/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/150625.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, June 25, 2015, Vol. 16, No. 124 Headlines G E O R G I A VTB BANK: S&P Affirms 'BB-/B' Counterparty Rating; Outlook Stable G E R M A N Y KOLIBRI POWER: To Continue Operating Under Colibri Energy Name ORION ENGINEERED: Moody's Raises CFR to Ba3, Outlook Stable G R E E C E GREECE: ECB Raises Liquidity Limit; Creditors Refuse Proposals I T A L Y HYPO ALPE-ADRIA: Heta Injects Capital Into Italian Subsidiary R U S S I A CB TEST: Under Provisional Administration, License Revoked MAST-BANK: Under Provisional Administration, License Revoked S P A I N BANCO BPI: Fitch Affirms 'BB' Long-Term Issuer Default Rating U N I T E D K I N G D O M BRITISH AIRWAYS: S&P Revises Outlook to Pos. & Affirms 'BB' CCR CRITERION: Rent Hike Prompts Administration; Buyer Sought DOBSON & CROWTHER: In Administration; Trading Continues FAB UK 2004-1: Fitch Affirms 'CCsf' Rating on Class A-3E Notes FAB UK 2004-1: S&P Affirms CCC- Ratings on Three Note Classes KJK INVESTMENTS: High Court Winds Up Investment Firm LONGCROSS CONSTRUCTION: Files Administration Notice PRECISE MORTGAGE 2015-2B: Fitch Rates Class E Notes 'BB(EXP)sf' * UK: Pos. Outlook For South East Hotels/Restaurants, R3 Says ********* ============= G E O R G I A ============= VTB BANK: S&P Affirms 'BB-/B' Counterparty Rating; Outlook Stable ----------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its 'BB-/B' long- and short-term counterparty credit ratings on Georgia-based VTB Bank (Georgia). The outlook is stable. The affirmation reflects S&P's view that VTB Georgia remains a "strategically important" subsidiary for its parent, VTB Bank, a diversified financial services group headquartered in Russia. At the same time, S&P thinks that VTB Georgia is showing steady progress in working out its problem loans, while curbing its growth appetite. S&P has therefore revised its assessment of VTB Georgia's risk position to "moderate" from "adequate" and raised its assessment of the bank's stand-alone credit profile (SACP)to 'b' from 'b-'. S&P bases its ratings on VTB Georgia on our 'bb-' anchor for a commercial bank operating only in Georgia, the bank's "moderate" business position, "moderate" capital and earnings, "moderate" risk position, "average" funding, and "adequate" liquidity. In 2014, the share of VTB Georgia's nonperforming assets (by which S&P means problem loans and repossessed investment property) reduced to 5.3% from 6.7% of the total loan book and repossessed real estate owned, after the bank recovered about Georgian lari (GEL)2 million (EUR800,000) on some large problem assets. S&P considers that the bank has a track record of successful workouts of problem loans for at least four straight years. S&P expects provision recovery to continue in 2015, although the pace of such recovery will likely slow. S&P also thinks that the bank's growth appetite has lessened, which should prevent rapid risk accumulation in the future. Among the key weaknesses of VTB Georgia's risk position, S&P still sees high single-name loan and industry concentrations. S&P regards the loan book as concentrated. The 20 largest borrowers represented about 30% of total loans and 1.5x of equity as of Dec. 31, 2014. S&P still considers that high foreign currency lending, at about 60% of total lending at end-2014, creates substantial financial risk for the bank, not only in terms of credit risk if the lari depreciates, but also in terms of the management of foreign currency mismatch risk. The bank's 96% owner, VTB group, acquired its stake in 2005, maintaining its presence through the 2008 conflict in Georgia and despite the current sanctions imposed on major Russian entities. S&P considers that VTB group is interested in expanding its geographic footprint in Georgia, given the strong upside potential of the local economy. S&P observes a strong track record of capital and liquidity support to VTB Georgia from its parent, including a US$6.5 million capital injection in 2014 and a planned capital injection this year. Therefore, S&P incorporates two notches in its rating on VTB Georgia to reflect support from VTB Bank. At the same time, S&P caps the long-term rating on VTB Georgia at the level of our long-term sovereign rating on Georgia (BB-/Stable/--). S&P's assessment of VTB Georgia's business position as "moderate" reflects S&P's view of the bank's still-limited domestic market share. With total assets of approximately GEL1 billion (about US$531 million) the bank ranks No. 6 in terms of assets among Georgia-based financial institutions, with a market share of about 5%. The bank focuses on commercial banking for mid-tier domestic corporate clients (40% of the loan book), and small and midsize enterprises (22%), as well retail clients (36%). S&P believes VTB Georgia's relatively small capital base limits the bank's pricing power and constrains its ability to compete with Georgia's two largest banks for high-quality borrowers. At the same time, S&P notes that in the future the bank will likely continue to leverage its parent's financial resources to win bigger clients. S&P views VTB Georgia's capital and earnings as "moderate," reflecting S&P's expectation that the bank's risk-adjusted capital ratio, which stood at 7.4% as of Dec. 31, 2014, will gradually decline to 6.8%-6.9% in 2015-2016. In S&P's forecast, it factors in a Tier-1 capital injection of GEL10 million in 2015, and do not expect any dividends to be paid this year. S&P thinks that net interest margins will contract to about 6%, which would put some pressure on earnings in 2015. S&P regards the bank's revenue mix as supportive of stable and predictable earnings generation: 65%-70% has historically come from interest income and 8%-10% from fees and commissions. S&P expects this composition will be sustained in the future, although it could be affected by one-time effects, such as large disposals of repossessed collateral. S&P expects net profit in 2015 at about GEL10 million, equivalent to a return on assets of about 1%. "We assess VTB Georgia's funding as "average" and its liquidity as "adequate." Customer deposits remain the major funding source for the bank and the 20 largest depositors represented about 45% of the bank's liabilities as of Dec. 31, 2014, a moderately high level of concentration, in our view. The bank's loan-to-deposit ratio was 86% on the same date, which is better than that of its domestic peers. In our view, the maturity structure of VTB Georgia's funding is well balanced, with short-term wholesale funding comprising 13% of total funding and broad liquid assets covering short-term wholesale liabilities by almost 2.7x," S&P said. Funding attracted from the parent amounted to GEL133 million on Dec. 31, 2014 (approximately 14% of total liabilities), supporting the stability of bank's funding profile and enabling it to sustain a net interest margin at a generally satisfactory level. VTB Georgia also has an outstanding liquidity facility from its parent, VTB Bank, which it could use if necessary. S&P thinks that the sanctions imposed on the parent bank have an only limited impact on VTB Georgia and the amount of liquidity support available to the subsidiary. The stable outlook reflects S&P's expectation that VTB Georgia will maintain at least moderate capitalization, with nonperforming loans generally in line with the system average, and its funding and liquidity position will not worsen. A positive rating action is currently remote, given that S&P's long-term rating on VTB Georgia is at the level of S&P's long- term rating on Georgia and S&P's view that the bank is unlikely to survive sovereign credit stress, if any occurs. Consequently, an upgrade of the sovereign is a prerequisite for S&P to consider an upgrade of the bank. S&P might consider revising its assessment of the bank's SACP upward if its business position improved significantly, and S&P considered such improvement as sustainable. S&P might consider a downgrade if it saw that the bank's relative importance for its parent had declined, in particular, if VTB Bank's interest or capacity to provide continuing financial support for VTB Georgia diminished and is not sufficient to maintain capital or liquidity ratios at current levels. A deterioration of the sovereign's creditworthiness, resulting, for example, from weaker economic growth than S&P expects, a worsening financial position, or rising imbalances, could also lead to a negative rating action on the bank. ============= G E R M A N Y ============= KOLIBRI POWER: To Continue Operating Under Colibri Energy Name -------------------------------------------------------------- Sandra Enkhardt at pv-magazine reports that Kolibri Power Systems AG will continue operating under the name Colibri Energy GmbH. Despite ongoing insolvency proceedings, the energy storage company has been processing orders and developing new products, the report says. At the start of June, Kolibri Power began operating under the name Colibri Energy, pv-magazine relates. Via a management buyout -- effectively a company reorganization -- former board members, Helmuth von Grolman and James Astorian took the energy storage manufacturer over. They are now acting as managing partners, with the majority of the previous company investors remaining involved, according to the report. The workforce has also been kept on. pv-magazine notes that Kolibri was forced to file for insolvency after considerable due diligence breaches by then management member, Mirko Hannemann, which led to massive financial damages. The company filed a criminal complaint against Mr. Hannemann, the report says. According to reports, the financial loss was between EUR2 million and EUR5 million, pv-magazine relays. Colibri reports that despite the ongoing insolvency proceedings, new products are being marketed and existing orders processed, including a 200 kWh battery system for a transport vehicle in Hamburg, the report says. Germany-based Colibri Energy is not only involved in large energy storage solutions, but also in stationery and small mobile applications. ORION ENGINEERED: Moody's Raises CFR to Ba3, Outlook Stable ----------------------------------------------------------- Moody's Investors Service has upgraded the corporate family rating (CFR) of Orion Engineered Carbons S.A. ("OEC SA", and together with its subsidiaries, "Orion") to Ba3, from B1, and has concurrently upgraded its probability of default rating (PDR) to B1-PD, from B2-PD. At the same time, Moody's has upgraded to Ba3 (from B1) the rating of the EUR665 million equivalent term loan facility ('TL facility') and of the EUR115 million multicurrency revolving credit facility ('RCF') borrowed by Orion Engineered Carbons GmbH and OEC Finance US LLC, two indirect subsidiaries of OEC SA. All ratings have a stable outlook. RATINGS RATIONALE The rating action reflects Orion's positive operating and financial track record so far since its listing in July 2014, and the rating agency's expectation that the company will be able to display further positive momentum in its operating and financial performance over the coming quarters, which will then translate into (i) an adjusted EBITDA margin materially higher than the recent historical peak of 16% achieved in 2014, (ii) a gross leverage ratio, as adjusted by Moody's, sustainably below 3.5x, and (iii) positive free cash flows supporting the adequate liquidity profile of the company. The rating action therefore anticipates the progressive migration of Orion's key metrics towards levels which are more commensurate with the 'Ba' rating category. At the same time, Moody's expects the business profile of the company to continue to be supported by Orion's (i) strong market position as the global leader in specialty carbon black segment and as the third largest global producer of rubber carbon blacks; (ii) long-standing relationships with established and reputable blue-chip customers; (iii) large, well maintained and flexible manufacturing asset base spread across the key regions for the company, North and Latin America, Europe and Asia; and (iv) continued progress with regard to the percentage of customer contracts containing cost-pass through mechanisms (i.e. indexed pricing formulas) allowing to mitigate the impact of raw material price fluctuations (mostly linked to oil) on operating profits. The status of Orion as a publicly listed company, along with management publicly stated commitment towards a deleveraging target of 2.5x net debt/EBITDA ratio over the medium term, based on company's reported figures, mitigates the consideration that financial policy still remains shareholder-friendly, given the dividend policy publicly targeted. Indeed, Orion, after paying a dividend of EUR40 million in the last quarter of 2014, has confirmed its plan to pay, in 2015 and subsequent years, a dividend of EUR40 million per annum, which would approximate to a dividend payout ratio close to 70% based on the agency's forecasted net income for Orion in 2015. As a mitigating consideration, the company's projected liquidity position, which is supported by Moody's expectations of continuous robust operational cash flow being generated going forward, would accommodate such a dividend policy, as well as rising capex requirements which Moody's expects the company will likely face over the coming years, in order to upgrade its US plants to comply with regulations the Environmental Protection Agency ('EPA') is enforcing across the US carbon black industry. Orion should also be legally entitled to receive an indemnification from former owner Evonik Industries AG ('Evonik', Baa2 positive) for a large portion of the future regulatory-driven capex requirements in the US. Such indemnification would represent a supportive consideration for the company's liquidity, as an important mitigating factor if and when the company will start to incur more capex in the US. Such indemnification from a third party (Evonik) is also a positive differentiation of Orion's case compared to the case of other peers facing capex requirements already settled with EPA in the US in the recent past. OUTLOOK The stable outlook reflects Moody's expectation that Orion will display credit metrics appropriate with its rating category and keep an adequate liquidity position at all times, and will continue to be able to maintain its high operating profitability by effectively managing the volatility of its feedstock and the cyclicality of its end-user markets. The outlook also assumes that the outcome of the current negotiations with the US EPA can be comfortably managed by the company, and that Orion's financial policy, albeit shareholder friendly, will not become more aggressive, while management will stick to its public commitment to focus on further deleveraging the company. What Could Change the Rating UP An upgrade is currently considered as unlikely, however positive rating pressure could build over time in case of a material improvement in liquidity and credit metrics, including (1) Moody's-adjusted debt/EBITDA ratio falling below 3.0x on a sustained basis; (2) retained cash flow (RCF)/debt ratio above 20% on a sustained basis; and (3) the company maintaining a sustained positive free cash flow. An upgrade will also require a more balanced financial policy. What Could Change the Rating DOWN Moody's would consider downgrading the rating if credit metrics deteriorate substantially, including Moody's adjusted debt/EBITDA ratio above 4.0x on a sustained basis and RCF/debt ratio below 10%. Furthermore, free cash flows turning negative and any deterioration in the company's liquidity position could contribute towards a rating downgrade. PRINCIPAL METHODOLOGIES The principal methodology used in these ratings 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. Based in Frankfurt, Germany, Orion group is the third-largest global producer of rubber blacks by capacity and the largest global producer of specialty pigment blacks by both volumes and revenue. The company has 14 plants (including joint ventures) across Europe, North and South America, Asia and South Africa. Orion was formed on July 29, 2011, following the leveraged buyout of the carbon black operations from Evonik. Post IPO, the two reference shareholders, Rhone Capital L.L.C. and Triton Managers Limited, each own 27.4% of the company. In 2014, Orion reported revenues of EUR1.32 billion. =========== G R E E C E =========== GREECE: ECB Raises Liquidity Limit; Creditors Refuse Proposals -------------------------------------------------------------- Claire Jones, John Aglionby and Kadhim Shubber at The Financial Times report that the European Central Bank on June 23 raised the limit on the emergency liquidity assistance available to Greek banks to about EUR89 billion as depositors continued to withdraw funds. The move has become a daily operation as tension mounts amid negotiations to secure an eleventh-hour deal to unlock EUR7.2 billion in bailout funds and prevent Greece defaulting on its debts at the end of the month, the FT relays. The extension of a little under EUR1 billion in ELA funding, according to people with knowledge of the decision, is less than half EUR2 billion figure on June 22, the FT notes. The reduction follows rising optimism for a deal after eurozone leaders, meeting in Brussels on June 22, welcomed reform proposals by the Greek government that included its first substantial concessions in months, the FT relates. Depositors Pull Out Money Separately, the FT's Claire Jones, Kerin Hope and Henry Foy report that another EUR1.6 billion-worth of deposits left the Greek banking system on June 22, following withdrawals of EUR2 billion on June 19 and over the weekend according to two senior bankers. Greek banks need central bank loans to pay back depositors who have been pulling out their money for fear that Athens and its creditors will prove unable to strike a deal, the FT says. Capital controls would help stem the run on deposits by forcing Greeks to limit withdrawals from their accounts and by preventing funds from leaving the country, according to the FT. Creditors Refuse Proposals Lana Clements at Express reports that EU creditors refused to accept half-hearted austerity reforms put forward by the Greek Prime Minister, and on June 24 summoned Alexis Tsipras back to Brussels to push for further concessions. In response, Mr. Tsipras has accused creditors of double standards and not wanting to find an agreement, Express relates. "The repeated rejection of equivalent measures by certain institutions never occurred before -- neither in Ireland nor Portugal," Express quotes Mr. Tsipras as saying. "This odd stance seems to indicate that either there is no interest in an agreement or that special interests are being backed." The offer on the table already contains measures that the Greek leader has repeatedly promised he would never agree to, and which look set to tear the Greek government apart, Express discloses. Politicians in Athens have blasted the proposals, which include cuts to pension spending and increased taxes, in return for a bailout loan worth EUR7.2billion (GBP5.6 billion), Express relates. At the same time, one of Greece's main creditors, the International Monetary Fund (IMF) is thought to be highly skeptical about a number of assumptions and figures made in the proposal as it stands, Express relays. ========= I T A L Y ========= HYPO ALPE-ADRIA: Heta Injects Capital Into Italian Subsidiary ------------------------------------------------------------- Boris Groendahl at Bloomberg News reports that Heta Asset Resolution AG and Austria agreed to inject capital and liquidity into Hypo Alpe-Adria-Bank SpA to avoid Italian authorities winding down the Italian operations of failed Hypo Alpe-Adria- Bank International AG. According to Bloomberg, Heta said in a statement on June 23 it agreed to supply aid for the business, whose main activity is leasing in northern Italy, because it may otherwise lose a larger sum of money it's owed by the former subsidiary. It said the Italian unit's parent, Austrian state-owned HBI-Bundesholding AG, will also provide aid, Bloomberg relates. The terms weren't disclosed, Bloomberg notes. "The goal of the agreement is to avoid a regulatory procedure in Italy and to achieve a bigger repayment of the outstanding funds," Bloomberg quotes Heta as saying in the statement. "The economic and financial consequences of the agreement will be reflected in Heta's first-half results." Heta, Hypo Alpe's "bad bank," sold the Italian business to HBI when it was set up in October, Bloomberg recounts. It has EUR1.6 billion in outstanding loans to the Italian business, and set aside EUR1.2 billion for potential losses last year, Bloomberg says, citing Heta's annual report published last week. An additional EUR300 million "emergency liquidity facility" to replace deposits withdrawn from the bank was frozen when Austrian regulators imposed a debt moratorium on Heta in March, Bloomberg states. Heta warned in the annual report that this led to a continuous deterioration of the liquidity situation of HBI, whereby it can't compensate the continuous deposit outflow without external support, Bloomberg relays. About Hypo Alpe-Adria Hypo Alpe-Adria International AG is a subsidiary of BayernLB. It is active in banking and leasing. In banking, HGAA serves both corporate and retail customers and offers services ranging from traditional lending through savings and deposits to complex investment products and asset management services. Hypo Alpe received EUR1.75 billion in aid in emergency capital from the Austrian government. European Union Competition Commissioner Joaquin Almunia said in March 2013 that Hypo Alpe faced possible closure for failing to adequately restructure. The European Commission approved Hypo's recapitalization in December 2013, but made it conditional on the management presenting a thorough plan to overhaul the group. The Austrian finance ministry, which effectively runs Hypo Alpe, submitted a restructuring plan to the Commission on Feb. 5, 2013. On Sept. 3, 2013, the Commission cleared Hypo Alpe's restructuring plan, which includes the sale of the bank's Austrian unit and Balkans banking network and the winding-down of non-viable parts. It also approved additional aid to wind down the bank. As reported in the Troubled Company Reporter-Europe on Nov. 3, 2014, The Wall Street Journal said Austria's nationalized lender Hypo Alpe-Adria-Bank International AG said on Oct. 30 it has split itself between a wind-down unit, called Heta Asset Resolution GmbH, and its southeastern European network of banks. The split is part of the lender's restructuring plan approved by the European Commission, the Journal disclosed. According to the Journal, under the plan, the Austrian government -- Hypo Alpe- Adria's current owner -- must sell off all of the bank's assets or transfer them into a wind-down unit by mid-2015. =========== R U S S I A =========== CB TEST: Under Provisional Administration, License Revoked ---------------------------------------------------------- The Bank of Russia, by its Order No. OD-1438 dated June 24, 2015, revoked the banking license from the Moscow-based credit institution Open Joint-stock Company Commercial Bank TEST or OJSC CB TEST from June 24, 2015. The Bank of Russia took such an extreme measure -- revocation of the banking license -- due to the credit institution's failure to comply with federal banking laws and Bank of Russia regulations, due to repeated violations within one year of the requirements stipulated by Article 7 (excluding Clause 3 of Article 7) of the Federal Law "On Countering the Legalisation (Laundering) of Criminally Obtained Incomes and the Financing of Terrorism", and due to the applications within one year of measures envisaged by the Federal Law "On the Central Bank of the Russian Federation (Bank of Russia)". CB TEST did not observe the requirements of the legislation on anti-money laundering and combating the financing of terrorism, including with regard to the identification of customers, their representatives and beneficiary owners. The internal control rules on anti-money laundering and combating the financing of terrorism of CB MAST-Bank did not comply with the Bank of Russia's requirements. The credit institution was involved in dubious large-value cash withdrawals outside the Russian Federation. Besides, CB TEST was focused on servicing customers who conducted dubious passthrough payments in their accounts. The management and owners of the bank did take measures required to normalize its activities. The Bank of Russia, by its Order No. OD-1439, dated June 24, 2015, appointed a provisional administration to CB TEST for the period until the appointment of a receiver pursuant to the Federal Law "On the Insolvency (Bankruptcy)" or a liquidator under Article 23.1 of the Federal Law "On Banks and Banking Activities". In accordance with federal laws, the powers of the credit institution's executive bodies are suspended. According to its financial statements, as of June 1, 2015, OJSC CB TEST ranked 741st by assets in the Russian banking system. MAST-BANK: Under Provisional Administration, License Revoked ------------------------------------------------------------ The Bank of Russia, by its Order No. OD-1436 dated June 24, 2015, revoked the banking license from the Moscow-based credit institution Commercial Bank MAST-Bank (Joint-stock Company) or CB MAST-Bank (Registration No. 3267) from June 24, 2015. The Bank of Russia took such an extreme measure -- revocation of the banking license -- due to the credit institution's failure to comply with federal banking laws and Bank of Russia regulations, due to the identification of instances of material unreliability of financial statements, due to repeated violations within one year of the requirements stipulated by Article 7.2 of the Federal Law "On Countering the Legalisation (Laundering) of Criminally Obtained Incomes and the Financing of Terrorism", due to the fact that the values of all capital adequacy ratios of the bank are below two percent, due to the bank's inability to meet monetary obligations to creditors, and also taking into account repeated applications within one year of measures envisaged by the Federal Law "On the Central Bank of the Russian Federation (Bank of Russia)". Because of the bank's highly risky lending policy and extremely poor quality of assets which did not generate sufficient cash flow, CB MAST-Bank did not execute its obligations to depositors. At the same time, the credit institution submitted to the Bank of Russia grossly unreliable financial statements which concealed grounds for initiating measures to prevent insolvency (bankruptcy) and to revoke the banking license. Besides, after CB MAST-Bank complied with the supervisor's requirement to create loss provisions commensurate with risks assumed, the bank's capital was reduced to a critical level. In these circumstances, guided by Article 20 of the Federal Law "On Banks and Banking Activities", the Bank of Russia performed its obligation and revoked the banking license from the credit institution. The bank's activities contain established facts of repeated violation of requirements of the legislation on anti-money laundering and combating the financing of terrorism with regard to customer identification procedure on cashless settlements conduced at customers' instructions. Besides, the credit institution was involved in dubious large-value cash withdrawals abroad, and also dubious payable-through. The Bank of Russia, by its Order No. OD-1437 dated June 24, 2015, the Bank of Russia appointed a provisional administration to CB MAST-Bank for the period until the appointment of a receiver pursuant to the Federal Law "On the Insolvency (Bankruptcy)" or a liquidator under Article 23.1 of the Federal Law "On Banks and Banking Activities". In accordance with federal laws, the powers of the credit institution's executive bodies are suspended. CB MAST-Bank is a member of the deposit insurance system. The revocation of the banking license is an insured event as stipulated by Federal Law No. 177-FZ "On the Insurance of Household Deposits with Russian Banks" in respect of the bank's retail deposit obligations, as defined by law. According to its financial statements, as of June 1, 2015, CB MAST-Bank ranked 189th by assets in the Russian banking system. ========= S P A I N ========= BANCO BPI: Fitch Affirms 'BB' Long-Term Issuer Default Rating ------------------------------------------------------------- Fitch Ratings has affirmed Banco BPI, S.A.'s Long-term Issuer Default Rating (IDR) at 'BB', Short-term IDR at 'B' and Viability Rating at 'bb'. The IDRs have been removed from Rating Watch Positive following Spain's CaixaBank S.A.'s (BBB/Positive) decision to withdraw its tender offer for Banco BPI's shares on June 18, 2015. The Outlook on the Long-term IDR is Stable. KEY RATING DRIVERS IDRS, VR AND SENIOR DEBT The bank's IDRs, VR and senior debt ratings reflect weak domestic earnings, but also take into account Banco BPI's stronger asset quality indicators and funding and liquidity profile than domestic peers and reasonable capitalization, after the repayment of EUR920 million cocos in 2014. International activity, mainly Angola, made up the bulk of Banco BPI's net income in 1Q15, while it represented only around 20% of the group's assets. In 1Q15 the bank just broke even in Portugal, reflecting lower business volumes, interest rates and spreads, which were partially offset by lower funding costs following the repayment of state cocos in 2014 and re-pricing of deposits. Fitch expects Banco BPI to be fairly well placed to cope with the slowdown in the Angolan economy, supported by the subsidiary's wide margins, strong cost efficiency, deposit-driven activity and absence of private sector loan growth in 2010-2014, reflecting the group's prudent approach towards risk-taking. The group's Fitch Core Capital (FCC) ratio was 10.4% at end-2014 and unreserved credit-at-risk loans/FCC remained a manageable 18%. Banco BPI's capital ratios have been affected in 2015 by Angola not being recognized as having supervisory and regulatory equivalence to the EU. At end-1Q15, Banco BPI's common equity tier 1 fully loaded ratio was still acceptable at 9.1%, compared with 9.6% at end-2014. Banco BPI has weathered the domestic recession better than peers. Its credit-at-risk remained fairly stable at 5.4% of gross loans at end-1Q15, with ample reserve coverage of above 70%. This reflects the bank's loan mix, lower exposures to troubled economic sectors and more moderate risk appetite. The bank's main funding source is deposits. Loan de-leveraging enabled it to improve the regulatory net loans/deposits ratio to 83% at end-1Q15 from 94% at end-1Q14. Wholesale and European Central Bank funding has declined. Liquidity is supported by a large portfolio of liquid assets. The Stable Outlook reflects the stabilization of the bank's risk profile. Fitch expects Banco BPI's profitability to improve, but at a slow pace given low interest rates and still declining loan volumes. SUPPORT RATING AND SUPPORT RATING FLOOR The bank's Support Rating (SR) of '5' and Support Rating Floor (SRF) of 'No Floor' reflect Fitch's view that senior creditors can no longer rely on receiving full extraordinary support from the sovereign in the event that any of these banks becomes non- viable. In Fitch's view, the EU's BRRD and the SRM are now sufficiently progressed to provide a framework for resolving banks that is likely to require senior creditors participating in losses, if necessary, instead of or ahead of a bank receiving sovereign support. In the EU, BRRD has been effective in member states since 1 January 2015, including minimum loss absorption requirements before resolution financing or alternative financing (eg, government stabilization funds) can be used. Portugal transposed BRRD into the national regulatory framework on 26 March 2015, including the bail-in tool. SUBORDINATED DEBT AND OTHER HYBRID SECURITIES The subordinated debt and preference shares issued by Banco BPI are all notched down from the bank's VR in accordance with Fitch's assessment of each instrument's respective non- performance and relative loss severity risk profiles, which vary considerably. SUBSIDIARY AND AFFILIATED COMPANIES The ratings of Banco Portugues de Investimento (BPI) are equalized with those of its 100% parent, Banco BPI. The equalization is driven by BPI's integration within its parent bank and the benefits derived from parent support. Fitch does not assign VR to the institution as the agency does not view it as an independent entity. RATING SENSITIVITIES IDRS, VR AND SENIOR DEBT The bank's IDRs and senior debt ratings are sensitive to a change in its VR. They could be upgraded if Banco BPI enhances its recurrent profitability in its domestic operations, particularly at pre-impairment operating level. A continued improvement of the operating environment should support business volumes, benefit asset quality and result in a reduction in impairment charges. This will ultimately benefit profitability and enhance the bank's capitalization. Downward rating pressure would primarily come from a substantial deterioration in asset quality and a material deterioration of its Angolan subsidiary. The bank's ratings are also sensitive to the conclusion of the sale process of NovoBanco and potential related costs and capital impact, if any. The ratings do not currently incorporate Banco BPI's potential role in further sector consolidation. Fitch would therefore treat any corporate transactions involving Banco BPI as event risk. SUPPORT RATING AND SUPPORT RATING FLOOR The SR is potentially sensitive to a change in assumptions around the propensity of Portugal to provide timely support to the bank. While not impossible, this is highly unlikely in Fitch's view. The SR may also change in the event of a successful alternative offer for Banco BPI's shares but Fitch does not currently factor that into the ratings. SUBORDINATED DEBT AND OTHER HYBRID SECURITIES The ratings of Banco BPI's subordinated debt and preference shares are primarily sensitive to change in the bank's VR. SUBSIDIARY AND AFFILIATED COMPANIES The ratings of BPI are sensitive to rating actions on Banco BPI's IDRs. The rating actions are as follows: Banco BPI Long-term IDR affirmed at 'BB'; removed from RWP, Outlook Stable Short-term IDR affirmed at 'B'; removed from RWP Viability Rating: affirmed at 'bb' Support Rating: affirmed at '5'; removed from RWP Support Rating Floor: affirmed at 'No Floor' Senior unsecured debt: affirmed at 'BB'; removed from RWP Commercial paper programme: affirmed at 'B'; removed from RWP Lower Tier 2 subordinated debt: affirmed at 'BB-'; removed from RWP Preference shares: affirmed at 'B'; removed from RWP BPI: Long-term IDR affirmed at 'BB'; removed from RWP, Outlook Stable Short-term IDR affirmed at 'B'; removed from RWP Support Rating: affirmed at '3'; removed from RWP =========================== U N I T E D K I N G D O M =========================== BRITISH AIRWAYS: S&P Revises Outlook to Pos. & Affirms 'BB' CCR --------------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook on U.K.- based airline British Airways PLC (BA) to positive from stable. At the same time, S&P affirmed the 'BB' long-term corporate credit rating on the company. S&P also affirmed its long-term issue rating on BA's enhanced equipment trust certificates (EETC) class A and B at 'A' and 'BBB', respectively, and the 'BB' rating on its GBP250 million unsecured bonds due 2016. S&P also affirmed the 'B' issue ratings on the EUR300 million notes of BA's subsidiary British Airways Finance (Jersey) L.P. The outlook revision reflects S&P's view that the stand-alone credit profile (SACP) of BA is 'bb+' and hence could support a higher rating. However, the rating is constrained by S&P's view of the credit metrics of BA's parent, IAG. S&P believes there is uncertainty around IAG's credit metrics at this stage due to the potential acquisition of Aer Lingus and the subsequent impact on its credit ratios. S&P could raise the ratings on BA if IAG acquires Aer Lingus and is able to maintain credit metrics that would support a higher rating on BA. S&P has assigned an SACP of 'bb+' for BA, reflecting its expectation that the company's solid operating performance in 2014 will continue into 2015, demonstrated by good revenue growth and improving profitability. While BA currently benefits from lower fuel prices, S&P believes that the company will be able to maintain funds from operations (FFO) to debt above 30% even if they started to increase somewhat faster than S&P's current projections. The company's good performance in 2014 resulted in stronger financial ratios; FFO to debt improved to about 36%. S&P expects BA to be able to maintain FFO to debt at this level, supporting S&P's assessment of its financial risk profile as "intermediate". S&P continues to view BA's business risk profile as "fair". It is constrained by S&P's view of the cyclicality of the airline industry and volatile fuel costs, although the latter are currently favorable for BA. Combined with BA's exposure to the transatlantic premium market, this has led to significant volatility in BA's profitability over the last economic cycle. However, these factors are partially offset by BA's ability to use its strong market position at Heathrow and in the transatlantic premium market to generate higher profitability than its peers operating under similar business models, as was the case in 2014. S&P considers BA's position at Heathrow Airport, with its access to the wealthy and sizable London market, is a key support in S&P's assessment of the company's competitive position. S&P also believes that BA's position at Heathrow Airport provides the company some protection from significant capacity increases by competitors in key long-haul destinations that could lead to lower average ticket prices. S&P also consider that BA has a good track record of managing its cost base and extensive route network, which further supports S&P's analysis. The rating on BA is currently constrained by the group credit profile of its parent, IAG (not rated). S&P believes that the acquisition of Aer Lingus, based on the current parameters, is likely to weaken IAG's credit ratios. However, at this stage S&P considers that IAG could maintain credit metrics that is supportive of a higher rating depending on the operating performance of its airline portfolio in 2015 and 2016, which S&P reflects in the positive outlook on BA. Under S&P's base case for BA, it assumes: -- Available seat kilometers (ASK; measure of capacity) to grow by 2%-3% in 2015. -- BA to be able to sell the new capacity and hence revenue passenger kilometers (RPK) to grow at the same pace or slightly ahead of ASKs in 2015. -- Average ticket prices to be 2%-3% lower in 2015 as part of the lower fuel prices are passed on to consumers. -- Oil prices (Brent) at around $55 per barrel in 2015 and $65 per barrel in 2016, in line with S&P's assumptions outlined in "Standard & Poor's Revises Its Crude Oil And Natural Gas Price Assumptions," published March 26, 2015. -- Unit costs excluding fuel to grow by between 2%-4%. -- Capex of about GBP1.3 billion-GBP1.5 billion in 2015, leading to neutral to slightly negative free operating cash flow for the year. Based on these assumptions, S&P arrives at these credit measures: -- Return on capital ranging between 13%-15% in 2015-2016. -- Weighted-average FFO to debt of 31%-32% in 2015-2016. -- EBITDA interest cover of about 12x. The positive outlook on BA reflects S&P's view that it could raise the ratings if the company maintains FFO to debt above 30% through to 2016 and its parent can maintain its credit metrics at a level that supports a higher rating on BA despite the potential acquisition of Aer Lingus. S&P could revise the outlook to stable should adjusted FFO to debt drop below 30%. In S&P's view, this could happen if revenues were to decline by more than 2%, for example due to higher-than-expected pressure on average ticket prices not being offset by similar cost reductions. CRITERION: Rent Hike Prompts Administration; Buyer Sought --------------------------------------------------------- Naomi Rovnick at The Financial Times reports that The Criterion, a historic London restaurant in the heart of Piccadilly Circus, has gone into administration after its landlord increased the annual rent by 60%. According to the FT, the owner of the restaurant has had its rent increased to GBP850,000 a year. The restaurant, which is run by young Georgian entrepreneur Irakli Sopromadze and owned by his father, also owes landlord Criterion Capital, an unrelated company, GBP517,000 in rental arrears, the FT discloses. Administrator Peter Kubik, of UHY Hacker Young, said the restaurant, which was previously run by celebrity chef Marco Pierre White until the Sopromadzes purchased it in 2009, will be put back on the market, the FT relates. Mr. Kubik said the family, who could not immediately be reached for comment, originally paid GBP1.25 million for the Criterion, the FT notes. The Georgian owners are also the restaurant's largest creditors, however, so they will have a big say in who buys it, the FT states. Mr. Kubik, as cited by the FT, said that his job was simply to "get a good price" for the company. The Criterion, which serves modern European food and is also known for its opulent interior and golden mosaic ceiling, has long been a favorite with London's pre-theatre crowd. DOBSON & CROWTHER: In Administration; Trading Continues ------------------------------------------------------- On June 16, 2015, it was announced that Chris Ratten and Lindsey Cooper of Baker Tilly Restructuring and Recovery LLP had been appointed Joint Administrators to Dobson & Crowther Limited. Following a review of the financial position of the company, the Administrators have decided that it can continue to trade for a short period in order to complete existing orders and explore whether there are any parties willing to buy it as a going concern. Any parties with an interest in the business should make contact with Baker Tilly Restructuring and Recovery LLP as soon as possible on 0161 830 4000. The company has recently incurred losses and to address these it has been necessary for the Administrators to take the difficult decision make 55 redundancies. Baker Tilly will now work with the former employees and relevant government departments to ensure that the former staff receive their entitlements from the National Insurance Fund. FAB UK 2004-1: Fitch Affirms 'CCsf' Rating on Class A-3E Notes -------------------------------------------------------------- Fitch Ratings has affirmed FAB UK 2004-1 Limited's notes. The transaction is a securitization of European structured finance assets, concentrated in the UK. At closing the SPV issued GBP204.5 million of fixed and floating rate notes, using the proceeds to buy a GBP200 million portfolio managed by Gulf International Bank (UK) Ltd. KEY RATING DRIVERS The affirmations reflect the notes' credit enhancement relative to the portfolio's credit quality. The portfolio is heavily concentrated in UK RMBS, for which Fitch maintains a stable outlook. Since the last review in July 2014, current defaults have increased to GBP26.28 million from GBP18 million, due to 'CCCsf' or below rated assets migrating to default. In addition, two assets have been written off, leading to a loss of GBP5 million for the transaction. As a result the credit quality of the performing pool, excluding defaulted assets but including 'CCC' rated or below assets, has slightly improved. The transaction continue to deleverage slowly with the class A-1E and A-1F notes (ranked pari passu) having a note factor of 45.6% compared with 49% one year ago and 59% two years ago. All the over-collateralization tests are out of compliance, and consequently the class A2 and A3 are deferring interest and excess spread is used to paydown the senior notes. Since the last review in July 2014, GBP760,000 of interest has been used to pay down the senior notes. Over the past year, the deleveraging of the senior notes was insufficient to compensate for the additional defaults and write off, and credit enhancement has decreased for all the rated notes. The class S1 and S2 combination notes' rating reflect the ratings of their respective component classes i.e. the class A-1F notes and class C notes for the class S1 combination note and the class A-3F and class C notes for the class S2 combination notes. RATING SENSITIVITIES Applying a 1.25x default rate multiplier to all assets in the portfolio would likely result in a downgrade of one notch for the class A1 and A2 notes. Applying a 0.75x recovery rate multiplier to all assets in the portfolio would have no impact on the notes' ratings. DUE DILIGENCE USAGE No third party due diligence was provided or reviewed in relation to this rating action. DATA ADEQUACY Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring. The majority of the underlying assets have ratings or credit opinions from Fitch and/or other Nationally Recognised Statistical Rating Organisations and/or European Securities and Markets Authority registered rating agencies. Fitch has relied on the practices of the relevant Fitch groups and/or other rating agencies to assess the asset portfolio information. Overall, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. SOURCES OF INFORMATION The information below was used in the analysis. -- Loan-by-loan data provided by Bank of New York as of 27 May 2015. -- Transaction reporting provided by Bank of New York as of 27 May 2015. Fitch has affirmed the following ratings: Class A-1E Notes (ISIN: XS0187962104): affirmed at 'BBsf'; Outlook Stable Class A-1F Notes (ISIN: XS0187962369): affirmed at 'BBsf'; Outlook Stable Class A-2E Notes (ISIN: XS0187962799): affirmed at 'Bsf'; Outlook Stable Class A-3E Notes (ISIN: XS0187962872): affirmed at 'CCsf' Class A-3F Notes (ISIN: XS0187963094): affirmed at 'CCsf' Class S1 Combination Notes (ISIN: XS0187963334): affirmed at 'BBsf'; Outlook Stable Class S2 Combination Notes (ISIN: XS0187963508): affirmed at 'CCsf' FAB UK 2004-1: S&P Affirms CCC- Ratings on Three Note Classes ------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its credit ratings on FAB UK 2004-1 Ltd.'s class A-1E, A-1F, A-2E, A-3E, A-3F, and BE notes. At the same time, S&P has raised to 'BBB- (sf)' from 'BB+ (sf)' its rating on the class S1 combination notes. The rating actions follow S&P's updated credit and cash flow analysis of the transaction using data from the trustee note valuation report dated May 15, 2015, and the application of S&P's relevant criteria. Similar to S&P's previous review of the transaction, the class A- 1E and A-1F notes have continued to amortize as the transaction continues to deleverage. At closing, the class S1 notes represented GBP10 million of combination notes, which comprise GBP7.5 million of class A-1F notes and GBP2.5 million of class C subordinated notes. S&P's rating on the class S1 combination notes addresses the payment of GBP7.5 million of principal. S&P's analysis shows that the distribution of payments that have been made by the underlying components has resulted in a reduced principal amount outstanding of the class S1 combination notes. Based on these observations, S&P's credit and cash flow analysis indicates that the class S1 notes are able to achieve a higher rating. S&P has therefore raised to 'BBB- (sf)' from 'BB+ (sf)' its rating on this class of notes. Since S&P's previous review, the class A-1E and A1-F notes have amortized by approximately GBP19.6 million, representing a 22% reduction in the principal amount outstanding of the notes. Overall, S&P's analysis indicates a slight deterioration in the underlying portfolio's general credit quality. S&P has observed a decrease in the percentage of assets rated in the 'AA' rated category (to 4.72% from 5.76%) and the 'BB' rating category (to 6.91% from 9.61%). By contrast, assets rated in the 'B' rating category have increased by 6.16% since S&P's previous review. With this, S&P's credit analysis indicates that its scenario default rates (SDRs) -- the level of defaults that S&P expects the transaction to incur at the respective rating levels -- have increased since S&P's previous review. Both the class A and BE notes' overcollateralization tests continue to breach their required triggers, similar to what S&P observed in its previous review. "We conducted our cash flow analysis to determine the break-even default rate (BDR) for each rated class of notes. The BDR represents our estimate of the maximum level of gross defaults, based on our stress assumptions, that a tranche can withstand and still fully repay the noteholders. We used the portfolio balance that we consider to be performing, the reported weighted-average spread, and the weighted-average recovery rates that we considered to be appropriate. We incorporated various cash flow stress scenarios using our shortened and additional default patterns and levels for each rating category assumed for each class of notes, combined with different interest stress scenarios as outlined in our criteria," S&P said. Overall, S&P's credit and cash flow results indicate that the available credit enhancement for the class A and BE notes is commensurate with the currently assigned ratings. S&P has therefore affirmed its ratings on these classes of notes. FAB UK 2004-1 is a cash flow mezzanine structured finance collateralized debt obligation (CDO) transaction that closed in April 2004. RATINGS LIST FAB UK 2004-1 Ltd. GBP214.5 mil fixed-, floating-, and zero-coupon notes Rating Rating Class Identifier To From A-1E XS0187962104 BB+ (sf) BB+ (sf) A-1F XS0187962369 BB+ (sf) BB+ (sf) A-2E XS0187962799 B+ (sf) B+ (sf) A-3E XS0187962872 CCC- (sf) CCC- (sf) A-3F XS0187963094 CCC- (sf) CCC- (sf) BE XS0187963177 CCC- (sf) CCC- (sf) S1 XS0187963334 BBB- (sf) BB+ (sf) KJK INVESTMENTS: High Court Winds Up Investment Firm ---------------------------------------------------- KJK Investments Ltd and G Loans Ltd, two North West-based companies, were wound up by the High Court for operating a misleading pension-backed loan and investment scheme in which clients invested GBP11.9 million. The liquidation was ordered following an investigation by the Insolvency Service. The investigation found that the companies operated what is commonly known as a 'pension liberation' scheme. Clients were encouraged to obtain a loan from Windermere-based G Loans Ltd, on the condition that they used their existing pension funds to purchase shares in the Liverpool-based KJK Investments Ltd. Clients were led to believe that their investment in KJK Investments Ltd would increase in value by 6% each year and that these returns would be sufficient to enable the client to repay their loan from the proceeds of their pension upon retirement. Over a 2-1/2 year period, KJK Investments Ltd received GBP11.9 million worth of investments from 209 clients. The loans made to clients by G Loans Ltd were typically in the region of 50% of the amount invested by the client in KJK Investment Ltd shares. G Loans Ltd provided GBP6.3 million of loans to the same 209 clients. The investigation found that KJK Investments Ltd was not a commercial lender (as it claimed to be), but that a significant portion of the funds invested by the clients were, in fact, lent by KJK Investments Ltd on uncommercial terms to G Loans Ltd. This was the only means by which G Loans Ltd was able to provide loans to the clients -- meaning that the loans which clients received from G Loans Ltd were funded from their own pension funds invested in KJK Investments Ltd. This was not made clear to clients. The loans provided by both KJK Investments Ltd and G Loans Ltd were on terms that allowed interest to be accrued rather than paid, such that G Loans Ltd was not in a position to repay its liability to KJK Investments Ltd, and that KJK Investments Ltd, in turn, could not pay a dividend to the clients that had invested in it. The remaining funds invested in KJK Investments Ltd were used to make loans to other associated companies on uncommercial terms and to pay substantial commissions, fees and salaries to those involved in the operation of the companies. Sales commissions totalled in excess of GBP900,000 while the directors received payments totalling GBP490,000. The court was satisfied that the companies acted with a lack of commercial probity in the way in which they marketed the scheme to clients and that the scheme itself was lacking in any proper commercial basis -- with the result that there was no realistic prospect of clients getting back the funds which they had originally invested in KJK Investments Ltd. Colin Cronin, Investigation Supervisor, said: "Pension liberation is being widely promoted as an easy way of gaining early access to pension savings, particularly given the recent changes in pension legislation. Any schemes offering such benefits should be viewed with caution and independent financial advice should always be sought before entering into such a scheme. "In this case clients were not told that they were obtaining loans funded directly from their own pension pots. The Insolvency Service will investigate and bring to a halt the activities of companies that mislead clients in this way and that are found to be operating against the public interest." KJK Investments Ltd was incorporated on April 22, 2009. The company's registered office is at 16 Crosby Road North, Liverpool, in Merseyside. G Loans Ltd was incorporated on Jan. 7, 2009. The company's registered office is at St Catherine's Cottage, Patterdale Road, in Windermere, Cumbria. The petitions to wind-up KJK Investments Ltd and G Loans Ltd were presented under s124A of the Insolvency Act 1986 on Aug. 8, 2013. The companies were wound up on April 15, 2015 and the Official Receiver has been appointed as liquidator. LONGCROSS CONSTRUCTION: Files Administration Notice --------------------------------------------------- ABI on June 23 disclosed that Longcross Construction filed a notice to appoint administrators. The notice follows on from several construction company administrations this year, including Anglo Holt, GB Group Holdings and GB Building Solutions Limited. This announcement highlights the need for firms to protect themselves against the financial problems of a trading partner. Mark Shepherd, Manager of General Insurance, ABI, said: "The announcement that Longcross Construction has appointed administrators is the latest in a number of high-profile announcements that large construction firms have stopped trading or been placed in administration this year. "This latest administration puts a number of major construction projects in jeopardy and provides a stark reminder about the vital role trade credit insurers play in protecting businesses from the knock on effects that can be caused by the unexpected insolvency of a trading partner. "Trade credit insurers provided more than GBP16 million of cover for goods and services supplied on credit to Longcross Construction Ltd. This means their suppliers will have the protection of credit insurers to replenish the loss incurred. Without this insurance in place, many more companies would be at risk of large financial losses, and potentially further job losses. "Trade credit insurance gives businesses security to extend credit to companies they are trading with and improves access to bank funding, which encourages businesses to expand and supports sustainable growth. Credit insurers also work with their customers to help them understand and manage their risk when trading with other firms." PRECISE MORTGAGE 2015-2B: Fitch Rates Class E Notes 'BB(EXP)sf' --------------------------------------------------------------- Fitch Ratings has assigned Precise Mortgage Funding 2015-2B plc's notes expected ratings, as follows: Class A: 'AAA(EXP)sf', Outlook Stable Class B: 'AA(EXP)sf', Outlook Stable Class C: 'A(EXP)sf', Outlook Stable Class D: 'BBB(EXP)sf', Outlook Stable Class E: 'BB(EXP)sf', Outlook Stable Class Z: not rated The transaction is a securitization of buy-to-let (BTL) mortgages that were originated by Charter Court Financial Services (CCFS), trading as Precise Mortgages (Precise or the originator) in the UK (excluding Northern Ireland). The loans are serviced by the servicing arm of Charter Court Financial Services Limited, operating under the name Exact. The majority of the mortgages (Tier 1 & Tier 2 products) have been originated in line with market-typical prime BTL underwriting guidelines. This is the fifth transaction from Precise and Fitch has assigned ratings to the previous four transactions. KEY RATING DRIVERS Prime Underwriting, Limited History Fitch deemed the Tier 1 & 2 BTL loans to be consistent with other prime BTL in the UK market. These loans have been granted to borrowers with no adverse credit; full and detailed rental income verification; full property valuations with robust audit checks; and with a clear lending policy in place. Data, although limited, shows robust performance which would be expected of prime loans. Fitch treated these loans as prime but with an increased underwriting adjustment to account for the limited data history. Flexible Underwriting The portfolio also includes 14% of Tier 3 products, for which the underwriting criteria permits prior adverse credit behavior and pricing is higher. Since the Tier 3 originations represent the smallest sample of originated loans among the different product categories, the performance data available is very limited. However, none of the Tier 3 loans selected for this pool have any adverse credit history. Fitch used the non-conforming matrix for these loans but with a reduced underwriting adjustment. Unrated Originator and Seller The originator and seller are not rated entities and as such may have limited resources available to repurchase any mortgages in the event of a breach of the representations and warranties (RW) given to the issuer. While this is a weakness, there are a number of mitigating factors that make the likelihood of a RW breach remote. High London Concentration 49% of the loans are located in Greater London. Although this is typical for BTL pools, it is much higher than the proportion of the UK population in this region. Fitch views properties in London as overvalued and applies a sustainable discount of 31.1% in its stressed scenarios. In addition, Fitch has increased the default probability for these loans to account for the geographical concentration. RATING SENSITIVITIES Material increases in the frequency of defaults and loss severity on defaulted receivables could produce loss levels greater than Fitch's base case expectations, which in turn may result in negative rating actions on the notes. Fitch's analysis revealed that a 30% increase in the weighted average (WA) foreclosure frequency, along with a 30% decrease in the WA recovery rate, would imply a downgrade of the class A notes to 'A+sf' from 'AAAsf' and the class B notes to 'Asf' from 'AAsf'. DUE DILIGENCE USAGE No third party due diligence was provided or reviewed in relation to this rating action. DATA ADEQUACY Precise provided Fitch with a loan-by-loan data template. All relevant fields were provided in the data tape, with the exception of prior mortgage arrears, where Precise was unable to differentiate between loans having had one to six months of prior arrears and those having had seven to 12 months prior arrears. Performance data on historical static arrears was provided for all loans originated by Precise, but the scope of the data was limited by the relatively small origination volumes to date and the length of available history (the first Precise origination was in 2010). Precise has experienced only two sold repossessions to date, due to its limited origination history. As a proxy, Precise provided a data tape in Fitch template format for 242 sold repossessions that have been serviced by Exact, which included the Precise- originated loans. Although the majority of the sample was not for loans originated by Precise, the agency considers the performance of the servicer to be one of the key components in determining sold possession performance. The majority of the loans in the repossession file were from non-prime originations that were originated at the peak of the market during 2006-2008, when in many cases property valuations were optimistic. Despite this, the observed quick sale adjustments (QSA) were fairly well aligned to Fitch's base criteria assumptions. Given this and that in Fitch's opinion Precise's approach to obtaining property valuations is robust -- as it obtains both full valuations and conducts subsequent desktop audit valuations -- the agency has applied QSA assumptions as per its standard criteria and not applied any upward adjustments. Fitch requested to receive a third party assessment conducted on the asset portfolio information and expects to receive and review the results before the transaction's close. Fitch conducted a review of a small targeted sample of Precise's origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio. Overall and together with the assumptions referred to above, Fitch's assessment of the asset pool information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. SOURCES OF INFORMATION The information below was used in the analysis. -- Loan-by-loan data provided by Precise as at June 12, 2015 -- Transaction reporting provided by U.S. Bank Global Corporate Trust Services for Precise 2014-2 plc as at March 12, 2015 -- Loan enforcement details provided by Precise as at May 1, 2015 -- Loan performance data provided by Precise as at May 1, 2015 * UK: Pos. Outlook For South East Hotels/Restaurants, R3 Says ------------------------------------------------------------- Insider Media reports that there has been a drop in the number of South East hotel businesses which have a higher than normal risk of insolvency, according to research from insolvency trade body R3. The report relates that the research has revealed that while there are currently more active hotel businesses than ever in the South East, the sector has the lowest number considered at risk of insolvency since January. Compared to five months ago when the local hotel industry had 888 active businesses, with 80 at high risk of insolvency and 135 at a caution level, there are currently 924 operating hotels, with only 72 at high risk and 130 at a caution level, Insider Media relays. According to the report, R3 said the figures paint a positive picture for the sector ahead of the busy summer season when many holidaymakers will be heading to the South Coast. Restaurants also appear to be on more secure footing, with figures of businesses at high risk of insolvency dropping since April while the number of active companies continues to rise, the report says. "It's certainly positive to see this trend in the figures for local hotels and restaurants, especially before the South becomes a hive of activity once more over the summer," Insider Media quotes Andrew Watling, chairman of the Southern Committee of R3 and a partner at Quantuma in Southampton, as saying. "Hotels are sure to do well with guests staying to visit local attractions and before and after cruises, so it's important they do what they can to continue the good work into the autumn." The research, compiled using Bureau van Dijk's 'Fame' database of company information, tracks the proportion of businesses across key sectors that have a heightened risk of entering insolvency, the report notes. ********* 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 * * *