/raid1/www/Hosts/bankrupt/TCREUR_Public/151119.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
E U R O P E
Thursday, November 19, 2015, Vol. 16, No. 229
Headlines
A U S T R I A
HETA ASSET: Creditor Group Ready to Restructure EUR11-Bil. Bond
B E L G I U M
AZELIS HOLDING: Moody's Affirms B3 CFR, Outlook Stable
SOLVAY SA: Moody's Assigns (P)Ba1 Rating to Proposed Bonds
F R A N C E
AREVA SA: Olkiluoto Project Issues Hamper Bailout Talks
OBERTHUR TECHNOLOGIES: Moody's Confirms B2 CFR, Outlook Stable
G E R M A N Y
HECKLER & KOCH: Majority Shareholder Injects EUR60 Million
I R E L A N D
ALLIED IRISH: Fitch Rates Upcoming Tier 2 Issue 'BB-(EXP)'
WEATHERFORD INTERNATIONAL: S&P Assigns 'BB+' CCR then Withdraws
I T A L Y
CLARIS SME 2015: Fitch Assigns 'BB+sf' Rating to Class B Debt
K A Z A K H S T A N
KAZAKHSTAN: Fitch Says Privatization Plan May Hurt Corp. Ratings
NOSTRUM OIL: Moody's Affirms B2 CFR & Changes Outlook to Negative
L U X E M B O U R G
AGUILA 3: Moody's Affirms B3 Corporate Family Rating
CIH INTERNATIONAL: Fitch Affirms 'BB+' Issuer Default Rating
N E T H E R L A N D S
HYVA GLOBAL: Moody's Withdraws B3 Corporate Family Rating
N O R W A Y
NORSKE SKOGINDUSTRIER: S&P Lowers Corp. Credit Rating to 'CC'
SYDVARANGER GRUVE: Intends to File for Bankruptcy Over Debt
R U S S I A
DAR CJSC: Placed Under Provisional Administration
DOSTOINSTVO JSC: Placed Under Provisional Administration
LIGHTHOUSE: Bank of Russia Ends Provisional Administration
IBA-MOSCOW: Moody's Affirms B3 Long-Term Deposit Ratings
PODDERZHKA OJSC: Placed Under Provisional Administration
PRIORITY INSURANCE: Placed Under Provisional Administration
PROMSVYAZBANK: Moody's Raises Long-Term Deposit Ratings to Ba3
S P A I N
ZINKIA ENTERTAINMENT: Scores Deal After Exiting Administration
S W E D E N
NORCELL SWEDEN: Moody's Raises CFR to Ba3, Outlook Stable
U N I T E D K I N G D O M
CWMAMAN INSTITUTE: Venue Up For Sale Following Liquidation
NORTHAMPTON TOWN: Council Makes Last-Ditch Attempt to Save Club
SSI UK: Thai Parent Incurs GBP600MM Loss Over Redcar Collapse
TULLETT PREBON: Moody's Changes Outlook on Ba1 CFR to Stable
X X X X X X X X
* Litigations Pose Risks to Banks' Earnings, Moody's Says
*********
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A U S T R I A
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HETA ASSET: Creditor Group Ready to Restructure EUR11-Bil. Bond
---------------------------------------------------------------
Boris Groendahl and Alexander Weber at Bloomberg News report that
Austrian bad bank Heta Asset Resolution AG's biggest creditor
group is ready to restructure state guarantees of as much as
EUR11 billion (US$11.7 billion) in bonds as long as the debt is
repaid in full.
The "Ad Hoc" group of Heta bondholders, who own about EUR2.5
billion, said in a statement on Nov. 18 that they consider the
province of Carinthia solvent enough to honor its guarantees on
Heta's bonds, Bloomberg relates. The group, as cited by
Bloomber, said the deficiency guarantee Carinthia gave to the
bank it owned until 2007 could lead to claims of around EUR3
billion, which could be paid down at affordable annual rates over
30 years if Austria backs them.
The offer will consist of two elements: The expected recovery
rate from selling and winding down Heta's assets, plus a
contribution from Carinthia that's commensurate with its
"economic capacity", Bloomberg says. The discount will be
imposed on all debt holders if at least two-thirds accept the
deal, a threshold the Ad Hoc group expects won't be achieved,
Bloomberg notes.
Heta is managing the remnants of Hypo Alpe-Adria-Bank
International AG, one of the most damaging Austrian bank failures
after the 2008 financial crisis, Bloomberg discloses.
Heta Asset Resolution AG is a wind-down company owned by the
Republic of Austria. Its statutory task is to dispose of the
non-performing portion of Hypo Alpe Adria, nationalized in 2009,
as effectively as possible while preserving value.
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B E L G I U M
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AZELIS HOLDING: Moody's Affirms B3 CFR, Outlook Stable
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Moody's Investors Service has affirmed the B3 Corporate Family
Rating and B3-PD Probability of Default Rating on Azelis Holding
S.A., formerly named Antelope Holdco S.A., the ultimate parent of
Azelis S.A., as well as the B3 instrument rating on the existing
first lien facilities and Caa2 rating on the existing second lien
facilities assigned at Azelis Finance S.A.. Concurrently,
Moody's has assigned provisional (P)B2 and (P)Caa2 ratings to the
proposed first-lien and second-lien facilities to be borrowed by
Azelis Finance S.A. and Azelis US Holding, Inc.. The outlook on
all ratings is stable.
The new financing, in combination with EUR177 million of
additional cash equity (of which 85% will be structured as
preferred equity certificates), will be used to fund the
acquisition of Koda Distribution Group (KDG) by Azelis and to
refinance all of Azelis' existing debt. The transaction still
requires regulatory and customary approvals, which are expected
by the end of December.
The proposed first-lien senior secured facilities consist of (1)
a US$80 million equivalent revolving credit facility (RCF) due in
2020 and a US$460 million equivalent term loan B facility due in
2022. The proposed US$215 million equivalent second-lien facility
is due in 2023.
Moody's issues provisional ratings in advance of the final sale
of securities. Upon closing of the transaction and a conclusive
review of the final documentation, Moody's will endeavor to
assign definitive ratings. A definitive rating may differ from a
provisional rating.
RATINGS RATIONALE
Moody's decision to affirm Azelis' B3 CFR reflects the company's
continued positive momentum in terms of revenue growth and the
transformational aspect of the acquisition, which doubles its
scale and improves diversity in significantly increasing its
presence in the US. In combination, this mitigates the increased
leverage of the company pro-forma for the acquisition of KDG. In
addition, the rating is supported by the company's cash flow
generation projected to remain positive pro-forma for the
transaction despite the increase in debt.
Azelis Holding S.A.'s (previously named Antelope Holdco S.A.) B3
CFR is weighed on by (i) the current high debt/EBITDA, which
Moody's expects will be approximately 7.0x pro forma for the
transaction at FY2015, falling to 6.5x at FY2016 as cross selling
opportunities take time to realise; (ii) Azelis' thin operating
margins despite slightly higher margins from the KDG acquisition;
(iii) strong competition from bigger players in mature European
and North American markets; (iii) Azelis' still relatively small
scale, although significantly improved post the acquisition,
which tends to be a key driver of profitability in the chemical
distribution industry, with expected revenues and Moody's
adjusted EBITDA of US$1.7 billion and US$110 million respectively
in FY2016; (iv) a history of undertaking acquisitions in the past
which have led to restructuring and reorganization costs; and (v)
exposure to FX variations, due to a geographically diversified
client base.
The rating derives support from other aspects of the company's
business profile as a (i) leading European and North American
specialty chemicals distributor, in fragmented but highly
competitive markets. Additionally, (ii) the company's broad
customer, supplier, product and industry diversification
throughout Europe and Northern America, help mitigate its
exposure to these mature markets, as well as growth opportunities
in China and the KDG acquisition should allow some cross selling
over time, and (iii) Moody's expects restructuring costs will be
limited in the next 18 months despite the large size of the KDG
acquisition due to the lack of overlap between the two
businesses. Finally, (iv) the company benefits from low capital
expenditure requirements of less than 1% of revenues allowing it
to generate positive cash flow going forward despite the large
amount of debt.
Assuming the refinancing is successful, Moody's would consider
Azelis' liquidity profile adequate for its near-term
requirements. Azelis started generating positive free cash flow
again during 2014, aided by improved control over working capital
and Moody's expects this to continue going forward despite the
increase in debt. The only financial covenant will be a
springing covenant on the RCF if it is more than 30% drawn and
Moody's expects this will be set with adequate headroom.
The new proposed first-lien facilities have provisional (P)B2
ratings, one notch above the CFR, as they rank ahead of the
proposed US$215 million equivalent second-lien facility, which
has a provisional (P)Caa2 rating, two notches below the CFR.
RATING OUTLOOK
Azelis' stable outlook reflects Moody's view that the company
will continue to operate at satisfactory (albeit weak) margin
levels, reduce leverage going forward and maintain an adequate
liquidity position.
WHAT COULD CHANGE THE RATINGS UP/DOWN
The ratings could be upgraded if Azelis were to sustain (1)
Moody's adjusted debt/EBITDA below 5.5x; (2) Moody's adjusted
EBITDA margins at approximately 6% and (3) positive free cash
flow. Conversely, the ratings could be downgraded if the
company's EBITDA margin falls below 4.5%, if debt/EBITDA is
sustained above 7.0x, free cash flow turns negative or if
liquidity deteriorates.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Global
Distribution & Supply Chain Services published in November 2011.
Headquartered in Antwerp, Belgium, Azelis is a leading pan-
European specialty chemical distributor. In fiscal year-end
Dec. 31, 2014 Azelis reported revenues of approximately
EUR791 million and a Moody's-adjusted EBITDA of EUR38 million.
SOLVAY SA: Moody's Assigns (P)Ba1 Rating to Proposed Bonds
----------------------------------------------------------
Moody's Investors Service has assigned a provisional (P)Ba1
rating to the proposed issuance of Undated Deeply Subordinated
Fixed to Reset Rate Perp-NC Bonds (the Hybrid) by Solvay Finance,
guaranteed by Solvay SA (Solvay). Moody's has also assigned
(P)Baa2 ratings to the proposed issuance of euro-denominated
senior unsecured bonds by Solvay and of US dollar-denominated
senior unsecured notes by Solvay Finance (America), LLC.,
guaranteed by Solvay. The outlook is negative on all ratings.
The size and completion of the Hybrid and senior unsecured
transactions remain subject to market conditions.
In July 2015, Solvay announced its decision to acquire 100% of
the share capital of Cytec Industries Inc. (Baa2 review for
downgrade) for an enterprise value of US$6.4 billion, including a
total cash consideration of US$5.5 billion. Solvay intends to
issue hybrid securities of up to a maximum amount of EUR1 billion
and senior bonds to secure the long-term financing of this
transaction, which remains subject to Cytec shareholder's
approval on November 24, 2015, and customary closing conditions
including regulatory approvals.
RATINGS RATIONALE
The rating of (P)Ba1 is two notches lower than Solvay's Baa2
senior unsecured rating. This reflects the features of the
proposed Hybrid securities in relation to the existing senior
unsecured obligations of Solvay rated Baa2.
The proposed Hybrid is perpetual, deeply subordinated, it has no
events of default and Solvay can opt to defer coupons on a
cumulative basis. In Moody's view, the Hybrid has equity-like
features that allow it to receive basket 'C' treatment, which
corresponds to 50% equity treatment of the borrowing for the
calculation of the credit ratios by Moody's.
Moody's issues provisional ratings in advance of the final sale
of securities and these ratings reflect Moody'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 Hybrid and senior unsecured
bonds. A definitive rating may differ from a provisional rating.
As the Hybrid rating is positioned relative to another rating of
Solvay, either (i) a change in the senior unsecured rating of
Solvay, or (ii) a re-evaluation of its relative notching, could
impact the Hybrid rating.
Downward pressure on the ratings may result from any (i) material
setback in integrating the acquired target and/or (ii) prolonged
deviation in the group's future performance relative to our
current expectations, preventing a timely recovery in the group's
credit metrics, including debt to EBITDA falling back towards 3
times and retained cash flow (RCF) to net debt rising into the
high teens by 2017.
While any upward rating pressure is unlikely to develop at this
juncture, (i) a material and sustained improvement in
profitability with EBITDA margins stabilizing around 20% and (ii)
a reduction in leverage with debt to EBITDA permanently lowered
below 2.5 times and RCF to net debt raised above 25%, may lead to
a rating upgrade over time.
The principal methodology used in these ratings was Global
Chemical Industry Rating Methodology published in December 2013.
Based in Brussels, Solvay S.A. is one of the leading European
chemicals groups. In the fiscal year ended Dec. 31, 2014, Solvay
reported consolidated sales of EUR10.6 billion and recurring
EBITDA of EUR1.8 billion.
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F R A N C E
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AREVA SA: Olkiluoto Project Issues Hamper Bailout Talks
-------------------------------------------------------
Michael Stothard at the Financial Times reports that negotiations
over the government-backed bailout of French nuclear group Areva
have hit a roadblock as none of the parties involved want to bear
responsibility for a costly project in Finland.
According to the FT, the agreement on a multibillion-euro rescue
deal for Areva is supposed to be finalized by the end of this
month, but important issues have yet to be resolved.
People familiar with the situation said all the parties involved
in the rescue package -- Areva, EDF and the French government --
were reluctant to assume liability for further problems with the
nuclear group's troubled Olkiluoto 3 power plant in Finland, the
FT relates. The project is already EUR5 billion over budget and
nine years behind schedule, the FT notes.
In July, Areva, EDF and the French government announced that the
three parties had come to a provisional agreement that would see
EDF pay about EUR2 billion for a 75% stake in Areva's lossmaking
reactor business, Areva NP, the FT recounts.
The idea is that this will go some way to providing Areva with
the EUR7 billion it says it needs over the next two years to stay
afloat, with the rest coming from other asset sales and a state-
backed capital raising, the FT states.
But EDF has made clear that it would take no exposure to the
Finnish project when taking control of Areva NP, the FT relays.
Areva SA is a France-based company that offers technological
solutions for nuclear power generation.
OBERTHUR TECHNOLOGIES: Moody's Confirms B2 CFR, Outlook Stable
--------------------------------------------------------------
Moody's Investors Service has confirmed Oberthur Technologies
Group S.A.S.' B2 corporate family rating, B2-PD probability of
default rating (PDR) and Caa1 instrument rating on the EUR190
million Senior Notes due 2020. Concurrently Moody's has
confirmed the B1 instrument rating on the EUR260 million Term
Loan B due 2019 and EUR88 million Revolving Credit Facility (RCF)
raised by Oberthur Technologies S.A. and the USD280 million Term
Loan B due 2019 raised by Oberthur Technologies of America Corp.,
both subsidiaries of Oberthur Technologies. The outlook on all
ratings is stable.
This concludes the review, which was initiated on Oct. 29, 2015.
RATINGS RATIONALE
Moody's decision to confirm the ratings follows Oberthur
Technologies' announcement on Nov 4, 2015, that its Board of
Directors decided to postpone its Initial Public Offering (IPO)
due to market conditions. Previously, on October 19th, 2015, the
company registered its Document de Base (registration document)
with the French financial markets authority, the Autorite des
marches financies (AMF). The registration of the Document de
Base was a first step towards an initial public offering of the
company's shares on the regulated market of Euronext Paris, which
was expected before year-end subject to market conditions and
regulatory approval.
While Moody's understands that the company aims at re-initiating
the IPO process in 2016, timing of completion is now less
certain. If Oberthur Technologies were to launch the IPO again,
Moody's would review the company's ratings' positioning.
Oberthur Technologies' B2 CFR remains constrained by the
company's weak free cash flow (FCF) generation projected at below
5% as a percentage of adjusted debt through to 2017. Moody's
expects Oberthur to remain FCF negative or neutral at best in
2015 (EUR28 million free cash outflow in FY 2014) due to on-going
restructuring charges related mainly to the reorganization of the
company's manufacturing footprint and negative working capital
movement mainly related to the ramp-up of shipment capacity of
EMV payment cards to the US. FCF-to-debt is expected to trend
towards 5% by 2017 thanks to the phasing-out of restructuring
costs, the normalization of annual capex spend at around 5% of
sales, but will remain limited due to high interest payments on
the existing debt.
Oberthur Technologies' rating is constrained to a lesser extent
by the company's high adjusted leverage (as adjusted by Moody's
for operating leases, non-recurring items, pension liabilities,
and capitalized development costs) of around 5x based on last
twelve month (LTM) to Sept. 30, 2015, EBITDA of EUR179 million as
reported by the company. However, Moody's positively views the
strong de-leveraging in 2015 from 6.3x adjusted debt-to-EBITDA as
of fiscal year end (FYE) 2014 (based on audited consolidated
accounts) with potential for further de-leveraging throughout
2016 and 2017 based on the strong momentum of the company's
Financial Services Institutions (FSI) segment mainly driven by
the EMV roll-out in the US.
Based on the performance achieved in the first nine months of FY
2015 ending Sept. 30, 2015, Oberthur Technologies confirmed its
guidance for 2015 set forth in its Document de Base with revenues
expected to grow at above 18% at current exchange rates while
generating an EBITDA margin (as reported by the company) of
15.5%. In the first nine months ending Sept. 30, 2015, Oberthur
Technologies experienced high revenue growth at 23% compared to
the same period last year. Group sales were driven by the strong
performance of the FSI segment, which grew at 43%, primarily
benefitting from the roll-out of EMV payment cards in the US. In
addition, the Mobile Network Operator (MNO) segment experienced
an 11% revenue growth during the same period following a
continued period of decline between 2012-2014. MNO revenue
growth was driven mainly by higher sales of classic SIM cards in
Americas and a strong progression of Advanced SIM in particular
LTE SIM in North America and NFC SIM with European telecom
operators. The good performance of FSI and MNO more than offset
the strong reduction in the Connected Devices & Identity Market
(CD&IM) segment (-12% year-on-year revenue decline) due to a lack
of significant new contracts delivered during that period and a
strong comparable in 2014. 2014 performance was positively
impacted by a one-off short-term and high-volume contract to
supply voting cards to a Middle Eastern country. Moody's notes
that Oberthur is subject to an audit from the World Bank
pertaining a contract that the company entered into in January
2015 to provide voter identification cards to the Bangladeshi
Election Commission expected to generate approximately EUR80
million in revenue over the 2015-2017 period. The audit will
determine whether a sanctionable practise has occurred in
relation to the allocation of this World-Bank financed project.
While the outcome and possible consequences are uncertain at this
stage, an unfavorable decision for Oberthur might result in a
reduction of the company's Identity Markets' backlog of EUR222
million as of end of October 2015, which increased by more than
EUR50 million since Aug. 31, 2015, mainly driven by the signing
of a multiple-year system and document contract in Western
Africa.
In year-to-date (YTD) Q3 2015, EBITDA benefitted from revenue
growth as well as profitability margin improvement driven by
operating leverage and the successful implementation of the
restructuring program which consisted among others in the
rationalization of the manufacturing footprint as well the
exiting from less profitable MNO contracts. In the LTM period to
Sept. 30, 2015, the Group generated EUR179 million of EBITDA (as
reported by the company) corresponding to a 16% EBITDA margin
compared to 15.3% in FY 2014.
Oberthur Technologies' liquidity position remains adequate thanks
to EUR57 million of cash on balance sheet and EUR53 million
availability under the EUR88 million Revolving Credit Facility
(RCF) as of Sept. 30, 2015. Moody's expects that liquidity will
improve from FY 2016 as the company starts generating positive
FCF thanks to a normalization of capex and non-recurring items
relating to the restructuring program launched by the company in
2014 and lower working capital needs related to a slowdown of the
growth of the FSI segment. To support fast-growing demand as
part of the US EMV roll-out, Oberthur experienced a significant
increase in working capital from increasing inventories and
receivables.
STRUCTURAL CONSIDERATIONS
Oberthur's PDR (B2-PD) is aligned with the CFR, reflecting our
assumption of a 50% family recovery rate as is customary for
capital structures including both secured bank loans and bonds.
The Term Loans B and the RCF are rated at B1, one notch above the
CFR, due to the cushion provided by the relatively large amount
of the first loss absorbing Senior Notes rated Caa1 and ranking
below.
Rating Outlook
The stable outlook reflects Moody's view that (1) Oberthur will
continue experiencing revenue growth with FSI offsetting revenue
volatility of MNO and CD&IM going forward, (2) free cash flow
will become positive from 2016, and (3) the company will maintain
an adequate liquidity position.
What Could Change the Rating - Up
Positive pressure could develop if Oberthur (1) reduces adjusted
leverage sustainably below 5.0x, (2) generates adjusted FCF-to-
Debt above 5% on a sustained basis, and (3) improves its
liquidity position. Positive pressure could also arise from the
successful completion of the IPO.
What Could Change the Rating - Down
Negative pressure could arise if (1) adjusted leverage increases
above 6.0x, (2) Oberthur experiences sustained negative FCF,
potentially impairing its liquidity position.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Global
Manufacturing Companies published in July 2014.
Incorporated in France, Oberthur Technologies benefits from its
number two global position in the manufacturing of smartcards
behind Gemalto, the global leader. The company splits its
activities between three operating segments: FSI (61% of group
revenues in the first nine months of FY 2015), MNO (24%), and
Connected Device Makers (15%). The group is majority owned by
the private equity firm Advent International since Nov. 2011. On
April 30, 2015, the Group announced a new organization of its
business, which was implemented in order to be fully operational
on July 1, 2015, (the reporting segments in this document reflect
the new organization).
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G E R M A N Y
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HECKLER & KOCH: Majority Shareholder Injects EUR60 Million
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Luca Casiraghi at Bloomberg News reports that Heckler & Koch AG
obtained EUR60-million (US$64 million) cash injection from its
majority shareholder boosting liquidity more than fivefold.
The cash provided by majority shareholder Andreas Heeschen last
week increased liquidity to EUR74 million from EUR13 million at
the end of September, according to company documents seen by
Bloomberg.
According to Bloomberg, Mr. Heeschen's money will strengthen
Heckler & Koch's balance sheet after the German government
disputed the quality of rifles supplied to the nation's military
and blocked exports to some of the company's largest Middle East
customers.
The new money will be used to help repay EUR15 million drawn from
a secured credit facility to cover interest payments on the
notes, Bloomberg says, citing company documents. It will also
partially pay down a separate loan, Bloomberg discloses.
Heckler & Koch AG is a German gunmaker.
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I R E L A N D
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ALLIED IRISH: Fitch Rates Upcoming Tier 2 Issue 'BB-(EXP)'
----------------------------------------------------------
Fitch Ratings has assigned Allied Irish Banks, Plc's (AIB;
BB/Positive) upcoming Tier 2 subordinated debt issue an expected
Long-term rating of 'BB-(EXP)'.
The assignment of the final rating is contingent on receipt of
final documentation confirming to information already received.
KEY RATING DRIVERS
The issue is rated one notch below AIB's 'bb' Viability Rating
(VR), reflecting the higher than average loss severity of this
type of debt than senior unsecured obligations. Fitch has not
applied additional notching for incremental non-performance risk
relative to the VR given that loss absorption would only occur
once the bank reaches the point of non-viability.
RATING SENSITIVITIES
As the securities are notched down from AIB's VR, their rating is
mostly sensitive to any change in this rating. The Positive
Outlook on AIB's Long-term IDR reflects Fitch's view that as
improvements in the bank's capital profile and deleveraging of
problematic assets continue to feed through to its credit
profile, the ratings may be upgraded. However, if any of Fitch's
expectations are not met, or if macroeconomic conditions reverse
and cause further weakening of asset quality to the extent that
impairment charges would compromise the banks' profitability and
therefore capital flexibility, this would be rating negative.
The issue's rating is also sensitive to a change in Fitch's
assessment of loss severity or non-performance risk.
WEATHERFORD INTERNATIONAL: S&P Assigns 'BB+' CCR then Withdraws
---------------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'BB+' long-term
and 'B' short-term corporate credit ratings to Ireland-based
diversified oilfield services provider Weatherford International
plc. At the same time, S&P withdrew its long- and short-term
corporate credit ratings on Weatherford International Ltd. The
'BB+' issue-level ratings on the company's unsecured notes and
the 'B' commercial paper rating are unchanged.
The rating actions follow the company's re-domestication to
Ireland from Switzerland, and the name of the successor parent
public company being changed from Weatherford International Ltd.
to Weatherford International plc. Weatherford International plc
is the parent company and is a guarantor of all the company's
unsecured obligations, including its revolving credit facility
and commercial paper program, issued by holding company
subsidiaries Weatherford International Ltd. and Weatherford
International LLC.
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I T A L Y
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CLARIS SME 2015: Fitch Assigns 'BB+sf' Rating to Class B Debt
-------------------------------------------------------------
Fitch Ratings issued a correction to its October 30, 2015,
release on Claris SME 2015 S.r.l.
The announcement corrects the version published on October 30,
2015. It corrects the figures for the average probability of
default of the transaction's portfolio and for the exposure to
commingling risk. The contacts of the analysts were also amended.
Fitch Ratings has assigned Claris SME 2015 S.r.l.'s notes final
ratings as follows:
EUR1,270,000,000 Class A: 'AA+sf'; Outlook Stable
EUR290,000,000 Class B: 'BB+sf'; Outlook Stable
EUR321,425,000 Class J-1: not rated
EUR81,142,000 Class J-2: not rated
The transaction is a granular cash flow securitization of a
EUR1,953m static pool of mortgage and non-mortgage loans granted
to small and medium-sized enterprises (SME) located in Italy. The
underlying loans were originated by Veneto Banca S.c.p.a. (VB)
and VB's subsidiary, bancApulia S.p.A. (BA).
The ratings address the likelihood of investors receiving
interest payments in accordance with the terms of the transaction
documentation and full repayment of principal by legal final
maturity in October 2062.
KEY RATING DRIVERS
Positive Selection of Portfolio
Fitch determined an annual average probability of default (PD)
for the originators' book of 5.75%, resulting in a five-year
forward-looking average expected PD for the transaction's
portfolio of 5.5%. This implies a positive selection of the
securitized portfolio compared with the originators' balance
sheet and was accomplished through the removal of lower credit
quality obligors from the securitized portfolio.
Trapping of Excess Spread
The transaction's priority of payments uses all available funds
after payment of fees, interest on the rated notes and
replenishment of the reserve fund to repay principal on the rated
notes. No payment to junior items in the waterfall is made until
the rated notes are paid in full. Class B note interest will
become subordinate to class A principal if the cumulative default
ratio is equal to or above 12%.
10 Year Recovery Lag
Fitch has assumed a ten-year linear lag on recovery receipts
following defaults in this transaction. This was based on
historical recovery data for defaulted loans in VB and BA's loan
book.
Commingling and Set-Off Exposure
The securitized portfolio is exposed to set-off risk equal to
5.25% of the opening portfolio notional and commingling risk
ranging from 2.1% (at the 'BB+sf' rating stress) to 3.2% (at
'AA+sf') of the opening portfolio notional. In its analysis,
Fitch examined exposure to both risks throughout the life of the
transaction and in a 'AA+sf' stress assumed a loss equal to the
maximum exposure to both risks in a single month.
Sovereign Cap
The notes' ratings are subject to a cap on Italian structured
finance transactions, six notches above the rating of the
Republic of Italy (BBB+/Stable/F2).
RATING SENSITIVITIES
As part of its analysis, the agency considered the sensitivity of
the notes' ratings to the stresses on defaults, recovery rates
and correlation to assess the impact on the ratings.
While an increase of 25% of the default probabilities assigned to
the underlying obligors could result in a downgrade of one notch
for both the class A and B notes' ratings, a decrease of 25% of
their assumed recovery rates would have no impact on the ratings.
Finally a joint stress combining the above mentioned stresses
plus a doubled correlation could lead to a four-notch downgrade
for the class A notes' rating and to a three-notch downgrade for
the class B notes' rating.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation
to this rating action.
DATA ADEQUACY
Fitch reviewed the results of a third party assessment conducted
on the asset portfolio information, which indicated errors or
missing data related to the loans' origination date and the
mortgaged property value information. These findings were
immaterial to this analysis.
Fitch conducted a review of a small-targeted sample of the
originators' origination files and found the information
contained in the reviewed files to be adequately consistent with
the originators' policies and practices and the other information
provided to the agency about the asset portfolio.
Overall, 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.
REPRESENTATIONS AND WARRANTIES
A comparison of the transaction's representations, warranties and
enforcement mechanisms to those typical for the asset class is
available by accessing the appendix that accompanies the new
issue report that will be shortly available at
www.fitchratings.com. In addition refer to the special report
"Representations, Warranties and Enforcement Mechanisms in Global
Structured Finance Transactions" dated June 12, 2015 and
available on the Fitch website.
SOURCES OF INFORMATION
The information below was used in the analysis.
-- Loan-by-loan data provided by VB as at 30 September 2015
-- Historical performance data provided by VB for 2004-2015
-- Loan enforcement details provided by VB for 2004-2015\
===================
K A Z A K H S T A N
===================
KAZAKHSTAN: Fitch Says Privatization Plan May Hurt Corp. Ratings
-----------------------------------------------------------------
Kazakhstan's privatization plans could lead Fitch to downgrade
state-owned corporates if the government's stake drops below 50%
or parental support from the sovereign weakens substantially. But
the strategic nature of such entities suggests that the
government is unlikely to cede control to external shareholders,
or fail to support them in case of need. Fitch also believes that
privatization plans are subject to change, depending on market
conditions and other factors.
"We have in the past taken action based on weakening ownership
and support. In November 2014, Fitch revised Mangistau
Electricity Distribution Network Company's (MEDNC, BB+) Outlook
to Negative to reflect the expectation of the weakening links
between MEDNC and the state as a result of Samruk-Energy's
intention to sell its 75% stake in the medium term."
"Fitch expects that following the announced partial privatization
the sovereign National Welfare Fund Samruk-Kazyna (Samruk-Kazyna,
BBB+/Stable) will retain control in a number of key players.
These include Kazakhstan Electricity Grid Operating Company
(KEGOC, BBB+/Negative), JSC National Company KazMunayGas (NC KMG,
BBB/Stable), JSC National Company Kazakhstan Temir Zholy (KTZ,
BBB/Negative), JSC Samruk-Energy (Samruk-Energy, BBB-/Stable),
and JSC National Company Kazakhstan Engineering (BBB-/Stable). We
believe it will continue to support them at least until the end
of the decade," Fitch said.
The privatization announcement reflects an extension to, rather
than a change in, policy. The Kazakh government has been keen to
divest minority stakes in large state-owned companies as well as
controlling stakes in smaller ones. In April 2014 it approved a
list of 106 companies earmarked for privatization over 2014-2016.
Only 21 companies were privatized in 2014, and further asset
sales were postponed mostly due to unfavorable market conditions,
tenge devaluation and insufficient investor interest.
As per the approved privatization program, Samruk-Kazyna plans to
sell a minority stake in NC KMG; around 10% in KTZ by 2016; from
a 20%-25% stake to the local residents in a so-called People's
IPO of Samruk-Energy; 10% minus one share in JSC National Atomic
Company Kazatomprom (Kazatomprom, BBB-/Stable) as well as 49%
stakes in its three non-core subsidiaries in 2016; 10% in KEGOC;
and a 75% stake in MEDNC.
At end-2014, Samruk-Kazyna placed a 10% stake in KEGOC at the
Kazakh public stock exchange. Fitch expects that following the
planned IPO, Samruk-Kazyna will maintain a majority stake in
KEGOC and that the government's guarantees for part of KEGOC's
debt will remain in place.
"We believe that state support for NC KMG will remain strong
after the announced partial privatization. NC KMG carries a
substantial social burden as it sells many products domestically
at regulated prices and maintains low-margin operations due to
certain social commitments. It continues to receive tangible
state support, eg, in June 2015 it announced the sale of half of
KMG Kashagan B.V., which holds a 16.88% stake in Kashagan, to
Samruk-Kazyna for USD4.7bn in cash. It was announced earlier this
year that NC KMG's stakes in domestic refineries may be put up
for sale; we view the impact of this potential disposal on NC
KMG's rating as neutral provided that the company receives a
substantial part of the disposal proceeds to compensate for its
significant investments in refinery upgrades."
"KTZ has communicated to us that the Kazakh government is
considering a wider privatization for KTZ's core and non-core
operating subsidiaries eg, a sale of a 75% minus one share stake
in an entity that would combine KTZ's two key operating
subsidiaries, KazTemirTrans (KTT) and AO Locomotive, instead of
selling only KTT. KTZ's current rating does not assume a disposal
of the company's rolling stock operations as the government has
not yet made its final decision and the transaction, even if
approved, is unlikely to complete before 2018. As current
mainline infrastructure tariff only comprises around 40% of the
freight rail transportation tariff, a deconsolidation of AO
Locomotive and KTT would materially impact KTZ's cash flows.
Should the transaction go ahead, we would assess its impact on
the company's business risk, credit ratios and the degree of
state support incorporated in the rating," Fitch said.
The impact of privatization on Kazatomprom's rating is likely to
be neutral as only a minority stake is to be offered for sale and
Fitch rates the company on the standalone basis and does not
incorporate state support.
Samruk-Kazyna currently owns 51% stake in Kazakhtelecom JSC
(BB/Positive), so privatization would likely push the state
ownership to below 50%. Fitch does not factor any parental
support in Kazakhtelecom's ratings.
NOSTRUM OIL: Moody's Affirms B2 CFR & Changes Outlook to Negative
-----------------------------------------------------------------
Moody's Investors Service has changed to negative from stable,
the outlook on all ratings of Nostrum Oil & Gas Plc. At the same
time, the rating agency affirmed the B2 corporate family rating
of Nostrum and the B2 senior unsecured rating of Zhaikmunai LLP,
a wholly owned subsidiary of Nostrum, the issuer of senior
unsecured US$400 million and US$560 million notes, jointly and
severally guaranteed by its parent, Nostrum, and all of its
subsidiaries. Nostrum's probability of default rating (PDR) is
affirmed at B2-PD.
RATINGS RATIONALE
-- OUTLOOK CHANGE TO NEGATIVE FROM STABLE
The change in outlook is primarily driven by falling oil prices
and the rating agency's view that it will be challenging for the
company to maintain its credit profile within the current rating
category over the next 12-18 months, in light of the recent sharp
decline in earnings as a result of the continued low oil prices.
This could nevertheless be mitigated if the gas treatment unit
(GTU) 3 is put into operation as planned at the end of 2016, and
if it materially contributes to cash flow generation from 2017,
and/or oil prices recover substantially. Brent crude currently
oscillates at below US$50/barrel (bbl) down from US$112/bbl in
June 2014.
Moody's expects that oil prices will rise only gradually in 2016
and 2017 from late 2015 levels in a "lower for longer"
environment, with Brent crude averaging US$53/bbl in 2016, rising
to US$60/bbl in 2017.
In H1 2015, revenue fell 38% y-o-y to US$274 million, and
Moody's-adjusted EBITDA was down 50% to US$140 million. Broadly
stable debt, together with lower EBITDA resulted in leverage
(Moody's-adjusted total debt/EBITDA) rising to 2.8x at H1 2015
from 2.0x at Dec. 31, 2014. With the low oil price environment
expected to remain in 2H 2015, this will likely contribute to a
further weakening in the leverage metric to about 3.5x-4.0x by
year-end 2015. Moody's does not expect a noticeable improvement
in leverage, unless oil prices recover beyond our base case
assumption by 2017, when the company expects daily production to
grow to 70,000 boe (from current 44,042 boe) following
commencement of operations of GTU 3 and further to 100,000 boe by
2018.
Moody's does not expect the recent tenge depreciation to provide
substantial benefits to the company, as the positive impact on
its revenue, of which 85%-90% is export based, will be offset by
the substantial proportion of the foreign currency component that
makes up its capex and debt (at more than 90% and 100%,
respectively).
Substantial capex requirements associated with the GTU 3 project
will result in negative free cash flows in 2015-2016. Moody's
estimates that the company will generate about US$200-US$300
million negative free cash flows in 2015.
Despite scaling down of its drilling program and lower overall
capex estimated by the company at about US$300 million in 2015
and at least US$160 million in 2016, compared with US$336 million
in 2014, Moody's believes that the company's capex plans are
still quite ambitious. About $300 million from total capex
program in 2015-16 related to GTU 3 construction and have been
committed.
The company intends to further grow its reserves base via
investment into licenses and appraisal exploration activities
aimed at transferring possible and probable reserves into proved
reserves. However, the company had to scale down its drilling
program in the light of low oil price environment, which exposes
it to the risk that GTU 3 will operate below its capacity owing
to insufficient feedstock, by the time it's commenced at the end
of 2016. Following completion of GTU stage 3, overall capacity
will reach 4.2 bcm by the end of 2016, up from 1.7 bcm currently,
and will help to double production at the Chinarevskoye field by
the end of 2018, which should restore the company's credit
metrics. Despite the company's successful track record in
construction of GTU 1 and 2, this project still carries execution
risks of delays and cost overrun.
-- AFFIRMATION OF NOSTRUM'S B2 RATINGS
The affirmation of Nostrum's rating reflects Moody's view that
the company's financial, operating and liquidity profile remains
commensurate with the B2 rating category.
The B2 rating reflects (1) the company's positive track record of
implementing large investment projects (GTU 1 and 2) and
converting reserves; and (2) beneficial field geology, geographic
positioning and reserves' quality, which account for the
company's low production costs.
At the same time, Nostrum's rating remains constrained by the
company's (1) weakening credit metrics owing to lower oil prices;
(2) relatively modest scale of operations by international
standards (with average daily production of approximately 44
thousand barrels of oil equivalent (boe) per day in nine months
2015); (3) high field concentration, with only one field
currently in operation; (4) large-scale investment plan until
2016, encompassing GTU 3, which the company expects to complete
in H2 2016; and (5) Moody's view that the company's liquidity
will be largely absorbed to fund the GTU 3 project, albeit it is
expected to remain sufficient over at least a 12-month period.
WHAT COULD CHANGE THE RATING DOWN/UP
Given the negative outlook, upward pressure on Nostrum's ratings
is unlikely at present.
The outlook could be stabilized if Nostrum were to see a reversal
in the recent trend in earnings, with the EBITDA/interest ratio
remaining above 3.5x, while maintaining an adequate liquidity
profile. Commencement of GTU 3 on time and budget could help
achieve adherence to these metrics.
Moody's could downgrade the ratings as a result of any
developments that weaken Nostrum's operational or financial
profile, including (1) a decline in production; (2) deterioration
of debt leverage to over US$30,000 per boe of average daily
production on a sustained basis; (3) deterioration of
EBITDA/interest ratio to below 3.5x on a sustained basis; (4)
deterioration in the company's liquidity and financial profile;
and (5) the imposition by the Government of Kazakhstan of
material regulatory and/or contractual changes adversely
affecting the economics of Nostrum's operations.
The principal methodology used in these ratings was Global
Independent Exploration and Production Industry published in
December 2011.
A public company incorporated under the Companies Act 2006 and
registered in England and Wales, Nostrum Oil & Gas Plc (Nostrum)
via its indirectly owned subsidiary Nostrum Oil & Gas LLP,
incorporated in Kazakhstan, is engaged in the exploration,
development and production of oil and gas at the Chinarevskoye
oil and gas field and exploration of oil and gas at the
Rostoshinskoye, Darjinskoye and Yuzhno-Gremyachinskoye fields
under the framework of production sharing agreements (PSA) with
the Government of Kazakhstan.
Nostrum's main shareholders are its founder Mr. Frank Monstrey
and his spouse (17%); Mayfair B.V. (25%); and Baring Vostok
Capital Partners via its affiliate Dehus Dolmen Nominees Limited
(15%). The approximately 43% of total shares remaining are traded
in the form of Ordinary Shares on the London Stock Exchange
(LSE).
For the last twelve months ended June 30, 2015, Nostrum reported
revenue of US$591 million while Moody's-adjusted EBITDA amounted
to US$365 million.
List of Affected Ratings
Affirmations:
Issuer: Nostrum Oil & Gas Plc
Corporate Family Rating, Affirmed B2
Probability of Default Rating, Affirmed B2-PD
Issuer: Zhaikmunai LLP
BACKED Senior Unsecured Regular Bond/Debenture, Affirmed B2
(LGD4)
Outlook Actions:
Issuer: Nostrum Oil & Gas Plc
Outlook, Changed To Negative From Stable
Issuer: Zhaikmunai LLP
Outlook, Assigned Negative
===================
L U X E M B O U R G
===================
AGUILA 3: Moody's Affirms B3 Corporate Family Rating
----------------------------------------------------
Moody's Investors Service has affirmed Aguila 3 S.A. (Swissport)
B3 Corporate Family Rating and probability of default rating
(PDR) of B3-PD. Concurrently, Moody's has also affirmed the B3
ratings of the outstanding USD945 million and CHF350 million
senior secured notes.
In relation to the announced acquisition of Swissport by HNA
Group Co. Ltd., Moody's has also assigned a provisional rating of
(P)B1 to the proposed CHF1,145 million Term Loan B to be issued
by Swissport Investments S.A. and CHF150 million Revolving Credit
Facility to be issued by Swissport International AG.
On July 30, 2015, PAI Partners SAS announced the sale of
Swissport to HNA Group (a global enterprise group based in China)
for a total enterprise value of CHF2.7 billion or 10.9x pro-forma
LTM Jun-15 EBITDA. The transaction is subject to regulatory and
anti-trust approvals and it is expected to close by late 2015 or
early 2016. Upon closing of the acquisition, the proceeds from
the loan will be used, together with the issuance of additional
CHF315 million of unsecured debt (likely to be issued in the form
of notes), to repay the existing notes and effectively refinance
all of the outstanding debt. Moody's then expects to move the
CFR to Swissport Group S.A.R.L., the top and reporting entity of
the new restricted group.
The outlook on all ratings is stable.
Moody's issues provisional ratings in advance of the final sale
of securities. Upon closing of the transaction and a conclusive
review of the final documentation, Moody's will endeavor to
assign definitive ratings. A definitive rating may differ from a
provisional rating.
RATINGS RATIONALE
"The affirmation of the CFR reflects our view that leverage as
measured by Moody's Adjusted Debt to EBITDA will remain broadly
unchanged, from 5.4x as of June 30, 2015, to 5.5x pro forma for
the acquisition and the refinancing of the notes. Moody's
considers the company well positioned in its rating category.
The rating factors in our assumption that Swissport's growth
strategy under the new ownership will remain broadly unchanged in
the next 12 to 18 months although we recognize that HNA could
facilitate the company's expansion in higher margin emerging
markets including China in the longer term" says Emmanuel Savoye,
AVP and lead Analyst of Swissport.
The (P)B1 rating on the proposed Term Loan B is two notches above
the CFR because of the assumption that the company will shortly
issue a sizeable CHF315 million unsecured debt in order to
refinance fully the outstanding debt. The unsecured debt
effectively provides loss absorption in our Loss Given Default
model and an uplift to the rating of the term loan. The (P)B1
Term Loan rating may change should the issuance amount and the
terms of the unsecured debt be different than Moody's current
expectations.
Swissport's current liquidity is adequate and supported by CHF103
million of unrestricted cash as of Sept. 30, 2015. As part of
the transaction, cash will increase by CHF90 million (CHF50
million of which can be used to collateralize contracts that
benefit from performance guarantees) and the company will replace
the existing RCF of CHF200 million with a new one of CHF150
million. Moody's expects the RCF to be undrawn at closing. The
RCF has a springing leverage covenant with a 30% initial bank
case headroom. Pro-forma for the refinancing, liquidity is
adequate and further supported by the 6 years maturity of the
proposed term loan.
The Term Loan B and the RCF benefit from the same security and
guarantees on a pari-passu basis from subsidiaries representing
minimum 80% of assets and EBITDA excluding JVs, while Moody's
expect the unsecured debt to rank below.
RATIONALE FOR THE STABLE OUTLOOK
The stable outlook reflects Moody's expectation that Swissport
will maintain adequate liquidity, continue to successfully
achieve organic growth while renewing existing contracts, and
focus on measures aimed at improving profitability across its
network. Moody's has not included any large debt funded
acquisitions in its forecast.
WHAT COULD CHANGE THE RATING UP/DOWN
Upward pressure on the ratings would develop if Moody's adjusted
debt to EBITDA falls sustainably below 5.5x and Moody's
EBITA/Interest increases above 1.5x.
Downward pressure on the ratings would develop in case of a
deterioration in liquidity or substantially negative free cash
flows.
The principal methodology used in these ratings was Business and
Consumer Service Industry published in December 2014.
CIH INTERNATIONAL: Fitch Affirms 'BB+' Issuer Default Rating
------------------------------------------------------------
Fitch Ratings has affirmed all of the ratings for Constellation
Brands Inc. and its subsidiary, CIH International S.a.r.l.,
including the Issuer Default Ratings (IDR) at 'BB+'. The rating
affirmation follows the announcement by Constellation that it has
entered into a definitive agreement to acquire Home Brew Mart
which includes craft beer brand, Ballast Point, for a total
consideration of approximately US$1 billion.
As of Aug. 31, 2015, Constellation had US$7.4 billion of debt
outstanding and US$330 million in cash. The Rating Outlook is
Stable.
TRANSACTION HIGHLIGHTS
Fitch estimates a transaction multiple in the upper-20x range
based on Ballast's 2015 EBITDA. Constellation will fund the
transaction through a combination of cash and debt. The
transaction is expected to close by the end of 2015, subject to
customary closing conditions.
Fitch views the acquisition as highly complementary with a robust
portfolio that is innovation focused, which has been a modest
weak point in the past for Constellation. The portfolio includes
more than 40 different styles of beer and increases
Constellation's exposure to the faster growing, high end craft
beer and spirits segments. Ballast Point has grown its revenue
base almost threefold to US$49 million in 2014 from US$14 million
in 2012 and during the first nine months of 2015, revenue grew
166% to US$86 million. While relatively modest at only 2% of
overall revenue, Ballast Point's operations will materially
leverage Constellation's distribution, marketing scale, supply
chain and market research over time and should become a key
aspect of Constellation's overall growth strategy.
KEY RATING DRIVERS
Leverage Will Increase Slightly, Further Improvement Expected in
FY2017
The acquisition will increase leverage (total debt/EBITDA) to
slightly greater than 4x at the end of fiscal 2016 (year ending
February 2016), which would be flat to fiscal 2015 year-end
level. Leverage had decreased to 3.8x as of Aug. 31, 2015. Year
to date, Constellation has generated better than expected
operating cash flow (OCF) and margin expansion given industry
leading comparable sales. Fitch now expects OCF to be more than
US$100 million higher than initially forecast for fiscal 2016 to
US$1.3 billion. Given the strong operating trends in
Constellation's beer business, which generates more than 60% of
the company's operating income, Fitch expects leverage should
decrease to the upper 3x range in fiscal 2017 as growth in EBITDA
should more than offset any increased borrowing to fund beer
capacity expansion and a growing dividend.
Hispanics, Premiumization Driving Growth
Fitch believes Constellation is well positioned to capture long-
term growth due to its strong appeal to the Hispanic consumer
coupled with the ongoing trend toward premiumization in the beer
industry driven by Mexican imports and craft beer. Other growth
factors include the expected sizeable increase in Hispanic
consumers reaching the legal drinking age, growth in
distribution, and expansion of drinking occasions due to
increased draft and can consumption.
The US$4.75 billion Modelo acquisition (an additional true-up
payment of US$543 million was made at the beginning of fiscal
2015) that closed in fiscal 2014, materially increased
Constellation's diversity, scale and exposure to above-average
market growth rates in the beer segment. For the last 12 months,
Constellation generated more than 60% of segment operating income
from the beer business compared to approximately 40% in fiscal
2013, and grew beer depletion volumes by approximately 9.5% which
significantly outperformed the U.S. beer industry.
Comparatively, the overall U.S. beer industry has increased in
the low single digits during the past two years after generally
experiencing low single-digit declines for several years prior
due to share loss as the millennial generation shifted
preferences into wine and spirits along with a recessionary
macroeconomic environment. As premiumization continues to affect
the beer market, consumers are trading up for high-quality,
flavorful products in above-premium, super-premium categories
including hard cider and flavored malt beverages, craft and
import offerings. While several imported beer segments are
experiencing declines, Mexican imports continue to grow and have
been the primary imports growth driver during the past several
years.
Thus, Fitch expects Constellation will generate increased long-
term cash flows driven by the above strong underlying
fundamentals, further leverage of new product development
innovation, and the potential for increased cost of goods sold
efficiencies as the company brings expansion capacity on-line.
The Ballast Point acquisition allows Constellation to more
effectively target different demographic segments that are
attracted to craft beer and spirits and should minimize potential
cannibalization of its existing Mexican beer and spirits
portfolio, thus supporting a slightly improved growth profile.
Leading Market Positions
Constellation's ratings consider the company's leading market
positions and well-known liquor portfolio. According to the
company, Constellation is the third-largest U.S. beer company
with approximately 50% volume share in the import segment due to
its Mexican beer portfolio that contains five of the top 15 U.S.
imported beers. Constellation is also one of the world's largest
wine producers, is focused on growing premium brands, and is the
producer of one of the fastest-growing premium brand vodkas,
Svedka.
Constellation has begun to improve wine growth during the first
half of fiscal 2016 with focus brand depletion growth of more
than 6% during the second fiscal quarter of 2016. Fitch's
forecast assumes modest growth in wine revenue for fiscal 2016
after wine sales declined 1.2% in fiscal 2015. The wine portfolio
had lagged the overall U.S. category in fiscal 2015 causing wine
dollar market share to erode slightly, driven by competition in
the super-premium price segment. The luxury/ super luxury wine
segments have witnessed strong volume and dollar sales growth
since 2010 as consumers continue to trade up to wine priced $20
and above. Constellation's recent acquisition of the luxury wine
brand, Meomi, highlights the company's focus on improving the
price mix in the wine portfolio.
CFO Growing, FCF Pressured Due to Elevated Capital Intensity
Fitch expects Constellation will generate increased cash flow
from operations (CFO) driven by strong underlying fundamentals,
further leverage of new product innovation, and increased
efficiencies as expansion capacity comes online. Fitch has
increased its expectations for CFO in FY2016 by more than US$100
million to almost US$1.3 billion due to higher operating earnings
growth. The company expects capital expenditures for FY2016 will
be in the range of US$1.05 billion to US$1.15 billion, with
capital expenditures related to the Nava brewery expansion in the
range of US$950 million to US$1.05 billion.
Fitch expects a free cash flow deficit of US$50 million to US$75
million in fiscal 2016, which compares to previous deficit
expectations of approximately US$200 million. Constellation
initiated a dividend of approximately US$240 million for fiscal
2016. With accelerated investments for additional growth related
beer capacity likely required due to continued high demand
growth, Fitch believes Constellation's deficit will rise in
FY2017 to approximately $225 million although EBITDA growth
should more than offset increased borrowing, resulting in
moderate leverage improvement.
Recovery Rating Notching
Constellation's bank obligations and the European borrower's bank
obligations are secured by a 100% pledge of certain material U.S.
subsidiaries and a 65% pledge of certain foreign subsidiaries and
foreign holding companies. The European Borrower's obligations
are additionally secured by a 100% direct pledge of certain other
foreign subsidiaries which includes the Mexican brewery held by
CIH Holdings Mexico and the IP rights at the CI Cerveza
subsidiary. Fitch believes the additional stock pledge for the
European borrower reflects a superior recovery position at 'RR1'.
KEY ASSUMPTIONS
Additional key assumptions within Fitch's fiscal 2016 rating case
for the issuer include:
-- Consolidated revenue growth of 7.5% supported by depletion
growth in the beer segment of approximately 9%;
-- Operating income margin improvement for the beer segment of
approximately 200 basis points to 34%; modest increase in
operating income margin in the wine and spirits segment to
the high 23% range;
-- Operating cash flow of almost US$1.3 billion;
-- FCF deficit in the range of US$50 to US$75 million. With
accelerated investments for additional growth related beer
capacity likely due to demand growth, Fitch believes
Constellation's deficit will rise to approximately US$225
million in FY2017;
-- Total debt to EBITDA leverage of approximately 4.1x versus
previous expectations of 3.8x - 3.9x by the end of FY2016.
For FY2017, EBITDA expansion should drive improvement to the
upper-3x range.
RATING SENSITIVITIES
While a ratings upgrade is not anticipated over the next 12
months, future developments that may, individually or
collectively, lead to a positive rating action include:
-- Leverage such that total debt-to-operating EBITDA is under
3.5x or FFO adjusted leverage is under 4.5x on a sustained
basis;
-- Demonstrated ability to improve and sustain FCF margin above
3.5%;
-- Growing volume trends for their primary brands;
-- Maintain EBIT margin in the mid-20% range and EBITDAR margin
of at least 30%.
Future developments that may, individually or collectively, lead
to a negative rating action include:
-- Deterioration in volume trends leading to market share
losses;
-- Significant and ongoing deterioration in profitability due to
competitive activity;
-- Increased leverage such that total debt-to-operating EBITDA
moves above the low 4x range or FFO adjusted leverage that
moves above the low 5x range on a sustained basis.
LIQUIDITY
Constellation had a cash position of US$330 million as of
Aug. 31, 2015 with nearly full availability (US$15 million of
outstanding letters of credit) under its US$1.15 billion senior
secured revolving credit facility that matures in 2020.
Constellation also has two accounts receivable securitization
facilities that provide additional borrowing capacity from US$235
million up to US$330 million and from $100 million up to US$190
million structured to account for the seasonality of the
company's business. Both facilities were extended an additional
364-day term in September 2015 and moderately upsized to provide
additional liquidity capacity. The facilities were undrawn as of
Aug. 31, 2015.
Upcoming debt maturities in fiscal 2017 include US$700 million of
7.25% notes, which Fitch expects will be refinanced. Annual
amortization requirements for the term loans over the next three
fiscal years is approximately US$35 million remaining in FY2016,
US$138 million in FY2017 and US$138 million in FY2018.
FULL LIST OF RATING ACTIONS
Fitch has affirmed the following ratings:
Constellation Brands, Inc.
-- Long-term IDR at 'BB+';
-- Senior unsecured notes at 'BB+/RR4';
-- US$1,150 million senior secured revolver at 'BBB-/RR2';
-- US$1,271.6 million senior secured term loan A at 'BBB-/RR2';
-- US$241.9 million senior secured term loan A-1 at 'BBB-/RR2'.
CIH International S.a.r.l.
-- Long-term IDR at 'BB+';
-- US$1,430.1 million European term loan A at 'BBB-/RR1'.
=====================
N E T H E R L A N D S
=====================
HYVA GLOBAL: Moody's Withdraws B3 Corporate Family Rating
---------------------------------------------------------
Moody's Investors Service has withdrawn the B3 corporate family
rating and B3-PD probability of default rating of Hyva Global
B.V. (Hyva), following refinancing and repayment of the entire
debt structure. The Caa1 rating of Hyva's USD375 million 8.625%
senior secured notes due 2016, has also been withdrawn.
RATINGS RATIONALE
Moody's has withdrawn the rating for its own business reasons.
===========
N O R W A Y
===========
NORSKE SKOGINDUSTRIER: S&P Lowers Corp. Credit Rating to 'CC'
-------------------------------------------------------------
Standard & Poor's Ratings Services said that it had lowered its
long-term corporate credit rating on Norwegian paper producer
Norske Skogindustrier ASA (Norske Skog) to 'CC' from 'CCC'.
At the same time, S&P lowered the issue rating on Norske Skog's
senior secured notes to 'CC' from 'CCC+'. S&P revised the
recovery rating on these notes to '3' from '2' to reflect its
expectation of recovery in the lower half of the 50%-70% range in
the event of a default.
S&P also lowered the issue ratings on Norske Skog's senior
unsecured notes to 'C' from 'CC'. The recovery rating is
unchanged at '6', indicating S&P's expectation of 0%-10% recovery
in a default scenario.
S&P has placed all the long-term ratings and the 'C' short-term
corporate credit rating on Norske Skog on CreditWatch with
negative implications.
The downgrades and CreditWatch placements follow Norske Skog's
launch of a debt exchange offer for its outstanding EUR108
million and EUR212 million senior unsecured notes maturing in
June 2016 and June 2017, respectively.
Norske Skog is offering to exchange the notes maturing in 2016
and 2017, respectively, for new notes maturing in 2019 and 2026.
The new notes will pay half of the interest in cash and half at
the time of maturity. The discount relative to the existing
notes will be 10% for the 2016 noteholders and 50% for the 2017
noteholders. In addition to the new notes, the holders of the
notes due 2017 will receive a perpetual note, maturing in 2114,
equivalent to 25% of the nominal amount of the original 2017
notes, with a cash interest coupon of 2%.
S&P views the offer as constituting a "distressed exchange,"
which under its criteria is tantamount to an immediate default.
This is because Norske Skog's offer is below the par value of the
notes and there is a high likelihood that the company will
default on payments, leaving the noteholders with limited
alternatives to recover their investment.
S&P believes that the existing noteholders will likely accept the
offer, based on the substantial default risk and the low recovery
prospects on the notes. In S&P's view, Norske Skog's financial
risk profile remains stressed, due to the difficult operating
environment for newsprint and magazine paper, as well as Norske
Skog's high leverage and upcoming debt maturities in 2016 and
2017.
S&P aims to resolve the CreditWatch following the completion of
the debt exchange. If the offer is completed as planned, S&P
will lower the long-term rating on Norske Skog to 'SD' (selective
default) and the issue rating on the affected senior unsecured
notes to 'D'.
After that, S&P will reassess Norske Skog's liquidity position
and financial risk profile based on the outcome of the debt
exchange, which may result in the long-term ratings being raised
to 'CCC' or 'CCC+'.
If Norske Skog does not complete the offer or fails to receive
the required consent S&P will reassess the company's credit
profile.
SYDVARANGER GRUVE: Intends to File for Bankruptcy Over Debt
-----------------------------------------------------------
Terje Solsvik at Reuters reports that Sydvaranger Gruve AS, the
Norwegian mining subsidiary of Australia's Northern Iron Ltd.,
was set to file for bankruptcy on Nov. 18 as its US$100 million
debt has become unsustainable.
Northern Iron said attempts to find new investors for
Sydvaranger, which has close to 400 employees, had also failed,
Reuters relates.
Northern Iron, as cited by Reuters, said the two largest
creditors were top Norwegian bank DNB and government investment
agency Innovation Norway.
Northern Iron, on Nov. 12 requested a trading halt for its shares
pending the outcome of talks with banks over the Sydvaranger
mine, Reuters discloses.
===========
R U S S I A
===========
DAR CJSC: Placed Under Provisional Administration
-------------------------------------------------
The Bank of Russia, by its Order No. OD-3153 dated November 12,
2015, took a decision to appoint from November 12, 2015, a
provisional administration to Insurance Company DAR CJSC.
The decision to appoint the provisional administration was taken
due to the suspension of the Company's insurance and reinsurance
licenses (Bank of Russia Order No. OD-2613 dated September 30,
2015).
The powers of the executive bodies of the Company are suspended.
Ilya S. Pavlikov, member of the non-profit partnership Self-
Regulatory Organisation of Receivers International Centre of
Experts and Professional Receivers, has been appointed as a head
of the provisional administration.
DOSTOINSTVO JSC: Placed Under Provisional Administration
--------------------------------------------------------
The Bank of Russia, by its Order No. OD-3161 dated November 12,
2015, took a decision to appoint from November 12, 2015, a
provisional administration to Life Insurance Company Dostoinstvo
JSC.
The decision to appoint the provisional administration was taken
due to the suspension of the Company's insurance license (Bank of
Russia Order No. OD-2689, dated October 7, 2015).
The powers of the executive bodies of the Company are suspended.
Mikhail V. Storozhuk, member of the non-profit partnership Self-
Regulatory Organisation of Receivers SEMTEK, has been appointed
as a head of the provisional administration.
LIGHTHOUSE: Bank of Russia Ends Provisional Administration
----------------------------------------------------------
In compliance with Sub-clause 4.1.2 of Clause 4.1 of the
Regulation on the provisional administration in a management
company and in a specialized depository approved by FSFM of
Russia Order No. 10-23/pz-n, dated March 25, 2010, the Bank of
Russia took a decision to terminate the activity of the
provisional administration of Lighthouse Capital, LLC.
IBA-MOSCOW: Moody's Affirms B3 Long-Term Deposit Ratings
--------------------------------------------------------
Moody's Investors Service has changed to stable from positive the
outlook on IBA-Moscow's B3 long-term local- and foreign-currency
deposit ratings and affirmed the ratings. Concurrently, IBA-
Moscow's standalone baseline credit assessment (BCA), adjusted
BCA and counterparty risk assessment (CRA) were affirmed at b3
and B2(cr)/Not-Prime(cr), respectively. The bank's Not-Prime
short-term local- and foreign-currency deposit ratings were also
affirmed; the short-term ratings carry no specific outlook.
Moody's assessment is primarily based on IBA-Moscow's audited
financial statements for 2014, prepared under IFRS and local GAAP
reports for H1 2015.
RATINGS RATIONALE
-- STANDALONE RATINGS
The rating outlook change to stable from positive is driven by
the reversal of asset quality improvement trends seen in recent
years. In Moody's opinion, IBA-Moscow's asset quality remains
challenged by a relatively high level of impaired loans. Under
audited IFRS statements, restructured loans as a proportion of
gross loans increased to 32% as of Dec. 31, 2014, (year-end 2013:
19%; year-end 2012: 30%; year-end 2011: 42%). As per management
data, the level of restructured lending remained high and
amounted to 26% of gross lending as of June 30, 2015. Moody's
understands that these loans have been granted for long-term
investment projects, and are largely funded and guaranteed by the
parent company, the International Bank of Azerbaijan (Ba3 stable,
b3 BCA).
Moody's notes that IBA-Moscow's BCA remains constrained by: (1)
high level of restructured loans; (2) high loan book
concentration, including high exposure to the construction and
real estate sectors; and (3) high dependence on the parent's
related business projects and funding. At the same time, Moody's
notes that IBA-Moscow's standalone ratings are supported by the
bank's adequate funding profile and moderate capitalization.
IBA-Moscow's foreign currency exposure to largely unhedged
borrowers and high credit concentration represents one of the key
risks. As of mid-2015, foreign currency loans accounted for 76%
of gross loans as per management data (year-end 2014: 76%). As
reported in audited IFRS statements at year-end 2014, the bank's
aggregate exposure to the six largest customers amounted to 29%
of total gross loans or 404% of its Tier 1 capital, although the
majority of this exposure is guaranteed by the parent company.
In Moody's opinion, these concentration levels render the bank
vulnerable to the financial performance of a limited number of
borrowers in risky market segments.
Moody's notes that although in recent years IBA-Moscow has
notably decreased its dependence on parental funding, the share
of parent-related resources remains significant, accounting for
approximately 31% of IBA-Moscow's total liabilities as of June
30, 2015 (year-end 2014: 25%; year-end 2013: 27%). In addition,
the parent company used to provide guarantees under the
syndicated loans attracted by IBA-Moscow from local and foreign
banks (around 13% of liabilities as of June 30, 2015).
-- SUPPORTED RATINGS
Moody's assessment of a high probability of parental support from
International Bank of Azerbaijan results in no rating uplift, as
the parent's standalone BCA of b3 is at the same level as IBA-
Moscow's standalone BCA.
WHAT COULD MOVE THE RATINGS UP/DOWN
Upward pressure on the ratings could develop following a material
reduction in the volume of restructured loans or a BCA upgrade of
the bank's parent company, the International Bank of Azerbaijan.
Downward pressure on the bank's ratings could develop following
higher-than-expected asset-quality deterioration and credit
costs, which would significantly erode the bank's capital
buffers.
PRINCIPAL METHODOLOGIES
The principal methodology used in these ratings was Banks
published in March 2015.
Headquartered in Moscow, Russia, IBA-Moscow is a 100% subsidiary
of International Bank of Azerbaijan. IBA-Moscow reported total
audited IFRS assets of RUB51.6 billion, total shareholders'
equity of RUB4.1 billion and a net income of RUB1 million for
year-end 2014.
PODDERZHKA OJSC: Placed Under Provisional Administration
--------------------------------------------------------
The Bank of Russia, by its Order No. OD-3162 dated November 12,
2015, took a decision to appoint from November 12, 2015, a
provisional administration to governmental insurance company
Podderzhka OJSC.
The decision to appoint the provisional administration was taken
due to the suspension of the Company's insurance license (Bank of
Russia Order No. OD-2701, dated October 7, 2015).
The powers of the executive bodies of the Company are suspended.
Dmitry S. Minenkov, member of the non-profit partnership First
Self-Regulatory Organisation of Receivers, has been appointed as
a head of the provisional administration.
PRIORITY INSURANCE: Placed Under Provisional Administration
-----------------------------------------------------------
The Bank of Russia, by its Order No. OD-3143 dated November 12,
2015, took a decision to appoint from November 12, 2015, a
provisional administration to PRIORITY INSURANCE, LLC.
The decision to appoint the provisional administration was taken
due to the suspension of the Company's insurance license (Bank of
Russia Order No. OD-2617 dated September 30, 2015).
The powers of the executive bodies of the Company are suspended.
Irina G. Tkachenko, member of the non-profit partnership Self-
Regulatory Interregional Public Organisation Association of
Receivers, has been appointed as a head of the provisional
administration.
PROMSVYAZBANK: Moody's Raises Long-Term Deposit Ratings to Ba3
--------------------------------------------------------------
Moody's Investors Service has upgraded Promsvyazbank's long-term
local- and foreign-currency deposit ratings to Ba3 from B1. At
the same time, Moody's has upgraded the bank's senior unsecured
debt ratings to Ba3 from B1 and the senior unsecured medium-term
notes program rating to provisional (P)Ba3 from (P)B1. The
rating agency also upgraded the bank's long-term counterparty
risk assessment (CR Assessment) to Ba2(cr) from Ba3(cr).
However, all long-term ratings remain on a negative outlook.
List of affected ratings
Upgrades:
LT Bank Deposits (Foreign Currency and Local Currency),
Upgraded to Ba3 from B1 Negative
LT Counterparty Risk Assessment, Upgraded to Ba2(cr) from
Ba3(cr)
Senior Unsecured Regular Bond/Debenture (Foreign Currency and
Local Currency), Upgraded to Ba3 from B1 Negative
Senior Unsecured MTN (Foreign Currency), Upgraded to (P)Ba3
from (P)B1
Affirmations:
Baseline Credit Assessment, Affirmed b1
Adjusted Baseline Credit Assessment, Affirmed b1
ST Bank Deposits (Foreign Currency and Local Currency),
Affirmed NP
ST Counterparty Risk Assessment, Affirmed NP(cr)
Subordinate Regular Bond/Debenture (Foreign Currency), Affirmed
B2
Subordinate Regular Bond/Debenture (Foreign Currency), Affirmed
B3 (hyb)
Subordinate MTN (Foreign Currency), Affirmed (P)B2
Other Short Term (Foreign Currency), Affirmed (P)NP
Outlook Actions:
Outlook, Remains Negative
RATINGS RATIONALE
The upgrade of Promsvyazbank's long-term deposit and senior
unsecured debt ratings to Ba3 from B1 reflects Moody's
expectation that the bank will receive a moderate level of
extraordinary support from the Russian authorities in case of
need. This assumption of government support results in a one-
notch uplift from its b1 BCA.
The upgrade follows the Central Bank of Russia's (CBR)
announcement on Oct. 20, 2015, that it had approved the list of
10 systemically important banks and formally designated
Promsvyazbank:
-- the eighth largest banking group in Russia by total assets
-- as a systemically important financial institution.
The affirmation of Promsvyazbank's BCA reflects a moderation in
the bank's negative credit factors during the second and third
quarters of 2015, as reflected by: (1) Promsvyazbank's ability to
strengthen its capital base as planned, and (2) the stabilization
of its earnings-generating capacity. The affirmation also
reflects Promsvyazbank's adequate liquidity profile and Moody's
expectation that the bank's business franchise will remain
resilient to a market downturn.
NEGATIVE OUTLOOK
The negative outlook on Promsvyazbank's long term ratings
reflects the persistent risks to the bank's credit profile in
Russia's challenging operating environment which will continue to
exert pressure on the bank's financial fundamentals given the
bank's 1) high single-borrower concentration and sizable exposure
to loans denominated in foreign currency; 2) still moderate
albeit improved Tier 1 capital level, which will remain sensitive
to exchange-rate volatility and reliant on external capital
injections.
Moody's notes that in the past several months, Promsvyazbank has
received additional capital both from its main shareholder and
from the Russian government. Moody's expects that the recent and
forthcoming capital contributions will allow the bank to keep its
capital adequacy ratios from deteriorating over the next 12
months, even as it posts losses owing to increased credit costs
and weaker pre-provision income amid Russia's economic recession.
The rating agency expects that the bank will maintain its Tier 1
ratio above 9% and that its total capital adequacy ratio will be
approximately 16% at the end of 2015, compared with 9.3% and
14.5% respectively at H1 2015 (8.0% and 13.5% at the end of
2014). Moody's also notes that the systemically important
designation would benefit the bank's credit profile because it
would require the bank to maintain larger loss-absorbing buffers
than other Russian banks.
During H1 2015, the bank's non-performing loans (NPLs) increased
to 5.3% of total loans, up from 2.9% at the end of 2014 and
Moody's expects that Promsvyazbank's asset quality trend will
remain negative, owing to weak economic conditions in Russia. In
particular, the bank's asset quality will remain challenged by
relatively high single-borrower concentration and sizable
exposure to loans denominated in foreign currency. However,
Moody's expects the pace of the bank's asset quality
deterioration to slow down over the next 12 months, given
Promsvyazbank's increased focus on large corporate borrowers with
relatively high creditworthiness.
In H1 2015, Promsvyazbank reported a net loss of RUB4.8 billion
(H1 2014: net profit RUB561 million) and Moody's expects that the
bank will be loss-making in 2015 owing to increased provisioning
expenses. At the same time, Moody's notes stabilisation of
Promsvyazbank's earnings-generating capacity given its net
interest margin improvement in Q3-Q4 2015 to approximately 3.5%,
after having roughly halved to 2% in the first quarter. Expected
easing provisioning pressure in 2016 coupled with non-recurring
gains will support the bottom line and reduce losses, helping the
bank to break-even by the end of next year.
Promsvyazbank benefits from a diversified liability structure and
an adequate liquidity profile. The bank funds its operations
mainly through client accounts (70% of total liabilities at H1
2015), and maintains a sufficient level of liquid assets.
Moody's adds that the bank's designation as a systemically
important bank would benefit the bank's liquidity profile because
it would require the bank to maintain higher liquidity coverage
ratio.
WHAT COULD MOVE THE RATINGS DOWN/UP
Negative rating actions could result from any of:
(1) a further worsening of the operating environment which could
exert additional pressure on the bank's financial
fundamentals;
(2) Promsvyazbank's credit costs will materially increase beyond
the level currently anticipated by Moody's; and
(3) significantly weakened loss absorption capacity or liquidity
profile.
Given the negative outlook on Promsvyazbank's ratings, any
ratings upgrade in the next 12-18 months is unlikely.
PRINCIPAL METHODOLOGIES
The principal methodology used in these ratings was Banks
published in March 2015.
Headquartered in Moscow, Russia, Promsvyazbank reported total
(unaudited International Financial Reporting Standards)
consolidated assets of RUB1.0 billion and shareholder equity of
RUB78.2 billion in Q2 2015.
=========
S P A I N
=========
ZINKIA ENTERTAINMENT: Scores Deal After Exiting Administration
--------------------------------------------------------------
TVI Vision reports that Spain's Zinkia Entertainment has scored a
VOD deal for its Pocoyo preschool animated series after exiting
administration.
The kids IP management-focused company recently began trading in
the Alternative Stock Market again after going into
administration in early 2014, according to TVI Vision.
The report notes that the company has subsequently done a deal
with MoMedia for two seasons of the popular Pocoyo to be
distributed on TVOD platforms.
"It's very important for Zinkia that Pocoyo has a multiplatform
presence," the report quoted Zinkia chairman Jose Maria
Castillejo as saying.
The report relays that MoMedia has positioned itself as a partner
distributor for kids TV firms looking to further exploit their
IP. Pocoyo had already sold to 150 broadcasters around the world,
including Nick Jr. in the UK and CITV in the UK.
The company's investors include venture capital investment firm
ESRG and Endemol Shine, the report adds.
===========
S W E D E N
===========
NORCELL SWEDEN: Moody's Raises CFR to Ba3, Outlook Stable
---------------------------------------------------------
Moody's Investors Service has upgraded Norcell Sweden Holding 2
AB's Corporate Family Rating to Ba3 (from B1) and the company's
Probability of Default Rating (PDR) to Ba3-PD (from B1-PD). The
Ba3 rating of the SEK 2.5 billion senior secured notes due 2019
at the company's Norcell Sweden Holding 3 AB subsidiary has been
affirmed at Ba3 given that following the imminent call redemption
of the company's senior notes due 2019 (rating unchanged at B3)
there will no longer be any rating uplift from junior ranking
debt for the senior secured notes. The outlook for all ratings
is stable.
RATINGS RATIONALE
The upgrade of Com Hem's CFR to Ba3 acknowledges the company's
solid operating performance and reflects Moody's expectation that
Com Hem (i) can achieve continued revenue and EBITDA growth, (ii)
will maintain its Moody's adjusted debt/EBITDA leverage below
4.5x and (iii) will keep up operational momentum with ongoing RGU
growth and muted churn. Moody's views the company's growth
strategy, which now prioritizes price/ARPU increases over volume
growth as credible and acknowledges potential for continued
growth in B2B revenue, upselling potential with bundle
penetration below European peers and the competitive benefits
form the company's high quality network.
However, the Ba3 CFR also considers (i) significant competition
from fibre-based local area networks (LAN); (ii) an already high
level of broadband penetration in Sweden, including at higher
speed tiers, (iii) cash flow and debt capacity absorption from
Com Hem's share buy-back program, (iv) continuously decreasing
landlord and fixed telephony revenue; (v) modest margin pressure
from the resultant changing business mix and from somewhat higher
marketing cost and (vi) the modest scale of Com Hem's revenue
relative to rated peers in Europe.
Moody's views Com Hem's current liquidity provision as adequate,
but notes that a substantial part of the company's revolving
credit facility was utilized as of Sept.30, 2015, (SEK1.35
billion out of SEK2 billion). In addition, Moody's notes that
essentially all of the company's debt outstanding as of 30
September 2015 falls due in 2019. Against this backdrop the
ratings factor in Moody's expectation the company will seek to
term out or reduce revolver drawings and extend maturities in the
near term.
Given Com Hem's expressed focus on shareholder value, Moody's
does not expect any further near-term upgrade pressure on the
ratings. Over time ratings could be upgraded on the basis of
further solidifying operating trends (churn levels maintained)
and continued growth in revenue and underlying EBITDA in line
with company guidance; (ii) positive FCF generation being
maintained and (iii) leverage as measured by the Moody's-adjusted
Debt/EBITDA ratio falling sustainably below 3.75x. Downward
rating pressure could evolve if on a sustained basis: (i)
operating performance was to weaken materially; (ii) leverage
exceeded 4.5x; and (iii) free cash flow generation turned
negative.
The principal methodology used in these ratings was Global Pay
Television - Cable and Direct-to-Home Satellite Operators
published in April 2013.
Com Hem is the largest cable operator in Sweden based on the
number of connected homes and unique subscribers. The company
provides broadband, television and fixed telephony services to a
subscriber base of approximately 1.9 million homes as of
Sept. 30, 2015, connected through Com Hem's network covering
approximately 40% of all homes in Sweden including all
metropolitan areas such as Stockholm, Gothenburg, Malmî and
Uppsala. For the last twelve months ending Sept. 30, 2015, Com
Hem reported SEK5.0 billion in revenues and around SEK2.3 billion
in adjusted EBITDA (Com Hem definition).
===========================
U N I T E D K I N G D O M
===========================
CWMAMAN INSTITUTE: Venue Up For Sale Following Liquidation
----------------------------------------------------------
Insider Media Limited reports that the historic Cwmaman Institute
in Rhondda Cynon Taff, which has previously hosted gigs by the
Stereophonics, is up for sale after the body that runs the
building entered liquidation.
The venue, believed to be the largest miners' welfare institute
in England and Wales was first established in 1868 to improve the
lives of the local mining community, according to Insider Media
Limited. In recent years it has been used as a center for arts
and historical groups and has hosted gigs by the Stereophonics,
who hail from the area, the report notes.
Cwmaman Public Hall and Institute Ltd appointed Steve Wade --
steve.wade@begbies-traynor.com -- and David Hill --
david.hill@begbies-traynor.com -- of business rescue and recovery
specialist Begbies Traynor's Cardiff office, as joint liquidators
on 2 November 2015.
Reasons behind the closure are said to include reductions in
government funding to the groups that use the venue and the
introduction of charging for room hire, which led to a drop in
usage, the report notes.
The report relays that Steve Wade, of Begbies Traynor, said: "It
is a huge shame that such a wonderful historic building has found
itself in this predicament but it is a great asset both locally
and indeed nationally and we're confident a buyer can be found.
Ideally it would have an anchor tenant who would use the building
on a regular basis, whilst some of its features could be used by
the community."
Cwmaman Public Hall and Institute Ltd was founded in 1999 as a
charity to operate the institute and the building underwent a
significant refurbishment at the turn of the 21st century thanks
to GBP3.8 million of Lottery funding.
NORTHAMPTON TOWN: Council Makes Last-Ditch Attempt to Save Club
---------------------------------------------------------------
leisureopportunities.co.uk reports that Northampton Borough
Council has lodged a petition to try and save Northampton Town
Football Club (NTFC) from liquidation, as a consortium led by
former Oxford United chair Kelvin Thomas seeks to take control of
the struggling League Two club.
The club currently owes the Council more than GBP10 million,
which was supposed to have been used to redevelop the club's
Sixfields ground, along with a new hotel and conference center,
though none of these developments have materialized, with much
confusion as to where the multi-million pound loan has ended up,
according to leisureopportunities.co.uk.
A winding-up petition is being sought by Her Majesty's Revenue &
Customs (HMRC), who the club owed GBP166,000 in unpaid taxes.
In a statement, the Council said it had held discussions with
HMRC, who "indicated that they are unwilling to delay or adjourn
this action", in regards to the winding-up order, the report
notes.
The report relays that the council will appear in court to oppose
the liquidation, with the petition hopefully buying the club more
time to conclude a deal with the consortium, which is seeking to
acquire a controlling interest in NTFC and is also in advanced
discussions with the Council about the club's debt.
"When the Council met on the November 2, it was urged to take
steps to oppose the petition for Liquidation from HMRC, and it
unanimously committed to do all it can to support NTFC and its
supporters," said Council leader Mary Markham, the report relays.
"This course of action would prevent the club being put into
liquidation on 16 November and would give us time to continue
working with other interested parties to put together a rescue
plan," Mr. Markham said, the report notes.
SSI UK: Thai Parent Incurs GBP600MM Loss Over Redcar Collapse
-------------------------------------------------------------
Alan Tovey at The Telegraph reports that the owner of the Redcar
steelworks which collapsed taking thousands of jobs with it has
lost more than half a billion pounds on the plant's failure.
Sahaviriya Steel Industries (SSI), the Thai parent company of SSI
UK which owned the steelworks, expects "zero recovery" from the
liquidation of the plant which took place in October, according
to The Telegraph.
Reporting third-quarter numbers, SSI said it a suffered THB33
billion (GBP600 million) loss over the period, of which GBP530
million was related to the liquidation of the Redcar plant, The
Telegraph relates.
The collapse of the Redcar steelworks with the loss of 2,200 jobs
was the first major signal of the crisis currently ravaging
Britain's steelmakers, The Telegraph notes.
Win Viriyaprapaikit, SSI group chief executive, as cited by The
Telegraph, said "Global steel over-capacity and demand imbalance
since late 2014 and the continuous decline in steel prices
resulted in a huge operating loss for the group."
SSI bought the Recar plant from Tata Steel four years ago and
Mr. Win said the collapse had been triggered by global pressures
hitting the business, The Telegraph relays.
About SSI UK
SSI UK is Britain's second largest steelmaker. SSI UK is a
subsidiary of Thailand's largest steelmaker Sahaviriya Steel
Industries.
As reported by the Troubled Company Reporter-Asia on Oct. 5,
2015, The Telegraph said SSI UK went into liquidation days after
it announced it was closing one of Britain's biggest steelmakers
in Redcar, resulting in 1,700 job losses. According to The
Telegraph, the company had its liquidation application granted by
a judge in Manchester on Oct. 2.
On Oct. 2, David Kelly, Toby Underwood and Ian Green from
PricewaterhouseCoopers were appointed as special managers and
continue to assist and support the Official Receiver in the
discharge of his duties.
TULLETT PREBON: Moody's Changes Outlook on Ba1 CFR to Stable
------------------------------------------------------------
Moody's Investors Service changed the outlook to stable on ICAP
plc's (ICAP) Baa3 long-term Corporate Family Rating and the Baa3
senior unsecured debt ratings of ICAP and ICAP Group Holdings
plc. At the same time the outlook was also changed to stable for
the Ba1 long-term Corporate Family Rating of Tullett Prebon plc
and the Ba1 guaranteed senior debt of Tullett Prebon Group
Holdings plc (TPGH). All ratings were affirmed.
RATINGS RATIONALE
IGBB TRANSACTION
The change in outlook for both ICAP and Tullett Prebon follows
from the announcement of ICAP's sale of its global voice broking
and information business (IGBB) to Tullett Prebon in return for a
56% equity holding in the enlarged Tullett Prebon plc, to be
renamed TP ICAP. Of the 56%, 36.1% of the consideration will go
directly to ICAP shareholders, with 19.9% held by the remaining
ICAP business. Moody's understands that IGBB will be acquired
with enough cash and working capital to support its daily
operations and to meet regulatory requirements. Tullett Prebon
will repay to ICAP at completion a GBP330 million loan to IGBB.
Tullett Prebon will fund this by raising a bank bridge facility
of GBP470million, of which the remaining balance will be used to
fund GBP141 million in maturing July 2016 notes. Moody's expects
ICAP to use a portion of the proceeds to reduce debts such that
its proforma debt-to-EBITDA leverage will be approximately 2.0x.
With this transaction, TP ICAP will become the number one global
voice broking business in the industry operating across more than
30 countries. I CAP NewCo will become a focused electronic
markets and post-trade market infrastructure operator.
As a part of the transaction, the current COO of ICAP will move
across to TP ICAP to support the integration of the voice broking
businesses. ICAP will also be able to appoint a new non-
executive director to the board of TP ICAP. ICAP NewCo will also
retain responsibility for the ongoing ISDAfix investigation,
including an indemnity to TP ICAP for any associated liabilities
that may arise.
The completion of the transaction is conditional on bondholder
consent and shareholder approval expected in the first quarter of
2016, with regulator and competition authority approval expected
later in 2016. Provided consent is received within this
timeframe, Moody's would expect the transaction to complete
towards the end of 2016.
ICAP RATINGS RATIONALE
As a part of the IGBB sale, ICAP will receive a 19.9%
consideration of the enlarged TP ICAP business, and thus dividend
income from the TP ICAP global voice broking business.
Otherwise, ICAP NewCo will be focused purely on electronic
markets and post trade businesses. In addition, ICAP will
receive a GBP330 million loan repayment, some of which we expect
to be used to pay down existing facility drawings with any
surplus available for future investment. With this pay down,
Moody's expects proforma gross debt to EBITDA to fall to 2x, with
GBP420 m of gross debt outstanding.
ICAP's remaining electronic markets and post trade business offer
relatively better credit fundamentals as we expect them to
support an improvement in ICAP NewCo's operating margins as
reported trading operating profit margins in the first half of
2015 for electronic markets was 31% and post trade 38%, as
compared to global broking's 7% margin. While the sale of IGBB
will result in a smaller, less diverse revenue base, the
remaining businesses have demonstrated relatively better
stability of earnings than IGBB, which is a positive for
bondholders. Over recent years, IGBB faced a series of
restructuring exercises in adapting to depressed broking
activity, a result of structural and cyclical industry
challenges.
With a less diverse revenue base, creditors will be more narrowly
exposed to the volumes and activity in the two remaining core
businesses. However, Moody's sees strong underlying dynamics to
support growth in volumes in both businesses as ICAP NewCo
broadens its client base and adds complementary products,
particularly FX forwards to EBS Direct. The businesses will
require continued investment to maintain and support growth which
is a commitment that could come under pressure should one of its
core platforms underperform materially. Beyond these core
businesses, ICAP NewCo will also retain and build upon its
"Euclid Opportunities" early stage financial technology
investments which are largely focused on solutions for managing
post-trade risk.
The FCA have provisionally confirmed that ICAP NewCo will cease
to be subject to continuing consolidated regulatory capital
requirements; its existing waiver is due to expire in 2016. This
will mean ICAP NewCo will free up capital which can be deployed
to support growth in the remaining businesses. Aside from the
potential costs and litigation related to ISDAfix, conduct risk
at ICAP NewCo will decline materially given the exit of voice
broking. Moody's expects legacy litigation risk to be manageable
within ICAP NewCo's earnings capacity.
WHAT COULD CHANGE THE RATING - UP
Near-term upward rating pressure is unlikely to occur given the
completion timeframe for the IGBB sale in late 2016. The rating
could see upward pressure should the firm benefit from a
sustained increase in earnings while reducing debt levels and
committing to a policy of gross debt-to-EBITDA leverage below
1.5x.
WHAT COULD CHANGE THE RATING - DOWN
While ICAP NewCo's execution risk with this transaction appears
reasonably contained, a negative outcome from approvals by the
regulator or competition authority would be negative for the
rating. Outside of this, the remaining business could face
downward pressure should one of the core platforms for the
business underperform materially. Underperformance in the
business, or debt-funded corporate transaction, that results in
leverage of more than 2.5x without prospects for a recovery of
leverage to less than 2x would be negative for the rating.
TULLETT PREBON RATINGS RATIONALE
Upon completion of the IGBB acquisition, Tullett Prebon will
become the largest voice broker globally, a positioning which is
a positive for creditors as the combined business will have a
broader, more diverse revenue base with opportunity for margin
improvement through the near-term elimination of duplicative
costs. While the business is likely to face cyclical and
structural pressures that have negatively affected broking
activity across the sector, the enlarged footprint offers greater
potential to offset such decline through further cost management.
Moody's change in outlook to stable is resident upon the
expectation that the transaction will successfully complete and
that ambitions for near-term cost synergies are achieved within
management's three-year timeframe. Should the transaction not
complete or execution on the combination of the business not go
according to plan, we may revisit our outlook. However, the
stable outlook reflects our base case that the combination will
proceed as intended. In consideration of potential execution
risk with this transaction, Moody's look favorably upon the new
CEO's background with integration in a banking environment and
the commitment of ICAP's COO to the enlarged business. In
addition, the businesses will be reinforced through various
linkages between the firms' respective platforms.
With the transaction, the enlarged Tullett Prebon business will
nearly double its broking revenue. On the back of this, Moody's
forecasts EBITDA in the combined TP ICAP to be more than GBP200
million, which includes costs required to achieve identified cost
synergies. From this base, Moody's expects EBITDA levels to rise
as cost synergies are achieved and to mitigate potential revenue
pressures. With initial gross debts of GBP550 million, we expect
the business to deleverage to approximately 2.0x within the
three-year horizon, as EBITDA generation improves and cash levels
are optimized, and borrowings on the bank facility are reduced
accordingly. To fund the GBP330 million payment to ICAP NewCo,
Tullett Prebon will raise a bank bridge facility which will also
be used to support repayment of its July 2016 notes.
Moody's anticipates industry revenues to face further pressure.
While Moody's views favorably the market leadership positioning
of the enlarged TP ICAP, and do expect market participants to
continue to seek the support of voice and hybrid voice-electronic
forms of broking in their search for liquidity, the overall
revenues derived from these activities is expected to decline,
albeit at a slower rate than recent periods. Outside of a shift
towards more efficient electronic forms of execution, volumes in
the voice-hybrid arena are expected to face pressure as bank
balance sheets see continued pressure to deleverage and clearing
mandates drive market participants to reduce activity or shift to
more liquid, cleared products. For TP ICAP, we do note that the
business has reinforced its strengths in energy and commodities,
which are products that may be less susceptible to these
pressures. As these pressures arise, Moody's expects TP ICAP to
reduce its cost base to maintain margin levels. With this
transaction, TP ICAP is in a better position to reduce costs than
previously by eliminating duplicative costs and reducing the
share of revenue paid to brokers. In the 12-months to June 2015,
Tullett Prebon's broker compensation levels were 55.4% of
revenues as compared to IGBB's 49.8%, however this may be due to
differences in the composition of revenue generated across
products.
Post completion, Moody's expects TP ICAP be granted an updated
investment firm consolidation waiver from the Financial Conduct
Authority (FCA). The proposed new waiver is expected to take
effect on completion, with a duration of 10 years. With this
waiver, TP ICAP will need to retain earnings such that it is able
to eliminate excess goodwill over the ten year period following
completion. The waiver, along with its other requirements to
limit debt levels, net-debt leverage and interest coverage, is a
positive development for creditors as TP ICAP is more likely to
prioritize retaining capital than otherwise.
WHAT COULD CHANGE THE RATING - UP
Near-term upward rating pressure is unlikely to occur given the
completion timeframe for the IGBB acquisition in late 2016.
However, a ratings upgrade could occur should performance in the
business improve materially, on a sustainable basis, such that
gross debt-to-EBITDA falls below 2x. Industry pressures are
likely to make this a challenge. The combined business' improved
competitive positioning, more diverse revenue base and
opportunity for further cost synergies does offer better
prospects however.
WHAT COULD CHANGE THE RATING - DOWN
The ratings could see downward pressure should the transaction
not complete or perform in line with management's guidance.
Moody's base case is that both completion and targeted synergies
are realistic. Should industry revenue pressures come under
further pressure, absent an appropriate response in the cost
base, such that EBITDA generation deteriorates and pressures
leverage to beyond 3.0x, the rating could be downgraded.
The principal methodology used in these ratings was Global
Securities Industry Methodology published in May 2013.
List of affected ratings
Affirmations:
Issuer: ICAP plc
LT Corporate Family Rating (Foreign Currency), Affirmed Baa3
Stable
BACKED Senior Unsecured Regular Bond/Debenture (Local
Currency), Affirmed Baa3 Stable
BACKED Senior Unsecured MTN (Local Currency), Affirmed (P)Baa3
Issuer: ICAP Group Holdings plc
Senior Unsecured Regular Bond/Debenture (Foreign Currency),
Affirmed Baa3 Stable
Subordinate MTN (Local Currency), Affirmed (P)Ba1
Senior Unsecured MTN (Local Currency), Affirmed (P)Baa3
Issuer: Tullett Prebon plc
LT Corporate Family Rating (Foreign Currency), Affirmed Ba1
Stable
Issuer: Tullett Prebon Group Holdings plc
BACKED Senior Unsecured Regular Bond/Debenture (Local
Currency), Affirmed Ba1 Stable
Outlook Actions:
Issuer: ICAP plc
Outlook, Changed To Stable From Negative
Issuer: ICAP Group Holdings plc
Outlook, Changed To Stable From Negative
Issuer: Tullett Prebon plc
Outlook, Changed To Stable From Negative
Issuer: Tullett Prebon Group Holdings plc
Outlook, Changed To Stable From Negative
===============
X X X X X X X X
===============
* Litigations Pose Risks to Banks' Earnings, Moody's Says
---------------------------------------------------------
Ongoing probes and litigation regarding the legacy conduct and
market practices of 15 rated global investment banks (GIBs) --
which have been proceeding rapidly both in the US and abroad -
pose a significant risk to these banks' earnings stability,
capital and leverage positions and franchises, says Moody's
Investors Service in a report published.
"The GIBs' improved capital bases and robust revenues from less
volatile, non-capital markets activities support their credit
strength. These provide a substantial buffer against potential
losses arising from outstanding and future litigations. However,
tail risks remain a concern, in particular potential franchise
damage which could arise in the event of criminal proceedings
against these banks or steep penalties," says Alessandro Roccati,
a senior vice president at Moody's.
The greatest risk to GIBs' core franchise value are potential
criminal proceedings, says Moody's, since a guilty plea can
result in the loss of existing and potential clients. This could
erode margins, impair capital cushions and stifle the banks'
ability to generate capital internally.
Also posing considerable tail risk for the GIB's business models
and franchise strength are the uncertain size, timing and effect
of outstanding and future litigations, according to the rating
agency.
Moody's ratings and analysis of the rated GIBs incorporates
potential litigation charges, including amounts provisioned and
estimates of possible additional charges. In total, the banks
have recorded around USD219 billion in litigation provisions
following the onset of the global financial crisis (2008-14),
which have been steepening in recent years.
The US GIBs have recorded the greatest provisions, around two
thirds (USD139 billion) of the total, while the European GIBs
recorded only around one third (USD80 billion). The split is
largely attributable to US GIBs having had higher exposures to US
mortgages and starting to provision for related litigations
earlier than their European peers.
Moody's estimates that Bank of America Corporation (BAC) and JP
Morgan Chase & Co. (JPM) have recorded the highest litigation
provisions thus far of around USD70 billion and USD37 billion,
respectively, accounting for more than half of all GIBs'
litigation provisions in the period 2008-14.
Moody's notes that key buffers against unexpected losses are
banks' substantial, stable revenues from the banks' less
volatile, non-capital markets activities which can help cushion
bondholders against unexpected losses, as well as their improved
capital bases. These banks' average fully applied CET1 ratio has
increased since the financial crisis, to 11.3% for the group at
end-June 2015, up from 10.6% at end-2014.
*********
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
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Information contained herein is obtained from sources believed to
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