. Justice Peter Charleton, who is now in the Supreme Court, ruled that the family were entitled to advance claims that the loans were made for "wholesale" market manipulation in breach of Irish and European law, The Irish Times recounts. IBRC argues the High Court was wrong to find the Quinns could rely on the "general principle of illegality" in support of their bid to avoid liability, The Irish Times notes. About Irish Bank Resolution Irish Bank Resolution Corp., the liquidation vehicle for what was once one of Ireland's largest banks, filed a Chapter 15 petition (Bankr. D. Del. Case No. 13-12159) on Aug. 26, 2013, to protect U.S. assets of the former Anglo Irish Bank Corp. from being seized by creditors. Irish Bank Resolution sought assistance from the U.S. court in liquidating Anglo Irish Bank Corp. and Irish Nationwide Building Society. The two banks failed and were merged into IBRC in July 2011. IBRC is tasked with winding them down and liquidating their assets. In February, when Irish lawmakers adopted the Irish Bank Resolution Corp., IBRC was placed into a special liquidation in the Irish High Court to complete liquidation and distribution of the two banks' assets. IBRC's principal asset as of June 2012 was a loan portfolio valued at some EUR25 billion (US$33.5 billion). About 70 percent of the loans were to Irish borrowers. Some 5 percent of the portfolio was under U.S. law, according to a court filing. Total liabilities in June 2012 were about EUR50 billion, according to a court filing. Most assets in the U.S. have been sold already. IBRC is involved in lawsuits in the U.S. IBRC was granted protection under Chapter 15 of the U.S. Bankruptcy Code in December 2013. Kieran Wallace and Eamonn Richardson of KPMG have been named the special liquidators. SLIEVE RUSSELL: Losses Decline to EUR544,000 in 2013 ---------------------------------------------------- John Mulligan at Irish Independent reports that the Slieve Russell Hotel in Cavan, once a gem in Sean Quinn's family businesses but now under the control of a receiver, slashed its losses from EUR9.2 million to EUR544,000 last year as a writedown in the value of the property wasn't repeated. Underlying operating profit at the hotel, which is operated by a receiver, rose 27% to EUR439,000 despite turnover dipping to EUR11.3 million from EUR11.9 million, Irish Independent discloses. The Slieve Russell, which is located close to what was the Quinn group headquarters, had a share receiver appointed to it in 2011 as the Quinn empire unraveled, Irish Independent recounts. The hotel is currently valued at EUR10 million, having had its value significantly reduced, Irish Independent notes. A subsidiary of the Slieve Russell business had been loaned a substantial amount of money by what was then Anglo Irish Bank, Irish Independent relays. At the end of 2013, EUR67 million was still owed to Anglo's successor, IBRC, Irish Independent states. =================== K A Z A K H S T A N =================== HALYK BANK: Fitch Assigns 'BB(EXP)' Rating to Sr. Unsecured Bond ---------------------------------------------------------------- Fitch Ratings has assigned Halyk Bank of Kazakhstan's upcoming KZT100bn senior unsecured local bond an expected Long-term rating at 'BB(EXP)'. The bank's other ratings are unaffected by the rating action. KEY RATING DRIVERS The bond is rated at the same level as Halyk's 'BB' Long-term local-currency Issuer Default Rating (IDR), as it will rank equally with the claims of other senior unsecured creditors, save the claims of retail depositors. The notes will be issued by the bank under its KZT200bn local bond program. The Series 7 issue will carry a coupon rate at 7.5%, payable semi-annually; it is expected to have a maturity 10 years. Retail depositors accounted for about 40% of Halyk's liabilities at end-3Q14 according to local accounting standards. RATING SENSITIVITIES Changes to Halyk's Long-term local currency IDR will be reflected in the bond's rating. Halyk's other ratings are: Long-term foreign and local currency IDRs: 'BB'; Outlook Stable Short-term foreign and local currency IDRs: 'B' Viability Rating: 'bb' Support Rating: '4' Support Rating Floor: 'B' Senior unsecured debt rating: 'BB' =============== P O R T U G A L =============== BES FINANCE: Moody's Comments on Outstanding Rated Debt ------------------------------------------------------- Moody's Investors Service has transferred the funding vehicle BES Finance Ltd. together with its outstanding B3 senior unsecured debt and the C(hyb) junior subordinated debt and preferred stock to Novo Banco, S.A. (B2 under review for downgrade bank deposits, BFSR E under review for upgrade/BCA ca). BES Finance Ltd.'s B3 long-term senior debt ratings remain on review for downgrade. Following the transfer, the guarantor of BES Finance Ltd's outstanding senior unsecured debt is Novo Banco, while the guarantor of its subordinated debt and preferred shares remains Banco Espirito Santo, S.A. (BES, E/ca). Ratings Rationale Moody's has taken this action as it has now been able to clarify the legal status of this debt. Specifically, BES Finance Ltd. together with its outstanding debt has been transferred to Novo Banco. This transfer was not clear to the rating agency at the time when it assigned ratings to Novo Banco, and other debt transferred from BES on August 12, 2014. Following the transfer, the guarantor of BES Finance Ltd's outstanding senior unsecured debt is Novo Banco, while the guarantor of the vehicle's subordinated debt and preferred shares is BES. On August 3, 2014, Bank of Portugal intervened and applied resolution measures to BES to preserve the stability of the Portuguese Banking system in face of the bank's imminent risk of default. Bank of Portugal transferred most of BES's assets, liabilities and off-balance-sheet items to the newly created bank Novo Banco. In addition, Novo Banco received a EUR4.9 billion capital injection from the Portuguese Resolution Fund. Depositors and senior debt holders were protected by the Portuguese authorities, because they were transferred to Novo Banco. However, shareholders and holders of junior debt instruments remained at or were guaranteed by BES. What Could Change The Rating UP/DOWN The transferred senior unsecured debt could be downgraded if Moody's were to assess a lower probability of systemic support in the case that a new government intervention is needed, and this downside risk is not fully offset by the potential improvement in Novo Banco's BFSR. Moody's could upgrade the rating of the junior debt instruments as a consequence of a recovery from the assets remaining and/or guaranteed by BES, which warrants a loss severity for these instruments below 65%. ========= S P A I N ========= FTPYME BANCAJA 3: S&P Affirms 'CCC' Rating on Class D Notes ----------------------------------------------------------- Standard & Poor's Ratings Services affirmed its credit ratings on FTPYME Bancaja 3, Fondo de Titulizacion de Activos' class B, C, and D notes. Upon publishing S&P's updated criteria for rating single- jurisdiction securitizations above the sovereign foreign currency rating (RAS criteria), S&P placed those ratings that could potentially be affected "under criteria observation". Following S&P's review of this transaction, its ratings that could potentially be affected by the criteria are no longer under criteria observation. S&P has used data from the Sept. 2014 investor report to perform its credit and cash flow analysis and have applied its European small and midsize enterprise (SME) collateralized loan obligation (CLO) criteria and its current counterparty criteria. For ratings in this transaction that are above S&P's rating on the sovereign, it has also applied its RAS criteria. CREDIT ANALYSIS FTPYME Bancaja 3 is a single-jurisdiction cash flow CLO transaction securitizing a portfolio of SME loans that was originated by Bankia S.A. in Spain. The transaction closed in Oct. 2004. S&P has applied its European SME CLO criteria to determine the scenario default rate (SDR)--the minimum level of portfolio defaults that S&P expects each tranche to be able to withstand at a specific rating level using CDO Evaluator. To determine the SDR, S&P adjusted the archetypical European SME average 'b+' credit quality to reflect two factors (country and originator and portfolio selection adjustments). "We ranked the originator into the moderate category. Taking into account Spain's Banking Industry Country Risk Assessment (BICRA) score of 6 and the originator's average annual observed default frequency, we have applied a downward adjustment of one notch to the 'b+' archetypical average credit quality. To address differences in the creditworthiness of the securitized portfolio compared with the originator's entire loan book, we further adjusted the average credit quality by three notches," S&P said. As a result of these adjustments, S&P's average credit quality assessment of the portfolio was 'ccc', which it used to generate its 'AAA' SDR of 88.99%. S&P has calculated the 'B' SDR, based primarily on its analysis of historical SME performance data and S&P's projections of the transaction's future performance. S&P has reviewed the originator's historical default data, and assessed market developments, macroeconomic factors, changes in country risk, and the way these factors are likely to affect the loan portfolio's creditworthiness. As a result of this analysis, S&P's 'B' SDR is 23%. S&P interpolated the SDRs for rating levels between 'B' and 'AAA' in accordance with S&P's European SME CLO criteria. RECOVERY RATE ANALYSIS S&P applied a weighted-average recovery rate (WARR) at each liability rating level by considering the asset type and its seniority, the country recovery grouping, and the observed historical recoveries in this transaction. COUNTRY RISK S&P's long-term rating on the Kingdom of Spain is 'BBB'. S&P's RAS criteria require the tranche to have sufficient credit enhancement to pass a minimum of a "severe" stress to qualify to be rated above the sovereign. CASH FLOW ANALYSIS S&P used the reported portfolio balance that it considered to be performing, the principal cash balance, the current weighted- average spread, and the weighted-average recovery rates that S&P considered to be appropriate. S&P subjected the capital structure to various cash flow stress scenarios, incorporating different default patterns and timings and interest rate curves, to determine the rating level, based on the available credit enhancement for each class of notes under S&P's European SME CLO criteria. Under S&P's RAS criteria, it can rate a securitization up to four notches above its foreign currency rating on the sovereign if the tranche can withstand "severe" stresses. However, if all six of the conditions in paragraph 48 of the RAS criteria are met (including credit enhancement being sufficient to pass an extreme stress), S&P can assign ratings in this transaction up to a maximum of six notches (two additional notches of uplift) above the sovereign rating. In S&P's view, the available credit enhancement for the class B notes withstands extreme stresses. S&P has therefore affirmed its 'AA (sf)' rating on the class B notes. Given that the rating levels for the class C and D notes are lower than the sovereign ratings, S&P has not applied its RAS criteria. Based on S&P's credit and cash flow analysis and the application of its current counterparty criteria, S&P considers the available credit enhancement for the class C and D notes to be commensurate with their current ratings. S&P has therefore affirmed its ratings on the class C and D notes. RATINGS LIST Class Rating FTPYME Bancaja 3, Fondo de Titulizacion de Activos EUR900 Million Floating-Rate Notes Ratings Affirmed B AA (sf) C BB (sf) D CCC (sf) MAPFRE SA: Fitch Affirms 'BB' Rating on EUR700MM 5.91% Sub. Debt ---------------------------------------------------------------- Fitch Ratings has affirmed Mapfre SA's Issuer Default Rating (IDR) at 'BBB+' and its core operating subsidiaries' Insurer Financial Strength (IFS) ratings at 'A-'. The Outlook on the ratings is Stable. Key Rating Drivers The affirmation reflects Mapfre's strong underwriting performance in 1H14 and its strong and stable level of risk-adjusted capitalization. Offsetting factors include Mapfre's exposure to the Spanish sovereign (BBB+/Stable) and other countries rated 'BBB+' and below. Spain's sovereign rating (BBB+/Stable) continues to weigh on the group's ratings. The ratio of Spanish fixed income instruments to shareholders funds remained high at end-1H14 at 124% (YE13: 115%), which leaves Mapfre substantially exposed to the Spanish economy. Mapfre's credit fundamentals are supported by its solid capital adequacy (247% at end-2013) and consolidated shareholders' funds of EUR8.5 billion at end-1H14 (YE13: EUR7.8 billion). The increase in shareholders' funds of EUR650 million since YE13 was predominantly due to falling spreads in Spain, the appreciation of the Brazilian real, the US dollar and the Turkish lira. Fitch considers Mapfre's financial leverage as low and supportive of the ratings, and expects it to remain stable in 2014. Mapfre's Fitch-calculated financial leverage declined to 21% at end-2013 from 24% at end-2012, compared with its peak of 33% at end-9M12. The ratings incorporate Fitch's expectation that Mapfre will maintain a strong and stable underwriting performance. At 1H14, Mapfre reported a combined ratio of 95.7% (1H13: 95.6%). The life business reported a result of EUR373.8 million (1H13: EUR284.3 million). The ratings also reflect Mapfre's strong franchise and access to distribution in Spain and Latin America. Mapfre remains a market leader in Spain, with a 13% market share and a strong player in Latin America with a 9.5% share. RATING SENSITIVITIES Mapfre's ratings could be downgraded if its exposure to the Spanish insurance market or sovereign debt results in investment losses with a material impact on capital. Mapfre's ratings could also be downgraded if the Spanish sovereign rating is downgraded. Factors that could trigger an upgrade include an upgrade of Spain's rating, alongside strong group capitalization (as measured by, for example, the regulatory Solvency I ratio remaining above 200%), or exposure to Spanish debt falling below 100% of group shareholders' funds (currently 115%). The rating actions are: Mapfre Familiar Mapfre Global Risks Cia De Seguros Y Reaseguos Mapfre Vida SA De Seguros Y Reaseguros Mapfre Re Compania De Reaseguros S.A -- IFS affirmed at 'A-'; Outlook Stable Mapfre SA -- Long-term IDR affirmed at 'BBB'; Outlook Stable -- EUR1 billion 5.125% senior unsecured debt due 2015 affirmed at 'BBB-' -- EUR700 million 5.91% subordinated debt due 2037 with step-up in 2017 affirmed at 'BB' =========================== U N I T E D K I N G D O M =========================== BESTWAY UK: S&P Assigns 'B+' CCR & Rates GBP725MM Sr. Debt 'BB-' ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B+' long-term corporate credit rating to Bestway UK Holdco Ltd., the parent company of U.K.-based food wholesale and cash-and-carry business of Bestway Group. The outlook is stable. At the same time, S&P assigned its 'BB-' long-term issue rating to Bestway UK's proposed senior secured debt of GBP725 million, comprising a revolving credit facility (RCF), a term loan A, and a term loan B. The recovery rating is '2', indicating S&P's expectation of "substantial" (70%-90%) recovery for senior secured creditors in the event of a default. The ratings on Bestway UK reflect S&P's view of its stand-alone credit profile (SACP) of 'bb-' incorporating its assessment of its business risk profile as "fair" and financial risk profile as "aggressive." The long-term corporate credit rating is one notch lower than Bestway UK's SACP in accordance with S&P's group rating methodology. "We assess Bestway UK's business risk profile as "fair," reflecting the group's well-established positions in both the U.K. food wholesale and pharmacy markets, the group's relatively low cyclicality of earnings in both of its main end markets; and its stable cash generation. Likewise, we consider the barriers to entry posed by the restricted issue of new pharmacy licenses in the U.K. as an important business risk strength. At the same time, our business risk assessment is tempered by what we consider to be the highly competitive nature of both the food wholesale and pharmacy markets and the group's reliance on government funding and regulatory risks in the pharmacy business. What's more, we see geographical concentration of earnings in the U.K. and execution risks related to integrating the pharmacy business into Bestway UK's group structure as another limiting factor," S&P said. "We consider the Co-operative pharmacy's operating model to be generally more efficient than the average U.K. pharmacy, due to its meaningful scale and well-established operating model. We consider this model to comprise a robust supply chain and strong wholesale procurement operations and supplier relationships, an efficient distribution system, good customer service, and an experienced management team. On the other hand, we also note that the profitable over-the-counter and health and beauty products segments contribute very low revenues, and we view this negatively when comparing the Co-operative pharmacy's business with other market-leading pharmacy chains. This also renders the pharmacy significantly reliant on U.K. health care spending and exposes it to some level of event risk arising from unexpected or unfavorable changes to the U.K. government's policies. Such adverse regulatory changes could affect the Co-operative pharmacy's market position or erode its profitability," S&P added. "In our opinion, Bestway UK's wholesale food retail business, which is based on the cash and carry model, relies on the group's ability to effectively control its fixed-cost base and maintain a focused product range. Profitability in the cash and carry business is generally low with historical EBITDA margins reaching 3.5% (on a reported basis) at most. This drives our assessment of the combined group's (the pharmacy and the wholesale business) profitability as "less than average" when compared with the wider retail sector. That said, we believe that Bestway UK's good brand recognition, retail network supported by two supervised symbol groups, and broad national coverage underpin the group's competitive position and allow it to somewhat offset the pricing and profitability pressure resulting from fierce competition in the market place. While the wholesale business is generally able to convert a relatively high share of its profits into cash, we note that it is exposed to the temporary swings in working capital caused by tobacco products purchasing. Funding requirements are generally at their highest in April, around the time of the government's budget announcement and the related rise in excise duties. Just before the budget is announced and prices increase, wholesalers stock as many tobacco products as possible," S&P added. "Our assessment of Bestway UK's financial risk profile as "aggressive" is based on the proposed capital structure after the pharmacy business buyout. We estimate that Bestway UK will post a Standard & Poor's-adjusted debt-to-EBITDA ratio of about 4x- 4.5x in financial 2015 ending June 30, 2015. This ratio includes the proposed GBP650 million first-lien term loans, about GBP50 million of capitalized operating leases, and about GBP5 million of unfunded pension liabilities. From the debt figure, we net our estimate of surplus cash of about GBP55 million after applying a standard 25% haircut. Our estimate of Bestway UK's adjusted EBITDA for 2015 is about GBP150 million-GBP155 million, giving effect to our operating lease adjustment. We treat the GBP183 million shareholder loan provided by the ultimate parent of Bestway UK to Bestway UK's subsidiaries as equity, according to our criteria," S&P noted. S&P anticipates Bestway UK to steadily post modest growth over the medium term, thanks to some growth in the pharmacy segment underpinned by acquisitions, relocations, and managed care uplifts against the backdrop of stable performance in the food retail segment. Earnings should also be supported by Bestway UK's continuous cost-reduction efforts, implemented in order to withstand pricing pressures that flow from Bestway UK's customers, inherent in the nature of its wholesale cash and carry operations. S&P's base case assumes: -- Continuing U.K. GDP growth owing to strong consumer demand. S&P's U.K. GDP forecast is 2.9% for 2014 and 2.5% for 2015, with the unemployment rate improving to 6.7% in 2014 and 6.4% in 2015. -- The U.K. food wholesale market continuing to grow consistently in the low-to-mid-single-digits as evidenced in recent years. Accordingly, S&P forecasts growth of about 2% in the medium term primarily driven by the delivered grocery segment, which has a modest but growing share of online business. -- Low-single-digit sales growth on a combined basis, with no openings or acquisitions of new wholesale depots in the forecast period and small add-on acquisitions in the pharmacy segment. -- Overall, EBITDA margins to remain largely flat with a slight reduction in gross margins on the back of competitive pressure offset by a reduction in fixed costs and some synergies between the two segments. -- Low synergies and integration costs due to the varying nature of the two U.K. businesses. S&P expects an orderly pharmacy divestment process from the Co-operative Group and no major integration issues. -- No dividend inflow from the overseas subsidiaries of Bestway Group. However, historically, Bestway Group used part of such dividend inflow to pay down debt at the U.K subsidiaries. Should Bestway UK benefit from its parent using the same approach in the future, there could be potential for greater deleveraging. Based on these assumptions, S&P arrives at these credit measures: -- Adjusted debt to EBITDA of about 4.5x in June 2015, declining to about 4.0x by June 2016, mostly on the back of debt reduction due to mandatory amortization and a cash flow sweep. -- Adjusted FFO to debt of 15%-20% over the forecast period. -- On average over the forecast period, both of the above core credit ratios will remain in the "aggressive" financial risk profile category. -- Reported free operating cash flow (FOCF) of about GBP15 million-GBP20 million in financial 2015, rising to about GBP30 million by 2017 as one-off integration spending is phased out. "We view Bestway UK as a "core" subsidiary of the wider Bestway Group incorporating, in addition to the Bestway UK business, majority ownership in Pakistan-based United Bank Limited (UBL) and Bestway Cement Limited (BCL). We assess the group credit profile (GCP) at 'b+' supported by Bestway UK's 'bb-' SACP, and restricted by the country risk and sovereign rating of Pakistan at 'B-/Stable/B'. We believe that Bestway UK plays an integral part in Bestway Group's strategy of growing its U.K. presence and expansion in the markets adjacent to the wholesale operations that Bestway Holding had originally developed. We base our view of Bestway UK's core status in the Bestway Group on its legacy status within the group, including the shared name of Bestway UK Holdco and Bestway Holdings, underpinned by Bestway's brand recognition in the U.K. wholesale market. Furthermore, the financing structure in the GBP725 million senior facilities agreement restricts dividend leakage from the U.K. operations to overseas subsidiaries. Finally, we view positively management's track record over the past four years of using a significant part of dividends received from overseas subsidiaries, averaging GBP30 million per year, to reduce debt at the U.K. subsidiaries," S&P said. The stable outlook reflects S&P's view that Bestway UK's good market positions in both of its end markets should allow it to post modest revenue growth amid soft market conditions, and maintain an adjusted debt-to-EBITDA ratio of comfortably lower than 5x. This assumes an orderly pharmacy divestment process from the Co-operative Group and no major integration issues that could cause a higher one-off spend than S&P anticipates in its base-case scenario. Likewise, S&P anticipates that Bestway UK will be able to generate positive reported FOCF and utilize surplus cash mostly for debt reduction, in line with the debt documentation requirements. There is a risk that due to the tightening of financial covenants already in financial 2016, as stipulated in the debt documentation, headroom under the covenant level could fall below the 15% that is required for S&P to assess liquidity as "adequate". S&P could lower the ratings if it revises downward its GCP assessment on Bestway UK. This could occur if the company's operating performance deteriorates to such an extent that S&P expects its adjusted EBITDA to fall significantly below the GBP135 million-GBP145 million S&P estimates in its base case, thereby impairing the performance of the whole Bestway Group. This could occur if Bestway UK fails to offset flat trading in its wholesale business with growth initiatives in the pharmacy segment, faces unexpected issues in integrating the pharmacy acquisition, and/or if the group faces unfavorable regulatory changes. S&P could also lower the ratings if we see increased risks within other parts of Bestway Group, particularly its banking operations. This could happen if, for instance, S&P was to take a negative rating action in respect of the sovereign ating on Pakistan. In that scenario, S&P would examine the impact of abovementioned factors on Bestway UK's SACP, as well as the GCP. Likewise, S&P could lower its rating if it anticipates the company's headroom under its financial covenants to decline and lead to an increased liquidity risk in the medium term. S&P does not expect to raise the rating on Bestway UK any time soon. One-off spending related to the pharmacy acquisition and integration that could take some time dampen the possibility of an upgrade. Nevertheless, S&P would consider raising the rating if it was to raise the GCP. This could happen if Bestway UK improves its EBITDA and free cash flow generation causing Standard & Poor's-adjusted debt to EBITDA to sustainably improve to less than 4x, as a result of the sustained improvement in trading, the rise in profitability, and better working capital management. A positive rating action would be contingent on a Bestway GCP upgrade. This would be underpinned by an improved financial risk profile of U.K. operations and sustained stable credit quality for the rest of the group. Any positive rating action would be conditional upon the company maintaining a liquidity position of at least "adequate," according to S&P's definition. CONNAUGHT: Former Workers Lose Four-Year Bid for Compensation ------------------------------------------------------------- Aaron Morby at Construction Enquirer reports that more than a hundred Norwich workers who lost their jobs when housing repairs contractor Connaught collapsed have failed in a bid to win compensation. Up to 124 former Connaught workers were hoping to secure a legal ruling that would have paved the way to seek compensation from contractors that took over the housing repair work, according to Construction Enquirer. Construction union UCATT had taken an employment tribunal on behalf of the workers arguing that when Connaught went into administration in September 2010 their contracts transferred to other companies and their staff should have been TUPE transferred with the new contracts, the report notes. If UCATT had been successful, the workers could have claimed for unfair dismissal and other rights against the contractors, the report relates. The report disclosed that the Employment Tribunal ruled that no TUPE transfer took place. UCATT is now exploring a claim on behalf of the workers for a protective award as Connaught failed to inform and consult the workforce before making them redundant, the report relays. If this claim is successful, the workers will be paid by the Government's Insolvency Service for eight weeks pay at the statutory maximum amount, the report notes. The report adds that Brian Rye, Regional Secretary for UCATT's Eastern Region, said: "The ex-Connaught workers are bitterly disappointed with the decision by the employment tribunal. Despite this setback, UCATT is absolutely committed to fighting for justice for the workers and we will be using every legal avenue left open to us." ER HEMMINGS: In Administration; 37 Jobs at Risk ----------------------------------------------- The Bristol Post reports that future of 37 workers at ER Hemmings (Building) Limited and ERH Construction are in doubt after the administrators were called in. The two companies have been placed under the control of administrators Grant Thornton, The Bristol Post relates. Both companies are subsidiaries of construction and communications group ERH, founded by Ernie Hemmings more than 40 years ago, The Bristol Post discloses. Parent company ERH (Holdings) and its subsidiary ERH Communications have now been taken over by Centregreat Limited, a Welsh engineering and facilities management business, The Bristol Post relays. "The building and construction industry has suffered considerably over the past few years and it is disappointing that, despite the efforts of the companies' management teams, another employer has been unable to survive in this difficult economic climate," The Bristol Post quotes administrator Nigel Morrison -- nigel.morrison@uk.gt.com -- of Grant Thornton, as saying. Mr. Morrison said people affected by the administration and takeover would be receiving a letter in the next few days, The Bristol Post notes. The two subsidiaries had "both incurred losses over the past few years", the administrator, as cited by The Bristol Post, said leading to financial restructuring and the end of trading. ER Hemmings (Building) Limited and ERH Construction are based in based in Yate. GEMGARTO 2012-1: S&P Raises Rating on B2 Notes to BBB- from BB -------------------------------------------------------------- Standard & Poor's Ratings Services raised its credit ratings on Gemgarto 2012-1 PLC's class M1, M2, B1, and B2 notes. At the same time, S&P has affirmed its 'AAA(sf)' rating on the class A1 notes. The rating actions follow S&P's credit and cash flow analysis based on the Aug. 2014 investor report. S&P's analysis reflects the application of S&P's U.K. residential mortgage-backed securities (RMBS) criteria. The collateral pool comprises first-lien U.K. residential (74.4%) and buy-to-let (25.6%) mortgage loans originated in or after 2010. The proportion of interest-only loans has slightly increased to 31.44% from 30.80% at closing. There are no self-certified loans in the pool and the weighted- average indexed current loan-to-value (LTV) ratio has decreased to 68.43% from 74.35% at closing. The transaction has performed better than S&P's expectations at closing. While arrears have increased in recent periods, 90+ days arrears at 0.41% remain well below that of S&P's U.K. RMBS index. The transaction has not experienced any losses. The cash reserve, which was partially funded at closing, has steadily increased to GBP9.12 million from GBP6 million as of the August 2014 interest payment date. The reserve's target level is GBP12 million. The pool factor (the outstanding collateral balance as a proportion of the original collateral balance) is currently 51.24%. The available credit enhancement for each class of notes has increased significantly due to the deleveraging and the increase in the cash reserve amount. S&P lists its weighted-average foreclosure frequency (WAFF) and weighted-average loss severity (WALS) assumptions at each rating level: WAFF (%) WALS (%) Expected credit loss (%) AAA 32.55 35.29 11.49 AA 22.84 28.28 6.46 A 17.07 16.87 2.88 BBB 11.92 10.57 1.25 BB 6.85 6.50 0.45 B 5.20 3.61 0.19 S&P's WAFF and WALS assumptions have decreased since closing. In particular, S&P's WAFF assumptions decreased due to the low level of delinquencies compared with the rating agency's expectations at closing, coupled with the increased seasoning. S&P's WALS assumptions decreased as a result of increasing house prices, which have led to a decrease in S&P's weighted-average indexed current LTV ratio. Overall, S&P's expected credit loss at each rating level has decreased. Based on this and the aforementioned increase in available credit enhancement, and following S&P's credit and cash flow analysis, it has raised its ratings on the class M1, M2, B1, and B2 notes. S&P's analysis indicates that the available credit enhancement for the class A1 notes is commensurate with the currently assigned rating. S&P has therefore affirmed its 'AAA (sf)' rating on the class A1 notes. Gemgarto 2012-1 is the first transaction to securitize collateral originated under Kensington Mortgage Company Ltd.'s revised underwriting framework. The collateral pool consists of U.K. residential and buy-to-let mortgage loans originated in or after 2010. RATINGS LIST Class Rating Rating To From Gemgarto 2012-1 PLC GBP246.5 Million Mortgage-Backed Floating-Rate Notes Ratings Raised M1 AA+ (sf) A+ (sf) M2 AA (sf) A (sf) B1 A- (sf) BBB (sf) B2 BBB- (sf) BB (sf) Rating Affirmed A1 AAA (sf) INFINIS ENERGY: Moody's Assigns 'Ba3' Corporate Family Rating ------------------------------------------------------------- Moody's Investors Service has assigned a Ba3 corporate family rating (CFR) and Ba2-PD probability of default rating (PDR) to Infinis Energy Plc. Concurrently, Moody's has withdrawn the Ba3 CFR and Ba2-PD PDR of Infinis Holdings. Finally, Moody's has affirmed the Ba3 senior unsecured rating of the notes due 2019 issued by Infinis Plc. The outlook on all ratings is stable. The rating actions follow the Initial Public Offering (IPO) in November 2013 of the group, for which Infinis Energy Plc was created specifically as a new holding company in order to issue shares and in particular, the decision to no longer publish future consolidated financial statements for the Infinis Holdings group. The results of the Infinis Holdings group are now included within the Infinis Energy Plc financial statements. Ratings Rationale The assignment to Infinis Energy Plc of a CFR at the same level as that previously maintained in relation to Infinis Holdings and the affirmation of the Ba3 rating of the senior notes issued by Infinis Plc reflect Moody's opinion that the reorganization and IPO were credit neutral for both the group in general and Infinis Plc bondholders in particular. The Ba3 CFR reflects, as positives: (1) the group's market position as a leading renewable electricity generator in the UK; (2) the stable and transparent renewable energy subsidy mechanisms, controlled by the UK Government, under which all of the group's assets operate; (3) Infinis' low marginal cost generating fleet, which provides consistent load factors. However, the rating is constrained by (1) the group's small scale, relative to peers rated using Moody's Unregulated Utilities and Unregulated Power Companies methodology; (2) the reliance on landfill gas generation from its 121 sites, albeit gradually diminishing as a result of the onshore wind investment program; (3) the material level of planned debt-funded capital expenditure, which will mean that the level of leverage is likely to remain high in the medium term (between 4.5x and 5x debt to EBITDA on a gross basis; 4-4.5x EBITDA on a net basis); (4) the post-IPO financial policy, which prioritizes dividends and investment over de-leveraging and hence could reduce financial flexibility, particularly if power prices declined significantly from current levels. The Ba3 rating of the senior notes takes into account the group Loss Given Default assessment of 65%, which reflects the fact that, other than the ringfenced project financed wind business, the group's capital structure primarily consists of the notes. The LGD assessment is in line with Moody's approach for all-bond transactions. According to this approach the LGD assessment for the notes remains LGD4. Rating Outlook The stable rating outlook reflects that the group's capital structure is relatively resilient to downside sensitivities. What Could Change the Rating UP/DOWN Given the current high level of leverage, the material investment program and dividend growth plan, which will delay deleveraging, Moody's considers that upward pressure on the ratings is unlikely to arise in the short term. Conversely, downward rating pressure could arise in the event (1) a material deterioration in the technical availability of the generation portfolio or the landfill gas yield; (2) a decline in wholesale power prices to GBP40-45, which would result in gross debt to EBITDA above 5x; (3) a material step-up in the planned level of dividends over and above the current policy of real annual growth; (4) a currently unforeseen change to the renewable energy subsidy regime in the UK, which has a material adverse impact on the value of the subsidies received. Principal Methodologies The methodologies used in these ratings were Unregulated Utilities and Unregulated Power Companies published in October 2014, and Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. L M ENGINEERING: In Administration, Cuts 21 Jobs ------------------------------------------------ Construction Enquirer reports that Wrexham specialist steelwork contractor L M Engineering Services has fallen into administration with the loss of 21 jobs. The firm specialized in stainless steel structures for the nuclear and process industries as well as smaller scale steel bridges, according to Construction Enquirer. The report notes that LMES worked for several major contractors, including Laing O'Rourke where its delivered over 3 km of stainless steel balustrades for the Cheesegrater tower at 122 Leadenhall, London. It ranked as one of the UK's largest stainless steel fabricators with over 60,000 sq ft of dedicated stainless factory space approved to UK nuclear production standards, the report adds. OSPREY ACQUISITIONS: Fitch Affirms 'BB' Issuer Default Rating ------------------------------------------------------------- Fitch Ratings has affirmed Osprey Acquisitions Limited's (Osprey) Long-term Issuer Default Rating (IDR) at 'BB' and senior secured rating at 'BB+'. The Outlook on the Long-term IDR is Stable. Fitch has also affirmed the bond issued by Anglian Water (Osprey) Financing Plc (AWOF) at 'BB+' senior secured. The bond is guaranteed by Osprey, and is rated in line with Osprey's 'BB+' senior secured rating. Osprey is a holding company of Anglian Water Services Limited (Anglian Water or OpCo; A/BBB+/Negative), one of the 10 appointed regulated water and sewerage companies (WaSC) in England and Wales. The affirmation reflects Fitch's expectation of a modest reduction in gearing to around 85% by 2020, lower subordination of the holding company debt due to de-leveraging of the Opco and dividend cover in line with current rating guidelines of above 2.5x, offset by increasing business risk in the UK water sector. The rating also reflects the market leading operational and regulatory performance of Anglian Water, the main operating subsidiary of the group, as well as the structurally and contractually subordinated nature of the holding company financing at the Osprey level. AWOF is the financing vehicle for Osprey, which is a holding company for businesses focused on the water sector, including ownership of Anglian Water -- a water and wastewater business that is regulated by Ofwat. KEY RATING DRIVERS Adequate Dividend Cover and Reduced Subordination at Holdco For the year ending March 31, 2014, (FY14), Fitch calculates Osprey's pension-adjusted net debt/regulatory asset value (RAV) at 90.2%, dividend cover at 4.5x and post-maintenance and post- tax interest cover (PMICR) at around 1.3x. Fitch forecasts that Osprey should be able to maintain credit metrics in line with ratio guidelines, i.e. dividend cover above 2.5x and PMICR at around 1.1x. The agency forecasts gearing to reduce to around 85% by March 2020. Fitch also notes that subordination at Osprey is reducing as a result of the operating company deleveraging over April 2015 to March 2020 (AMP6). Increasing Business Risk in Water Sector Fitch believes that business risk in the water sector will increase for AMP6. Fitch expects business risk for the water sector will be more closely aligned with that of the UK gas distribution sector. In addition to a significant reduction in the cost of capital to an all-time low of 3.85%, total expenditure will be benchmarked at the top quartile, representing a more demanding target for capital expenditure. Ofwat is pursuing progressive targets for the retail price controls, eliminating protection from RPI and implementing catch-up efficiency targets using an average cost to serve, which Fitch believes does not fully reflect each company's operating cost base. Robust Performance vs. Regulatory Targets Anglian Water is one of the top quartile performers in the industry. Over the first four years of the price control, the company improved its regulatory performance and positioned itself well to face the challenges that the new price control may bring in April 2015. For FY14, Anglian Water reported stable asset serviceability in all four areas for its networks, including wastewater infrastructure, which was assessed as marginal in FY13. In addition, Anglian Water continues to be an industry leader in terms of leakage as a result of the implementation of a proactive leakage control and reactive repair work program. The company also ranked joint top amongst water and wastewater companies for the service incentive mechanism, a measure that captures the quantitative and qualitative performance of customer service. RATING SENSITIVITIES Positive: Future developments that could lead to positive rating actions include: -- Given the regulator's proposals related to the price review 2014, upgrades in the sector are unlikely. Negative: Future developments that could lead to negative rating action include: -- A sustainable drop of dividend cover below 2.5x. Similarly, an increase in group gearing above 90% or drop of PMICR below 1.1x would attract additional analysis from Fitch. -- A marked deterioration in operating and regulatory performance of Anglian Water or adverse changes to the regulatory framework in the UK water sector. Once the final determinations are published and have been evaluated, we could revise rating guidelines for the sector. LIQUIDITY & DEBT STRUCTURE Adequate Back-Up Liquidity As of March 31, 2014, Osprey held GBP11.9 million in cash and AWOF had available GBP25 million of undrawn, committed bank facilities with a maturity in Nov. 2015. This is sufficient to bridge short-term liquidity needs. For debt service, Osprey and AWOF effectively rely on upstream cash flows from their operating subsidiaries, primarily Anglian Water. SERCO GROUP: Faces Two More Difficult Years, CEO Says ----------------------------------------------------- Perry Gourley at The Scotsman reports that Rupert Soames, the Serco chief executive who left Glasgow-based Aggreko to head up the scandal-hit outsourcing firm, on Nov. 9 admitted the company faces two more difficult years. Shares in the firm -- which recently won a 15-year contract to run the Caledonian sleeper train service between Scotland and London -- plunged by almost a third after it slashed its profits guidance for this year and next and wrote down the value of the business by GBP1.5 billion, The Scotsman relates. Mr. Soames highlighted the impact of several contracts where Serco is making large losses and reiterated that he wants to re-focus the company as being a provider of services to governments in areas such as justice and immigration, defense and transport, while looking to sell the majority of its business outsourcing operations, The Scotsman discloses. Among the operations being put up for sale is the group's Great Southern Rail business in Australia, The Scotsman notes. The turnaround plan will be financed by a GBP550 million cash call to investors early next year, on top of the GBP165 million raised in a share placing this summer, The Scotsman says. Mr. Soames warned that Serco will have "to get smaller and more focused" to get back on track, The Scotsman states. Confronted by slowing growth rates and increased competition in core markets, Mr. Soames, as cited by The Scotsman, said Serco had concentrated too much on winning new business and lost focus by diversifying into areas that required different skills. "This transformation will take time, but will be worthwhile," The Scotsman quotes Mr. Soames as saying. "The next two years are going to be difficult, and we expect our revenue to reduce over this period through disposals and exiting loss-making contracts, following which we expect to be able to start growing again." As reported by the Troubled Company Reporter-Europe on Nov. 11, 2014, The Financial Times related that Serco lowered its forecast for adjusted operating profit this year by GBP20 million to GBP130 million-GBP140 million and lowered its outlook for 2015, the FT discloses. That will push the company into a breach of its debt-to-profit covenant on a private placement loan, so it plans to hold talks with its lenders to amend the conditions, the FT said. Serco Group plc is a British outsourcing company based in Hook, Hampshire. It operates public and private transport and traffic control, aviation, military and nuclear weapons, detention centers, prisons and schools on behalf of the UK government. SYNCRO: Robert Maxwell's Sons Escape Bankruptcy ----------------------------------------------- The Telegraph reports that two sons of the disgraced media boss Robert Maxwell have escaped bankruptcy over a joint loan debt. Kevin Maxwell, 55, and Ian Maxwell, 58, both faced bankruptcy petitions at the High Court in London over an unspecified sum, but the petitions were dismissed, according to The Telegraph. Wendy Parker, representing DCF (UK) Ltd, a loan company based in Bexhill on Sea in Sussex, told the court the parties had "agreed terms," the report notes. The report relates that neither brother was in court for the brief hearing, which came after Mr. Maxwell was banned from running a company for eight years in 2011 following an investigation by the Insolvency Service. The investigation found that he and two other directors had diverted more than GBP2 million out of Syncro, a Manchester-based construction company he ran, shortly before it went into administration, the report says. Mr. Maxwell had previously been made Britain's biggest bankrupt in 1992, with debts of more than GBP400 million. A year earlier, his father was found drowned at the age of 68 after apparently falling from his yacht off the Tenerife coast, the report notes. The two brothers, who had both sat on the board of Maxwell Communications Corporation, were investigated after his death over an alleged conspiracy to defraud the company's pension fund but both were cleared of fraud in 1996, the report adds. TENZA TECHNOLOGIES: In Administration; Potential Buyers Sought -------------------------------------------------------------- Hanna Sharpe at Business Sale Report reports that Tenza Technologies has been placed into administration with a 90% job cull. Only about eight staff remain at the business, which makes self- adhesive and speciality packaging from its base in Saxmundham, Suffolk. Jason Godefroy -- jason.godefroy@duffandphelps.com -- and John Whitfield -- john.whitfield@duffandphelps.com -- the appointed administrators at Duff & Phelps, are understood to be in discussion with some potential buyers for the business, which is still trading but not at full capacity. Tenza Technologies is a Suffolk packaging firm. The company makes standing heat resistant food pouches, tenzalopes -- documents enclosed envelopes made with oxo-biodegradable film, and bespoke PVC items among other products. TITAN EUROPE 2007-1: Fitch Cuts Ratings on 4 Note Classes to 'C' ---------------------------------------------------------------- Fitch Ratings has downgraded Titan Europe 2007-1 (NHP) Limited's class B, C, D and E notes to 'C' from 'CC'. KEY RATING DRIVERS The 'C' rating on the junior class B, C, D and E notes indicates that a default appears imminent or inevitable. On Nov.3, 2014, it was publicly announced that Formation Capital (a large US fund focused on seniors housing and care, post-acute and health care real estate investments) in partnership with Safanad (a global principal investment firm) and Court Cavendish, the healthcare turnaround specialist and current management team at HC-One, the operator of the securitized care homes, have signed a binding commitment to acquire NHP, the borrower in the transaction. However, the proceeds would be insufficient to pay back the class B, C, D and E notes. The special servicer, Capita, has informed noteholders that the binding sale and purchase agreement (SPA) has effectively been executed in respect of the sale of all of the subsidiaries of the borrower (which includes HC-One Limited), through the sale of all of the shares of NHP Holdco 1 Limited. The special servicer received the consent of the issuer as controlling party, as directed by the note trustee pursuant to a resolution passed by the class A noteholders (as required in the servicing agreement). The total consideration under the SPA for the disposal is around GBP477.7 million, which is 10% lower than Jones Lang LaSalle's last valuation in Dec. 2013 (albeit based on a marginally higher number of properties). The resulting net proceeds available to the issuer's collection account (ICA) are expected to be around GBP457.6 million. However, this amount may change as it is subject to a variety of assumptions and estimates provided by third parties (as indicated by Capita). This net amount will not allow the class B, C, D and E notes to even be partially repaid as no proceeds are left after the more senior ranking liabilities, namely around GBP14.9 million of servicing advances, around GBP98.5 million of swap mark-to- market, GBP133 mi of swap deferrals and GBP408 million of class A notes. Fitch estimates that the implied loan-to-value ratios (with the additional inclusion of over GBP9.5 million of the junior notes' deferred interests) are around 153% for the class B notes, 162% for the class C notes, 175% for the class D notes and 189% for the class E notes. The regulatory information services (RIS) notification published on Nov. 3, 2014, indicated that the completion of the disposal under the SPA is scheduled to occur on Nov. 12, 2014. However, the structure may not unwind until the next interest payment date (IPD) in Jan. 2015. Delays may occur in case of disputes with regard to the allocation of funds at issuer level, notably, as Fitch currently understands, between the swap providers and the class A noteholders. Ultimately, the net proceeds of the disposal will remain in the ICA until disbursement by the cash manager. RATING SENSITIVITIES Fitch expects to downgrade the class B, C, D and E notes to 'D' and subsequently withdraw the ratings when the structure effectively unwinds, which may occur at the next IPD in Jan. 2015. SUMMARY OF CREDIT Titan Europe 2007-1 (NHP) is a securitization of 275 nursing homes owned by NHP, which are let on long leases to third-party operators active in the UK healthcare sector (in particular HC- One, a subsidiary of the borrower group, which accounts for around 85% of the estate). The rating actions are: GBP42.15 million class B secured floating-rate notes due 2017: downgraded to 'C' from 'CC' GBP42 million class C secured floating-rate notes due 2017: downgraded to 'C' from 'CC' GBP58 million class D secured floating-rate notes due 2017: downgraded to 'C' from 'CC' GBP60 million class E secured floating-rate notes due 2017: downgraded to 'C' from 'CC' ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than US$3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/booksto order any title today. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Europe is a daily newsletter co- published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA. Valerie U. Pascual, Marites O. Claro, Rousel Elaine T. Fernandez, Joy A. Agravante, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2014. All rights reserved. ISSN 1529-2754. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Europe subscription rate is US$775 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter Chapman at 215-945-7000 or Nina Novak at 202-362-8552. * * * End of Transmission * * *