/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/160408.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 Friday, April 8, 2016, Vol. 17, No. 069 Headlines A U S T R I A ACTIV SOLAR: Withdraws Restructuring Plan, Payout Ratio Below 10% C R O A T I A SUNCANI HVARI: Orco to Sell 15.77% Stake for EUR8.15 Million C Z E C H R E P U B L I C CE ENERGY: Moody's Withdraws Ba2 Corporate Family Rating F R A N C E PEUGEOT SA: Moody's Raises CFR to Ba2, Outlook Stable I R E L A N D EUROCREDIT CDO VI: Moody's Affirms Ba3 Rating on Class E Notes JUBILEE CDO VI: Moody's Affirms Ba3 Rating on Class E Notes L U X E M B O U R G VAT LUX II: S&P Puts 'B' CCR on CreditWatch Positive R U S S I A SIBUR PAO: Fitch Assigns 'BB+' Rating to RUB10BB 10-Year Bonds TRANSAERO AIRLINES: Repays RUB320-Mil. Debt to Vnukovo Airport S P A I N ABENGOA SA: Seeks Nasdaq Delisting as Part of Restructuring Plan IBERCAJA BANCO: S&P Affirms 'BB' Counterparty Credit Ratings U K R A I N E PROLETARY: Luhansk Court Opens Bankruptcy Proceedings RAIFFEISEN LEASING: Moody's Assigns Caa2 CFR, Outlook Stable U N I T E D K I N G D O M PREMIERTEL PLC: Fitch Affirms 'BBsf' Rating on Class B Notes TATA STEEL: More Potential Buyers Emerge for Plants, Javid Says VEDANTA RESOURCES: Moody's Says Buybacks Not Distressed Exchanges X X X X X X X X * S&P Takes Rating Actions on 8 European Synthetic CDO Tranches * BOOK REVIEW: Risk, Uncertainty and Profit ********* ============= A U S T R I A ============= ACTIV SOLAR: Withdraws Restructuring Plan, Payout Ratio Below 10% ----------------------------------------------------------------- Alexander Weber at Bloomberg News reports that creditor protection association Creditreform said in an e-mailed statement the main creditor of Activ Solar is Ukraine's Ukreximbank. According to Bloomberg, a restructuring plan was withdrawn by Activ Solar after agreement with Ukreximbank couldn't be reached. Creditreform said the payout ratio is seen below 10%, "if there will be a payout at all", Bloomberg relays. As reported by the Troubled Company Reporter-Europe on Feb. 11, 2016, Bloomberg News related that Activ Solar filed for insolvency in Vienna. Creditreform, as cited by Bloomberg, 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. 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 stations. ============= C R O A T I A ============= SUNCANI HVARI: Orco to Sell 15.77% Stake for EUR8.15 Million ------------------------------------------------------------ SeeNews reports that Orco Property Group said it has entered into an agreement to exit Suncani Hvar, selling its 15.77% stake in the company for some EUR8.15 million (US$9.3 million). The aggregate price of the transaction is based on the nominal value of the transferred shares, i.e. 20 kuna per share, Orco Property Group, as cited by SeeNews, said in a statement on April 5, adding that it sold 3,062,196 Suncani Hvar shares. It did not disclose the buyer, SeeNews notes. In December, Suncani Hvar said that following the successful completion of the pre-bankruptcy proceedings the company expects to end the year with an operating profit of almost HRK68 million (US$10.3 million/EUR9.0 million), SeeNews recounts. In June, Suncani Hvar said it is inviting eligible creditors to convert their claims against the company into equity as part of its court-approved pre-bankruptcy proceedings, SeeNews relays. As part of the proceedings, the company was obliged to raise its capital by converting a portion of creditor claims into equity, SeeNews discloses. Suncani Hvar is a Croatian hotel group. =========================== C Z E C H R E P U B L I C =========================== CE ENERGY: Moody's Withdraws Ba2 Corporate Family Rating --------------------------------------------------------- Moody's Investors Service has withdrawn the Ba2 corporate family rating and the Ba2-PD probability of default rating of CE Energy, a.s. (CE Energy) following the announcement of the sale of German assets by EP Energy, a.s. and given the ongoing reorganization of the business. CE Energy has no rated debt outstanding following an early full redemption of the EUR500 million notes completed on April 1, 2016. The senior secured notes were rated at B1 at the time of the withdrawal. =========== F R A N C E =========== PEUGEOT SA: Moody's Raises CFR to Ba2, Outlook Stable ----------------------------------------------------- Moody's Investors Service has upgraded to Ba2 from Ba3 the corporate family rating and to Ba2-PD from Ba3-PD the probability of default rating of Europe's second-largest maker of light vehicles, Peugeot S.A. Concurrently, Moody's has upgraded to Ba2/(P)Ba2 from Ba3/(P)Ba3 Peugeot's and its rated subsidiary GIE PSA Tresorerie's ratings and affirmed the NP/(P)NP ratings. The outlook on all ratings has been changed to stable from positive. "The upgrade of Peugeot's ratings recognizes its success in implementing its industrial reconstruction plan, as well as the potential for further improvement in earnings in the next 12 to 18 months as Peugeot launches new models, takes advantage of the positive business momentum in Western Europe and continues its rationalization efforts," says Yasmina Serghini, a Moody's Vice President - Senior Credit Officer and lead analyst for Peugeot. RATINGS RATIONALE Moody's has upgraded Peugeot's ratings to Ba2 to reflect the successful execution of the company's turnaround strategy, which has supported a meaningful improvement in the company's earnings and cash flow generation since 2014. In particular, Peugeot last year delivered a much improved operating margin of 3.0% (with Moody's adjustments), up from 0.2% in the prior year, also boosted by favorable operating conditions in Western Europe, Peugeot's single largest market. Outside of Europe, Peugeot has also eliminated or narrowed down its losses in challenged markets such as Brazil and Russia which, if sustained on the back of a large reduction in fixed costs, will help build a more resilient business at times of declining sales volumes. Moody's expects that Peugeot's margin will increase towards 4% by 2017 on the back of (1) anticipated further demand growth for passenger cars in Western Europe in 2016 and 2017 of 4.7% and 3.1%, respectively, together with (2) Peugeot's continued efforts at improving its pricing power, rationalizing its model range and cost structure and upcoming model launches from late 2016. Moody's anticipates that by 2017 Peugeot's profitability will narrow the gap in its profit margin relative to some of its global rated competitors such as Renault S.A. (Baa3 stable), General Motors Company (Baa3 senior unsecured bank credit facility/Ba1 senior unsecured, positive) and Ford Motor Company (Baa2 stable). Peugeot's higher profitability and cash conversion in 2015 translated into stronger debt-protection ratios as evidenced by a Moody's-adjusted (gross) debt/EBITDA ratio of 3.4x (7.3x in 2014), a Moody's-adjusted EBITA/Interest Expense ratio of 1.9x (0.1x) and a Retained Cash Flow (RCF)/debt of 26.9% (7.8%). Moody's expects that a gradual increase in margin will support an incremental improvement in Peugeot's credit metrics in the next 24 months towards 2x leverage and 3.5x interest coverage, a level that will position the company's rating strongly at the Ba2 level. However, Moody's anticipates that Peugeot's free cash flow generation in the next 24 months will not be as strong as in 2014 and 2015 reflecting mostly a moderation in working capital inflow which lifted free cash flow during the last two years. Moreover, Peugeot will start paying dividends to its shareholders starting in 2017, with respect to the 2016 financial year, which, albeit at a moderate level (25% payout ratio) will constrain free cash flow to some extent. Moody's assessment of Peugeot's rating factors in the rating agency's expectations that the Push to Pass plan for the 2016-21 period largely builds on the previous strategy Back in the Race announced in 2014. Having said that, the new plan raises the company's self-imposed recurring operating margin targets to 4% on average for the period 2016-18 then to 6% by 2021. It also introduces a new 10% group revenue growth by 2018 (compared to 2015; at constant exchange rates) with an additional 15% by 2021. Peugeot said it will achieve these targets through a combination of measures aiming at diversifying and expanding its offerings in the areas of after-sales, leasing, used cars and fleet management which Moody's believes carry a moderate execution risk and associated costs. However, Peugeot's Ba2 CFR is constrained by (1) the highly competitive nature of the automotive industry; (2) volatility in operating conditions in certain of Peugeot's markets and in foreign currency (both in emerging markets and in respect of the British Pound); (3) the company's high reliance on the European market, which is generally greater than its rated competitors; and (4) subdued commercial performance posted by the company outside of Europe. In the regard to the last point, the company has been held back by its lack of new model launches and lower growth in China year-on-year, the company's second-largest market, in which Moody's forecasts demand growth for passenger cars of 6.5% in 2016, decelerating to 2.5% in 2017. This is likely to constrain the share of income from Peugeot's Chinese joint ventures (which totaled EUR300 million in 2015). WHAT COULD CHANGE THE RATINGS UP/DOWN Peugeot's ratings are unlikely to be upgraded in the near-term in light of the upgrade. Over time, upward pressure could materialize on the ratings and/or the outlook if Peugeot (1) improves its market share on the back of a positive and consistent sales performance and (2) delivers a longer track record of operational improvement with stronger and sustained profitability in its automotive operations. Quantitatively, (1) a structurally positive free cash flow from its industrial operations excluding working capital fluctuations (as defined by Moody's), (2) a Moody's-adjusted EBITA margin for its industrial business around the mid-single-digits (in percentage terms), (3) a Moody's-adjusted EBITA/Interest Expense at or above 3.5x, and (4) a Moody's-adjusted (gross) debt/EBITDA ratio below 2.5x could support a rating upgrade. This assessment is premised on the maintenance of a cash balance of approximately EUR10 billion. Conversely, the ratings could be downgraded if Peugeot's operational performance were to weaken on the back of continued erosion of its market share, its EBITA margin were to fall to the low single-digit range (in percentage terms, including Moody's adjustments), its free cash flow were to turn negative and its Moody's-adjusted debt/EBITDA were to rise above 3.5x, on a sustained basis. PRINCIPAL METHODOLOGIES The principal methodology used in these ratings was Global Automobile Manufacturer Industry published in June 2011. Peugeot S.A. is Europe's second-largest maker of light vehicles with its two main brands Peugeot and Citroen. In addition, Peugeot holds a 51.7% interest in Faurecia SA (Ba2 stable), one of Europe's leading automotive suppliers and remains a 25% shareholder in Gefco, France's second-largest transportation and logistics service provider. In 2015, Peugeot generated revenues of EUR54.7 billion and reported a recurring operating income of EUR2.7 billion. List of Affected Ratings: Upgrades: Issuer: Peugeot S.A. Probability of Default Rating, Upgraded to Ba2-PD from Ba3-PD Corporate Family Rating, Upgraded to Ba2 from Ba3 BACKED Senior Unsecured Medium-Term Note Program, Upgraded to (P)Ba2 from (P)Ba3 Senior Unsecured Regular Bond/Debenture, Upgraded to Ba2 from Ba3 BACKED Senior Unsecured Regular Bond/Debenture, Upgraded to Ba2 from Ba3 Issuer: GIE PSA Tresorerie BACKED Senior Unsecured Regular Bond/Debenture, Upgraded to Ba2 from Ba3 Affirmations: Issuer: Peugeot S.A. BACKED Senior Unsecured Medium-Term Note Program, Affirmed (P)NP Issuer: GIE PSA Tresorerie Senior Unsecured Commercial Paper, Affirmed NP Outlook Actions: Issuer: Peugeot S.A. Outlook, Changed To Stable From Positive Issuer: GIE PSA Tresorerie Outlook, Changed To Stable From Positive ============= I R E L A N D ============= EUROCREDIT CDO VI: Moody's Affirms Ba3 Rating on Class E Notes -------------------------------------------------------------- Moody's Investors Service has taken action on the following notes issued by Eurocredit CDO VI PLC: -- EUR33.5 million (Current outstanding balance EUR25.7 million) Class B Senior Secured Floating Rate Notes due 2022, Affirmed Aaa (sf); previously on Oct 21, 2015 Affirmed Aaa (sf) -- EUR30 million Class C Senior Secured Deferrable Floating Rate Notes due 2022, Upgraded to Aaa (sf); previously on Oct 21, 2015 Upgraded to Aa1 (sf) -- EUR24 million Class D Senior Secured Deferrable Floating Rate Notes due 2022, Upgraded to A3 (sf); previously on Oct 21, 2015 Upgraded to Baa2 (sf) -- EUR20 million (Current outstanding balance EUR15.8 million) Class E Senior Secured Deferrable Floating Rate Notes due 2022, Affirmed Ba3 (sf); previously on Oct 21, 2015 Affirmed Ba3 (sf) Eurocredit CDO VI PLC, issued in December 2006, is a collateralized loan obligation ("CLO") backed by a portfolio of mostly high yield European loans. It is predominantly composed of senior secured loans. The portfolio is managed by Intermediate Capital Managers Limited. The transaction's reinvestment period ended in January 2013. RATINGS RATIONALE The rating upgrades of the Notes are primarily a result of the redemption of the senior Notes and subsequent increases of the overcollateralization ratios (the "OC ratios") of the remaining Classes of Notes. Moody's notes that the Class A-T Notes and Class A-R Notes have redeemed in full while Class B has redeemed approximately EUR7.8 million on the last payment date in January 2016. As a result of the deleveraging, the OC ratios of the Notes have increased significantly. According to the March 2016 trustee report, the Classes B, C, D and E OC ratios are 409.15%, 188.70%, 131.86% and 110.00% respectively compared to levels just prior to the payment date in September 2015 of 274.14%, 166.37%, 126.56% and 109.31%. The key model inputs Moody's uses in its analysis, such as par, weighted average rating factor, diversity score and the weighted average recovery rate, are based on its published methodology and could differ from the trustee's reported numbers. In its base case, Moody's analyzed the underlying collateral pool as having a performing par and principal proceeds balances of EUR100.1 million and GBP2.5 million, a weighted average default probability of 24.08% (consistent with a WARF of 3457), a weighted average recovery rate upon default of 48.94% for a Aaa liability target rating, a diversity score of 15 and a weighted average spread of 3.87%. The default probability derives from the credit quality of the collateral pool and Moody's expectation of the remaining life of the collateral pool. The estimated average recovery rate on future defaults is based primarily on the seniority of the assets in the collateral pool. In each case, historical and market performance and a collateral manager's latitude to trade collateral are also relevant factors. Moody's incorporates these default and recovery characteristics of the collateral pool into its cash flow model analysis, subjecting them to stresses as a function of the target rating of each CLO liability it is analyzing. JUBILEE CDO VI: Moody's Affirms Ba3 Rating on Class E Notes ----------------------------------------------------------- Moody's Investors Service has upgraded the ratings on these notes issued by Jubilee CDO VI: EUR27 mil. Class C Senior Secured Deferrable Floating Rate Notes due 2022, Upgraded to Aa1 (sf); previously on Oct. 6, 2015, Upgraded to Aa2 (sf) EUR21 mil. Class D Senior Secured Deferrable Floating Rate Notes due 2022, Upgraded to A3 (sf); previously on Oct. 6, 2015, Upgraded to Baa1 (sf) EUR3.15 mil. (Current rated balance: EUR 0.24 mil.) Class Q Combination Notes due 2022, Upgraded to Aa2 (sf); previously on Oct 6, 2015, Upgraded to A1 (sf) Moody's also affirmed the ratings on these notes issued by Jubilee CDO VI: EUR25 mil. (Current balance outstanding: EUR20.17 mil.) Class A1-b Senior Secured Floating Rate Notes due 2022, Affirmed Aaa (sf); previously on Oct. 6, 2015, Affirmed Aaa (sf) EUR112.5 mil. (Current balance outstanding: EUR7.67 mil.) Class A2-a Senior Secured Floating Rate Notes due 2022, Affirmed Aaa (sf); previously on Oct. 6, 2015, Affirmed Aaa (sf) EUR12.5 mil. Class A2-b Senior Secured Floating Rate Notes due 2022, Affirmed Aaa (sf); previously on Oct. 6, 2015, Affirmed Aaa (sf) EUR13 mil. (Current balance outstanding: EUR 2.10 mil.) Class A3 Senior Secured Floating Rate Notes due 2022, Affirmed Aaa (sf); previously on Oct. 6, 2015, Affirmed Aaa (sf) EUR32 mil. Class B Senior Secured Floating Rate Notes due 2022, Affirmed Aaa (sf); previously on Oct. 6, 2015, Affirmed Aaa (sf) EUR17 mil. Class E Senior Secured Deferrable Floating Rate Notes due 2022, Affirmed Ba3 (sf); previously on Oct. 6, 2015, Upgraded to Ba3 (sf) Jubilee CDO VI, issued in August 2006, is a collateralized loan obligation backed by a portfolio of mostly high yield European loans. It is predominantly composed of senior secured loans. The portfolio is managed by Alcentra Limited. The transaction's reinvestment period ended in September 2012. RATINGS RATIONALE The rating actions on the notes are primarily a result of the improvement in their over-collateralization (OC) ratios since the rating action in October 2015. On March 2016 payment date, Class A1-a, A2-a, A3 and A1-b notes were paid in total by EUR18.22 million or 7% of their original aggregate balance. As a result of this deleveraging, the OC ratios have increased. According to the March 2016 trustee report the OC ratios of Classes A/B, C, D and E are 194.00%, 150.22%, 127.79% and 114.01% compared to 162.54%, 136.28%, 121.07% and 111.04%, respectively, in September 2015. The rating of the Class Q combination Notes addresses the repayment of the rated balance on or before the legal final maturity. The rated balance at any time is equal to the principal amount of the combination note on the issue date minus the sum of all payments made from the issue date to such date, of either interest or principal. The rated balance will not necessarily correspond to the outstanding notional amount reported by the trustee. The key model inputs Moody's uses in its analysis, such as par, weighted average rating factor, diversity score and the weighted average recovery rate, are based on its published methodology and could differ from the trustee's reported numbers. In its base case, Moody's analyzed the underlying collateral pool as having a performing par of EUR162.95 million, EUR6.4 million of defaulted assets, a weighted average default probability of 23.76% (consistent with a WARF of 3,340 with a weighted average life of 4.3 years), a weighted average recovery rate upon default of 45.24% for a Aaa liability target rating, a diversity score of 18 and a weighted average spread of 3.68%. The default probability derives from the credit quality of the collateral pool and Moody's expectation of the remaining life of the collateral pool. The estimated average recovery rate on future defaults is based primarily on the seniority of the assets in the collateral pool. In each case, historical and market performance and a collateral manager's latitude to trade collateral are also relevant factors. Moody's incorporates these default and recovery characteristics of the collateral pool into its cash flow model analysis, subjecting them to stresses as a function of the target rating of each CLO liability it is analyzing. Methodology Underlying the Rating Action: The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in December 2015." Factors that would lead to an upgrade or downgrade of the ratings: In addition to the base-case analysis, Moody's conducted sensitivity analyses on the key parameters for the rated notes, for which it assumed a lower weighted average recovery rate of the portfolio. Moody's ran a model in which it lowered the weighted average recovery rate of the portfolio by 5%; the model generated outputs that were within one notch of the base-case results. This transaction is subject to a high level of macroeconomic uncertainty, which could negatively affect the ratings on the note, in light of uncertainty about credit conditions in the general economy. CLO notes' performance may also be impacted either positively or negatively by (1) the manager's investment strategy and behavior and (2) divergence in the legal interpretation of CDO documentation by different transactional parties due to embedded ambiguities. Additional uncertainty about performance is due to: 1) Portfolio amortization: The main source of uncertainty in this transaction is the pace of amortization of the underlying portfolio, which can vary significantly depending on market conditions and have a significant impact on the notes' ratings. Amortization could accelerate as a consequence of high loan prepayment levels or collateral sales by the collateral manager or be delayed by an increase in loan amend-and-extend restructurings. Fast amortization would usually benefit the ratings of the notes beginning with the notes having the highest prepayment priority. 2) Recovery of defaulted assets: Market value fluctuations in trustee-reported defaulted assets and those Moody's assumes have defaulted can result in volatility in the deal's over- collateralization levels. Further, the timing of recoveries and the manager's decision whether to work out or sell defaulted assets can also result in additional uncertainty. Moody's analyzed defaulted recoveries assuming the lower of the market price or the recovery rate to account for potential volatility in market prices. Recoveries higher than Moody's expectations would have a positive impact on the notes' ratings. In addition to the quantitative factors that Moody's explicitly modeled, qualitative factors are part of the rating committee's considerations. These qualitative factors include the structural protections in the transaction, its recent performance given the market environment, the legal environment, specific documentation features, the collateral manager's track record and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, can influence the final rating decision. =================== L U X E M B O U R G =================== VAT LUX II: S&P Puts 'B' CCR on CreditWatch Positive ---------------------------------------------------- Standard & Poor's Ratings Services placed its 'B' long-term corporate credit rating on Luxembourg-based vacuum valve producer VAT Lux II Sarl on CreditWatch with positive implications. At the same time, S&P puts on CreditWatch positive its 'B' issue rating on VAT's $405 million senior secured term loan B due 2021 ($276 million outstanding after the company's commitment to prepay $40 million on March 31, 2016). The recovery rating on this instrument remains at '3', reflecting S&P's expectation of meaningful recovery in the higher half of the 50%-70% range in the event of a payment default. The CreditWatch placement follows VAT's launch of its IPO on the SIX Swiss Exchange. S&P understands that the transaction aims to enlarge the company's shareholder base and will therefore have no cash impact for VAT. However, because a shareholder loan of CHF405 million has been converted into common equity, S&P expects the transaction will be positive for VAT's credit profile based on S&P's anticipation that its debt protection metrics will improve. The launch comes a few weeks after the company's public statement of its intent to float on the SIX Swiss Exchange. Moreover, S&P understands that the company targets a quicker turnaround than initially indicated, given a first listing on April 14, 2016. S&P thinks that the IPO will markedly improve VAT's financial risk profile given the conversion of the CHF405 million (as of year-end 2015) shareholder loan into common equity. With S&P's treatment of this instrument as debt, on Dec. 31, 2015, VAT's adjusted debt reached CHF730 million, of which 42% was composed of senior secured credit facilities. After the conversion of this shareholder loan into equity on March 29, 2016, the company's adjusted debt would be less than CHF290 million (accounting for the $40 million prepayment on March 31, 2016). This would translate into a debt-to-EBITDA ratio of about 2x-2.5x by year-end 2016 and a funds from operations (FFO)-to-debt ratio significantly improving toward 25%-30%. VAT's financial risk profile will also strengthen with its two financial sponsors, Partners Group and Capvis Equity partners, relinquishing control of the company. S&P anticipates that the two sponsors' ultimate ownership of VAT will be just below 40% (or 45.8% assuming full exercise of the overallotment option that covers 1,200,000 shares), while the family owners and management would retain an aggregate stake of 8.3% (assuming full exercise of the overallotment option). S&P has not yet revised up its financial risk profile assessment given the execution risks inherent to an IPO transaction. Also, equity markets have been particularly volatile since the beginning of the year, although there has been some relief in recent weeks. What's more, if the IPO is unsuccessful, S&P thinks that the financial sponsors could explore alternatives to partially monetizing their investment. In such a scenario, S&P do not rule out releveraging of VAT's balance sheet back to year- end 2015 levels. Consequently, a change in S&P's view of VAT's financial risk profile would be contingent on the final ownership structure, particularly if the financial sponsorship stake continues to exceed our 40% threshold, on which S&P bases its assessment of the company's financial sponsor ownership. In S&P's view, VAT's highly attractive dividend policy will weigh on its financial risk profile. S&P understands the company targets dividend payments of CHF60 million in 2016, followed by a potential payback of up to 100% free operating cash flow after scheduled amortization of debt (provided reported net debt does not significantly deviates from 1x EBITDA). S&P is maintaining its assessment of the business risk profile given VAT's market leadership, technology edge, and attractive geographic diversification. With its focus on premium vacuum valves, the company has delivered sustainably healthy EBITDA margins averaging 28% over the past three years. Yet, VAT remains exposed to the semiconductor industry, which is inherently volatile and features some customer concentration. Over the medium to long term, S&P also sees technology risk attached to VAT's products, if competing products emerge. Moreover, S&P thinks VAT is small in size in absolute terms, as reflected through revenues and EBITDA of about CHF411 million and CHF127 million at year-end 2015. The CreditWatch reflects the possibility that S&P could raise its long-term corporate credit rating on VAT by at least one notch on successful completion of the IPO and full allocation of the funds. S&P aims to resolve the CreditWatch placement over the next 90 days on completion of the IPO. S&P will assess the impact of any sustainable debt reduction on VAT's financial risk profile, as well as reviewing the ownership structure, including reduced financial sponsor ownership. The magnitude of any potential ratings upside would depend on S&P's view of VAT's ability to continue to deliver stronger credit metrics, its ultimate shareholding structure, and S&P's view of its liquidity remaining adequate. S&P would most likely affirm its ratings on VAT if it does not succeed in placing the IPO. =========== R U S S I A =========== SIBUR PAO: Fitch Assigns 'BB+' Rating to RUB10BB 10-Year Bonds -------------------------------------------------------------- Fitch Ratings has assigned PAO SIBUR Holding's recent issue of RUB10 billion ten-year rouble bonds a local currency senior unsecured 'BB+' rating. Fitch has simultaneously affirmed SIBUR's Long-term Issuer Default Rating (IDR) at 'BB+' with Negative Outlook, Short-term foreign currency IDR at 'B', and SIBUR Securities Limited's five- year USD1 billion guaranteed Eurobonds due 2018 at 'BB+'. SIBUR's USD1 billion Eurobonds due 2018 and new RUB10 billion rouble bonds rank pari passu with the group's senior unsecured debt and are only structurally subordinated to SIBUR's debt at its subsidiaries, largely represented by debt at Tobolsk Polymer and ZapSibNefteKhim (ZapSib-2). Fitch expects SIBUR's structurally senior debt to increase with further utilization of ZapSib-2 project debt funding, but to remain well below Fitch's 2x-2.5x threshold of prior ranking debt-to-EBITDA for notching unsecured debt rating until the bonds mature. Thus, Fitch sees no subordination pressure on the bonds' recoveries, as reflected in the bonds' ratings being equalized with SIBUR's IDR. KEY RATING DRIVERS Leveraging Risk Drives Outlook The Negative Outlook reflects Fitch's expectations of materially higher leverage during 2017-2019, due to expenditure on the multi-billion ZapSib-2 project at a time of low and volatile petrochemical pricing. Fitch expects funds from operations (FFO) adjusted net leverage to rise to 2.8x over 2017-2019 before returning to below our 2x rating guideline in 2020. This is despite SIBUR's operational performance benefiting from a weak rouble and a long-term drawdown/maturity period under its recent loan facilities obtained for the ZapSib-2 project. Fitch believes that, once completed in 2020, ZapSib-2 will materially enhance SIBUR's operational profile. SIBUR's ratings are constrained by higher-than-average systemic risks associated with the Russian business and jurisdictional environment. Excluding these risks, Fitch assesses SIBUR's credit profile in the 'BBB' category, which reflects the group's leading market and cost position in the petrochemical sector, diversified portfolio and proven access to competitively priced feedstock. Leveraging on Transformational ZapSib-2 Project SIBUR's USD9.5 billion ZapSib-2 project is expected to add 1.5 million tonnes (mt) of steam cracking capacity and 2mt of polymer capacity, and will be transformational for SIBUR's operational profile. In particular, SIBUR's basic polymer capacity will triple from its current 1mt level and the share of internally processed liquefied petroleum gas (50% of SIBUR's energy product sales) will almost double. This will further reduce SIBUR's sales exposure to volatile, oil-linked energy products towards 30% from 45%, and increase the exposure to more resilient, higher value added petrochemical products to 60% from 40%. ZapSib-2 is SIBUR's largest investment, accounting for 80% of 2016-2020 total capex. SIBUR has already raised long-term debt financing, including USD2.3 billion of export credit agencies' funding, a USD1.75 billion loan from the National Wealth Funding, and a USD210 million loan from Russian Direct Investment Fund and its partners, with most facilities maturing beyond 2020 when the project is expected to launch. While SIBUR has demonstrated flexibility in the past by postponing some of ZapSib-2's capex, Fitch believes there is limited scope for this once the financing is raised. Fitch expects SIBUR's capex will peak in 2016-2018 at over 35% of sales. At a time of low oil prices partly offset by the weak rouble, this will put SIBUR's leverage under pressure over this period. This pressure, coupled with the risks around SIBUR's limited further flexibility to defer ZapSib-2 capex, is reflected in the Negative Outlook. Pricing Pressure Varies Across Products SIBUR's product portfolio consists of energy products (48% of 1H15 sales) and petrochemical products (48%). Energy products are diversified across liquefied petroleum gas, natural gas, naphtha and other products, but most of these products have significant pricing correlation with oil. Petrochemical products are mostly represented by polypropylene, polyethylene, synthetic rubbers and other plastics, which are more resilient to oil price shocks. While the recent oil shock has eroded SIBUR's energy products performance, it has had a less severe impact on petrochemical products' sales and aided its margins due to the decreasing cost of inputs. Medium-term Margins and Leverage Pressure Fitch expects SIBUR's revenues to show consistent single-digit increases over the next five years, driven by rubbers and polymers volume growth, and oil price recovery and despite the strengthening rouble. The strengthening rouble and local inflation will also contribute to a reduction in SIBUR's margin to 33%-35% from 2017 from a 37%-39% peak in 2015-2016, which is more consistent with historical performance. Aggressive capex exceeding 30% of sales for 2016, 2017 and 2018, coupled with a 25% dividend payout ratio, will outpace operational cash flows and translate into a negative high single- digit free cash flow (FCF) margin and leverage of 2.5x in 2016 and 2.8x in 2017-2018 (2015E: 2.5x). Over the long term, we expect SIBUR to reduce capex from 2019 as most of the ZapSib-2 project capex is realised, resulting in gradual deleveraging towards below 2x post 2019. This is based on our assumption that SIBUR will not undertake new large projects before the ZapSib-2 ramps up. Fitch assumes the potential project of Amur gas chemical complex will be financed with non-recourse project finance. Sinopec's Stake Neutral to Ratings In December 2015, China Petroleum & Chemical Corporation (Sinopec; A+/Stable) acquired 10% of SIBUR's equity and subsequently nominated one of 10 Directors on SIBUR's Board of Directors. SIBUR's investment and dividend strategy remains intact after the change of shareholder structure. Fitch views this strategic partnership positively, as China is a growing market for SIBUR's products and future collaborative petrochemical projects. FX has Multiple Implications SIBUR reports in roubles. Its costs are dominated in roubles while its revenues are mostly driven by the US dollar. Similar to other petrocurrencies, the rouble becomes weaker during low oil pricing and vice versa. As a result, the price contraction in oil and oil derivatives by two thirds in 4Q15-1Q16 compared with 2014 was, to a large extent, compensated by more than a halving of the value of the rouble against the US dollar. This translated into reduced sales and margins for SIBUR's oil-linked energy products. However, the relative price resilience of polymers and rubbers compared with oil, coupled with a weaker rouble, translated into higher sales and margins for SIBUR's petrochemical products. The overall effect of a weak rouble and low oil prices is broadly neutral for rouble-reported sales but positive for margins, as the rouble mitigates the impact of the weak oil price environment. The weak rouble also has had an impact on SIBUR's capex and dividends. All other things being equal, a weak rouble increases the foreign currency element of capex and leads to a higher dividend payout through higher net profits. SIBUR's debt is also mostly in foreign currencies and is thus inflated by a weak rouble. Therefore, the overall weak rouble impact is positive on operational cash flow and moderately positive on leverage despite driving up capex, dividends and debt, all else being equal. KEY ASSUMPTIONS Fitch's key assumptions within the rating case for SIBUR include: -- Oil price at USD35/bbl in 2016, gradually growing towards USD65/bbl by 2019. -- USD/RUB gradually strengthening towards 57 in 2019 from its peak at 75 in 2016. -- Energy product prices to follow oil price movements with petrochemical product prices dropping 15%-20% in 2016, before recovering in single-digit growth after 2016. -- Capex/sales peaking at above 35% during 2016-2018, and dividend payout of 25% of net income, driving a strongly negative FCF margin until 2019. RATING SENSITIVITIES Positive: Future developments that may, individually or collectively, lead to positive rating action include: -- Progress towards the completion of ZapSib-2 project combined with expectations of FFO adjusted net leverage trending towards 2x, which would lead to the Outlook being revised to Stable -- Sustained positive FCF leading to FFO net adjusted leverage at or below 1.5x through the cycle, which would lead to an upgrade Negative: Future developments that may, individually or collectively, lead to negative rating action include: -- Material deterioration in the company's cost position or in access to low-cost associated petroleum gas. -- Aggressive investments leading to inability to keep FFO adjusted net leverage well below 3x in 2017-2019 and below 2x by 2020. LIQUIDITY Historically, SIBUR has had significant short-term debt constituting 25%-35% of total debt, which is well above its cash cushion. However, SIBUR's continued access to undrawn committed credit lines mitigates the liquidity gap. At end-3Q15 SIBUR had RUB84 billion of short-term debt maturities, which were covered by RUB15 billion of cash and RUB151 billion long-term committed credit lines. SIBUR's exposure to uncommitted credit lines (end- 3Q15: RUB106 billion), coupled with its proven long-term relationships with state-owned banks, bolsters its liquidity balance. TRANSAERO AIRLINES: Repays RUB320-Mil. Debt to Vnukovo Airport -------------------------------------------------------------- Polina Montag-Girmes at Air Transport World reports that Russia's Transaero Airlines -- which ceased operations in October 2015 -- has paid RUB320 million (US$4.65 million) out of a RUB1.5 billion debt to Moscow Vnukovo International Airport. Vnukovo board chairman Vitaly Vancev said on April 5, the payments were made in November, December, and January, ATW discloses. In February 2012, Transaero moved part of its operations from Domodedovo to Vnukovo airport, where it transferred and launched several European routes such as London, Rome, Milan, Venice and Paris, ATW relates. The airport has had stable growth over the past few years, but is losing passengers after Transaero's bankruptcy last year, ATW notes. OJSC Transaero Airlines is a Russian airline with its head office in Saint Petersburg. It operates scheduled and charter flights to 103 domestic and international destinations. ========= S P A I N ========= ABENGOA SA: Seeks Nasdaq Delisting as Part of Restructuring Plan ---------------------------------------------------------------- The Associated Press reports that Abengoa SA says it is asking to be delisted from the Nasdaq stock exchange as part of its debt- restructuring plan. According to the AP, Abengoa, which began bankruptcy protection proceedings five months ago, is also seeking deregistration of its shares from the U.S. Securities and Exchange Commission. Abengoa said in a statement on April 6 that in future, its shares will be traded only on the Spanish stock exchange, the AP relates. The company, as cited by the AP, said the move aims to remove administrative burdens and costs associated with being a U.S. listed company and meeting SEC regulatory requirements. About Abengoa S.A. Spanish energy giant Abengoa S.A. is a leading engineering and clean technology company with operations in more than 50 countries worldwide that provides innovative solutions for a diverse range of customers in the energy and environmental sectors. Abengoa is one of the world's top builders of power lines transporting energy across Latin America and a top engineering and construction business, making massive renewable- energy power plants worldwide. As of the end of 2015, Abengoa, S.A. was the parent company of 687 other companies around the world, including 577 subsidiaries, 78 associates, 31 joint ventures, and 211 Spanish partnerships. Additionally, the Abengoa Group held a number of other interests of less than 20% in other entities. On Nov. 25, 2015 in Spain, Abengoa S.A. announced its intention to seek protection under Article 5bis of Spanish insolvency law, a pre-insolvency statute that permits a company to enter into negotiations with certain creditors for restricting of its financial affairs. The Spanish company is facing a March 28, 2016, deadline to agree on a viability plan or restructuring plan with its banks and bondholders, without which it could be forced to declare bankruptcy. On March 16, 2016, Abengoa presented its Business Plan and Financial Restructuring Plan in Madrid to all of its stakeholders. U.S. Bankruptcies Abengoa, S.A., and 24 of its subsidiaries filed Chapter 15 petitions (Bankr. D. Del. Case Nos. 16-10754 to 16-10778) on March 28, 2016, to seek U.S. recognition of its restructuring proceedings in Spain. Christopher Morris signed the petitions as foreign representative. DLA Piper LLP (US) represents the Debtors as counsel. Gavilon Grain, LLC, et al., on Feb. 1, 2016, filed an involuntary Chapter 7 petition for Abengoa Bioenergy of Nebraska, LLC ("ABNE") and on Feb. 11, 2016, filed an involuntary Chapter 7 petition for Abengoa Bioenergy Company, LLC ("ABC"). ABC's involuntary Chapter 7 case is Bankr. D. Kan. Case No. 16-20178. ABNE's involuntary case is Bankr. D. Neb. Case No. 16-80141. An order for relief has not been entered, and no interim Chapter 7 trustee has been appointed in the Involuntary Cases. The petitioning creditors are represented by McGrath, North, Mullin & Kratz, P.C. On Feb. 24, 2016, Abengoa Bioenergy US Holding, LLC and 5 five other U.S. units of Abengoa S.A., which collectively own, operate, and/or service four ethanol plants in Ravenna, York, Colwich, and Portales, each filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Eastern District of Missouri. The cases are pending before the Honorable Kathy A. Surratt-States and are jointly administered under Case No. 16- 41161. Abeinsa Holding Inc., and 12 other affiliates, which are energy, engineering and environmental companies and indirect subsidiaries of Abengoa, filed Chapter 11 bankruptcy petitions (Bankr. D. Del. Proposed Lead Case No. 16-10790) on March 29, 2016. IBERCAJA BANCO: S&P Affirms 'BB' Counterparty Credit Ratings ------------------------------------------------------------ Standard & Poor's Ratings Services affirmed the long- and short- term counterparty credit ratings on Spain-based Ibercaja Banco S.A. (Ibercaja) at 'BB' and 'B', respectively. The outlook remains positive. S&P's ratings on Ibercaja continue to reflect the bank's solid retail banking franchise in Northeastern Spain and conservative management, as well as its better than average asset quality indicators. The bank's nonperforming assets stood at around 12.5% of gross loans and foreclosed real estate assets at end- 2015, with a coverage of problematic exposures of 48%. In addition, Ibercaja benefits from ample liquidity, resulting from its retail banking focus and conservative management approach to funding and liquidity. Its liquid assets covered its short-term wholesale funding 1.7x on Dec. 31, 2015. Constraining the ratings on the bank are its weak capital (with an estimated RAC ratio of 3.3%-3.8% as of Dec. 31, 2015), limited financial flexibility, and modest earnings generation capacity. Ibercaja is unlisted and its major shareholder is a banking foundation with limited sources of additional wealth, which constrains the bank's capital flexibility compared to listed entities. This is particularly relevant because Ibercaja's ability to generate capital organically remains low. Residential mortgages represent 65% of its loan book, which renders the bank particularly exposed to the current low-interest-rate environment. S&P forecasts its return on equity to remain between 2.5% and 4.0% in 2016 and 2017. However, Ibercaja is considering undertaking some capital enhancing measures in the next 12-18 months in order to repay the EUR407 million contingent convertible bonds (CoCos) subscribed by the Spanish government. S&P's total adjusted capital does not include such CoCos, as S&P considers them to have minimal equity content. The CoCos are perpetual, but the government may convert them into shares in 2018 -- or earlier if the bank is unlikely to be able to redeem them. As such, Ibercaja amortized 5% of the CoCos on March 31, 2016, and will likely redeem a further 40% in March 2017 and the remaining 55% in December 2017. S&P's positive outlook on Ibercaja reflects the possibility of an upgrade if its capital position continues improving. S&P believes this is more likely to result from a more supportive economic environment and potential non-organic capital strengthening measures rather than from internal capital generation. Contrary to S&P's previous expectations, it now believes organic earnings generation will not be enough by itself to drive an improvement of Ibercaja's RAC ratio. The bank's earnings generation capacity remains limited in the current low-interest- rate environment. Capital enhancing measures that the bank is considering include a capital increase ahead of, or at the same time as, the listing of its shares in the market, as well as an AT1 issue. Furthermore, the bank could implement these measures at a time when the economic risks faced by Spanish banks are likely to ease. S&P could therefore raise the ratings if S&P concludes that Ibercaja will achieve a RAC ratio sustainably above 4% over the next 12-18 months. S&P's current outlook doesn't take into account the implications for the bank's creditworthiness of its potential participation in additional consolidation moves. S&P could revise the outlook to stable if the bank proves unable to strengthen its solvency. This would occur if during S&P's outlook horizon it fails to accomplish the non-organic capital enhancing measures that it is considering, or if the improvement in Spain's economic risk does not materialize. ============= U K R A I N E ============= PROLETARY: Luhansk Court Opens Bankruptcy Proceedings ----------------------------------------------------- Ukrainian News Agency, citing an enterprise's statement in the information disclosure system run by the National Commission for Securities and Stock Market, reports that the Economic Court of Luhansk Region on April 4 opened bankruptcy proceedings in respect of Lysychansk-based Proletary glass factory, the largest manufacturer of sheet glass. Naftogaz of Ukraine national joint-stock company is an initiator, Ukrainian News discloses. Total creditor's claim is UAH27,151.685, Ukrainian News notes. Oleksandr Viskunov has been appointed as a bankruptcy commissioner, Ukrainian News relates. Lysychansk-based Proletary glass factory reported loss of UAH572.316 million for 2015, Ukrainian News recounts. As of late 2015, the assets of Proletary made up UAH753.629 million, accounts receivable UAH14.348 million, and current liabilities UAH1.443 billion, Ukrainian News notes. RAIFFEISEN LEASING: Moody's Assigns Caa2 CFR, Outlook Stable ------------------------------------------------------------ Moody's Investors Service has assigned first-time Caa2 Long-term Issuer and Corporate Family Ratings to Raiffeisen Leasing Aval. The outlook on the ratings is stable. Concurrently, the rating agency has affirmed the company's B2.ua National Scale Issuer and Corporate Family Ratings. RATINGS RATIONALE Raiffiesen Leasing Aval's (RLA) ratings are driven by its very weak standalone credit profile and very high level of support from its parent Raiffeisen Bank Aval (caa3 BCA/Caa2 stable LC deposit rating). RLA is a highly integrated subsidiary of its parent and operates as Raiffeisen Bank Aval's leasing division. Almost all of the company's funding is provided by the parent bank. Therefore RLA's Caa2 ratings are in line with the local currency deposit ratings of Raiffeisen Bank Aval. RLA's very weak standalone credit profile is constrained by the highly challenging operating environment in Ukraine, weak asset quality, low liquidity cushion and lack of shareholders' equity (the company is not required by regulations to maintain a minimum capital ratio). WHAT COULD MOVE RATINGS UP OR DOWN RLAs ratings will likely move in tandem with the ratings Raiffeisen Bank Aval. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Finance Companies published in October 2015. =========================== U N I T E D K I N G D O M =========================== PREMIERTEL PLC: Fitch Affirms 'BBsf' Rating on Class B Notes ------------------------------------------------------------ Fitch Ratings has affirmed Premiertel plc's CMBS notes as: GBP69.6 mil. Class A (XS0180245515) due May 2029: affirmed at 'AAsf'; Outlook Stable GBP201.5 mil. Class B (XS0180245945) due May 2032: affirmed at 'BBsf'; Outlook Stable Premiertel plc is a securitization of a loan financing long-term rental cash flows from a portfolio of five office properties located throughout the UK (two in England, two in Scotland and one in Northern Ireland) fully let to British Telecommunications plc (BT; BBB+/Stable/F2). KEY RATING DRIVERS The affirmation of the class A notes reflects the stable performance of the underlying real estate as well as the available liquidity. The class B notes (capped at BT's rating) continue to accrue a shortfall against scheduled (deferrable) principal payments in line with Fitch's expectations. The source of the shortfall is the increase in transaction costs due to fees related to the liquidity facility standby drawing. Fitch does not expect this added cost to be recouped from rental cash flow, leaving a portion of the class B notes at risk of being unpaid at the expiry of the lease in 2032 (also legal maturity). This exposes class B investors to risks associated with the borrower's ability and willingness to refinance its portfolio by that time (there is no tail period). Fitch considers refinancing risk in relation to the sufficiency of the sponsor's estimated future equity in the vacant possession value (VPV) of the portfolio in the run up to bond maturity. While any unpaid debt should be relatively minor (provided the lease performs in full) reliance on unenforceable financial incentives so far into the future together with the lack of applicable liquidity support for the notes precludes an investment grade rating for the class B notes. RATING SENSITIVITIES A weakening in property market conditions could cause a downgrade of the class A notes by reducing VPV. On the other hand, as long as BT performs, the notes will deleverage further, which could lead to an upgrade of the senior class. As the rating of the class B notes is capped at BT's rating, a severe enough reduction in the tenant's rating may lead to a downgrade of the class B notes. An upgrade of BT may lead to an upgrade of the class B notes, subject to estimated future VPV of the real estate providing sufficient debt coverage i.e. commensurate with at least one category against the breakeven, as per Fitch's loan rating methodology as described in its EMEA CMBS criteria. Fitch estimates 'Bsf' recovery proceeds of GBP322m. DUE DILIGENCE USAGE No third party due diligence was provided or reviewed in relation to this rating action. DATA ADEQUACY Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring. Fitch did not undertake a review of the information provided about the underlying asset pool ahead of the transaction's initial closing. The subsequent performance of the transaction over the years is consistent with the agency's expectations given the operating environment and Fitch is therefore satisfied that the asset pool information relied upon for its initial rating analysis was adequately reliable. Overall, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. TATA STEEL: More Potential Buyers Emerge for Plants, Javid Says --------------------------------------------------------------- Simon Mundy at The Financial Times reports that more than one possible buyer has come forward for Tata Steel's UK plants, said Sajid Javid, the business secretary, as he promised that investment bankers would formally start the sales process by April 11. "A number of people have already started coming forward," Mr. Javid, as cited by the FT, said after talks in Mumbai with Cyrus Mistry, Tata's chairman. "I think more will do so." So far, only Liberty House, the commodities company founded by Sanjeev Gupta, has publicly expressed interest in Tata Steel UK, the FT relates. Mr. Javid said he was unable to name anyone else because their interest remained private, the FT notes. According to the FT, Mr. Javid said the government could offer help to any buyer, and that EU state aid rules would not be "a problem at all". But a person close to Tata said Mr. Javid had not made any specific offers during his meeting with Mr. Mistry, the FT relays. According to The Telegraph's Alan Tovey, the feared collapse of Britain's steel industry would damage local economies on a similar scale to that of the end of the coal mining industry in the 1980's. New research suggests the closure of Tata Steel's Port Talbot plant could leave a scar on employment in the community that would last for decades and be similar in scale to the destruction of the mining sector, The Telegraph discloses. According to The Telegraph, research by the Institute for Public Policy Research (IPPR), warned that if no buyer is found for Tata's UK business -- which represents the bulk of Britain's steel industry -- it could see unemployment in areas which rely on the company rise significantly for at least 20 years. The IPPR's research also warned that the collapse of Tata's UK steel business -- which employs about 15,000 people directly but supports at least 25,000 jobs --could leave the Government facing a GBP4.6 billion bill, The Telegraph notes. Tata Steel is the UK's biggest steel company. VEDANTA RESOURCES: Moody's Says Buybacks Not Distressed Exchanges ----------------------------------------------------------------- Global diversified metals and mining company Vedanta Resources plc's (B2 negative) announcement of the initiation of partial buybacks of its convertible bond maturing July 2016 and senior unsecured bond maturing June 2016 do not represent distressed exchanges, Moody's Investors Service said. Moody's conclusion is based on the consideration that the bonds are currently trading at close to par value and investors are not expected to incur any economic loss if they participate in these buybacks. More significantly, Moody's does not assess the buybacks as instances of default avoidance. On March 31, 2016, Vedanta announced that it had begun the buyback of up to $148.6 million of its outstanding $743 million 6.75% bonds due in June 2016, currently trading at 98.75 cents; and up to $200 million of the outstanding $582 million convertible bonds due July 2016, trading at 99.75 cents. Vedanta will finance the buybacks from: (1) cash on its balance sheet; and (2) part repayment of an intercompany loan by one of its subsidiaries. Moody's specifies two conditions for a buyback to qualify as a distressed exchange: (1) the buyback has the effect of allowing the issuer to avoid default; and (2) as a result of the buyback, creditors incur economic losses relative to the par value of the bond. At the same time, in this instance, the cumulative economic loss to Vedanta's investors remains extremely low, and therefore Moody's treats the proposed buybacks as opportunistic. Following completion of the bond buybacks, Vedanta's balance of debt maturities for fiscal 2017 -- which ends on March 31, 2017, -- will fall to $2.3 billion from $2.67 billion, and which the company expects to repay out of fresh term loans, working capital loans, the stretching of working capital, and the special dividend from Hindustan Zinc Ltd (unrated). In addition to the progress in addressing near-term refinancing risk, Vedanta has also obtained relaxations on its covenants for testing periods until September 2018. Vedanta also has large debt maturities in fiscal 2018 of $2.7 billion and in fiscal 2019 of $4.3 billion. The principal methodology used in this rating was Global Mining Industry methodology published in August 2014. Headquartered in London, Vedanta Resources plc is a diversified resources company with interests mainly in India. Its core operations are held by Vedanta Ltd, a 62.9%-owned subsidiary which produces zinc, lead, silver, aluminum, iron ore and power. In December 2011, Vedanta acquired control of Cairn India Ltd (CIL), an independent oil exploration and production company in India. CIL is a 59.9%-owned subsidiary of Vedanta Ltd. On June 14, 2015, Vedanta Ltd announced the proposed merger of Vedanta Ltd and CIL, in a cashless all stock transaction, subject to approvals. If the merger goes ahead as announced, Vedanta's shareholding in Vedanta Ltd will fall to 50.1%. Listed on the London Stock Exchange, Vedanta is 69.8% owned by Volcan Investments Ltd. For the year ended March 31, 2015, Vedanta reported revenues of $12.9 billion and EBITDA of $3.7 billion. =============== X X X X X X X X =============== * S&P Takes Rating Actions on 8 European Synthetic CDO Tranches --------------------------------------------------------------- Standard & Poor's Ratings Services, on April 6, 2016, took various credit rating actions on eight European synthetic collateralized debt obligation (CDO) tranches. Specifically, S&P has: -- Raised and removed from CreditWatch positive its ratings on seven tranches; and -- Affirmed and removed from CreditWatch positive its rating on one tranche. The rating actions are part of S&P's periodic review of various European synthetic CDOs. The actions reflect, among other things, the effect of recent rating migration within reference portfolios and recent credit events on referenced obligations. S&P has used its SROC. WHERE S&P HAS RAISED ITS RATINGS S&P has raised its ratings on those tranches for which credit enhancement is, in S&P's opinion, at a level commensurate with a higher rating. WHERE S&P HAS AFFIRMED ITS RATINGS S&P has affirmed its ratings on those tranches for which credit enhancement is, in S&P's opinion, still at a level commensurate with their current ratings. ANALYSIS The rating actions follow the application of S&P's relevant criteria. S&P has used its CDO Evaluator model 6.3 to determine the amount of net losses in each portfolio that S&P expects to occur in each rating scenario. S&P has also applied its top obligor and industry tests. WHAT IS SROC? One of the main steps in S&P's rating analysis is the review of the credit quality of the portfolio referenced assets. SROC is one of the tools S&P uses when surveilling its ratings on synthetic CDO tranches with reference portfolios. SROC is a measure of the degree by which the credit enhancement (or attachment point) of a tranche exceeds the stressed loss rate assumed for a given rating scenario. SROC helps capture what S&P considers to be the major influences on portfolio performance: Credit events, asset rating migration, asset amortization, and time to maturity. It is a comparable measure across different tranches of the same rating. A list of the Affected Ratings is available at: http://is.gd/3oWXt7 * BOOK REVIEW: Risk, Uncertainty and Profit ------------------------------------------- Author: Frank H. Knight Publisher: Beard Books Softcover: 381 pages List Price: $34.95 Review by Gail Owens Hoelscher Order your personal copy today at http://www.amazon.com/exec/obidos/ASIN/1587981262/internetbankrup t The tenets Frank H. Knight sets out in this, his first book, have become an integral part of modern economic theory. Still readable today, it was included as a classic in the 1998 Forbes reading list. The book grew out of Knight's 1917 Cornell University doctoral thesis, which took second prize in an essay contest that year sponsored by Hart, Schaffner and Marx. In it, he examined the relationship between knowledge on the part of entrepreneurs and changes in the economy. He, quite famously, distinguished between two types of change, risk and uncertainty, defining risk as randomness with knowable probabilities and uncertainty as randomness with unknowable probabilities. Risk, he said, arises from repeated changes for which probabilities can be calculated and insured against, such as the risk of fire. Uncertainty arises from unpredictable changes in an economy, such as resources, preferences, and knowledge, changes that cannot be insured against. Uncertainty, he said "is one of the fundamental facts of life." One of the larger issues of Knight's time was how the entrepreneur, the central figure in a free enterprise system, earns profits in the face of competition. It was thought that competition would reduce profits to zero across a sector because any profits would attract more entrepreneurs into the sector and increase supply, which would drive prices down, resulting in competitive equilibrium and zero profit. Knight argued that uncertainty itself may allow some entrepreneurs to earn profits despite this equilibrium. Entrepreneurs, he said, are forced to guess at their expected total receipts. They cannot foresee the number of products they will sell because of the unpredictability of consumer preferences. Still, they must purchase product inputs, so they base these purchases on the number of products they guess they will sell. Finally, they have to guess the price at which their products will sell. These factors are all uncertain and impossible to know. Profits are earned when uncertainty yields higher total receipts than forecasted total receipts. Thus, Knight postulated, profits are merely due to luck. Such entrepreneurs who "get lucky" will try to reproduce their success, but will be unable to because their luck will eventually turn. At the time, some theorists were saying that when this luck runs out, entrepreneurs will then rely on and substitute improved decision making and management for their original entrepreneurship, and the profits will return. Knight saw entrepreneurs as poor managers, however, who will in time fail against new and lucky entrepreneurs. He concluded that economic change is a result of this constant interplay between new entrepreneurial action and existing businesses hedging against uncertainty by improving their internal organization. Frank H. Knight has been called "among the most broad-ranging and influential economists of the twentieth century" and "one of the most eclectic economists and perhaps the deepest thinker and scholar American economics has produced." He stands among the giants of American economists that include Schumpeter and Viner. His students included Nobel Laureates Milton Friedman, George Stigler and James Buchanan, as well as Paul Samuelson. At the University of Chicago, Knight specialized in the history of economic thought. He revolutionized the economics department there, becoming one the leaders of what has become known as the Chicago School of Economics. Under his tutelage and guidance, the University of Chicago became the bulwark against the more interventionist and anti-market approaches followed elsewhere in American economic thought. He died in 1972. ********* 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 2016. All rights reserved. ISSN 1529-2754. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Europe subscription rate is US$775 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter Chapman at 215-945-7000 or Nina Novak at 202-362-8552. * * * End of Transmission * * *