TCREUR_Public/160211.mbx         T R O U B L E D   C O M P A N Y   R E P O R T E R

                           E U R O P E

         Thursday, February 11, 2016, Vol. 17, No. 029



ACTIV SOLAR: Files for Insolvency, Owes EUR503 Million


ANGLO IRISH: Ex-CEO's Extradition Hearing Scheduled Today
TITAN EUROPE 2007-2: S&P Lowers Rating on Cl. A2 Notes to 'BB-'


QGOG CONSTELLATION: Depressed Market No Impact on Fitch Rating


* NETHERLANDS: Number of Bankruptcies Down to 27 in January 2016


NORSKE SKOGINDUSTRIER: S&P Retains CreditWatch Neg. on 'CC/C' CCR


CB INTERCOMMERZ: S&P Lowers Counterparty Credit Ratings to 'D/D'
CB MAXIMUM: Bank of Russia Ends Provisional Administration
KURGANMASHZAVOD: Bankruptcy Petition Filed by MTE Group
NOSTA BANK: Bank of Russia Ends Provisional Administration
NOTA-BANK PJSC: Bank of Russia Halts Provisional Administration

REGIONAL BANK: Bank of Russia Halts Provisional Administration


HQ BANK: Five People Goes to Trial Over 2010 Collapse
STENA AB: Moody's Puts 'Ba3' CFR on Review for Downgrade

U N I T E D   K I N G D O M

ELEMENT MATERIALS: Moody's Assigns Provisional 'B2' CFR



ACTIV SOLAR: Files for Insolvency, Owes EUR503 Million
Alexander Weber at Bloomberg News reports that Activ Solar has
filed for insolvency in Vienna.

According to Bloomberg, creditor protection association
Creditreform said in an e-mail the company has 34 creditors and
EUR503 million in liabilities, making for Austria's biggest
insolvency this year so far.

The company was also told to pay EUR57 million in Ukrainian
arbitration ruling in October, Bloomberg discloses.  Subsequent
settlement talks failed, Bloomberg relates.

The company is offering a 20% payout ratio within two years after
filing for restructuring without self-administration, Bloomberg

Activ Solar GmbH, headquartered in Vienna, Austria is engaged in
the production of polycrystalline silicon for the solar PV
industry and the development of large-scale photovoltaic power


ANGLO IRISH: Ex-CEO's Extradition Hearing Scheduled Today
The Irish Times reports that the rescheduled extradition hearing
at which former Anglo Irish Bank chief executive, David Drumm, is
now expected to agree to return to the State from the US is set to
take place in Boston today, Feb. 11.

He had been due in court on Feb. 8, but bad weather forced the
hearing's postponement, The Irish Times relates.  On Tuesday, it
was rescheduled to begin at 8:00 p.m. Irish time today, Feb. 11,
The Irish Times discloses.

According to The Irish Times, the State is seeking his extradition
to face 33 charges arising from transactions carried out during
his time at Anglo, which he led in the period before its collapse
in 2009.

                  About Irish Bank Resolution

Irish Bank Resolution Corp., the liquidation vehicle for what was
once one of Ireland's largest banks, filed a Chapter 15 petition
(Bankr. D. Del. Case No. 13-12159) on Aug. 26, 2013, to protect
U.S. assets of the former Anglo Irish Bank Corp. from being
seized by creditors.  Irish Bank Resolution sought assistance
from the U.S. court in liquidating Anglo Irish Bank Corp. and
Irish Nationwide Building Society.  The two banks failed and were
merged into IBRC in July 2011.  IBRC is tasked with winding them
down and liquidating their assets.  In February, when Irish
lawmakers adopted the Irish Bank Resolution Corp., IBRC was
placed into a special liquidation in the Irish High Court to
complete liquidation and distribution of the two banks' assets.

IBRC's principal asset as of June 2012 was a loan portfolio
valued at some EUR25 billion (US$33.5 billion). About 70 percent
of the loans were to Irish borrowers. Some 5 percent of the
portfolio was under U.S. law, according to a court filing.  Total
liabilities in June 2012 were about EUR50 billion, according
to a court filing.

Most assets in the U.S. have been sold already.  IBRC is involved
in lawsuits in the U.S.

IBRC was granted protection under Chapter 15 of the U.S.
Bankruptcy Code in December 2013.

Kieran Wallace and Eamonn Richardson of KPMG have been named the
special liquidators.

                       About Anglo Irish

Anglo Irish Bank was an Irish bank headquartered in Dublin from
1964 to 2011.  It went into wind-down mode after nationalization
in 2009.  In July 2011, Anglo Irish merged with the Irish
Nationwide Building Society, with the new company being named the
Irish Bank Resolution Corporation (IBRC).

Standard & Poor's Ratings Services said that it lowered its long-
and short-term counterparty credit ratings on Irish Bank
Resolution Corp. Ltd. (IBRC) to 'D/D' from 'B-/C'.   S&P also
lowered the senior unsecured ratings to 'D' from 'B-'.  S&P then
withdrew the counterparty credit ratings, the senior unsecured
ratings, and the preferred stock ratings on IBRC.  At the same
time, S&P affirmed its 'BBB+' issue rating on three government-
guaranteed debt issues.

The rating actions follow the Feb. 6, 2013, announcement that the
Irish government has liquidated IBRC.

The former Irish bank sought protection from creditors under
Chapter 15 of the U.S. Bankruptcy Code on Aug. 26, 2013 (Bankr.
D. Del., Case No. 13-12159).  The former bank's Foreign
Representatives are Kieran Wallace and Eamonn Richardson.  Its
U.S. bankruptcy counsel are Mark D. Collins, Esq., and Jason M.
Madron, Esq., at Richards, Layton & Finger, P.A., in Wilmington,

TITAN EUROPE 2007-2: S&P Lowers Rating on Cl. A2 Notes to 'BB-'
Standard & Poor's Ratings Services lowered to 'BB- (sf)' from
'BBB- (sf)' its credit rating on Titan Europe 2007-2 Ltd.'s class
A2 notes.

The downgrade follows S&P's review of the underlying loan's credit
quality in light of the transaction's April 2017 legal final
maturity date.

Since closing in June 2007, 15 loans have repaid with six
experiencing total losses of EUR20.05 million.  In this
transaction, principal losses materialize through non-accruing
interest amounts.  The transaction is now backed by three loans
(MPC loan, Cobalt loan, and Skoduv Palace loan) secured by 72
commercial properties located throughout Europe.

S&P's ratings on Titan Europe 2007-2's notes address timely
payment of interest and repayment of principal not later than the
April 2017 legal final maturity date.

Although S&P considers the class A2 notes' available credit
enhancement to adequately mitigate the risk of principal losses
from the underlying loans in higher stress scenarios, S&P notes
that the transaction's legal final maturity date is less than 15
months away.  While S&P believes that property sales will likely
occur before the legal final maturity date, it is not certain that
these sales will happen in time to allow the issuer to repay these
notes by their legal final maturity date in April 2017.

Taking the above factor into account, S&P considers that the
transaction has become more exposed to timing risk relating to the
repayment of principal no later than the legal final maturity
date.  Therefore, in accordance with S&P's credit stability
criteria and its European CMBS criteria, S&P has lowered to
'BB- (sf)' from 'BBB- (sf)' its rating on the class A2 notes.


Titan Europe 2007-2 Ltd.
EUR1.669 bil commercial mortgage-backed floating-rate notes

                                     Rating        Rating
Class            Identifier          To            From
A2               XS0302921381        BB- (sf)      BBB- (sf)


QGOG CONSTELLATION: Depressed Market No Impact on Fitch Rating
Fitch Ratings does not expect any immediate negative ratings
impacts on QGOG Constellation S.A.'s ratings despite the
deteriorating environment for offshore drillers. Offshore drillers
continue to face depressed market conditions due to lower demand
and a significant oversupply of rigs, including new-builds.  The
roughly 70% drop in oil prices has compounded the effects of the
offshore rig oversupply cycle resulting in continued market day-
rate's deterioration.

Constellation's credit quality is insulated from the current
deteriorating environment for the offshore drillers.  The vast
majority of Constellation's offshore rigs, which are the main
contributors of cash generation for the company, are expected to
remain fully contracted until 2018.  Fitch does not expect
Petrobras to early terminate these contracts due to the excellent
historical rigs operating performance.  Under Fitch's base case
assumption of an average uptime rate of 94% and not assuming
renegotiation of any existing contracts, Fitch forecasts the
company will remain FCF positive with leverage sharply declining
below 2.0x by 2018.

Fitch currently rates Constellation 'BB-' with a Negative Rating
Outlook.  Constellation's ratings reflect is consistent
deleveraging.  The self-amortizing nature of the secured debt at
the operating company (OpCo) is rapidly improving the company's
consolidated capital structure and improving cash flow
distribution to the holding company (HoldCo) as debt fully
amortizes.  During 2014, the Olinda Star drill rig became the
first of the company's operating assets to pay its debt in full,
which improved cash flows to the holding company.  Over the next
two years, at least two additional assets may fully repay their
OpCo level debt, further improving cash flows to the HoldCo and
eliminating structural subordination.

The Negative Outlook reflects the negative impact a prolonged ban
could have for the company as it could prevent Constellation from
renewing its contracts with Petrobras.  Recently, the company
received a notification from the Brazilian General Comptroller
(CGU) indicating that it has been removed from the list of
companies under investigation related to Petrobras contracting
practices with its suppliers.  This exclusion from the CGU gives
the company the ability to participate in new tenders and the
option to renew current its contracts with Petrobras once the
company receives formal confirmation from Petrobras.  A resolution
of the contracting ban with Petrobras could result in revising the
Negative Outlook.

Constellation ratings could also be negatively affected by the
following: a prolonged ban on entering into contracts or
participating in bidding processes, failure to lower leverage to
below 4.0x, or pressure on credit metrics as a result of an
aggressive growth strategy.


* NETHERLANDS: Number of Bankruptcies Down to 27 in January 2016
Statistics Netherlands reports that after four months of
increase, the number of bankruptcies fell by 27 in January 2016
relative to December 2015.

Most bankruptcies were filed in the trade sector, Statistics
Netherlands notes.

If the number of court session days is not taken into account, 366
businesses and institutions (excluding one-man businesses) were
declared bankrupt in January 2016, Statistics Netherlands states.

According to Statistics Netherlands, with a total of 96, the trade
sector had the highest number of bankruptcies.

The sector financial institutions accounted for 61 bankruptcies,
but these two sectors also include the highest number of
businesses, Statistics Netherlands discloses.  Proportionally, the
sector hotels and restaurants recorded the highest number of
bankruptcies, Statistics Netherlands relays.


NORSKE SKOGINDUSTRIER: S&P Retains CreditWatch Neg. on 'CC/C' CCR
Standard & Poor's Ratings Services said that its 'CC/C' long- and
short-term corporate credit ratings on Norway-based newsprint and
magazine paper producer Norske Skogindustrier ASA (Norske Skog)
remain on CreditWatch negative, where it placed them on Nov. 17,

S&P has also kept its 'CC' issue ratings on Norske Skog's senior
secured notes and S&P's 'C' issue ratings on the senior unsecured
notes on CreditWatch negative.

The recovery ratings on the senior secured notes remain at '3',
indicating S&P's expectation of recovery in the lower half of the
50%-70% range in the event of a default.

The recovery rating on the senior unsecured notes remains at '6',
indicating recovery prospects of 0%-10% in the event of a default.

S&P expects to assign issue ratings to the new instruments once
the debt exchange has been finalized.

The CreditWatch update follows Norske Skog's announcement that it
has postponed the deadline for its debt exchange offer until
Feb. 26, 2016.  This was due to a complaint from senior secured
bondholders that resulted in a temporary restraining order,
granted by the Supreme Court of the State of New York, pending the
outcome of a hearing scheduled for Feb. 24, 2016.

If the proposed debt exchange materializes as planned, S&P would
view it as a distressed exchange and tantamount to default.  This
is because the exchange constitutes less than the original
promise, in S&P's view, since the new securities' maturity dates
are after the original due dates; a portion of the new instruments
will be junior to the notes they replace; interest rates are
reduced; cash coupons are lower and have a payment-in-kind and
equity component; and, in the case of the new notes due 2017, the
principal amount is less than the original par amount.

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 its 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

If Norske Skog does not complete the offer or fails to receive the
required consent, S&P will reassess the company's credit profile.


CB INTERCOMMERZ: S&P Lowers Counterparty Credit Ratings to 'D/D'
Standard & Poor's Ratings Services said that it had lowered its
long- and short-term foreign and local currency counterparty
credit ratings on Russia-based CB Intercommerz Ltd. (Intercommerz)
to 'D/D' from 'R/R' and its Russia national scale rating to 'D'
from 'R'.  The ratings were subsequently withdrawn.

The rating actions follow the Central Bank of Russia's (CBR's)
revocation of Intercommerz's banking license on Feb. 8, 2016.  S&P
understands that, following the banking license withdrawal, the
CBR will start the process of settling the bank's obligations to
creditors in accordance with bankruptcy law.

In S&P's view, the regulator's latest action means that
Intercommerz is currently unable to fulfill its obligations to its
counterparties according to the terms of the respective
agreements.  Based on S&P's experience, it believes repayment to
creditors will be lengthy and recoveries low.  Consequently S&P
lowered its ratings to 'D'.

S&P has in turn therefore withdrawn its ratings on Intercommerz,
owing to the CBR's actions and because S&P has insufficient
reliable information to analyze the bank's future

CB MAXIMUM: Bank of Russia Ends Provisional Administration
The Bank of Russia took a decision to terminate from February 9,
2016, the activity of the provisional administration of Commercial
Bank Maximum.  The decision is memorialized in Order No. OD-426,
dated February 8, 2016.

The Feb. 8 decision was issued due to the ruling of the Court of
Arbitration of the city of Moscow dated January 26, 2016, with
regard to case No. A53-32249/2015 on recognizing CB Maximum
insolvent and ordering the appointment of a receiver.

Previously, on November 23, 2015, by Order No. OD-3274, the Bank
of Russia ordered the appointment of provisional administration to
manage CB Maximum following revocation of its banking license.

KURGANMASHZAVOD: Bankruptcy Petition Filed by MTE Group
TASS reports that the court press service said a bankruptcy
petition regarding Kurganmashzavod (KMZ) has been filed with the
Kurgan Arbitration Court.

The petitioner is MTE Group, registered in Moscow, TASS discloses.

"The petition is connected with arrears on lease contracts of MTE
Group and KMZ.  Earlier the companies struck an amicable
agreement, under which KMZ was to pay in two stages RUR41 million
(US$515,000) of total debt on lease payments and some RUR1.9
million (US$23,800) of cancelation penalty," TASS quotes the press
service as saying.

The court said Kurganmashzavod only paid RUR276,000 (US$3,460) out
of the debt, TASS relates.

"That's why MTE Group demands that the plant be recognized
bankrupt and that a bankruptcy commissioner be appointed," the
court, as cited by TASS, said.

According to TASS, the petition was filed Feb. 5 and has not yet
been accepted for hearing.

Kurganmashzavod is Russia's only enterprise manufacturing infantry
fighting vehicles.

NOSTA BANK: Bank of Russia Ends Provisional Administration
The Bank of Russia took a decision to terminate from February 4,
2016, the activity of the provisional administration of Commercial
Bank NOSTA.  The decision was memorialized in Order No. OD-335,
dated February 3, 2016.

The Bank of Russia issued the Feb. 3 decision due to the ruling of
the Arbitration court of the Orenburg Region (case No. A47-
12571/2015), dated January 11, 2016, on finding CB NOSTA insolvent
and ordering the appointment of a liquidator.

Previously, on November 16, 2015, via Order No. OD-3180, the Bank
of Russia ordered the appointment the provisional administration
to manage CB NOSTA or JSC NST-BANK (the Orenburg Region, the town
of Novotroitsk) due to the revocation of its banking license.

NOTA-BANK PJSC: Bank of Russia Halts Provisional Administration
The Bank of Russia took a decision to terminate from February 9,
2016, the activity of the provisional administration of NOTA-Bank.
The decision was noted in Order No. OD-424, dated February 8,

The Feb. 8 decision was issued due to the ruling of the Court of
Arbitration of the city of Moscow dated January 19, 2016, with
regard to Case No. A40-232020/15-101-322 on recognizing NOTA-Bank
insolvent and ordering the appointment of a receiver.

Previously, on October 13, 2015, via Order No. OD-2746, the Bank
of Russia ordered for the appointment of provisional
administration to NOTA-Bank following the revocation of its
banking license.

REGIONAL BANK: Bank of Russia Halts Provisional Administration
The Bank of Russia took a decision to terminate from January 28,
2016, the activity of the provisional administration JSC Regional
Bank for Development. The decision is under Order No. OD-230,
dated January 27, 2016.

The Jan. 27 decision was issued due to the ruling of the Court of
Arbitration of the city of Moscow dated December 22, 2015, with
regard to case No. A40-220058/15 on recognizing Regional Bank for
Development insolvent and ordering the appointment of a receiver.

Previously, under Order No. OD-3098, dated November 10, 2015, the
Bank of Russia ordered for the appointment of provisional
administration to manage JSC Regional Bank for Development or PJSC
JSCB RBR (the city of Moscow) following revocation of its banking


HQ BANK: Five People Goes to Trial Over 2010 Collapse
Radio Sweden reports that five people who played important roles
in the failed HQ Bank that crashed in 2010 went on trial on
Feb. 9 for embezzlement and swindling.

Three former managers, the two founders and the bank's auditor are
suspected of having tried to cover up bad investments and losses
during the financial crisis, Radio Sweden discloses.

According to Radio Sweden, the five suspects could get a maximum
of six years in jail.  They have denied all charges and the trial
is expected to go on for at least a month, Radio Sweden says.

In August 2010, the Swedish Financial Supervisory Authority (FI)
decided to revoke HQ Bank's license, for having serious
deficiencies in its trading operations and for taking
irresponsible risks, Radio Sweden recounts.

The bank was forced into liquidation, its stocks crashed, and soon
after the national economic crime authority opened a criminal
investigation into the bank's financial reporting, Radio Sweden
relates.  Prosecutors believed that the bank had reported
erroneous information about the value of its trading portfolios
and that it did not have sufficient capital to stay afloat, Radio
Sweden states.

STENA AB: Moody's Puts 'Ba3' CFR on Review for Downgrade
Moody's Investors Service has placed the Ba3 corporate family
rating of Swedish diversified group Stena AB on review for
downgrade, as well as its Ba3-PD probability of default rating
(PDR) and its B2 senior unsecured notes rating.  Concurrently,
Moody's has placed the Ba2 senior secured notes rating of group
company Stena International S.A. and its Ba2 senior secured bank
credit facility rating on review for downgrade.

"The review for downgrade reflects the expiry of several of
Stena's offshore drilling contracts in H2 2016 and H1 2017 and
Moody's expectation that market conditions in the offshore
drilling sector will still be under considerable pressure at that
juncture, which could result in Stena's financial profile
weakening materially and for a prolonged period of time," says
Marie Fischer-Sabatie, lead analyst for Stena.

While Moody's recognises that Stena has a diversified business
profile that includes more stable activities, the rating agency
will assess during its review to what extent this could mitigate
the negative effect on the drilling business.


The review mainly reflects Moody's expectation that offshore
drilling will remain under considerable pressure in the next
couple of years when most of Stena's offshore drilling contracts
expire and the group has to find new employment for its rigs.
This could result in Stena's financial profile weakening
materially and for a prolonged period of time.  Stena's offshore
drilling division is the largest contributor to group EBITDA and
represented close to 40% of group consolidated EBITDA in the 12-
month period through September 2015.

Stena, which owns seven rigs, will see five contracts expire in H2
2016 and H1 2017.  Given the currently weak market environment,
Moody's anticipates that it may be challenging for Stena to re-
contract all its rigs at contract expiry and that any new contract
is likely to include substantially lower rates than existing
contracts.  Moody's therefore expects Stena's drilling profits to
reduce in 2017 and group leverage to increase.  During its review
process, the rating agency will assess the effects of the weaker
offshore drilling market on Stena's financial profile.

Since the end of 2014, the offshore drilling sector has been
affected by sharp declines in day rates paid by customers.  This
resulted from (1) lower oil prices, which drove oil companies to
reduce their investments in exploration and production; and (2)
large oversupply in the drilling sector, which could take several
years to dissipate.

Nevertheless, Moody's recognizes the benefits of Stena's
diversified business profile, which includes more stable
activities such as real estate and investments, and Stena Line,
which has been steadily growing its EBITDA in recent years.  This
will help mitigate the pressures on the drilling division.

Moody's also considers the company's satisfactory liquidity
profile to be credit positive.  Stena's liquidity is underpinned
by (1) a cash balance amounting to SEK1.4 billion as at 30
September 2015; (2) several unused revolving credit facilities,
the main one totaling $800 million and maturing in March 2020; and
(3) a portfolio of short-term investments and marketable
securities, totaling SEK8.7 billion as at Sept. 30, 2015, which
could be sold if needed.  Stena's main liquidity needs in the next
12-18 months relate to capex, which Moody's projects to be in the
SEK4-5 billion range per annum.  Stena will also have some debt
repayments to make which Moody's estimates at around SEK2 billion
in 2016.


Stena's ratings are currently on review for downgrade.  During its
review process, Moody's will assess (1) the likely impact on
Stena's financial profile of the weaker market conditions in
offshore drilling, when the group has to renew its maturing
contracts; (2) the extent to which Stena's other business segments
could offset the negative effects from offshore drilling; and (3)
any other mitigating factors or remediation measures that could be
implemented by the group.

Prior to the review, Moody's said that it could downgrade Stena's
ratings if the company's consolidated debt/EBITDA increases above
6.0x and its consolidated (FFO + Interest)/Interest Expense
declines below 3.5x for a prolonged period of time.  A debt/EBITDA
ratio above 5.0x and a retained cash flow (RCF)/net debt below the
mid-teens in percentage terms at the restricted group level might
also result in a rating downgrade.  Downward rating pressure could
also result from (1) Stena's developing an increased appetite for
risk in its trading activities; and (2) any significant
deterioration in the group's liquidity profile.

Upward pressure on Stena's ratings could develop following (1) a
sustainable increase in internal cash flow generation, with
consolidated RCF/net debt approaching the high teens in percentage
terms; and (2) progressive deleveraging of the group's balance
sheet, with total consolidated debt/EBITDA below 5.0x.

                       PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was Global
Shipping Industry published in February 2014.

Headquartered in Gothenburg, Sweden, Stena AB is one of the
largest entities within the "Stena Sphere" of companies, fully
controlled by the Olsson Family.  Stena AB is a holding company
engaged in various business divisions, including ferry operations,
shipping, offshore drilling, real estate and other
investment/trading activities.  In the 12-month period to
September 2015, Stena generated revenues of SEK33.9 billion ($4.0
billion) and EBITDA from operations of SEK9.7 billion ($1.1

U N I T E D   K I N G D O M

ELEMENT MATERIALS: Moody's Assigns Provisional 'B2' CFR
Moody's Investors Service has assigned a provisional (P)B2
corporate family rating to Element Materials Technology Limited
(Element or the company).  Concurrently, Moody's has assigned a
(P)B2 rating to the USD225 million term loan B1 facility due 2023,
raised by EMT Finance Inc., and a (P)B2 rating to the USD210
million term loan B2 facility due 2023 (to be raised in EUR),
USD70 million capex/acquisition facility due 2023 and USD30
million revolving facility (RCF) due 2022 raised by EMT 2 Holdings
Limited and EMT Finance Inc., both subsidiaries of Element.  The
outlook on all ratings is stable.

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 a
definitive rating to the facilities.  A definitive rating may
differ from a provisional rating.  At the same time, Moody's will
withdraw the existing CFR and PDR on Element Materials Technology
Group Holdings CC2 Ltd and the ratings on the instruments raised
by its subsidiaries upon the completion of the acquisition of the
company by Bridgepoint and the repayment of those facilities.

The proceeds from the issuance of the term loan B1 and B2
facilities will be mainly used to fund the purchase consideration
of Element by its new private equity owner, Bridgepoint, from 3i.
The capex/acquisition facility and revolving facility will be
undrawn at the closing of the transaction and will be available to
fund Element's future capex, acquisition, and working capital


"Element's B2 CFR reflects (1) the company's well-established
position in its niche markets supported by high barriers to entry
into the technically demanding testing market and significant
switching costs for customers, (2) the critical and non-
discretionary nature of its testing services dedicated to
industries with zero tolerance for failure, and (3) the company's
good liquidity position supported by the RCF and expectation that
free cash flow (FCF)-to-debt will remain at around 5%", says
Sebastien Cieniewski, Moody's lead analyst for Element.  However,
the rating is constrained by (1) the company's high adjusted
leverage (as adjusted by Moody's mainly for operating leases) at
the closing of the transaction at 5.3x with Moody's expectation of
limited de-leveraging due to the company's acquisitive behavior in
a consolidating industry, (2) the small size of the business as
evidenced by its geographical and sector concentration with
increasing reliance on the US aerospace sector, and (3) the
cyclicality of its end-markets as demonstrated for example by the
recent pressure on Element's Oil & Gas segment in the context of
decreasing oil prices.

Element benefits from leading positions and long-standing customer
relationships in the technically-demanding and fragmented niche
markets of testing for the aerospace, oil and gas, and transport
and industrials sectors.  Moody's believes that the company's
market position is supported by high barriers to entry and high
customer switching costs driven by (1) the lengthy and complex
processes to obtain accreditations from regulatory bodies and
approvals from customers in order to operate testing services and
(2) significant investment required to set up laboratories and
update equipment and processes to meet customers' evolving needs.

However, Element's rating is constrained by its relatively small
scale compared with larger peers including Intertek Group plc
(unrated) and SGS SA (A3 Stable).  The company generated revenues
of USD277.2 million in fiscal year ending (FYE) 31 December 2015
or USD290.6 million pro-forma for acquisitions including Cascade
Tek (as reported by the company based on preliminary, unaudited
management accounts).  The company's operations are concentrated
both in terms of geography (73% of Element's 53 laboratories are
located in the US with the remainder located in Europe and one
facility in China) and segments with aerospace accounting for 54%
of 2015 revenues (on a pro-forma basis including all acquisitions
up to June 2015 and Cascade Tek) well above Oil & Gas (26%) and
Transport & Industrials (T&I, 20%).

Element's pro-forma adjusted gross leverage at 5.3x as of FYE 2015
(based on preliminary, unaudited fiscal year 2015 EBITDA of
USD79.7 million as reported by the company pro-forma for all
acquisitions and Cascade Tek and including USD1 million of
synergies still to be realized from recent acquisitions) is high.
Based on the company's track record of acquisitions over the last
three years and the overall trend for consolidation of the
industry, Moody's considers that Element will pursue debt-funded
bolt-on acquisitions going forward which will impede de-
leveraging.  In order to fund acquisitions, Element benefits from
a USD70 million capex/acquisition facility and can raise
additional debt as long as net debt-to-EBITDA remains at or below

However, Element's high leverage is partly mitigated by the good
long-term growth prospects of the technically-demanding testing,
inspection, and certification (TIC) market driven by increasing
regulation and outsourcing.  In particular, we expect sustained
growth in Element's Aerospace segment driven by an increase in the
production of new aircraft and engine platforms and the strong
order backlogs of original equipment manufacturers (OEMs), while
the T&I segment should benefit from the growth of the North
American transport industry which bounced back after the recession
with increased focus on R&D to catch up with European peers.

While underlying fundamentals are positive, Moody's notes,
however, that Element's end markets are cyclical.  In 2015, the
company's Oil & Gas segment experienced a 2.5% revenue decline --
after a period of strong growth at above 10% per annum in 2013 and
2014 -- with further softness expected at least throughout 2016.
The segment's revenues were negatively impacted by low oil prices,
which have led customers to cut or defer spending in particular in
sub-sea exploration/production reducing demand for testing
services.  Weak performance in the Oil & Gas segment was, however,
offset by growth in Aerospace (3.4%) and T&I (7.9%).  Going
forward, Aerospace and T&I should drive group revenue growth to
above 5% per annum from 2017.

Despite a slower top line growth in 2015, Moody's positively notes
that Element was able to further improve its EBITDA margin to
27.4% (as reported by the company pro-forma for acquisitions and
Cascade Tek and identified synergies from recent acquisitions)
from 24.8% in 2014.  The EBITDA margin increase was mainly driven
by 1) focus on cost savings, in particular early cost actions
taken in the Oil & Gas segment, and 2) the high operating leverage
of the business supported by group revenue growth.  Moody's
expects EBITDA margins to continue improving over the medium-term
driven by revenue growth as well as some cost initiatives,
including the rationalization of the laboratory footprint and
further cost actions in the Oil & Gas segment.

Moody's considers that Element benefits from a good liquidity
position.  Liquidity is supported by the company's undrawn USD30
million revolving facility and USD70 million capex/acquisition
facility mitigating the weak cash balance of USD2 million at the
closing of the transaction expected in Q1 2016.  As opposed to
other companies classified within the business and consumer
service methodology, Element has significant capex needs at around
6% of sales projected over the next 3 years limiting FCF
generation at around 5% during that period based on Moody's

The senior secured term loans B1 and B2, the capex/acquisition
facility and the revolving facility rank pari passu, benefit from
first lien guarantees from the company and its material
subsidiaries (guarantor coverage set at 80% of revenue and EBITDA
of material subsidiaries), and are secured by a first lien pledge
over substantially all the assets and shares of the borrowers and
guarantors.  The (P)B2 rating assigned to these facilities
reflects the absence of any significant non-debt liabilities
ranking ahead or behind.  Moody's notes that the revolving
facility has a springing leverage covenant tested only once 35% of
the facility is drawn -- the financial covenant is based on a net
leverage ratio set at 7.68x for the first two quarters of 2017
ending 30 June and 7.0x from that date thereafter -- well above
Element's 5.4x net leverage as reported by the company at the
closing of the transaction.

                          RATING OUTLOOK

Element Materials' stable outlook reflects Moody's expectation
that the company will experience a continued organic growth in
revenues driven by the strong underlying fundamentals of the
Aerospace segment mitigating weaknesses in the Oil & Gas segment
and the negative impact on leverage of future debt-funded bolt-on


Positive ratings pressure could arise if (1) the company's three
segments experience continued strong growth improving the scale
and diversification of the business; (2) leverage decreases
sustainably to around 4.5x; (3) FCF/debt increases to high single
digit on a sustainable basis; (4) while maintaining a solid
liquidity position.


The ratings could be downgraded if (1) Element's adjusted leverage
increases sustainably above 6.0x due to a weak operating
performance or debt-funded acquisitions; (2) FCF-to-debt reduces
towards zero on a sustainable basis; or (3) other liquidity
weaknesses arise.

The principal methodology used in these ratings was Business and
Consumer Service Industry published in December 2014.

Headquartered in the United Kingdom, Element is an independent
provider of materials and product qualification testing offering a
full suite of laboratory-based services focusing on aerospace, oil
and gas, and transportation and industrials sectors mainly in the
US and Europe.  These services cover technically demanding testing
for a broad range of advanced materials, components, products and
systems to ensure compliance with safety, performance and quality
standards imposed by customers, accreditation bodies and
regulatory authorities.


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  Go to 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-
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Valerie U. Pascual, Marites O. Claro, Rousel Elaine T. Fernandez,
Joy A. Agravante, Ivy B. Magdadaro, and Peter A. Chapman, Editors.

Copyright 2016.  All rights reserved.  ISSN 1529-2754.

This material is copyrighted and any commercial use, resale or
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