/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/150212.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, February 12, 2015, Vol. 16, No. 31 Headlines A U S T R I A OESTERREICHISCHE: Fitch Cuts LT Issuer Default Rating to 'B' F R A N C E LES EDITIONS JALOU: Placed Into Receivership G R E E C E ALPHA BANK: S&P Retains 'CCC+' Rating on CreditWatch Negative ATHENS: Moody's Puts 'Caa1' Issuer Rating for Downgrade EUROBANK ERGASIAS: Moody's Reviews B3 Bond Rating for Downgrade HELLENIC TELECOMMUNICATIONS: Moody's Puts Ba3 CFR for Downgrade NATIONAL BANK: Fitch Puts 'B-' IDR on CreditWatch Negative PIRAEUS BANK: Moody's Lowers Long-Term Deposit Rating to 'Caa2' PUBLIC POWER: S&P Lowers Rating to 'B-' on Liquidity Constraints I R E L A N D RMF EURO III: Moody's Raises Rating on EUR10.5MM Notes to Ba1 N E T H E R L A N D S FAXTOR ABS 2003-1: Moody's Affirms Caa3 Rating on 2 Note Classes PIGMENTS II: Moody's Assigns 'B1' Corporate Family Rating RENOIR CDO: Moody's Raises Rating on Class C Notes to 'B3' R U S S I A MORTGAGE AGENT 3: S&P Lowers Rating on Class A Notes to BB+ MORTGAGE AGENT 2011-2: S&P Lowers Rating on Class A2 Notes to BB+ S P A I N ABENGOA SA: S&P Affirms 'B/B' CCR; Outlook Remains Positive AYT GOYA HIPOTECARIO: Moody's Hikes Class B Notes Rating to Ba1 U N I T E D K I N G D O M B. ENDEAVOUR SHIPPING: Recognition Hearing Set for March 5 CATERHAM F1: Asset Auction Scheduled for March CITY LINK: Dartford MP Welcomes Jobs Boost for Former Workers DYFED CLEANING: Enters Administration, Seeks Buyer DYTECNA LTD: In Administration, Seeks Buyer EUROSAIL-UK PLC: Moody's Raises Rating on EUR36MM Certs. to Caa2 HERO ACQUISITIONS: Moody's Raises CFR to 'B1' Following IPO INDUS PLC: Moody's Affirms B1 Rating on GBP0.1MM Cl. X Notes JAKEM LTD: In Liquidation, Sells Kingsbarn Equestrian Center MARUSSIA F1: Denies ManorGP's Request MAX PETROLEUM: Could Become Insolvent Without Restructuring MEIF RENEWABLE: Fitch Assigns 'BB' Rating to GBP190MM Sr. Notes T BADEN: In Administration, Cuts 180 Jobs TOWERGATE FINANCE: Restructuring Deal No Impact on Fitch's C IDR USC: Mike Ashley Faces Legal Action After Staff Were Given Notice ********* ============= A U S T R I A ============= OESTERREICHISCHE: Fitch Cuts LT Issuer Default Rating to 'B' ------------------------------------------------------------ Fitch Ratings has downgraded Oesterreichische Volksbanken- Aktiengesellschaft's (OeVAG) Long-term Issuer Default Rating (IDR) to 'B' from 'BBB-' and Short-term IDR to 'B' from 'F3', and maintained the IDRs on Rating Watch Negative (RWN). Fitch downgraded OeVAG's Long-term IDR to 'BBB-' in October 2014 following the decision of OeVAG's board to spin off the bank's non-core business from Volksbanken-Verbund (VB-Verbund; A/Negative/bb-/RWP). At this time, there was limited information on OeVAG's future set-up. The bank's Long-term IDR remained within investment grade to reflect the possibility of further state support being available following the spin-off. The downgrade to 'B'/RWN reflects Fitch's expectation that state support for OeVAG can no longer be relied upon, in light of subsequent information regarding the structure of the planned spin-off. It also reflects the implementation of the EU's Bank Recovery and Resolution Directive and its bail-in provisions into Austrian national law on January 1, 2015, which significantly increase the risk that OeVAG's creditors may be subject to some form of bail-in if further state support was required as long as OeVAG has its banking licence. According to the spin-off plan, OeVAG will leave VB-Verbund's mutual support scheme and return its bank licence during 2015 and focus exclusively on the orderly wind-down of its non-core assets as a partly-regulated wind-down institution, without any additional state support. The downgrade reflects Fitch's assessment that state support can no longer be relied on for OeVAG, meaning that its IDRs are now driven by Fitch's view of the likelihood of institutional support from VB-Verbund. However, the latter's ability to support is constrained, as expressed by its Viability Rating of 'bb-'/RWP. OeVAG's remaining core assets and central clearing and support functions for VB-Verbund's members will be transferred to one of VB-Verbund's primary banks (most likely the largest of the group, Volksbank Wien-Baden AG; A/Negative). OeVAG intends to implement most of these transformations by end-1H15. KEY RATING DRIVERS - IDRS, NATIONAL RATINGS AND SENIOR DEBT OeVAG's Long-term IDR is now linked to VB-Verbund's Viability Rating of 'bb-'/RWP. Fitch do not notch from VB-Verbund's Long- term IDR as this is driven by state support and we do not believe that the state will provide further support to OeVAG, either directly or indirectly via VB-Verbund. Fitch believes that VB- Verbund will still be incentivised to support OeVAG if needed, while OeVAG remains a part of the co-operative group and its mutual support mechanism. The RWN on OeVAG's Long-term IDR reflects our expectation that VB-Verbund will no longer provide support to OeVAG once it is spun off, and that any contingent liabilities following the spin- off will be negligible. The two-notch difference between VB-Verbund's VR and OeVAG's Long-term IDR reflects the large size of OeVAG relative to VB- Verbund group as a whole. The RWP on VB-Verbund's VR is driven by our expectation of the benefits of OeVAG's planned spin-off on VB-Verbund's standalone profile and consequently does not apply to OeVAG's Long-term IDR. The 'B' support-driven Long-term IDR is consistent with a Support Rating of '4'. The revision of OeVAG's Support Rating Floor to 'No Floor', and its subsequent withdrawal, reflects our view that state support can no longer be relied upon. VB-Verbund's ratings are unaffected by these rating actions. Fitch does not typically assign VRs to banks in orderly wind down, such as OeVAG, because in our view they have no viable standalone business model, and could not operate without receiving or being expected to receive external support. RATING SENSITIVITIES - IDRS, NATIONAL RATINGS AND SENIOR DEBT Fitch has maintained the RWN on OeVAG's IDRs to reflect its expectation that support for OeVAG will be unlikely once it leaves the mutual support mechanism. Fitch therefore expects to resolve the RWN on OeVAG's ratings when the bank executes its planned exit from VB-Verbund's mutual support scheme, expected in 1H15. However, the resolution of the RWN could extend beyond the typical six-month horizon, as technical, legal and regulatory aspects may delay the process beyond the expected timeline. In resolving the RWN, Fitch will in particular assess OeVAG's new ownership structure, asset wind-down profile and performance implications, and funding structure, as well as any residual explicit or implicit state or institutional (VB-Verbund) support, which Fitch considers will be unlikely. Assuming that no external support can be relied upon, Fitch will likely assess OeVAG as a non-bank financial institution. In this case a multi- notch downgrade could be possible, reflected in the RWN on OeVAG's Short-term IDR. OeVAG's senior debt ratings are aligned with its Long-term IDR. Fitch has placed these instruments on Rating Watch Evolving (RWE) to reflect the uncertainty as to whether they will be allocated to VB-Verbund's future central institution, in which case their ratings would be upgraded to the level of VB-Verbund's IDRs, or if they will be spun off with OeVAG, in which case a further downgrade of the debt ratings in line with OeVAG's Long-term IDR would be likely. Fitch will resolve the RWE when this allocation has been formally decided, which it expects to occur at the time of OeVAG's spin-off at the latest. The rating actions are: Long-term IDR: downgraded to 'B' from 'BBB-' and maintained on RWN Short-term IDR: downgraded to 'B' from 'F3' and maintained on RWN Support Rating: downgraded to '4' from '2' and maintained on RWN Support Rating Floor: revised to 'No Floor' from 'BBB-' and withdrawn Senior unsecured notes: downgraded to 'B'/'B' from 'BBB-'/'F3' and revised to RWE Market linked securities: downgraded to 'B emr' from 'BBB- emr' and revised to RWE =========== F R A N C E =========== LES EDITIONS JALOU: Placed Into Receivership -------------------------------------------- wwd.com reports that Les Editions Jalou, publisher of L'Officiel, has been placed into receivership following a court decision ordering it to pay EUR4.2 million, or US$5.1 million at current exchange, to its former Russian licensee following the early termination of their contract. "Editions Jalou challenges the validity of its former Russian licensee's claims and has decided to lodge an appeal. Consequently, and as a precaution, the management of the company has chosen to go into technical receivership pending the decision," Jalou Media Group said, according to wwd.com. The report notes that Edouard de Lamaze, lawyer for Jalou Media Group, said it would seek to get the Paris Court of Appeal to reverse the decision. The group alleges the Russian licensee failed to respect the conditions of their agreement, prompting it to terminate the license a year early, the report relates. Benjamin Eymere, Editions Jalou's managing director, noted the family-owned group has entered 10 new markets in the last two years, increasing its revenues to EUR33 million euros, or US$43.8 million, in 2014 from EUR24 million, or US$30.9 million, in 2012, the report discloses. All dollar rates are calculated at average exchange for the period concerned. "We have more than 600 advertising clients in the luxury sector and we print 24 million copies per year under the L'Officiel banner for 70 million readers. We are taking all necessary measures to ensure that normal business activity and our development projects continue unchanged," the report quoted Mr. Eymere as saying. The family-owned group also comprises magazines including Jalouse, L'Optimum, L'Officiel Hommes, L'Officiel Art and La Revue des Montres. =========== G R E E C E =========== ALPHA BANK: S&P Retains 'CCC+' Rating on CreditWatch Negative ------------------------------------------------------------- Standard & Poor's Ratings Services said that its 'CCC+' long-term counterparty credit ratings on Greece-based Alpha Bank A.E. (Alpha), Eurobank Ergasias S.A. (Eurobank), National Bank of Greece S.A. (NBG), and Piraeus Bank S.A. (Piraeus) remain on CreditWatch with negative implications, where we initially placed them on Jan. 30, 2015. At the same time, S&P affirmed its 'C' short-term counterparty credit ratings and subordinated debt ratings on the four banks. The CreditWatch status reflects the possibility that S&P could downgrade the four banks if it anticipates the European authorities' and the ECB's support for Greek banks will no longer be available, or will not be sufficient to cover the four banks' financing needs. "We are maintaining the CreditWatch following the ECB's decision to revoke the waiver on minimum credit rating requirements for marketable instruments issued or guaranteed by the Hellenic Republic, starting from Feb. 11, 2015. This waiver previously allowed these instruments to be used as collateral in Eurosystem monetary policy operations, despite them not meeting minimum credit rating requirements. Liquidity needs of Greek banks that do not have sufficient alternative collateral can be satisfied by the Bank of Greece, Greece's National Central Bank, via its Emergency Liquidity Assistance (ELA) facility," S&P said. S&P understands that the Greek banks will be able to switch their current ECB funding collateralized by Greek government bonds and government-guaranteed bonds -- amounting to about EUR50 billion -- to ELA facilities with the Bank of Greece (Greece's national central bank). S&P also anticipates that Greek banks will likely rely further on ELA financing over the coming days and weeks as deposit outflows persist on the uncertain outcome of negotiations between the new Greek government and its official creditors. S&P also understands that the Greek banks' ability to continue accessing liquidity facilities provided by European liquidity support mechanisms, including the ELA, depends on the governing council of the ECB. The governing council can restrict ELA operations provided by the Bank of Greece if it considers that these operations interfere with the objectives and tasks of the Eurosystem. S&P continues to assess the stand-alone credit profiles (SACPs) of Alpha, Eurobank, NBG and Piraeus at 'ccc-'. The SACPs continue to incorporate S&P's view of the four banks' "adequate" business position, "very weak" capital and earnings, "moderate" risk position, "adequate" funding, and "very weak" liquidity. The ratings on the four banks also continue to incorporate two notches of additional short-term support. The CreditWatch status reflects the possibility that S&P could lower the long-term ratings on the four banks if it anticipates they will lose access to the liquidity provided by the European liquidity support mechanisms, or if S&P foresees such support being insufficient to meet the four banks' financing needs. In S&P's view, if the process of reaching an agreement between the Greek government and its official creditors is prolonged, this could lead to further pressure on Greece's financial stability in the form of deposit withdrawals. In a worst-case scenario, reduced financial stability could result in the imposition of capital controls. If capital controls were to be imposed, S&P could lower the ratings on the four banks. Conversely, S&P could affirm the ratings and remove them from CreditWatch if S&P believes that the Greek banks will likely retain permanent and sufficient support from the European authorities and the ECB such that they can meet their financial commitments in a timely manner. RATINGS LIST Ratings Affirmed; CreditWatch Update Alpha Bank A.E. Eurobank Ergasias S.A National Bank of Greece S.A. Piraeus Bank S.A. Counterparty Credit Rating CCC+/Watch Neg/C N.B. This does not include all ratings affected. ATHENS: Moody's Puts 'Caa1' Issuer Rating for Downgrade ------------------------------------------------------- Moody's Investors Service EMEA Limited has placed the Caa1 issuer rating of the City of Athens on review for downgrade. This rating action follows Moody's placement of Greece's Caa1 government bond rating on review for downgrade on 6 February 2015. Ratings Rationale Moody's rating action on the city of Athens reflects the high level of uncertainty over the outcome of the negotiations between Greece and its official creditors over the terms of Greece's support program and its implications on the city's finances. The rating action takes into account the close operational and financial linkages between the city and the Greek government. Municipalities in Greece, including the city of Athens, cannot act independently from the sovereign and do not have enough financial flexibility to permit their credit quality to be stronger than that of the sovereign itself. In addition, the institutional linkages intensify the close ties between the two levels of government through the sovereign's ability to change the institutional framework under which Greek municipalities operate. Although Athens has good autonomy in management, Moody's notes that the city relies on central government transfers for operation and capital investment, and has a local economic base that is highly integrated with that of the national economy. The city derives around 40% of its operating revenues from central government transfers (representing its second largest source of income) and capital investments are almost entirely funded by government grants and EU funds. Focus of the Review The review will focus on growing systemic risks, as reflected in the sovereign bond rating and related impact the sovereign review might have on the city's finances. The conclusion of the review for downgrade will be linked to the conclusion of the review at the sovereign level. What Could Change the Ratings UP/DOWN Should the sovereign credit quality deteriorate, the issuer rating of the City of Athens is likely to follow the sovereign rating action. In turn, if systemic pressures decrease, the review on the City of Athens's rating will likely lead to a confirmation of its current rating. Specific economic indicators as required by EU regulation are not applicable for this entity. On February 5, 2015, a rating committee was called to discuss the rating of the Athens, City of. The main points raised during the discussion were: The systemic risk in which the issuer operates has materially increased. 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. EUROBANK ERGASIAS: Moody's Reviews B3 Bond Rating for Downgrade --------------------------------------------------------------- Moody's Investors Service has taken the following rating actions: Mortgage covered bonds issued by Eurobank Ergasias S.A., under its Covered Bonds I programme: downgraded to B2, rating placed on review for downgrade Mortgage covered bonds issued by Eurobank Ergasias S.A., under its Covered Bonds II programme: B3 rating placed on review for downgrade Mortgage covered bonds issued by National Bank of Greece S.A., under its Global Covered Bonds programme: B1 rating placed on review for downgrade Mortgage covered bonds issued by National Bank of Greece S.A., under its Covered Bonds II programme: Ba3 rating placed on review for downgrade Mortgage covered bonds issued by Alpha Bank AE, under its Direct Issuance Global programme: B1 rating placed on review for downgrade Ratings Rationale The rating actions on the covered bond ratings referenced above follows the rating actions on the issuer ratings: Eurobank Ergasias S.A.: deposits Caa3 on review for downgrade; bank financial strength rating E/stable, baseline credit assessment caa3. National Bank of Greece S.A.: deposits Caa2 on review for downgrade; bank financial strength rating E/stable, baseline credit assessment caa2. Alpha Bank AE: deposits Caa2, on review for downgrade; bank financial strength rating E/stable, baseline credit assessment caa2. During the rating review Moody's will examine whether the timely payment indicator (TPI) framework caps the covered bond ratings at a lower level and to which extent the issuers will provide sufficient levels of overcollateralisation (OC), as appropriate in voluntary and/or committed form. Key Rating Assumptions/Factors Moody's determines covered bond ratings using a two-step process: an expected loss analysis and a TPI framework analysis. EXPECTED LOSS: Moody's uses its Covered Bond Model (COBOL) to determine a rating based on the expected loss on the bond. COBOL determines expected loss as (1) a function of the probability that the issuer will cease making payments under the covered bonds (a CB anchor event); and (2) the stressed losses on the cover pool assets following a CB anchor event. The cover pool losses for Eurobank Ergasias S.A. Mortgage Covered Bonds I are 23.2%. This is an estimate of the losses Moody's currently models following a CB anchor event. Moody's splits cover pool losses between market risk of 16.2% and collateral risk of 6.9%. Market risk measures losses stemming from refinancing risk and risks related to interest-rate and currency mismatches (these losses may also include certain legal risks). Collateral risk measures losses resulting directly from cover pool assets' credit quality. Moody's derives collateral risk from the collateral score, which for Eurobank Ergasias S.A. Mortgage Covered Bonds I is currently 10.4%. The OC in the cover pool is 14.3%, of which the issuer provides 5.3% on a "committed" basis. The minimum OC level consistent with the B2 rating target is 1.5%. These numbers show that Moody's is not relying on "uncommitted" OC in its expected loss analysis. All numbers in this section are based on the most recent Performance Overview based on data as of 30 September 2014. The cover pool losses for Eurobank Ergasias S.A. Mortgage Covered Bonds II are 53.7%. This is an estimate of the losses Moody's currently models following a CB anchor event. Moody's splits cover pool losses between market risk of 35.3% and collateral risk of 18.4%. Market risk measures losses stemming from refinancing risk and risks related to interest-rate and currency mismatches (these losses may also include certain legal risks). Collateral risk measures losses resulting directly from cover pool assets' credit quality. Moody's derives collateral risk from the collateral score, which for Eurobank Ergasias S.A. Mortgage Covered Bonds II is currently 27.5%. The OC in the cover pool is 43.9%, of which the issuer provides 5.3% on a "committed" basis. The minimum OC level consistent with the B3 rating target is 23.5%. These numbers show that Moody's is relying on "uncommitted" OC in its expected loss analysis. All numbers in this section are based on the most recent Performance Overview based on data as of 30 September 2014. The cover pool losses for National Bank of Greece S.A. Global Covered Bond Programme are 25.6%. This is an estimate of the losses Moody's currently models following a CB anchor event. Moody's splits cover pool losses between market risk of 17.8% and collateral risk of 7.8%. Market risk measures losses stemming from refinancing risk and risks related to interest-rate and currency mismatches (these losses may also include certain legal risks). Collateral risk measures losses resulting directly from cover pool assets' credit quality. Moody's derives collateral risk from the collateral score, which for National Bank of Greece S.A. Global Covered Bond Programme is currently 11.6%. The OC in the cover pool is 116.4%, of which the issuer provides 5.3% on a "committed" basis. The minimum OC level consistent with the B1 rating target is 1.5%. These numbers show that Moody's is not relying on "uncommitted" OC in its expected loss analysis. All numbers in this section are based on the most recent Performance Overview based on data as of 30 September 2014. The cover pool losses for National Bank of Greece S. A. Covered Bond Programme II are 21.1%. This is an estimate of the losses Moody's currently models following a CB anchor event. Moody's splits cover pool losses between market risk of 11.8% and collateral risk of 9.3%. Market risk measures losses stemming from refinancing risk and risks related to interest-rate and currency mismatches (these losses may also include certain legal risks). Collateral risk measures losses resulting directly from cover pool assets' credit quality. Moody's derives collateral risk from the collateral score, which for National Bank of Greece S. A. Covered Bond Programme II is currently 14.0%. The OC in the cover pool is 29.9%, of which the issuer provides 5.3% on a "committed" basis. The minimum OC level consistent with the Ba3 rating target is 1%. These numbers show that Moody's is not relying on "uncommitted" OC in its expected loss analysis. All numbers in this section are based on the most recent Performance Overview based on data as of 30 September 2014. The cover pool losses for Alpha Bank Direct Issuance Global Covered Bond Programme are 24.1%. This is an estimate of the losses Moody's currently models following a CB anchor event. Moody's splits cover pool losses between market risk of 16.6% and collateral risk of 7.4%. Market risk measures losses stemming from refinancing risk and risks related to interest-rate and currency mismatches (these losses may also include certain legal risks). Collateral risk measures losses resulting directly from cover pool assets' credit quality. Moody's derives collateral risk from the collateral score, which for Alpha Bank Direct Issuance Global Covered Bond Programme is currently 11.1%. The OC in the cover pool is 23.2%, of which the issuer provides 5.3% on a "committed" basis. The minimum OC level consistent with the B1 rating target is 1%. These numbers show that Moody's is not relying on "uncommitted" OC in its expected loss analysis. All numbers in this section are based on the most recent Performance Overview based on data as of September 30, 2014. The cover pool losses are an estimate of the losses Moody's currently models following a CB anchor event. Moody's splits cover pool losses between market risk and collateral risk. Market risk measures losses stemming from refinancing risk and risks related to interest-rate and currency mismatches (these losses may also include certain legal risks). Collateral risk measures losses resulting directly from the cover pool assets' credit quality. Moody's derives collateral risk from the collateral score. For further details on cover pool losses, collateral risk, market risk, collateral score and TPI Leeway across covered bond programmes rated by Moody's please refer to "Moody's Global Covered Bonds Monitoring Overview", published quarterly. TPI FRAMEWORK: Moody's assigns a "timely payment indicator" (TPI), which measures the likelihood of timely payments to covered bondholders following a CB anchor event. The TPI framework limits the covered bond rating to a certain number of notches above the CB anchor. Moody's have assigned the following TPI's to the programmes: Mortgage covered bonds issued by Eurobank Ergasias S.A. under its Covered Bonds I programme: Very Improbable Mortgage covered bonds issued by Eurobank Ergasias S.A. under its Covered Bonds II programme: Very Improbable Mortgage covered bonds issued by National Bank of Greece S.A. under its Global Covered Bonds programme: Very Improbable Mortgage covered bonds issued by National Bank of Greece S.A. under its Covered Bonds II programme: Improbable Mortgage covered bonds issued by Alpha Bank AE under its Direct Issuance Global programme: Very Improbable Factors That Would Lead to an Upgrade or Downgrade of the Ratings: The CB anchor is the main determinant of a covered bond programme's rating robustness. A change in the level of the CB anchor could lead to an upgrade or downgrade of the covered bonds. The TPI Leeway measures the number of notches by which Moody's might lower the CB anchor before the rating agency downgrades the covered bonds because of TPI framework constraints. A multiple-notch downgrade of the covered bonds might occur in certain limited circumstances, such as (1) a sovereign downgrade negatively affecting both the CB Anchor and the TPI; (2) a multiple-notch downgrade of the CB Anchor; or (3) a material reduction of the value of the cover pool. Rating Methodology The principal methodology used in these ratings was "Moody's Approach to Rating Covered Bonds" published in March 2014. Moody's published a Request for Comment (RFC) on January 8, 2015. In the RFC, Moody's propose an adjustment to the anchor point Moody's use in Moody's covered bond analysis. The proposed changes in this RFC apply to all new and existing ratings for covered bonds. If Moody's adopt the proposed changes, Moody's expect more covered bond ratings to be positively affected than negatively affected. However, in light of the banking RFC (see RFC published on 9 September 2014 by Moody's Banking group) and the CR rating RFC , measure (see RFC published on 8 January 2015 by Moody's Banking group) Moody's are not in a position to fully assess and disclose the exact impact of the proposed changes to Moody's covered bond methodology. HELLENIC TELECOMMUNICATIONS: Moody's Puts Ba3 CFR for Downgrade --------------------------------------------------------------- Moody's Investors Service has placed on review for downgrade the Ba3 corporate family rating (CFR) and the Ba3-PD probability of default rating (PDR) of Hellenic Telecommunications Organization S.A. (OTE). Concurrently, the rating agency has placed on review for downgrade the provisional (P)Ba3 senior unsecured ratings of the global medium-term note program (GMTN) and the Ba3 rating of the global bonds issued by OTE PLC (OTE's fully and unconditionally guaranteed subsidiary). This rating action follows Moody's decision to place the Government of Greece's Caa1 government bond ratings on review for downgrade. "While OTE has taken steps to insulate itself from the Greek economy, the company is predominantly a Greek business with approximately 70% of its revenues generated in Greece," says Carlos Winzer, a Moody's Senior Vice President and lead analyst for OTE. "As such, its ratings remain closely linked to conditions in its domestic environment. The government bond rating exerts pressure on OTE's rating." Ratings Rationale The action reflects Moody's recent decision to place Greece's Caa1 government bond rating on review for downgrade, as well as the likely risk of further downward on OTE's business and financial prospects that would likely accompany further deterioration in the Greek economic environment. OTE remains exposed to developments in the domestic Greek market despite demonstrating a degree of resilience through the recent period of sovereign stress and having taken steps to further insulate itself from the Greek economy. In this regard, the company has limited exposure to domestic banks and enhanced international banking relationships. The rating agency notes that the impact of any disruption in the Greek banking system on OTE will likely be limited as it has no Greek bank debt exposure. Whilst these factors allow OTE's ratings to be positioned higher than the government's bond rating, at the Ba3 sovereign ceiling, the increased uncertainty over whether Greece's new government will come to an agreement with its official creditors in time to meet its near-term funding and liquidity needs exerts negative pressure on Greece's sovereign creditworthiness and, in turn, OTE's ratings. OTE's Ba3 CFR is currently four notches above the Caa1 Greek government bond rating, to reflect the company's underlying characteristics and credit strength. However, given the company's high exposure (over 70% revenues are generated in Greece) to the country, its creditworthiness could weaken if the sovereign rating comes under further pressures in the absence of a timely agreement with official creditors. At Ba3, OTE's ratings reflect (1) the fact that a non-Greek financial subsidiary (OTE PLC, which is domiciled in the UK and subject to English law) issues its debt; (2) the fact that around 30% of OTE's revenues and 25% of its EBITDA are generated outside of Greece; (3) Moody's expectation that OTE will maintain substantial cash balances of around EUR1.15 billion to pre-fund future bond maturities; and (4) the implicit support it receives from its largest shareholder, Deutsche Telekom AG (Baa1 stable). What Could Change the Ratings Up/Down Given the review for downgrade and in the absence of a more explicit statement of support from Deutsche Telekom, Moody's currently expects no upward pressure on OTE's ratings in the short term. A rating downgrade could occur if: (1) Greece's government bond ratings were to be downgraded; (2) conditions in the domestic environment were to deteriorate further as a result of a weakening of Greece's credit profile or a material increase in the risk of Greece exiting the euro area; and/or (3) unexpected pressure were to be exerted on OTE's liquidity, particularly as a result of a failure by the company to maintain comfortable cash balances. Principal Methodologies The principal methodology used in these ratings was Global Telecommunications Industry published in December 2010. Other methodologies used include Loss Given Default for Speculative- Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Hellenic Telecommunications Organization S.A. (OTE) is the leading telecommunications operator in Greece, servicing 2.8 million retail fixed access lines, 1.3 million retail fixed-line broadband connections, 321,000 TV subscribers and 7.4 million mobile customers in Greece as of September 2014. In addition to its wireless operations in Greece, OTE offers mobile telephony services to customers in Albania (2.0 million customers) and Romania (6.0 million customers) through Cosmote, Greece's leading provider of mobile telecommunications services. In addition, OTE offers wireline services in Romania through RomTelecom. OTE is also involved in a range of other activities in Greece, notably in real-estate. OTE owns 100% of Germanos, the largest distributor of technology-related products in southeast Europe. OTE's major shareholder is Deutsche Telekom with an equity stake of 40%. List of Affected Ratings On Review for Downgrade: Issuer: Hellenic Telecommunications Organization S.A. Probability of Default Rating, Placed on Review for Downgrade, currently Ba3-PD Corporate Family Rating (Local Currency), Placed on Review for Downgrade, currently Ba3 Issuer: OTE PLC Senior Unsecured Medium-Term Note Program, Placed on Review for Downgrade, currently (P)Ba3 Senior Unsecured Regular Bond/Debenture, Placed on Review for Downgrade, currently Ba3 Outlook Actions: Issuer: Hellenic Telecommunications Organization S.A. Outlook, Changed To Rating Under Review From Stable Issuer: OTE PLC Outlook, Changed To Rating Under Review From Stable NATIONAL BANK: Fitch Puts 'B-' IDR on CreditWatch Negative ---------------------------------------------------------- Fitch Ratings has placed Greece-based National Bank of Greece S.A. (NBG), Piraeus Bank, S.A. (Piraeus), Alpha Bank AE (Alpha) and Eurobank Ergasias S.A.'s (Eurobank) Long-term Issuer Default Ratings (IDR) of 'B-' and Viability Ratings (VR) of 'b-' on Rating Watch Negative (RWN). The banks' Short-term IDRs of 'B' have also been placed on RWN. The RWN reflects downside rating potential due to rising funding and liquidity risks, as Fitch assumes that the negotiations between the Greek government and its official creditors will be very challenging. In Fitch's view, this will likely translate into continued deposit outflows for Greek banks that could potentially trigger imposition of capital controls, in particular if access to emergency funding was at any time restricted by the European Central Bank (ECB). KEY RATING DRIVERS - IDRS, SENIOR DEBT AND VRS NBG's, Piraeus's, Alpha's and Eurobank's IDRs and senior debt ratings are based on their standalone credit profiles, as captured in the VRs. The ratings are highly influenced by the banks' weak asset quality, exceptionally challenging economic and operating conditions, and weak funding and liquidity profiles, on which there is heightened pressure while the recently-formed Greek government seeks a new agreement with official creditors. Non-performing loan (NPL) ratios were a high 23.4% for NBG, 33% for Eurobank, 33.6% for Alpha and 39% for Piraeus as of end-3Q14. Unreserved NPLs remained well above their capital, putting solvency at risk under any further stress; and most of these banks also retained sizeable stocks of loans in arrears that may become NPLs in light of the weak economy. Add-on risks to Greek banks' asset quality may come from any delays or discontinuation around the implementation of reforms to facilitate asset recoveries, and/or exposure to the Swiss franc appreciation. The banks' 'B-' ratings indicate that a material default risk is present, but that a limited margin of safety remains as they are able to access central bank funds. In December 2014, the system lost EUR4bn of deposits (or 2.4% of the total as of end-November 2014) and interbank repo markets, which most of the banks used heavily until December to secure funds against EFSF bonds, have become unreliable. As a result, ECB funding increased to EUR56bn (14% of system assets) by year-end. Fitch believes deposit withdrawals accelerated in January and assume deposit levels now to be at least 8% lower than at end-November 2014. We view the ECB's decision on Feb. 4, 2015, to accelerate the termination of the collateral eligibility waiver in respect of both government bonds and bank-issued government-guaranteed bonds as negative because i) emergency liquidity assistance (ELA) funding from the Bank of Greece can be relatively quickly curbed or prevented by the ECB if specific ELA procedures are not met, creating event risk; and ii) it signals that the ECB may adopt a strict approach to applying relevant policies and procedures. Fitch also believes that switching to ELA may increase Greek banks' funding costs, potentially affecting their earnings, especially if negative deposit trends are prolonged over time. Nonetheless, Fitch understands that the ELA capacity has been increased to offset the reduction in ECB facilities. Fitch estimates that ELA usage will increase to at least approximately EUR50bn once funding switches from the ECB on Feb. 11, on top of which EUR38bn of EFSF debt instruments remain eligible at the ECB. The banks' ratings assume that the ECB will allow ELA funding to be provided by the Bank of Greece for as long as i) there is a reasonable probability of Greece reaching an agreement with its official creditors, which is Fitch's base case; and ii) deposit flight does not make banks' ELA reliance so heavy as to contradict ELA procedures, which include that ELA is only made available to solvent banks facing temporary liquidity problems. The senior debt ratings are aligned with the banks' IDRs and have 'RR4' Recovery Ratings. This reflects Fitch's assumptions so far that recoveries in the event of a default are likely to be average. RATING SENSITIVITIES - IDRS, SENIOR DEBT AND VRS The RWN on the banks' IDRs, VRs and senior debt ratings reflects Fitch's opinion that rising funding and liquidity risks mean there is a heightened probability of the ratings being downgraded. Fitch believes that even if the upcoming meetings of the European Council and Eurogroup succeed in establishing a framework for negotiations between the Greek government and its official creditors, reaching a new agreement is likely to be a protracted and complicated process. This represents a heightened risk to the stability of the banks' deposit levels (and hence liquidity profiles) that could eventually jeopardize the continued approval of ELA funds and/or force the authorities to impose restrictions on the banking sector to curb deposit outflows. The ratings and Recovery Ratings of senior debt issued by the banks and/or their respective issuing vehicles have also been placed on RWN to highlight the risk of a downgrade if funding and liquidity pressures result in a higher level of assets pledged, higher collateral constraints and/or weaker recovery prospects. Recovery prospects for senior debt are also likely to be affected by depositor preference in view of the implementation of the Bank Recovery and Resolution Directive (BRRD). The RWN is likely to be resolved upon further clarity around the outcome of the political negotiations and the impact on banks' funding and liquidity profiles. KEY RATING DRIVERS - SUPPORT RATING AND SUPPORT RATING FLOOR Greek banks' Support Ratings of '5' and SRFs of 'No Floor' reflect our expectation that while future support from the state is possible, it cannot be relied upon given the limited resources at Greece's disposal. RATING SENSITIVITIES - SUPPORT RATING AND SUPPORT RATING FLOOR In Fitch's opinion, Greek banks' SRs and SRFs are unlikely to be revised upwards given the limited ability of the Greek authorities to provide support. In addition, Fitch believes there is intent to reduce the propensity of state support for financial institutions in the EU, as evidenced by a series of legislative, regulatory and policy initiatives, including the BRRD and the Single Resolution Mechanism. KEY RATING DRIVERS AND SENSITIVITIES - SUBORDINATED DEBT AND OTHER HYBRID SECURITIES Subordinated debt and other hybrid capital instruments issued by NBG, Alpha and Eurobank are notched down from these banks' VRs of 'b-', in accordance with Fitch's assessment of each instrument's non-performance and relative loss severity risk profiles. The banks' subordinated debt is notched twice from VRs due to weak recovery prospects, as reflected by the affirmation of the 'RR6' Recovery Rating. The 'CC' rating on these instruments has also been placed on RWN, in line with the VRs. Hybrid capital, which is currently not performing, has been affirmed at 'C'/'RR6' to reflect the fact that loss absorption has been triggered and, if they return to performing status, economic losses are likely to be/have been severe. The ratings of subordinated debt and hybrid capital are sensitive to changes to the banks' VRs and performing status. Recovery Ratings are primarily sensitive to valuation and availability of free assets and the breakdown between unsecured and secured liabilities. KEY RATING DRIVERS AND SENSITIVITIES - STATE GUARANTEED DEBT The state-guaranteed debt of NBG, Alpha and Eurobank has been affirmed at 'B', in line with Greece's Long-term IDR (B/Negative). The state-guaranteed debt issuances are senior unsecured instruments that bear the full guarantee of the Greek state. Consequently, their ratings are the highest of the issuer's Long-term IDR and Greece's Long-term foreign currency IDR. These banks' state-guaranteed debt ratings are sensitive to any changes to Greece's sovereign ratings. The rating actions are: NBG: Long-term IDR: 'B-'; placed on RWN Short-term IDR: 'B'; placed on RWN VR: 'b-'; placed on RWN Support Rating: affirmed at '5' SRF: affirmed at 'No Floor' Senior notes: 'B-'/'RR4'; placed on RWN Short-term senior notes: 'B'; placed on RWN Hybrid capital: affirmed at 'C'/'RR6' State-guaranteed debt: affirmed at 'B' NBG Finance plc: Long-term senior unsecured debt rating: 'B-'/'RR4'; placed on RWN Short-term senior unsecured debt rating: 'B'; placed on RWN Piraeus Bank: Long-term IDR: 'B-'; placed on RWN Short-term IDR: 'B'; placed on RWN VR: 'b-'; placed on RWN Support Rating: affirmed at '5' SRF: affirmed at 'No Floor' Long-term senior unsecured debt rating: 'B-'/'RR4'; placed on RWN Short-term senior unsecured debt rating: 'B'; placed on RWN Commercial paper: 'B'; placed on RWN Piraeus Group Finance PLC: Long-term senior unsecured debt rating: 'B-'/'RR4'; placed on RWN Short-term senior unsecured debt rating: 'B'; placed on RWN Alpha Bank: Long-term IDR: 'B-'; placed on RWN Short-term IDR: 'B'; placed on RWN VR: 'b-'; placed on RWN Support Rating: affirmed at '5' SRF: affirmed at 'No Floor' Long-term senior unsecured debt rating: 'B-'/'RR4'; placed on RWN Short-term senior unsecured debt rating: 'B'; placed on RWN Market-linked senior notes: 'B-emr'/'RR4'; placed on RWN Hybrid capital: affirmed at 'C'/'RR6' State-guaranteed debt: affirmed at 'B' Alpha Credit Group PLC: Long-term senior unsecured debt rating: 'B-'/'RR4'; placed on RWN Short-term senior unsecured debt rating: 'B'; placed on RWN Subordinated notes: 'CC'/'RR6'; placed on RWN Eurobank: Long-term IDR: 'B-'; placed on RWN Short-term IDR: 'B'; placed on RWN VR: 'b-'; placed on RWN Support Rating: affirmed at '5' SRF: affirmed at 'No Floor' Senior notes: 'B-'/'RR4'; placed on RWN Short-term senior notes: 'B'; placed on RWN Market-linked senior notes: 'B-emr'/'RR4'; placed on RWN Commercial paper: 'B'; placed on RWN Subordinated notes: 'CC'/'RR6'; placed on RWN Hybrid capital: affirmed at 'C'/'RR6' State-guaranteed debt: affirmed at 'B' ERB Hellas PLC: Long-term senior unsecured debt rating: 'B-'/'RR4'; placed on RWN Short-term senior unsecured debt rating: 'B'; placed on RWN State-guaranteed debt: affirmed at 'B' ERB Hellas (Cayman Islands) Ltd.: Long-term senior unsecured debt rating: 'B-'/'RR4'; placed on RWN Short-term senior unsecured debt rating: 'B'; placed on RWN State-guaranteed debt: affirmed at 'B' PIRAEUS BANK: Moody's Lowers Long-Term Deposit Rating to 'Caa2' --------------------------------------------------------------- Moody's Investors Service has downgraded the long-term deposit and senior debt ratings of five Greek banks: Piraeus Bank SA (to Caa2 from Caa1), National Bank of Greece SA (to Caa2 from Caa1), Alpha Bank AE (to Caa2 from Caa1), Eurobank Ergasias SA (to Caa3 from Caa2) and Attica Bank SA (to Caa3 from Caa2). All ratings were placed on review for further downgrade. The rating actions follow Moody's decision to place Greece's Caa1 sovereign rating on review for downgrade on February 6, 2015. The bank rating downgrades are driven by Moody's view of a reduced likelihood of systemic support given 1) the heightened uncertainty about the government's ability to come to an agreement with official creditors in time to meet its own liquidity and funding needs, and 2) the likely reduction in the Hellenic Financial Stability Fund's (HFSF) capacity to support the banks in case of need. The rating review will assess the acute funding and liquidity pressures facing these banks. In addition, the review will assess banks' direct exposure to the sovereign and the impact of the weakened operating environment on asset quality and solvency. Ratings Rationale Rating Downgrade Driven by Uncertainty Surrounding the Country's Support Programme and the Hfsf's Capacity to Support the Banks The one notch downgrade of deposit and senior debt ratings is driven by Moody's view of a lower likelihood of systemic support, owing to the heightened uncertainty regarding the new government's ability to reach an agreement with its lenders before the end of the current support program, which expires at the end of February. A possible deadlock in the government's negotiations with official creditors could place at risk its own liquidity and funding needs, limiting its ability to support the banks in case if need. Furthermore, Moody's considers that there is uncertainty regarding the full renewal/extension of the state-owned HFSF, which has a mandate to ensure the stability of the banking system and forms an integral part of the support program. Moody's considers that there is a material risk that the bulk of the HFSF's reserves of around EUR11.5 billion could be either used to finance government needs or returned back to the European Financial Stability Facility (EFSF), reducing the capacity of the HFSF to support the banks if needed. Rating Review Triggered By the Deterioration in the Banks' Funding And Liquidity Profiles The primary driver of the review for downgrade is the weakening of banks' funding and liquidity, owing to 1) significant private- sector deposit outflows since December 2014, and 2) international banks' reduced appetite to engage in repo transactions with Greek banks. As a result, Greek banks' dependence on Eurosystem funding, both in the form of European Central Bank (ECB) funding and higher cost emergency liquidity assistance (ELA) from the Bank of Greece, has increased significantly. Moody's also considers that the ECB decision on February 4 to stop accepting Greek Government Bonds (GGBs) and Greek Government Guarantees as collateral for ECB funding purposes elevates the downside risks for Greek banks' funding and liquidity. Although the rating agency estimates that the banks' ELA collateral buffer (which remains unaffected by this decision) represents more than a third of the EUR150 billion total deposit base, the availability of ELA remains contingent to ECB's governing council approval every two weeks, rendering the banks' liquidity susceptible to government related developments. According to official figures from the Bank of Greece, ECB funding for the system increased to EUR56 billion as of end- December 2014, from around EUR45 billion as of end-November 2014. Moody's expects this balance to have increased to around EUR75 billion in January 2015 and notes that following the ECB's decision on February 4, around EUR50 billion of ECB funding will switch to ELA, increasing ELA from approximately EUR5 billion currently. High Linkages Between the Sovereign and Banks Additional factors driving the rating review relate to Greek banks' high exposure to GGBs, treasury bills (T-bills) and other sovereign-related securities, which Moody's expects to continue to increase during the negotiations between the new government and its official sector lenders. While sovereign exposures have declined significantly since the GGBs debt-swap in 2012 (private- sector involvement or PSI), Moody's estimates that these continue to comprise more than 40% of the banks' core Tier 1 capital as of September 2014. The rating review will also take into account the deterioration in the operating environment and associated risks for banks' non- performing loans and solvency. Focus of the Review The rating review will focus on the risk of further negative funding and liquidity developments, including continued deposit outflows in the context of the ECB's decision to limit Greek banks' access to ECB funding and the ongoing availability of ELA. This assessment will be conducted on a bank-by-bank basis, taking into account differences in the banks' liquidity buffers and financial profiles. Likewise, the rating review will take into consideration the credit implications of the sovereign rating review for the banks' government exposures and also any pressure on banks' asset quality and solvency. What Could Move the Ratings Up/Down Increased risks related to deposit outflows, which further amplify the banks' reliance on central bank funding, could prompt Moody's to downgrade the banks' ratings, as could uncertainty regarding the continued availability of central bank funding. In addition, the ratings could also be downgraded if the rating agency considers that potential asset-quality deterioration will consume capital, compromising banks' solvency. As signaled by the review for downgrade, upside potential for Greek banks' ratings is currently limited. The specific rating changes implemented are as follows: Issuer: Alpha Bank AE Long-term Bank Deposit Ratings Downgraded to Caa2 from Caa1; Placed Under Review for further Downgrade Short-term Bank Deposit Ratings, Affirmed NP Bank Financial Strength Rating, Affirmed E/Stable - (Baseline Credit Assessment caa2) Backed Senior Unsecured Medium-Term Note Program Downgraded to (P)Caa2 from (P)Caa1; Placed Under Review for further Downgrade Senior Unsecured Medium-Term Note Program Downgraded to (P)Caa2 from (P)Caa1; Placed Under Review for further Downgrade Subordinated Medium-Term Note Program, Placed on Review for Downgrade, currently (P)Caa3 Short-term Program, Affirmed (P)NP Issuer: Alpha Credit Group plc Backed Senior Unsecured Medium-Term Note Program Downgraded to (P)Caa2 from (P)Caa1; Placed Under Review for further Downgrade Backed Subordinated Medium-Term Note Program, Placed on Review for Downgrade, currently (P)Caa3 Backed Senior Unsecured Regular Bond/Debenture Downgraded to Caa2 from Caa1; Placed Under Review for further Downgrade Backed Subordinated Regular Bond/Debenture, Placed on Review for Downgrade, currently Caa3 Backed Commercial Paper, Affirmed NP Backed Short-term Program, Affirmed (P)NP Issuer: Alpha Group Jersey Limited Backed Senior Unsecured Medium-Term Note Program Downgraded to (P)Caa2 from (P)Caa1; Placed Under Review for further Downgrade Backed Subordinated Medium-Term Note Program, Placed on Review for Downgrade, currently (P)Caa3 Backed Pref. Stock Non-cumulative, Placed on Review for Downgrade, currently Ca (hyb) Issuer: Emporiki Group Finance Plc Backed Senior Unsecured Regular Bond/Debenture Downgraded to Caa2 from Caa1; Placed Under Review for further Downgrade Issuer: Attica Bank S.A. Long-term Bank Deposit Ratings, Downgraded to Caa3 from Caa2; Placed Under Review for further Downgrade Short-term Bank Deposit Ratings, Affirmed NP Bank Financial Strength Rating, Affirmed E/Stable - (Baseline Credit Assessment caa3) Issuer: Attica Funds plc Backed Subordinated Regular Bond/Debenture, Placed on Review for Downgrade, currently Ca Issuer: Eurobank Ergasias S.A. Long-term Bank Deposit Ratings Downgraded to Caa3 from Caa2; Placed Under Review for further Downgrade Short-term Bank Deposit Ratings, Affirmed NP Bank Financial Strength Rating, Affirmed E/Stable - (Baseline Credit Assessment caa3) Backed Senior Unsecured Medium-Term Note Program Downgraded to (P)Caa3 from (P)Caa2; Placed Under Review for further Downgrade Senior Unsecured Medium-Term Note Program Downgraded to (P)Caa3 from (P)Caa2; Placed Under Review for further Downgrade Subordinated Medium-Term Note Program, Placed on Review for Downgrade, currently (P)Ca Backed Short-term Program, Affirmed (P)NP Short-term Program, Affirmed (P)NP Issuer: EFG Hellas Funding Limited Backed Pref. Stock Non-cumulative, Placed on Review for Downgrade, currently Ca (hyb) Issuer: ERB Hellas (Cayman Islands) Limited Backed Senior Unsecured Regular Bond/Debenture Downgraded to Caa3 from Caa2; Placed Under Review for further Downgrade Backed Senior Unsecured Medium-Term Note Program Downgraded to (P)Caa3 from (P)Caa2; Placed Under Review for further Downgrade Backed Subordinated Medium-Term Note Program, Placed on Review for Downgrade, currently (P)Ca Backed Short-term Program, Affirmed (P)NP Issuer: ERB Hellas PLC Backed Senior Unsecured Regular Bond/Debenture Downgraded to Caa3 from Caa2; Placed Under Review for further Downgrade Backed Subordinated Regular Bond/Debenture, Placed on Review for Downgrade, currently Ca Backed Senior Unsecured Medium-Term Note Program Downgraded to (P)Caa3 from (P)Caa2; Placed Under Review for further Downgrade Backed Subordinated Medium-Term Note Program, Placed on Review for Downgrade, currently (P)Ca Backed Commercial Paper, Affirmed NP Backed Short-term Program, Affirmed (P)NP Issuer: National Bank of Greece S.A. Long-term Bank Deposit Ratings Downgraded to Caa2 from Caa1; Placed Under Review for further Downgrade Short-term Bank Deposit Ratings, Affirmed NP Bank Financial Strength Rating, Affirmed E/Stable - (Baseline Credit Assessment caa2) Backed Senior Unsecured Regular Bond/Debenture (Government Guaranteed), Placed Under Review for Downgrade, currently Caa1 Backed Short-term Senior Unsecured Regular Bond/Debenture, Affirmed NP Backed Senior Unsecured Medium-Term Note Program Downgraded to (P)Caa2 from (P)Caa1; Placed Under Review for further Downgrade Pref. Stock Non-cumulative, Placed on Review for Downgrade, currently Ca (hyb) Backed Short-term Program, Affirmed (P)NP Issuer: National Bank of Greece Funding Limited Backed Pref. Stock Non-cumulative, Placed on Review for Downgrade, currently Ca (hyb) Issuer: NBG Finance plc Backed Senior Unsecured Regular Bond/Debenture Downgraded to Caa2 from Caa1; Placed Under Review for further Downgrade Backed Subordinated Regular Bond/Debenture, Placed on Review for Downgrade, currently Caa3 Backed Senior Unsecured Medium-Term Note Program Downgraded to (P)Caa2 from (P)Caa1; Placed Under Review for further Downgrade Backed Subordinated Medium-Term Note Program, Placed on Review for Downgrade, currently (P)Caa3 Issuer: Piraeus Bank S.A. Long-term Bank Deposit Ratings Downgraded to Caa2 from Caa1; Placed Under Review for further Downgrade Short-term Bank Deposit Ratings, Affirmed NP Bank Financial Strength Rating, Affirmed E/Stable - (Baseline Credit Assessment caa2) Senior Unsecured Medium-Term Note Program Downgraded to (P)Caa2 from (P)Caa1; Placed Under Review for further Downgrade Subordinated Medium-Term Note Program Placed on Review for Downgrade, currently (P)Caa3 Issuer: Piraeus Group Capital Limited Backed Pref. Stock Non-cumulative, Placed on Review for Downgrade, currently Ca (hyb) Issuer: Piraeus Group Finance Plc Backed Senior Unsecured Regular Bond/Debenture Downgraded to Caa2 from Caa1; Placed Under Review for further Downgrade Backed Subordinated Regular Bond/Debenture, Placed on Review for Downgrade, currently Caa3 Backed Senior Unsecured Medium-Term Note Program Downgraded to (P)Caa2 from (P)Caa1; Placed Under Review for further Downgrade Backed Subordinated Medium-Term Note Program, Placed on Review for Downgrade, currently (P)Caa3 Backed Commercial Paper, Affirmed NP Backed Short-term Program, Affirmed (P)NP The principal methodology used in these ratings was Global Banks published in July 2014. All banks affected by the rating actions are headquartered in Athens, Greece: -- National Bank of Greece SA reported total assets of EUR113.3 billion as of September 2014 -- Piraeus Bank SA reported total assets of EUR86.4 billion as of September 2014 -- Eurobank Ergasias SA reported total assets of EUR74.3 billion as of September 2014 -- Alpha Bank SA reported total assets of EUR72.4 billion as of September 2014 -- Attica Bank SA reported total assets of EUR3.9 billion as of September 2014. PUBLIC POWER: S&P Lowers Rating to 'B-' on Liquidity Constraints ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on Greece- based utility Public Power Corp. S.A. (PPC) to 'B-' from 'B' and placed it on CreditWatch with negative implications. The downgrade reflects S&P's view that Greece's liquidity constraints and economic situation have worsened following the ECB's decision to lift the waiver on the eligibility of Greek government and government-related bonds in euro-system operations. This transferred the responsibility of lender-of- last-resort financing from the ECB to the Bank of Greece. In S&P's view, this could lead to further pressure on financial stability in the form of deposit withdrawals. Moreover, in a worst-case scenario, there could be the imposition of capital controls and a loss of access to lender-of-last-resort financing, potentially resulting in Greece's exclusion from the Economic and Monetary Union. S&P sees these risks as having meaningful implications to PPC's operations. Most notably, S&P believes they could affect PPC's ability to refinance its short-term maturities, maintain existing credit lines (which include a material adverse conditions clause), and collect cash from its customers at a time when deposit withdrawals could increase. S&P believes these factors could lead to a faster-than-anticipated deterioration of the utility's liquidity. More particularly, S&P views the exercise of a material adverse conditions (MAC) clause as unpredictable, given that a number of credit lines -- notably those provided by German government- related development bank KfW and the European Investment Bank (both rated AAA/Stable/A-1+)--include a MAC clause. S&P understands that exercising this clause would trigger the early repayment of loans and the cancellation of undrawn credit lines, which could ultimately trigger an event of default on the outstanding bonds given the cross-default provisions. In this context, in S&P's analysis of PPC it has revised its liquidity qualifier to "less-than-adequate" from "adequate". S&P continues to view PPC as "important" to Greece. The utility is the country's dominant power generator and sole power transporter and distributor. In addition, PPC is the only electricity supplier of last resort in Greece. As such, it provides public services such as discounted tariffs for low- income households. PPC is also of key social and economic importance for the government, being one of the largest Greek employers. The Greek state remains the controlling shareholder of PPC, with a 51% stake, and acts as the guarantor of most of PPC's debt from the European Investment Bank (40% of the total PPC debt). An acceleration of the debt could therefore imply an additional liability for the Greek Government. These risks are in addition to the ones S&P already factored into its rating on PPC, including: -- Potential material changes and delays in certain reforms to the electricity market in Greece; -- Risks relating to the group's increasing cost structure, together with deflationary trends in tariffs; -- The increasing risks related to the performance of bad debt provisions and to the group's ability to collect cash from customers; and -- Cancellation of the group's planned restructuring, including the privatization of the transmission network and spin-off of one-third of its generation and supply activities. S&P recognizes that such transactions would require the right timing and market conditions to optimize terms and value and that such conditions are unlikely in the short to medium term. S&P believes the materialization of these risks would significantly weaken the group's stand-alone credit profile (SACP). S&P now views PPC's liquidity as "less-than-adequate" under S&P's criteria, reflecting the increasing risks of fast deterioration of its liquidity position, in case of MAC clause exercise, imposition of capital controls and lack of access to new financing in this changing sovereign environment. Based on the latest information available, S&P factors into its liquidity assessment these sources of cash: -- About EUR330 million in available cash reported on Sept. 30, 2014. -- About EUR1 billion available under committed credit facilities with the EIB (EUR220 million for PPC and EUR235 million for PPC's transmission network [IPTO]) and with a consortium led by the German development bank KfW (EUR625 million). -- Funds from operations (FFO) of about EUR900 million. Against these sources, S&P sees these liquidity uses (as of Sept. 30, 2014): -- Short-term debt maturities of EUR650 million, half of which relate to the financing of IPTO (S&P understands from the company that EUR274 million was since extended to year-end 2015, with the aim to be refinanced via a five-year syndicated facility). -- S&P's estimate of approximately EUR700 million in capital expenditures, with no flexibility to defer or cut them. -- Further deterioration of working capital needs in 2015, which S&P estimates to be about EUR200 million. The CreditWatch placement reflects the increased uncertainties and risks associated with the situation the sovereign is facing. It also reflects S&P's view that PPC could be under increasing liquidity pressure if there isn't rapid improvement in operating conditions and the financing environment. S&P aims to update its CreditWatch status once there are more details on the Greek government's negotiations with official creditors, which ultimately will likely have implications on PPC's liquidity and its operating environment. S&P could lower the rating again if PPC's liquidity position deteriorates, through cancellation of credit lines or a Greek banking system liquidity crisis restricts PPC's access to its cash; if the group fails to secure additional credit facilities to finance its future investments as well as debt maturities; or if PPC's cash flow generation narrows further. Ultimately, S&P believes Greece's exclusion from the Economic and Monetary Union would likely lead PPC to default. S&P could affirm its ratings if we anticipate that liquidity risks are abating. ============= I R E L A N D ============= RMF EURO III: Moody's Raises Rating on EUR10.5MM Notes to Ba1 ------------------------------------------------------------- Moody's Investors Service announced that it has upgraded the ratings on the following notes issued by RMF Euro CDO III PLC: EUR23.3 Million Class IV Deferrable Mezzanine Floating Rate Notes, due 2021, Upgraded to A2 (sf); previously on Jul 10, 2014 Upgraded to Baa2 (sf) EUR10.5 Million (Current balance outstanding EUR 4.8M) Class V Deferrable Mezzanine Floating Rate Notes, due 2021, Upgraded to Ba1 (sf); previously on Jul 10, 2014 Upgraded to Ba2 (sf) Moody's also affirmed the ratings on the following notes issued by RMF Euro CDO III PLC: EUR20.1 Million (Current balance outstanding EUR 18.9M) Class II Senior Secured Floating Rate Notes, due 2021, Affirmed Aaa (sf); previously on Jul 10, 2014 Upgraded to Aaa (sf) EUR14.7 Million Class III Deferrable Mezzanine Floating Rate Notes, due 2021, Affirmed Aaa (sf); previously on Jul 10, 2014 Upgraded to Aaa (sf) RMF Euro CDO III PLC, issued in August 2005, is a Collateralised Loan Obligation ("CLO") backed by a portfolio of mostly high yield senior secured European and US loans, managed by Man GLG Credit Advisers AG. This transaction ended its reinvestment period in August 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 on the January 2015 payment date, the Class I notes have been paid in full by EUR17.6 million (or 7% of their original balance) and Class II notes have amortized by EUR1.13M, or 5.6% of their 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 January 2015, the Class I/II, Class III, Class IV and Class V OC ratios are 418.07%, 235.55%, 139.22% and 128.36%, respectively, versus June 2014 levels of 258.24%, 185.83%, 128.65% and 120.95%. 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 approximately EUR79.7 million, defaulted par of EUR4.1 million, a weighted average default probability of 27.6% (consistent with a WARF of 4,249 with a weighted average life of 3.6 years), a weighted average recovery rate upon default of 47.21% for a Aaa liability target rating, a diversity score of 14 and a weighted average spread of 4%. 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 92.04% 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 weighted average recovery rate of the portfolio. Moody's ran a model in which it lowered the weighted average recovery rate of the portfolio by 5%; the model generated outputs that were within one notch of the base-case results. This transaction is subject to a high level of macroeconomic uncertainty, which could negatively affect the ratings on the note, in light of 1) uncertainty about credit conditions in the general economy and 2) the concentration of lowly- rated debt maturing between 2015 and 2016, which may create challenges for issuers to refinance. CLO notes' performance may also be impacted either positively or negatively by 1) the manager's investment strategy and behavior and 2) divergence in the legal interpretation of CDO documentation by different transactional parties due to because of embedded ambiguities. Additional uncertainty about performance is due to the following: 1) Portfolio amortization: The main source of uncertainty in this transaction is the pace of amortization of the underlying portfolio, which can vary significantly depending on market conditions and have a significant impact on the notes' ratings. Amortization could accelerate as a consequence of high loan prepayment levels or collateral sales by the collateral manager or be delayed by an increase in loan amend-and-extend restructurings. Fast amortization would usually benefit the ratings of the notes beginning with the notes having the highest prepayment priority. 2) Recovery of defaulted assets: Market value fluctuations in trustee-reported defaulted assets and those Moody's assumes have defaulted can result in volatility in the deal's over- collateralization levels. Further, the timing of recoveries and the manager's decision whether to work out or sell defaulted assets can also result in additional uncertainty. Moody's analyzed defaulted recoveries assuming the lower of the market price or the recovery rate to account for potential volatility in market prices. Recoveries higher than Moody's expectations would have a positive impact on the notes' ratings. 3) Around 46.8% 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. 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. ===================== N E T H E R L A N D S ===================== FAXTOR ABS 2003-1: Moody's Affirms Caa3 Rating on 2 Note Classes ---------------------------------------------------------------- Moody's Investors Service announced that it has taken rating actions on the following classes of notes issued by Faxtor ABS 2003-1 B.V.: EUR23 Million Class A-2E Floating Rate Notes, Affirmed Aa2 (sf); previously on Jun 27, 2014 Upgraded to Aa2 (sf) EUR9 Million Class A-2F Fixed Rate Notes, Affirmed Aa2 (sf); previously on Jun 27, 2014 Upgraded to Aa2 (sf) EUR7.5 Million Class A-3E Floating Rate Notes, Upgraded to Ba1 (sf); previously on Jun 27, 2014 Upgraded to B1 (sf) EUR15 Million Class A-3F Fixed Rate Notes, Upgraded to Ba1 (sf); previously on Jun 27, 2014 Upgraded to B1 (sf) EUR5.5 Million Class BE Floating Rate Notes, Affirmed Caa3 (sf); previously on Jun 27, 2014 Affirmed Caa3 (sf) EUR9.5 Million Class BF Fixed Rate Notes, Affirmed Caa3 (sf); previously on Jun 27, 2014 Affirmed Caa3 (sf) Ratings Rationale The rating actions on the notes are a result of the material improvement in the credit quality of the collateral as well as the deleveraging of the Class A notes. Since the last rating action in June 2014, 31% of the portfolio aggregate amount was upgraded by an average of 1.85 notch. Also Moody's notes that on the 23 January 2015, 4 European structured finance transactions included in the portfolio and representing 16% of the collateral, were placed on review for upgrade following the revision of the methodology on country ceilings and the new ceiling applied to euro area countries. For more information on the underlying rating action please refer to the action "Moody's takes rating actions on Irish, Italian, Portuguese, Spanish ABS/RMBS deals" published on Moodys.com. Additionally the amount of assets rated within the Caa range by Moody's has remained stable at 29% of the portfolio performing par while the defaulted assets have decreased to EUR6.6 million as reported in the December 2014 trustee report. Since the interest payment of May 2014 the Classes A-2 have repaid EUR3.2 million or 10% of the tranche original balance. The amortization of the Classes A-2 has also improved the overcollateralization ratios ("OC ratios") across the capital structure. As per the December 2014 trustee report, the Class A and Class B overcollateralization ratios are reported at 156.40% and 105.62% respectively, compared to 141.47% and 99.15% as per the May 2014 trustee report. Moody's notes that the interest coverage test fails to pass its trigger and that at the last interest payment in November 2014, the interest payment to Classes A-3 was made partially using cash from the principal proceeds. Methodology Underlying the Rating Action: The principal methodology used in this rating was "Moody's Approach to Rating SF CDOs" published in March 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: Amounts of defaulted assets - Moody's considered a model run where all the Caa assets in the portfolio were assumed to be defaulted. The model outputs for these runs are consistent with the ratings. 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 2) divergence in the legal interpretation of CDO documentation by different transactional parties due to or because of embedded ambiguities. * 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 prepayment levels or collateral sales by the collateral manager. Fast amortization would usually benefit the ratings of the notes beginning with the notes having the highest prepayment priority. * 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. 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. PIGMENTS II: Moody's Assigns 'B1' Corporate Family Rating --------------------------------------------------------- Moody's Investors Service has assigned a B1 Corporate Family Rating (CFR) and B2-PD Probability of Default Rating (PDR) to Pigments II BV, the ultimate holding company for the Esmalglass- Itaca Group ("E-I"). Concurrently, Moody's assigned a provisional (P)B1 (LGD 3) rating to the group's EUR250 million senior secured Term Loan B, the EUR40 million senior secured Revolving Credit Facility as well as the EUR15 million senior secured capex and acquisition facility. The outlook on all ratings is stable. This is the first time that Moody's has rated Esmalglass-Itaca Group. The proceeds from the term loan will be used, together with cash on balance sheet, to (i) effect a refinancing of the group's current net debt; to (ii) finance the acquisition of Fritta Group as well as to (iii) cover transaction related fees and expenses. Moody's issues provisional ratings in advance of the final sale of securities and these ratings reflect the agency's preliminary credit opinion regarding the transaction only. Upon a conclusive review of the final documentation, Moody's will endeavor to assign definitive ratings to the group's proposed senior secured loans. Definitive ratings may differ from provisional ratings. Ratings Rationale The assigned B1 CFR balances E-I's high profitability, exposure to growing end customer industries in combination with solid geographic diversification and moderate financial leverage at the outset with its small scale and lack of track record in sustaining high profitability levels amid significant competition and price pressure for its inkjet ink products. E-I's rating is supported by the company's niche market leadership in the production of intermediate products for the ceramic tile industry with in segments dominant market share. Moody's believe that E-I's market position is protected by solid entry barriers relating to technological know-how and R&D capabilities. Demand fundamentals are positive for E-I's products on the back of an overall growing global construction market, some benefits from substitution as well as solid geographic and customer diversification, which should to some part balance the inherent cyclicality of the construction industry. With regards to the group's financial profile, the rating positively reflects high profitability levels with EBITDA margins in excess of 20%, albeit with a short track record in sustaining these high margins, as well as moderate financial leverage estimated at just above 3 times debt/EBITDA as adjusted by Moody's pro forma for the transaction. The rating also reflects the small scale of the group with sales of EUR332 million and a reported EBITDA of EUR69 million expected for 2014. Main weakness in that respect relates to the narrow product focus and to a lesser extent the limited number of full scale production plants with only one plant dedicated to inkjet inks. Moody's believe that E-I is active in a highly competitive market environment which requires careful volume and price management, in particular for its newest product group of inkjet inks to defend current profitability of the group. In that respect, the rating also reflects the fairly short track record in generating EBITDA margins of around 20%. Moody's deem input cost inflation another risk factor for the group's profitability, as E-I is reliant on selling price increases to recover higher costs for major raw materials, including metal oxides and specialty chemicals. Liquidity Following the proposed refinancing, Moody's anticipate that E-I's liquidity profile will be solid. Internal cash sources include cash on hand of around EUR15 million pro forma for the refinancing and annual operating cash flow before working capital requirements of EUR50 million-EUR60 million. In addition, Moody's note that E-I will have access to a revolving credit facility amounting to EUR40 million. These sources should be sufficient to fund working cash requirements, estimated at around 3% of sales, as well as capex and all other basic cash requirements (including intra-year working capital swings). Moody's expect that E-I will continue to generate positive amounts of free cash flows. Moody's note positively that following the proposed refinancing, E-I will not have any material debt maturities apart from contractual cash sweep mechanisms before 2021, when the RCF will mature. Outlook The stable outlook on the rating reflects Moody's expectation that E-I will maintain its current profitability levels with EBITDA margins around 20% and continue to generate positive free cash flow. The stable outlook is also based on Moody's expectation that E-I preserves a sufficient liquidity cushion supported by positive free cash flow generation and the absence of material debt financed acquisitions and shareholder distributions. What Could Change The Ratings -- Up/Down Positive rating pressure could build up if E-I is able to sustain profitability margins at current levels by defending prices for its most important product group of inkjet inks and supported by raising production efficiencies. In terms of leverage, Moody's would expect the group's debt/EBITDA as adjusted by Moody's to decline towards 2x with a track record building of a moderate financial policy such as by applying free cash generated towards debt repayment purposes. However, an upgrade to Ba3 would also require a further strengthening of the business profile through an extension of the group's scale by anticipated organic growth and potential bolt-on acquisitions as well as a further diversification geographically and product wise. Moody's could consider downgrading E-I if the group's profitability were to come under pressure, resulting in EBITDA margins declining below the high teen percentages with debt/EBITDA trending towards 4x. Also, a deterioration in liquidity could result in rating pressure building. Structural Considerations The differentiation between the Corporate Family Rating and the Probability of Default Rating reflects the all bank debt structure and the higher recovery expectations under this type of structure. The lenders under the senior secured term loan as well as the revolving credit facility and the capex and acquisition facility will obtain guarantees from guarantors representing at least 80% of group EBITDA and / or assets and a materially all asset pledge over the same assets. As all senior secured bank debt ranks pari passu and there is no material subordinated debt to absorb first losses, the senior secured bank debt is rated at the same level as the CFR in line with Moody's Loss Given Default methodology. Assignments: Issuer: Pigments II B.V. Corporate Family Rating, Assigned B1 Probability of Default Rating, Assigned B2-PD Senior Secured Bank Credit Facility (Local Currency), Assigned (P)B1 Senior Secured Bank Credit Facility (Local Currency), Assigned a range of LGD3 Principal Methodology The principal methodology used in this rating was Global Chemical Industry Rating Methodology published in December 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. The Esmalglass-Itaca Group ("E-I") is a world leading manufacturer of intermediate products for the global ceramic tile industry. Moody's expect the group to report sales of around EUR332 million and EBITDA of EUR69 million in 2014 (21% reported EBITDA margin). Headquartered in Spain, the group produces a full range of products which determine the key properties of floor and wall tiles including surface colors, glazing products and body coloring products. RENOIR CDO: Moody's Raises Rating on Class C Notes to 'B3' ---------------------------------------------------------- Moody's Investors Service announced that it has taken rating actions on the following classes of notes issued by Renoir CDO B.V.: EUR230 Million (currently EUR61.4M rated balance outstanding) Class A Floating Rate Notes, Upgraded to A2 (sf); previously on Aug 24, 2012 Downgraded to Baa3 (sf) EUR10.5 Million Class B Deferrable Floating rate Notes, Upgraded to Ba1 (sf); previously on Aug 24, 2012 Downgraded to Caa1 (sf) EUR14.8 Million Class C Deferrable Floating Rate Notes, Upgraded to B3 (sf); previously on Dec 31, 2009 Downgraded to Caa3 (sf) EUR4.25 Million Class D-1 Deferrable Fixed Rate Notes, Affirmed Ca (sf); previously on Mar 11, 2009 Downgraded to Ca (sf) EUR5.05 Million Class D-2 Deferrable Floating Rate Notes, Affirmed Ca (sf); previously on Mar 11, 2009 Downgraded to Ca(sf) EUR8.5 Million Combination Notes, Affirmed Ca (sf); previously on Mar 11, 2009 Downgraded to Ca (sf) Ratings Rationale The rating actions on the notes are a result of the material improvement in the credit quality of the collateral and the deleveraging of the Class A notes. In the last 12 months more than 67% of the assets in the portfolio have been upgraded and on average the magnitude of the upgrades was 2.8 notches. In particular Moody's notes that on the 23rd of January 2015 the Italian, Spanish, Portuguese and Irish assets included in the portfolio, representing 33% of the collateral, were upgraded or left on review for upgrade following the revision of the methodology on country ceilings and the new ceilings applied to euro area countries. For more information on the underlying rating action please refer to the action "Moody's takes rating actions on Irish, Italian, Portuguese, Spanish ABS/RMBS deals" published on Moodys.com. Additionally the amount of assets rated within the Caa range by Moody's has decreased to 8.7% from 15% of the portfolio performing par while the defaulted assets have remained stable at the current EUR 15.7m as reported in the November 2014 trustee report. Since the interest payment of January 2014 the Class A has repaid EUR31.5 million or 13.7% of the tranche original balance. The amortization of class A has also improved the overcollateralization ratios ("OC ratios") across the capital structure. As per the December 2014 trustee report, the Class A/B, Class C and Class D overcollateralization ratios are reported at 126.3%, 106.2% and 94.7% respectively, compared to 116.2%, 102.5% and 93.8% as per the January 2014 trustee report. Moody's underlines that for the first time since 2009 the Class C OC test is passing thus reverting the interest deferral on the class D. Methodology Underlying the Rating Action: The principal methodology used in this rating was "Moody's Approach to Rating SF CDOs" published in March 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: Amounts of defaulted assets - Moody's considered a model run where all the Caa assets in the portfolio were assumed to be defaulted. The model outputs for these runs are consistent with the ratings. Weighted average spread (WAS) - Moody's considered a model run where the WAS generated by the collateral was reduced to 1% from 1.45%. The model outputs for these runs are consistent with the ratings. 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 2) divergence in the legal interpretation of CDO documentation by different transactional parties due to or 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 prepayment levels or collateral sales by the collateral manager. Fast amortization would usually benefit the ratings of the notes beginning with the notes having the highest prepayment priority. * 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. 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. =========== R U S S I A =========== MORTGAGE AGENT 3: S&P Lowers Rating on Class A Notes to BB+ ----------------------------------------------------------- Standard & Poor's Ratings Services lowered to 'BB+ (sf)' from 'BBB- (sf)' and removed from CreditWatch negative its credit rating on 'Mortgage Agent Absolut 3' LLC's class A notes. On Dec, 30, 2014, S&P placed its rating on the class A notes issued by 'Mortgage Agent Absolut 3' on CreditWatch negative following S&P's Dec. 23, 2014 CreditWatch negative placement of its long-term foreign currency sovereign credit rating on the Russian Federation. The downgrade follows the application of S&P's updated criteria for rating single-jurisdiction securitizations above the sovereign foreign currency rating. S&P applied its RAS criteria to test the transaction structure's ability to withstand a sovereign default stress, or a "severe" stress as defined by the criteria, in a 'BBB-' rating scenario, following S&P's Jan. 26, 2015 lowering to 'BB+' of its long-term sovereign foreign currency rating on Russia. At closing in December 2014, S&P's 'BBB- (sf)' rating was constrained by the results of its cash flow analysis. S&P's analysis for rating above the sovereign has shown that the available credit enhancement for the class A notes is not sufficient to withstand a severe stress scenario under S&P's RAS criteria. Consequently, as under S&P's RAS criteria it cannot assign any ratings uplift above the sovereign rating, S&P has lowered to 'BB+ (sf)' from 'BBB- (sf)' and removed from CreditWatch negative its rating on the class A notes. The transaction is exposed to counterparty risk from VTB Bank JSC as the issuer account bank. On Feb. 4, 2015, S&P lowered to 'BB+' from 'BBB-' its long-term issuer credit rating (ICR) on VTB Bank. Based on the transaction documents, the issuer managing company has to replace VTB Bank, in its role of the issuer account bank, within 60 calendar days upon the loss of a 'BBB-' rating. Should the managing company fail to replace VTB Bank, under S&P's current counterparty criteria, its rating on the class A notes will be capped at its long-term ICR on VTB Bank. 'Mortgage Agent Absolut 3' is a Russian residential mortgage- backed securities (RMBS) transaction that securitizes a portfolio of ruble-denominated mortgage loans. MORTGAGE AGENT 2011-2: S&P Lowers Rating on Class A2 Notes to BB+ ----------------------------------------------------------------- Standard & Poor's Ratings Services lowered to 'BB+ (sf)' from 'BBB- (sf)' and removed from CreditWatch negative its credit rating on the class A2 notes issued by CJSC 'Mortgage Agent of AHML 2011-2'. On Dec. 30, 2014, S&P placed its rating on the class A2 notes issued by CJSC 'Mortgage Agent of AHML 2011-2' on CreditWatch negative following S&P's Dec. 30, 2014 CreditWatch negative placement of its long-term issuer credit rating (ICR) on Agency for Housing Mortgage Lending OJSC (AHML). The downgrade follows S&P's Jan. 30, 2015 lowering to 'BB+' of its long-term ICR on AHML that acts as an originator, master servicer, and financial aid provider to the issuer, and S&P's Feb. 4, 2015 lowering to 'BB+' of its long-term ICR on VTB Bank JSC that is an issuer account bank. S&P's current counterparty criteria cap its rating on the class A2 notes at the long-term ICR on AHML in its capacity as the master servicer and financial aid provider. S&P's lowering to 'BB+' of its long-term ICR on AHML has therefore capped at 'BB+ (sf)' its rating on the class A2 notes. At the same time, under S&P's current counterparty criteria, its lowering to 'BB+' of its long-term ICR on VTB Bank has also capped at 'BB+ (sf)' its rating on the class A2 notes. S&P has therefore lowered to 'BB+ (sf)' from 'BBB- (sf)' and removed from CreditWatch negative its rating on the class A2 notes. In S&P's view, the transaction's collateral performance has been consistently good since closing, with the percentage of defaulted loans (defined in this transaction as 90+ day delinquencies) staying under 2.0% to date. CJSC 'Mortgage Agent of AHML 2011-2' is a Russian residential mortgage-backed securities (RMBS) transaction originated by AHML, which securitizes a portfolio of ruble-denominated residential mortgages. ========= S P A I N ========= ABENGOA SA: S&P Affirms 'B/B' CCR; Outlook Remains Positive ----------------------------------------------------------- Standard & Poor's Ratings Services said that it affirmed its 'B/B' long- and short-term corporate credit ratings and on Spain- based engineering and construction company Abengoa S.A. The outlook remains positive. S&P understands that Abengoa remains committed to reducing its stake in its yield company to below 50%, which S&P thinks will lead to reduced consolidated leverage and improved credit ratios. Abengoa has sold a further 13% of the yield company, resulting in an overall stake of 51%, and also executed a second sale of concession business to the yield company. Altogether, the cash inflow from these transactions has been about EUR390 million in the first two months of 2015. At the same time, Abengoa has partnered with investment group EIG and created a new entity, APW-1, which will finance most of Abengoa's construction projects going forward. Once Abengoa has executed the reduction of its stake in the yield company below 50%, S&P anticipates that credit ratios could be at the stronger end of its "highly leveraged" assessment thanks to reduced consolidated debt, a lower interest burden on Abengoa, and the possible use of disposal proceeds to lower corporate debt. Management has demonstrated a clear willingness to execute this strategy. S&P's current understanding is that the debt to be deconsolidated amounts to around EUR3.1 billion. Management is also planning to sell more of the concession business, with related debt of EUR1,030 million, in the near term. Abengoa plans to hold a 45% interest in the newly created entity, APW-1, with the remainder held by EIG. In S&P's view, this should reduce Abengoa's capital expenditure burden for the concession business and support free operating cash flow (FOCF) over time. This transaction in itself does not imply any major imminent improvement of Abengoa's debt level or credit ratios, because the deconsolidation relates to a portfolio of recently started projects with debt of around EUR250 million; however, S&P also understands that Abengoa will receive about EUR600 million in cash proceeds when the APW-1 partnership has been finalized. Although the positive outlook captures the possibility that the yield company is deconsolidated, S&P's base case still assumes no change to Abengoa's scope of consolidation. Furthermore, S&P currently do not envisage changing its analytical approach by deconsolidating any nonrecourse debt that Abengoa reports on its balance sheet. However, when all transactions as announced by the company are executed, S&P thinks this will lead to an important reduction in the company's gross debt level. S&P notes amounts available on a nonrecourse basis for capital expenditure in concessions, but this liquidity cannot be used for general corporate purposes. It matches financing needs for projects well, however. The incurrence covenant on Abengoa's senior unsecured notes specifies debt-to-EBITDA ratios of less than 3x, where debt and EBITDA exclude nonrecourse subsidiaries. However, debt is netted against total consolidated cash and short-term financial investments, including those held by nonrecourse subsidiaries. Furthermore, the syndicated bank facility renewed in September 2014 includes a more demanding ratio of 2.5x net debt to EBITDA from June 30, 2015. As of Sept. 31, 2014, the ratio was 2.15x. S&P understands from the management that Abengoa was in compliance with this covenant at year-end 2014. S&P's base case assumes that Abengoa should be able to continue to meet those ratios. The positive outlook on Abengoa reflects S&P's view of a one-in- three possibility that Abengoa's financial risk profile will improve within the next six months, following management's plan to reduce ownership in its yield company. This could lead to a reduction in reported consolidated debt, implying credit ratios at the upper end of the "highly leveraged" category. S&P expects the group to continually place mature projects in the yield company. If these measures prove successful over the coming months, S&P could raise its long-term rating on Abengoa by one notch, assuming the group's liquidity remains at least "adequate." S&P could raise the rating in the near term if it continues to observe Abengoa placing a material part of its concessions business in its yield company, and if at the same time it successfully executes its plan to reduce the stake in the yield company to below 50%. This would likely require credit ratios at the higher end of the "highly leveraged" financial risk profile category. Furthermore, S&P is unlikely to take any positive rating action until transaction been executed. An upgrade would also assume that management will maintain at least "adequate" liquidity. Even if S&P didn't analytically deconsolidate the yield company, an upgrade could still be possible if it observed that the more stable concession business had a positive impact on the company's business risk profile. S&P would be likely to revise the outlook to stable if management does not successfully execute its plans to reduce the stake in the yield company, and FFO to debt remains around 4%-6%. S&P could also revise the outlook to stable if Abengoa doesn't continue to place its concession business in the yield company. AYT GOYA HIPOTECARIO: Moody's Hikes Class B Notes Rating to Ba1 --------------------------------------------------------------- Moody's Investors Service has downgraded the ratings of the senior notes and upgraded junior notes in a Spanish residential mortgage-backed securities (RMBS) transaction AyT Goya Hipotecario IV, FTA. Issuer: AyT Goya Hipotecario IV, FTA EUR1,066 million Class A Notes, Downgraded to A2 (sf); previously on Jan 23, 2015 A1 (sf) Placed Under Review for Possible Upgrade EUR234 million Class B Notes, Upgraded to Ba1 (sf); previously on Jan 23, 2015 Caa1 (sf) Placed Under Review for Possible Upgrade The rating action concludes the review of Classes A and B notes placed on review on January 23, 2015 because of reduced country risk for Spanish transactions as reflected in the upgrade of the local-currency country risk ceilings to Aa2 from A1 on January 20, 2015. Ratings Rationale The Class A downgrade, primarily reflects the linkage to Issuer Account Bank Barclays Bank, S.A (NR). On the 23rd January 2015, Ahorro y Titulizacion, S.G.F.T., S.A ("AyT") moved the Treasury Account functions to Barclays Bank, S.A from Barclays Bank Plc (A2/P-1). On the 2nd of January 2015 Caixabank (Baa3/P-3) acquired Barclays Bank, S.A. Currently Barclays Bank, S.A is an unrated subsidiary of Caixabank. Moody's has assessed the probability and impact of a default of Barclays Bank, S.A on the ability of the Issuer to meet its obligations under the transaction, including the impact of the loss of any cash held by Barclays Bank, S.A should it default and any loss that may be incurred after that time due to any delay in redirecting payments to new accounts or taking any other appropriate action. Moody's concludes that Class A falls into the strong linkage category, and therefore the maximum achievable rating is A2 (sf). The main drivers behind Class B's upgrade are (1) the reduced country risk as reflected by the increase in the maximum achievable rating in Spain, and principally (2) reduction in MILAN and (3) reduction in the expected loss (EL) assumption. Increased Local-Currency Country Ceilings The country ceilings reflect a range of risks that issuers in any jurisdiction are exposed to, including economic, legal and political risks. On 20 January 2015, Moody's announced a six- notch uplift between a government bond rating and its country risk ceiling for Spain. As a result, the maximum achievable ratings for structured finance transactions was increased to Aa2 from A1 for Spain. Reduction in Milan CE Moody's has revised its MILAN CE assumption to 14.1% from 15.0%, reflecting the change in performance. The downward revision to the Milan CE, together with the relevant revised country ceiling define the transaction's loss distribution and is an integral part in determining the affected notes' rating through Moody's cash flow models. Revision of Expected Loss As part of the rating action, Moody's reviewed the collateral performance of AyT Goya Hipotecario IV, FTA and incorporated the revision of EL assumptions into its analysis. Moody's has reassessed its lifetime loss expectation taking into account the better collateral performance than expected. As a result, Moody's decreased its Expected Loss of the original pool balance to 2.73% from 3.50%. Exposure to Counterparties Moody's rating analysis also took into consideration the exposure to key transaction counterparties including the roles of servicer, account bank, and swap provider. The rating action takes also into account commingling exposure to Barclays Bank, S.A. Moody's also assessed the exposure to Barclays Bank Plc (A2/P-1) acting as swap counterparty in when revising ratings. Principal Methodology The principal methodology used in this rating was "Moody's Approach to Rating RMBS Using the MILAN Framework" published in January 2015. Factors that would lead to an upgrade or downgrade of the rating: Factors or circumstances that could lead to an upgrade of the rating include: (1) further reduction in sovereign risk, (2) performance of the underlying collateral that is better than Moody's expected, (3) deleveraging of the capital structure and (4) improvements in the credit quality of the transaction counterparties. Factors or circumstances that could lead to a downgrade of the rating include: (1) an increase in sovereign risk, (2) performance of the underlying collateral that is worse than Moody's expects, (3) deterioration in the notes' available credit enhancement and (4) deterioration in the credit quality of the transaction counterparties. =========================== U N I T E D K I N G D O M =========================== B. ENDEAVOUR SHIPPING: Recognition Hearing Set for March 5 ---------------------------------------------------------- The hearing to consider approval of Peter Kubik and Andrew Andronikou's petition for recognition of B. Endeavour Shipping Company Limited's insolvency proceeding in the United Kingdom as a "foreign main proceeding" under Chapter 15 of the U.S. Bankruptcy Code will be held on March 5, 2015, at 9:45 a.m. About B. Endeavour B. Endeavour Shipping Company is a company incorporated in Cyprus whose sole asset is a 62,000 deadweight tonnage Panamax Tanker named "Ice Base," valued at approximately $28.1 million. Ice Base transports liquid natural gas and oil and operates principally in the territorial waters of the United States, including New York harbor. B. Endeavour is a unit of Baltic Tankers Holding Ltd., which owns five other Cyprus companies, each of which owns a 37,000 DWT product carrier that operates principally in the waters of Europe and the Baltic area. Baltic Tankers is owned by Northsea Base Investment (NSBI). Hamilton Corporation, NSBI's sole shareholder, is owned by certain family trusts. Marine Cross Services Limited, a London-based shipping agent, handles day-to- day financial administration and management. On Jan. 15, 2015, B. Endeavour and its five affiliates were placed into administration in London, England after defaulting on debt to BNP Paribas S.A. Peter Kubik and Andrew Andronikou of UHY Hacker Young LLP, were appointed joint administrators. Felicity Toube QC serves as counsel. The joint administrators on Feb. 3, 2015, filed a Chapter 15 bankruptcy petition (Bankr. S.D.N.Y. Case No. 15-10246) for B. Endeavour in Manhattan, in New York, to seek U.S. recognition of the UK proceeding. Judge Robert E. Gerber presides over the case. Geoffrey T. Raicht, Esq., at Proskauer Rose LLP, serves as counsel in the U.S. case. CATERHAM F1: Asset Auction Scheduled for March ---------------------------------------------- Zach Doell at Boldride reports that all of Caterham Formula One racing team's assets will head to auction in March. The Wyles Hardy & Co. auction site lists many of the team's assets, which include the obligatory office furniture, desktop computers, work benches, and engineering machinery, Boldride discloses. According to Boldride, a few 2014 Caterham F1 show cars are also up for sale, as well as body panels and racing components, pit- lane equipment, giant race and hospitality trailers, an F1 race simulator with a 200 degree field of view, and a Dell supercomputer. As reported by the Troubled Company Reporter-Europe on October 23, 2014, The Financial Times related that Caterham fell into administration, threatening the future of the racing franchise. London-based accountants Smith & Williamson were appointed administrators to Caterham on Oct. 17, 2014, the FT disclosed. The lack of success prompted team owner Tony Fernandes the AirAsia tycoon and chairman of Queens Park Rangers football club, to sell the franchise and the manufacturing company to a consortium of investors, according to the FT. However, the new owners -- whose identity remains unclear -- have struggled to raise sufficient financing, leaving Caterham owing millions to its suppliers, the FT said. Smith & Williamson is in discussions about a sale of the company, the FT noted. Caterham F1 is a racing team. CITY LINK: Dartford MP Welcomes Jobs Boost for Former Workers ------------------------------------------------------------- The Reporter discloses that parcel delivery company DPD will offer employment to at least six former City Link workers. DPD confirmed it had already recruited four former City Link staff who lost their jobs when the company went into administration on Christmas Eve, and expects to take on at least another two, according to The Reporter. The report notes that Dartford Member of Parliament Gareth Johnson has welcomed the jobs boost. "DPD is a growing company, investing in technology and infrastructure and creating jobs in our region. I was delighted to hear that six former City Link workers have found new jobs with DPD in Dartford and I will continue to do all I can to help those in our area affected by City Link's sudden closure," the report quoted Mr. Johnson as saying. The report notes that Mr. Johnson visited DPD's depot in Wilmington, which opened in October and created 55 new jobs. The report discloses that DPD's general manager in Dartford, Dan Hadley, said: "It was great to have Gareth come down for a look around the depot and to be able to pass on the good news about the former City Link staff. "We're a rapidly growing company and our new purpose built depot in Dartford gives us a huge advantage in terms of location and sorter technology, meaning we can increase the number of parcels we handle and service more routes cost effectively," Mr. Hadley said, the report relays. "It is a key location for us with Bluewater nearby and the new depot means we can provide an outstanding service to DPD customers in the area," Mr. Hadley added. DYFED CLEANING: Enters Administration, Seeks Buyer -------------------------------------------------- Western Telegraph reports that Dyfed Cleaning Services, a laundry firm that has branches in Milford Haven and Haverfordwest, has gone into administration. Administrators at business rescue and recovery specialists Begbies Traynor have been appointed to pursue the sale of the business, according to Western Telegraph. The report notes that the firm, which was adversely hit by a significant fire two years ago, is operating as usual as a buyer is sought. Joint administrators Steve Wade -- steve.wade@begbies-traynor.com -- and David Hill -- dave.hill@begbies-traynor.com -- from Begbies Traynor's Cardiff offices were appointed on January 29. The report notes that Mr. Wade said the company's main office, in Port Talbot, together with a distribution site and three additional operations in West Wales, would be of interest to a number of national operators and a quick sale was expected. "We have secured the immediate future of some 70 employees and it's very much business as usual as we go to the next stage," the report quoted Mr. Wade as saying. The Port Talbot site was hit by a fire in January 2013, which extensively damaged the building, the report recalls. The report discloses that Mr. Wade said: "Turnover has been hit hard since the fire, but the business continued to trade. The business also received the support of many of their suppliers during what was a very troubled time, and though the business has continued to move forward, administration eventually became inevitable due to a number of external forces." Dyfed Cleaning Services is one of the largest and longest established commercial laundries in south Wales, offering a range of linen, laundry and work wear cleaning services for businesses and leisure facilities. The company also has a number of dry cleaning and launderette outlets in west Wales, as well as a distribution site in Haverfordwest. DYTECNA LTD: In Administration, Seeks Buyer ------------------------------------------- Rachel Constantine at Business Sale reports that Dytecna Ltd, an engineering group with headquarters in Worcestershire, has gone into administration, and is now for sale. Dytecna Ltd, which has three sites across the UK including its head office on Malvern Hills Science Park, has called in administrators Philip Watkins -- philip.watkins@frpadvisory.com -- and Geoff Rowley -- geoff.rowkey@frpadvisory.com -- of FRP Advisory, according to Business Sale. The business focuses on technology, manufacturing and support services for the defense sector and employs 150 staff, the report notes. The report notes that the firm has called in administrators after a recent drop in trade put pressure on its ability to continue business under its current financial structure and it failed to secure further investment. "We are highly focused on working with Dytecna's staff, customers and suppliers and engaging with interested parties, while seeking a suitable buyer. Dytecna has enjoyed a good working relationship with a number of loyal clients over the years. In line with trading conditions affecting similar firms in its sector, the business has had to manage unsustainable pressure on its cash flow," the report quoted Mr. Watkins as saying. "The business maintains a strong order book and will aim to continue to deliver the high level of service for which the business is known. We would invite interested parties to make early contact," Mr. Watkins added. The report relays that financial accounts for January 1, 2013 to March 31, 2014 indicate a turnover of GBP22.4 million with pre- tax profits of GBP271,799. EUROSAIL-UK PLC: Moody's Raises Rating on EUR36MM Certs. to Caa2 ---------------------------------------------------------------- Moody's Investors Service has upgraded the ratings of four notes in Eurosail-UK 2007-4BL PLC following the execution of a restructuring. Issuer: Eurosail-UK 2007-4BL PLC EUR230 million A2a Certificate, Upgraded to Aa1 (sf); previously on Dec 21, 2010 Downgraded to Baa2 (sf) EUR52 million B1a Certificate, Upgraded to Aa3 (sf); previously on Nov 25, 2008 Downgraded to Caa1 (sf) EUR55 million C1a Certificate, Upgraded to Baa3 (sf); previously on Dec 21, 2010 Downgraded to Ca (sf) EUR36 million D1a Certificate, Upgraded to Caa2 (sf); previously on Dec 21, 2010 Downgraded to Ca (sf) Ratings Rationale The restructuring, implemented in two stages in November 2014 and in December 2014, included the redenomination of all notes, the application of cash receipts relating to the claims against the original swap counterparties and the split of the old class A3 into the new classes A3, A4 and A5. Moody's maintains its ratings for the classes of notes that keep the same ISIN following the restructuring, namely the classes A2a, B1a, C1a, D1a and E1c. For additional restructuring items, please refer to the end of this press release. The rating upgrades of the four classes of notes reflect the redenomination from euro (EUR) to British pound sterling (GBP) and partial repayment of the mezzanine and junior notes through the application of cash receipts. Prior to the restructuring the deal was exposed to foreign- exchange risk, present since the event of default on the swap agreement that the bankruptcy filing of Lehman Brothers Holdings Inc. triggered in 2008. The redenomination have eliminated the cross-currency risk and the potential for future build-up of under-collateralization that the depreciation of GBP to EUR could cause. All classes of the notes were redenominated to GBP from EUR at a conversion rate of 1.27 EUR/GBP. The class B1a also benefited from a write-up of GBP3.1 million. The cash receipts relating to the claims against the swap counterparties have been applied towards the repayment of the outstanding notes except for the class A2a. Other Considerations Moody's review of transaction's collateral indicated stable performance, the rating agency has maintained it expected loss assumption at 8.5% of the original pool balance and MILAN at 26.5%. Moody's rating analysis also took into consideration the exposure of the notes to the issuer account bank Danske Bank A/S (A3/P-2), acting through its London branch. List of Additional Restructuring Items Amendment to the margin of the notes: The margins of some classes of the notes were increased, namely to 30bps from 16bps for the class A2a, to 100bps from 36bps for the class B1a, and to 125bps from 65bps for the class C1a. Introduction of liquidity reserve fund: The issuer will establish the liquidity reserve fun through capturing principal payments to cover interest shortfall on the class A2a and A3 notes. Liquidity reserve fund target is GBP 2.5 million. Amendment of reserve fund level and required target amount: The reserve fund will be allowed to amortize to 2% of the outstanding notes balance without a floor, subject to certain conditions. The major conditions are: the reserve fund being at its required target, the class A2a notes have fully repaid, and delinquencies which are 90 days or more overdue not exceeding 22.5% of the outstanding mortgage balance. Waiver of account bank trigger breach: The noteholders agreed to waive the trigger breach of Danske Bank A/S acting as the transaction's account bank. As a result, Danske Bank A/S will continue to act as the transaction's account bank, even though it has a short-term rating of Prime-2, below the Prime-1 rating originally required for the issuer account bank. Methodology Underlying the Rating Action: The principal methodology used in this rating was "Moody's Approach to Rating RMBS Using the MILAN Framework" published in January 2015. Factors that would lead to an upgrade or downgrade of the rating: Upward pressure could develop on the ratings following (1) stronger underlying asset performance, beyond Moody's expectations; (2) further deleveraging with a build-up of credit enhancement; or (3) the improvement of the creditworthiness of the transaction's main counterparties. Downward pressure could develop on the ratings following (1) underlying collateral performance that is worse than Moody's expects; or (2) deterioration in the creditworthiness of the transaction's main counterparties. HERO ACQUISITIONS: Moody's Raises CFR to 'B1' Following IPO ----------------------------------------------------------- Moody's Investors Service has upgraded to B1 from B2 the corporate family rating (CFR) and affirmed the B1-PD probability of default (PDR) rating of Hero Acquisitions Limited (HSS or the company). Concurrently, Moody's has upgraded to B1 from B2 the GBP200 million senior secured notes maturing in 2019 issued by HSS Financing plc, a subsidiary of HSS. The rating outlook is stable. Ratings Rationale The rating action follows the London initial primary offering (IPO) of HSS Hire Group plc (the new top holding company of the Hero Acquisitions Limited group of companies), with 35% of the share capital now in public ownership. Net IPO proceeds of GBP89.5 million (net of GBP13.5 million of transaction fees) will be used to redeem GBP64 million of the GBP200 million senior secured notes and fund a GBP4.5 million redemption premium, and to repay GBP21 million of drawings under the GBP60 million revolving credit facility (RCF). Funds managed by Exponent (Exponent) and co-Investors acquired 79% of HSS in October 2012. Pro-forma for the IPO, their shareholding will decrease to 50.4% assuming no exercise of the over-allotment option. "The upgrade of HSS's CFR to B1 reflects (1) the company's improved credit metrics post IPO, (2) good execution in implementing the hub-and-spoke distribution model through the roll-out of local format branches enhancing utilization with a more limited capex spend, and (3) the good growth prospects for the UK tool and equipment rental market", says Sebastien Cieniewski, Moody's lead analyst for HSS. However, Moody's notes that the ratings remain constrained by (1) the cyclicality of the tool and equipment rental industry, (2) the geographical concentration of HSS's operations within the UK and Ireland, and (3) the limited prospects for de-leveraging over the rating horizon based on HSS's anticipated large capex spend over the next 24 months to be funded by operating cash flows and drawings under the RCF. Pro-forma for the IPO, HSS's adjusted gross leverage ratio (as adjusted by Moody's mainly for operating leases) as of 27 September 2014 will improve to 3.0x from 4.0x prior to the transaction. However, Moody's does not expect significant de-leveraging over the rating horizon based on the company's large capex investments which will result in negative free cash flow over the medium term to be funded by internally generated cash flows and drawings under the RCF and finance leases. In 2014, HSS forecasted a high capex spend of approximately GBP75-80 million which is expected to be maintained at a high GBP77 million in 2015. The company has been investing significantly in fleet hire expansion over the last 2 years with the ratio of hire fleet capex to hire fleet depreciation at c.2.0x. Part of the total capex is also used to further implement HSS's hub-and-spoke distribution system through the roll-out of low cost local format branches. The company forecasted 43 openings in 2014 with around 50 openings per annum going forward. The high level of capex was driven by high demand for HSS's services. The European Rental Association (ERA) estimates that the UK equipment rental will grow at 9.7% in 2014 and will continue growing at around 4.4% in 2015 and 4.2% in 2016 -- a credit positive for HSS. Moody's recognises the fact that HSS has been outperforming the UK equipment rental market gaining market share to 4.7% as of September 2014 from 3.6% in December 2011. More recently, in the 9-month period to September 27, 2014, HSS generated revenues of GBP208.5 million -- a 27.8% increase compared to the same period last year -- mainly driven by organic growth (18.6%) and acquisitions to a lesser extent (9.3%). Organic growth was supported by the roll-out of 14 new local format branches and significant capex investment of GBP60.7 million during Q1-Q3 2014 to increase hire fleet stock. HSS benefits from an adequate liquidity position. The company's limited cash balance of GBP5.2 million as of 27 September 2014 is mitigated by the relatively large GBP60 million RCF which can be upsized to reach up to 100% of HSS's last twelve months (LTM) EBITDA capped at GBP80 million. Pro-forma for the IPO, the RCF is assumed to be fully undrawn as at 27 September 2014, however, Moody's expects that HSS will increasingly draw under the RCF to fund its large capex plan. The PDR at B1-PD, at the same level as the CFR, reflects Moody's assumption of a 50% family recovery rate given the mix of bank debt and bonds in the capital structure. The GBP60 million RCF has a springing leverage covenant only that also acts as a draw stop, tested only once 25% of the facility is drawn. The senior secured notes are rated B1, at the same level as the CFR. Rating Outlook HSS' stable outlook reflects Moody's expectation of sustained revenue growth over the medium-term due to favorable macro- economic conditions in the UK. The outlook also reflects the expectation that the company will maintain a prudent acquisition strategy and benefit from significant availability under its RCF. What Could Change the Rating -- UP Upwards pressure could arise if the company (1) shows good execution in the development of its hub-and-spoke distribution system through the roll-out of local stores gaining significant size within the UK rental market, (2) reduces debt to EBITDA towards 2.0 times on a sustainable basis, (3) and improves EBITDA to interest above 5.0 times. Moody's would also expect the company to enhance its liquidity position through increased external sources of liquidity. What Could Change the Rating -- DOWN Conversely, negative pressure could arise on the ratings if (1) debt to EBITDA reverts towards 3.5 times on a sustained basis, (2) EBITDA to interest decreases to below 3.5 times, or (3) the company's liquidity profile weakens. The principal methodology used in these ratings was Equipment and Transportation Rental Industry published in December 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. Headquartered in Surrey, United Kingdom, Hero Acquisitions Limited is a provider of tool and equipment hire and related services in the United Kingdom and Ireland. The company operates mainly in the B2B market, and generated GBP271 million of revenues in LTM September 27, 2014. INDUS PLC: Moody's Affirms B1 Rating on GBP0.1MM Cl. X Notes ------------------------------------------------------------ Moody's Investors Service upgraded the ratings of Classes A and B and affirmed the rating of Class X Notes issued by Indus (Eclipse 2007-1) plc. GBP729 million (current outstanding balance of GBP109M) A Notes, Upgraded to Aa2 (sf); previously on Jun 28, 2013 Upgraded to A1 (sf) GBP48 million (current outstanding balance of GBP47M) B Notes, Upgraded to Baa3 (sf); previously on Jun 28, 2013 Affirmed B3 (sf) GBP0.1 million (current outstanding balance of GBP0.08M) X Notes, Affirmed B1 (sf); previously on Jun 28, 2013 Affirmed B1 (sf) Moody's does not rate the Class C, Class D and the Class E Notes. Ratings Rationale The upgrade action reflects the lowering of Moody's loss expectation for the pool since the last review. This is primarily due to Moody's expectation that the Criterion Loan (61% of current pool excluding Workspace Portfolio Loan) will repay without a loss. The collateral benefits from its prime West End London office and retail market location which has experienced strong rental growth and yield compression over the past few years. An updated valuation was recently reported at GBP 260 million, a 44% increase over the 2012 reported value. This reflects an UW whole loan LTV ratio (inclusive of swap mark to market) of approximately 64%. Additionally, since the last review credit enhancement on senior notes have increased because GBP21.9 million of recovery proceeds were distributed and a further 8.2 million are expected to be distributed at the next IPD following 1) the repayment of two loans (one with loss); 2) disposal proceeds and 3) a partial loan repayment following a borrower control change. The Workspace Portfolio loan is expected to repay with a loss of 16 million at the next IPD. The rating on the Class X Notes is affirmed 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. Moody's upgrade reflects a base expected loss in the range of 0%- 10% of the current balance excluding Workspace Portfolio Loan, compared with 20%-30% 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 maturity) and its value assessment of the collateral. Realised losses have remained stable at 5% of the original securitized balance since the last review. However, these will increase after allocation of losses from the Workspace Portfolio Loan. Moody's estimate of the base expected loss is now in the range of 0%-10% of the original pool balance compared with 10%- 20% at the last review. 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. Other factors used in this rating are described in European CMBS: 2014-16 Central Scenarios published in March 2014. Factors that would lead to an upgrade or downgrade of the rating: The rating is very sensitive to the performance of the Criterion loan. The main factor that could lead to a downgrade of the rating is failure of the Criterion loan to repay in full. Tha main factor that could lead to an upgrade of the rating is an increase in the property values backing the underlying loans leading to loan recoveries higher than Moody's expectation. However, the ratings of Class A is capped at Aa2 (sf) due to operational risk. Moody's Portfolio Analysis Indus (Eclipse 2007-1) plc closed in 2007 and represents the securitization of initially 19 mortgage loans originated by Barclays Bank Plc. As of the October 28 IPD, the transaction balance has declined by 75% to GBP225.2 million from GBP894.4 million at closing due to the pay off of 14 loans originally in the pool and a GPB10 million partial repayment on the NOS Portfolio Loan. Since last review, the balance has declined by 9% from GBP247.1 million to GBP225.2 million. Excluding Workspace Portfolio, four loans remain in the pool, which are secured by first-ranking legal mortgages over 230 commercial properties. The pool exhibits an average concentration in terms of property type (63% office, based on underwriter market value) and geographic location (100% in the UK). Moody's uses a variation of Herf to measure diversity of loan size, where a higher number represents greater diversity. Large multi-borrower transactions typically have a Herf of less than 10 with an average of around 5. The remaining pool has a Herf of 2.2, lower than the Herf of 7.9 at closing. Large losses will be realized on the Workspace Portfolio Loan (11.5% of the pool) which was secured by eight managed workspace properties involving a mix of warehouses, light industrial and office accommodation at closing. All eight properties have been sold for a total of GBP10.9 million and the proceeds of GBP8.2 million will be applied at the next IPD. Moody's notes that for the currently outstanding pool of four loans, Moody's weighted average LTV is 92% which translates into a high probability of default at maturity (50% - 75%). Moody's expects a loss on the pool in the range of 0% - 10%. Summary of Moody's Loan Assumptions Below are Moody's key assumptions for the top 2 loans. Criterion Loan - LTV: 90% (Whole)/ 80% (A-Loan); Total Default probability Medium; Expected Loss 0%-5%. The largest loan in the pool, Criterion Loan, represents 61% of the current securitized loan balance excluding the Workspace Portfolio Loan, and matures in July 2015. The whole loan is split into a securitized senior loan and a junior loan outside of the securitization. An interest rate swap covering the whole loan amount matures only in January 2022 and has currently a significant negative mark-to-market value for the borrower. The loan is secured by an asset in Picadilly Circus, London, which has a mix of retail and office use. Moody's value assessment for the property has increased in line with the strong performance of the prime London property market and the current Moody's LTV is 90% on the whole loan including the mark-to-market exposure of the long dated interest rate swap, which ranks senior to the securitized loan. The loan was previously in breach of the LTV covenant which was waived until July 2014 in exchange of the borrower meeting any shortfalls from their own equity. According to the latest valuation in November 2014, the whole loan LTV on the loan decreased from 90% to 64% against the covenant of 85%. The increase in value is primarily driven by cap rate compression backed by reversionary potential. Moody's expect the loan to fully repay. NOS Portfolio Loan - LTV: 104%; Total Default probability High; Expected Loss 10%-20%. The second largest loan, NOS Portfolio Loan, represents 28% of the current securitized loan balance excluding the Workspace Portfolio Loan, and matures in January 2017. The loan is secured by 227 small secondary retail units spread across the UK. The tenants are mostly small local businesses. The portfolio vacancy has remained close to 20%. Moody's LTV ratio decrease to 104% from 128% in the previous review, is primarily driven by an unexpected repayment of GBP 10 million, through equity generated from sale of sponsor share in the borrower. JAKEM LTD: In Liquidation, Sells Kingsbarn Equestrian Center ------------------------------------------------------------ Horse & Hand reports that Kingsbarn Equestrian Center is on the market with rural property specialists Baird Lumsden for around GBP650,000 after the company behind the centre, Jakem Ltd, was put into liquidation. The company describes it as "an extensive equestrian facility in a prime central belt location," according to Horse & Hand. The report notes that Duncan Ferguson from Baird Lumsden said there was "significant ongoing interest" in the property. Last year, Horse & Hand confirmed that showjumping shows at the center had been reallocated due to the liquidation, which followed a dispute between center owner Jackie Kemp and a stakeholder. The company reportedly has six-figure debts, as well as owing thousands to Falkirk Council, the report notes. A spokesman for BS said showjumpers in Scotland should not be at a loss, the report relays. "We've had more centres come on board in the past 18 months so we have more venues than previously in Scotland," the report quoted the spokesman as saying. The final court hearing for Jakem Ltd took place last month, and the company was placed into liquidation, the report discloses. On January 19, liquidators Grainger Corporate Rescue appointed Baird Lumsden to sell the property. "Hopefully as a result of the process, the centre will come out the other side and find a buyer to get it up and running again," said a spokesman from Grainger Corporate Rescue. The report discloses that the center originally opened in 2007 -- costing GBP10 million to build -- owned by Stewart Aitken, but went into administration in 2009. Ms. Kemp reopened the center under Jakem Ltd the same year, the report notes. Late last year, Ms. Kemp was under investigation by the Scottish SPCA after a social media campaign, entitled "Let's stop this horse cruelty" was set up, the report relays. The center is set in around 44 acres. It has a 75m x 60m international indoor arena, 75 indoor stables and 89 outdoor stables. There are also offices, a cafe and feed store, as well as potential development site, subject to planning permission. MARUSSIA F1: Denies ManorGP's Request ------------------------------------- ESP Formula One reports that the Formula One team formerly known as Marussia has suffered a setback to its hopes of entering this year's championship, after the F1 Strategy Group said its application "lacked substance" and was "speculative." The team missed the last three races of last season after going into administration, but ManorGP -- which has raced under the Marussia and Virgin names since entering F1 -- is in negotiations with proposed new investors, according to ESP Formula One. The report notes that ManorGP is seeking dispensation to enter this year's championship with last year's car despite alterations to the rules governing the design of the chassis and wings. To do so, the team needed majority approval from the F1 Strategy Group comprising the FIA -- motorsport's governing body -- plus the F1 commercial rights holder headed by Bernie Ecclestone, and the top six teams of Ferrari, Mercedes, Red Bull, McLaren, Williams and Force India, the report relates. Force India was among those to vote against on Feb. 5. "During the meeting, it emerged there were compliance issues and that the application lacked substance," Force India deputy the report quoted principal Bob Fernley as saying. "The speculative submission contained no supporting documentation to reinforce the case for offering special dispensation. For example, no details were supplied of who the new owners would be or the operational structures that would be put in place," the report quoted Mr. Fernley as saying. However, ManorGP's Graeme Lowdon, who was chief executive of the team before it entered administration, said he was surprised by Mr. Fernley's comments, the report relates. "We did not make any application to Feb. 6's Strategy Group meeting and nor were we asked to," Mr. Lowdon said, the report relates. "Instead, we are proceeding with our clear process regarding compliance and building our operation. We are doing everything possible to adhere to the process set out for us to return to the 2015 grid," Mr. Lowdon added. The report discloses that Mr. Lowdon said that "given the confidential nature of the negotiations underway, neither they (the investors) nor the team are able to provide further details regarding the team's new investors, however those investors have either met with or spoken to the key F1 bodies." Manor is provisionally entered on the 2015 team list, with the season to start March 15 in Melbourne, Australia, the report adds. Marussia Formula One Team is based in Banbury. MAX PETROLEUM: Could Become Insolvent Without Restructuring ----------------------------------------------------------- Energy Voice reports that Max Petroleum said it could become insolvent without debt restructuring and additional financing. The company said the fall in oil price has had a "very severe" impact on the company's forecast liquidity position for the year ahead, according to Energy Voice. As a result, its business had been rendered unviable unless further material investment is made into the company, the report notes. The report relates that this would be in addition to a comprehensive debt restructuring agreed with Sberbank, which have so far been unsuccessful. "While, as a result of the above, the Subscription by AGR Energy will not proceed, Max Petroleum continues negotiations with Sberbank regarding an appropriate debt restructuring and with AGR Energy regarding an equity investment that, together with the debt restructuring, would render the Company viable at current oil prices," the report quoted a spokesman as saying. "The directors of Max Petroleum currently believe that there is a reasonable prospect that ongoing discussions could result in a sufficient refinancing of the Company and, on that basis, have not put the Company into administration," the spokesman as saying, the report relates. "However, there is only a short period remaining to achieve such a refinancing and if current efforts are unsuccessful then the consequences will be negative for all stakeholders in the company," the spokesman adds. A further announcement is expected to be made by the company in due course. MEIF RENEWABLE: Fitch Assigns 'BB' Rating to GBP190MM Sr. Notes --------------------------------------------------------------- Fitch Ratings has assigned MEIF Renewable Energy UK plc's (MEIF Renewable; BB/Stable) GBP190 million 6.75% senior secured notes due Feb. 1, 2020 a final rating of 'BB'. MEIF Renewable's ratings benefit from a favorable regulatory framework, modest diversity of operations, long-term contracted fuel supplies, and a financial profile comparable to that of similarly rated peers. The ratings also take into account the company's exposure to wholesale electricity price volatility and declining electricity output from its landfill gas division, which is less predictable compared to conventional gas, as well as the debt funding with bullet maturity in 2020 and restrictive covenants. KEY RATING DRIVERS Supportive Regulatory Framework A favorable regulatory framework for renewable energy in the UK is the key factor supporting MEIF Renewable's business and financial profiles and, as a result, its ratings. The framework has generous renewable incentive schemes underpinned by challenging medium-term targets for industry-wide renewable energy production. In Fitch's view, the incentive mechanism in the UK represents a transparent and reliable source of revenues for MEIF Renewable. The company's revenues are predominantly governed by the Renewable Obligation (RO) regime. Only 1% of its revenue in the year ended March 31, 2014 was generated under the legacy Non- Fossil Fuel Obligation/ Scottish Renewable Obligation (NFFO/SRO) regime, which will switch to the more favorable RO regime in 2017 and 2018. The RO incentive regime provides significantly higher all-in prices per MWh than the NFFO feed-in tariff. Under the RO scheme the company receives payments related to the regulatory renewable energy incentive and support mechanism, in addition to the payment based on the wholesale market electricity price. The payments linked to the RO regime accounted for about 50% of the company's revenue in the year to 30 September 2014, contributing to the stability of its cash flow generation. Diversified Asset Portfolio MEIF Renewable's business profile benefits from modest diversity of operations across technologies, number of plants/sites and sources of fuel used for generation compared with some of its peers of similar scale that tend to focus on one technology or source of renewable energy generation. However, its individual sites and overall size are small. The company operates five biomass-fired power stations and 25 landfill sites, with a total net installed capacity of 174MW at end-September 2014. The assets are only located in the UK. The company is a large biomass-fuelled independent power generator in the UK, with its biomass plants accounting for almost two-thirds of its total net installed capacity. MEIF Renewable's EBITDA is fairly well balanced across two main divisions and their assets. The biomass business accounts for about 60% of the company's EBITDA, while the landfill gas division contributes about 40%. The largest biomass power station - Thetford - represents about 20% of the company's net installed capacity, demonstrating some concentration. Landfill Gas Output to Decline The output of landfill gas and, as a result, electricity generation by power gas engines can be less predictable and challenging to forecast compared to conventional gas. It is generally declining, especially in closed landfills and the company seeks to manage its opex and capex accordingly. Fitch expects the larger biomass business to offset electricity output fluctuations from the landfill gas division resulting in fairly predictable total power generation. Contracted Fuel Supplies Fuel costs are one of the key determinants of MEIF Renewable's profitability as they comprised almost half of the company's operating expenses (including biomass fuel costs and royalties payments for the use of landfill sites) in FY14. Fitch believes that MEIF Renewable's exposure to the fuel supply and price risks is mitigated by its medium-to-long term contracts for fuel supplies (including landfill gas), reasonably diversified supplier base and by the close proximity of its biomass stations to abundant fuel supplies. Prices in most of the biomass contracts are fixed for their duration and linked to the RPI. It is further offset by the fact that 95% and 81% of projected biomass fuel requirements for FY15 and FY16 have already been contracted (and over half of biomass fuel needs are contracted for FY17 and FY18), while 89% of expected gas volumes from landfill sites are contracted through to March 31, 2020. MEIF Renewable's long-term relationships with its suppliers, in particular in the biomass division, are supported by fuel being sourced from waste products that mainly have limited alternative use. Wholesale Electricity Price Volatility Although supported by the UK regulatory framework for renewable energy, MEIF Renewable's revenue and, as a result, cash flow generation is also dependent on the development of the wholesale power market. A substantial portion of the company's revenue (41.5% in the year to Sept. 30, 2014) is driven by payments for electricity based on the wholesale electricity market price. The company's power purchase agreements offer limited protection against wholesale electricity price fluctuations as the electricity price for its biomass division is fixed every 12 months in advance and the electricity price for its landfill gas division is fixed every six months in advance based on the average market rates prevailing in a certain period prior to the fixing date. Fitch assumes largely flat wholesale power prices over the forecast period of 2015-2019, based on forward market prices. Any significant drop in power prices is likely to weaken the company's financial profile, as electricity output produced from its landfill gas division is in long-term decline. Financials Comparable to Peers MEIF Renewable's credit metrics are comparable with those of its 'BB' category-rated utility peers, while Fitch assess its business profile as fairly strong for this rating level. Following the GBP190 million secured bonds issue, Fitch expects funds from operations (FFO) adjusted gross leverage to increase to 4.4x in FY15 from 3.75x in FY14 and FFO adjusted net leverage to rise to 3.7x from 3.3x, respectively. These forecasts take into account a new shareholder loan, which lacks both provisions for events of default and acceleration rights, enabling its exclusion from the Restricted Group's IDR perimeter in our analysis. The company's ability to pay dividends will be limited by the consolidated net leverage ratio stipulated in the bond documentation (eg net debt/EBITDA below 3.25x prior to the date that is three years from the bond issue and 2.5x thereafter). Fitch expects that the decrease of the net leverage threshold to 2.5x from 3.25x will prompt the company to commit to medium-term de-leveraging. LIQUIDITY AND DEBT STRUCTURE Senior Secured Notes While there is no immediate liquidity risk, the company will face large bullet maturities in 2020 but Fitch expects adequate landfill gas and biomass power production to facilitate refinancing. Fitch also anticipates that the company will pursue a proactive refinancing policy. Following the notes issue, MEIF Renewable's debt comprises only senior secured notes for GBP190 million due in 2020 and a remaining portion of a subordinated shareholder loan of GBP112.9 million, which is expected to fall due in 2021. The proceeds of the senior secured bond issue are expected to be primarily used for the repayment of all the current external debt and additional shareholder distribution, ie partial repayment (GBP78.3 million) of the new shareholder loan (GBP191.2 million) received by the company as part of its structural reorganization. MEIF Renewable's estimated cash position was GBP22.8 million at end-December 2014 (excluding restricted cash of GBP5.3 million which will be released after repayment of the existing facilities). The company is also expected to have access to a GBP20 million revolving credit facility due 4.5 years after the notes' issue date. Dividends Limit Free Cash Flow Given low capex and working capital requirements, Fitch expects the company to be free cash flow positive although a large portion is likely to be distributed as dividends, subject to the net leverage covenant stipulated in the bond documentation. Shareholder Loan Fitch excluded the new shareholder loan from the Restricted Group's IDR perimeter in our analysis as it is subordinated to all current and future indebtedness of the company (including senior secured notes), matures one year after the maturity of the senior secured notes, and its interest should only be paid in cash if permitted by the restricted payment tests specified in the inter-creditor agreement and the senior secured notes documentation. In our financial forecast we treated potential cash interest payments under the shareholder loan as part of dividends. KEY ASSUMPTIONS Fitch's key assumptions within its rating case for the issuer include: -- MEIF Renewable's debt comprises senior secured notes for GBP190 million due in 2020 and a remaining portion of a subordinated shareholder loan of GBP112.9 million, which is expected to fall due in 2021. -- Fitch excluded the new shareholder loan from the Restricted Group's IDR perimeter in its analysis. -- Fitch assumed largely flat wholesale power prices over 2015-2019, based on forward market prices. -- The company's ability to pay dividends will be limited by the consolidated net leverage ratio stipulated in the bond documentation. RATING SENSITIVITIES Positive: Future developments that could lead to positive rating action include: -- Increased wholesale prices or electricity output above Fitch's expectations leading to expected FFO adjusted gross leverage below 2.5x and FFO gross interest cover above 4x (FY14: 3.2) on a sustained basis. Negative: Future developments that could lead to negative rating action include: -- Recoverable landfill gas depletion faster than Fitch assumes or wholesale prices substantially lower than forward prices such that expected FFO adjusted net leverage is around 4x and FFO gross interest cover below 2.5x on a sustained basis. -- Changes to the regulatory framework resulting in a less supportive mechanism for the company's operations. T BADEN: In Administration, Cuts 180 Jobs ----------------------------------------- BBC News reports that T Baden Hardstaff Ltd, a haulage and engineering company, has gone into administration with the loss of 180 jobs in Nottinghamshire. KPMG was appointed administrators and made 180 of the 232 employees redundant, blaming a difficult climate, according to BBC News. The report notes that it is now seeking buyers of parts of the business. The company, based in Gotham, near Nottingham and founded in 1861, has four separate businesses: Hardstaff Haulage; lorry repair firm Charnwood Truck Services; safety barrier manufacturer Hardstaff Traffic Barrier Services; and natural gas supplier Portal Gas Services, the report relates. Traffic Barrier Services is still trading and a buyer is being sought, the report notes. The 150-year-old firm T Baden Hardstaff Ltd specialises in road haulage as well as maintenance of commercial fleets under the names Hardstaff Haulage and Charnwood Truck Services. TOWERGATE FINANCE: Restructuring Deal No Impact on Fitch's C IDR ---------------------------------------------------------------- Fitch Ratings says there is no impact on Towergate Finance plc's ratings following the announcement of a new financial restructuring deal, providing unsecured bondholders with a controlling equity stake. Fitch downgraded Towergate's IDR to 'C', on Feb. 3, 2015, following the announcement of an agreement with senior secured creditors for the implementation of a financial restructuring under a UK scheme of arrangement. On Feb. 6, the insurance intermediary announced that unsecured creditors have subsequently reached a new agreement with senior secured lenders. If approved, the new arrangement will result in senior secured creditors receiving GBP425 million of senior secured notes, GBP250 million of cash and 19.4% of the company's ordinary equity. The GBP250 million cash will come from the unsecured creditors in exchange for an 80.6% equity stake in the restructured business. As before, the senior secured creditors have agreed to provide GBP75 million of new financing in the form of super senior notes. The unsecured creditors will also inject a further GBP50 million capital contribution into the business, providing a total GBP125 million of additional liquidity for the group. Under the original proposal put forward by senior secured creditors, their existing holding was to convert to GBP375 million of new senior secured notes, GBP150 million of subordinated PIK notes and 100% of the ordinary share capital of the new group holding company, as well as injecting GBP75 million in the form of new super senior notes. Unsecured creditors could have been left with nothing. The agreement will be implemented via two parallel UK schemes of arrangement, one in respect of the original senior secured creditor deal, the other in respect of the new senior unsecured creditors' agreement. This means that if the senior unsecured deal fails to gain regulatory approval, the company can revert to the original arrangement with secured creditors. Fitch expects the new senior unsecured creditors deal to be executed by the end of 1Q15. USC: Mike Ashley Faces Legal Action After Staff Were Given Notice ----------------------------------------------------------------- International Business Times reports that former staff of clothing brand USC, which is owned by sportswear to football clubs tycoon Mike Ashley, have begun legal action against the then parent company Sports Direct, claiming they were given just 15 minutes consultation before being unceremoniously sacked. Some 79 former USC staffers as well as 166 agency employees claimed they were given the nosebleed consultations, as opposed to the legal 90-day notice period, according to International Business Times. USC, which was owned by Sports Direct at the time, was placed into administration in January, before being purchased by Republic, another firm owned by Ashley, the report notes. The Herald has reported that Thompsons Solicitors has agreed to represent the workers on a no win, no fee basis, the report discloses. The Herald said lawyers estimate compensation could run into the tens of thousands of pounds, but will likely be covered by the taxpayer-funded Insolvency Service, the report relays. This is because the firm was placed by Ashley into administration. Labour MP Brian Donohoe for Dundonald, where the plant was based, and Glasgow South MP Ian Davidson, chairman of the Scottish Affairs Select Committee, have received complaints from the ex- staff, the report notes. "Fifteen minutes consultation, that's all I am worth," stated one of USC's former employees in a complaint, the report says. Mr. Donohue is urging the Department of Business, Innovation and Skills to call Ashley to explain the events, the report adds. ********* 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 2015. 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 * * *