/raid1/www/Hosts/bankrupt/TCREUR_Public/160506.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, May 6, 2016, Vol. 17, No. 090
Headlines
A Z E R B A I J A N
STATE OIL: Moody's Confirms Ba1 Senior Unsecured Notes Rating
C Z E C H R E P U B L I C
NEW WORLD: Ministers Assess Impact of OKD Insolvency on Employees
F R A N C E
REXEL SA: Moody's Affirms Ba2 Corporate Family Rating
REXEL SA: S&P Affirms BB CCR, Outlook Remains Stable
I R E L A N D
IRISH PSYCHICS: "Legal Matters" Delay Winding-Up Process
L U X E M B O U R G
GESTAMP FUNDING: Moody's Assigns Ba3 Rating to EUR400MM Notes
GESTAMP FUNDING: S&P Rates Proposed EUR400MM Sr. Notes BB+
MAGNOLIA MIDCO: Moody's Raises Corporate Family Rating to B1
N E T H E R L A N D S
AES ANDRES: S&P Assigns BB- Global Scale Rating, Outlook Stable
DRYDEN 44 EURO: S&P Preliminary Rates Class F Notes B-
JACOBS DOUWE: Moody's Assigns Definitive Ba3 Corp. Family Rating
NORTHERN LIGHTS III: Moody's Lowers Rating on US$1-Bil. Notes
R U S S I A
CB EL BANK: Placed Under Provisional Administration
MOSTRANSBANK OJSC: Placed Under Provisional Administration
S P A I N
CAR RENTALS: Moody's Raises CFR to B1, Outlook Stable
T U R K E Y
DENIZBANK AS: Moody's Confirms Ba2 Deposits Rating
TURKIYE VAKIFLAR: Moody's Assigns ba1 Adjusted BCA Rating
U N I T E D K I N G D O M
ANGLO AMERICAN: Moody's Affirms Ba3 CFR & Changes Outlook to Pos.
AUSTIN REED: PPF Receives Formal Notification From Administrators
BAKKAVOR FINANCE: Moody's Raises CFR to B1, Outlook Stable
NORD ANGLIA: Moody's Affirms B1 CFR, Outlook Negative
TATA STEEL UK: Sales Process Pushed Back Beyond EU Referendum
TATA STEEL UK: Management Team Won't Take on Pension Obligations
X X X X X X X X
* BOOK REVIEW: AS WE FORGIVE OUR DEBTORS: Bankruptcy and Consumer
*********
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A Z E R B A I J A N
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STATE OIL: Moody's Confirms Ba1 Senior Unsecured Notes Rating
-------------------------------------------------------------
Moody's Investors Service confirmed the Ba1 corporate family
rating (CFR), Ba1 senior unsecured notes rating and Ba1-PD
probability of default rating (PDR) of State Oil Company of the
Azerbaijan Republic (SOCAR). The outlook on the ratings is
negative.
This action concludes the rating review initiated by Moody's on
January 22, 2016.
"Our decision to confirm SOCAR's ratings factors in the company's
high level of vertical integration into refining and trading
operations, allowing it to maintain adequate credit metrics for
its rating category in a "lower-for-longer" oil price
environment. SOCAR's rating also benefits from continued strong
support from the Government of Azerbaijan as the country's
largest employer and tax contributor," says Denis Perevezentsev,
a Moody's Vice President -- Senior Credit Officer.
On January 22, 2016, Moody's placed the ratings of 32 integrated
oil, exploration and production (E&P), and oilfield service (OFS)
companies in the EMEA region on review for downgrade. This
reflected the substantial drop of oil prices and the continued
oversupply in the global oil markets. Moody's also lowered its
oil price estimates on January 21, 2016 and now forecasts that
Brent oil price will average $33 per barrel of oil equivalent
(boe) in 2016 and $38/boe in 2017 (Moody's base case scenario),
with a slow recovery for oil prices over the next several years.
The drop in oil prices and weak natural gas prices have caused a
fundamental change in the energy industry and significantly
hampered the sector's ability to generate cash flow. Moody's
believes that this environment will continue for several years.
RATINGS RATIONALE
Given that SOCAR is 100% state-owned, Moody's considers it to be
a government-related issuer (GRI) and therefore applies its GRI
methodology to determine the company's rating. The final Ba1
rating for SOCAR comprises the following inputs: (1) a baseline
credit assessment (BCA) of ba3, which measures the company's
underlying fundamental credit strength; (2) the Ba1 local-
currency rating of the Azerbaijan government, with negative
outlook; (3) very high dependence between the state and the
company; and (4) Moody's assumptions of a high level of support
from the state in case of need.
SOCAR's Ba1 rating takes into account: (1) the key role that the
company plays in the oil and gas sector of Azerbaijan and the
national economy; (2) the rating agency's estimates of SOCAR's
stable oil and gas production in 2016-17; (3) robust liquidity
profile underpinned by substantial cash balances and comfortable
debt maturity schedule; and (4) its close linkages with the
Azerbaijan's government, which has accumulated substantial
reserves.
The rating also reflects the rating agency's conservative view on
(1) potential challenges in maintaining stable production over
longer-term if upstream capex is sustainably kept at a low level;
(2) the company's ability to efficiently replenish its oil
reserves; and (3) the low oil price environment and regulated
prices for domestically produced oil products in Azerbaijan,
which will continue to negatively impact the company's
profitability and cash flow metrics.
The company has a monopoly position in supplying oil and gas
products to the domestic market and is the state's official
representative in all oil and gas projects in Azerbaijan. SOCAR
also participates in all international consortia developing new
oil and gas projects in Azerbaijan. The largest of these are the
Azeri Chirag Gunesli (ACG) oil project and the Shah Deniz (SD)
gas project, and their respective transportation routes, Baku-
Tbilisi-Ceyhan oil pipeline (BTC) and South Caucasus gas pipeline
(SCP). SOCAR has an 11.65% share in the ACG project and a 10%
share in the SD production sharing agreement (PSA). In 2015,
SOCAR reported revenue of approximately $31.5 billion (including
trading operations) and EBITDA of $3.1 billion.
RATIONALE FOR NEGATIVE OUTLOOK
The negative outlook on the ratings is in line with the negative
outlook for the sovereign rating and reflects the fact that a
potential further downgrade of Azerbaijan's sovereign rating may
lead to downgrade of the company's rating.
WHAT COULD CHANGE THE RATING UP/DOWN
Given the Ba1 local-currency rating and sovereign ceiling of the
Government of Azerbaijan, upward pressure on SOCAR's ratings is
unlikely at present.
A lower BCA might result if SOCAR's financial profile
deteriorates beyond Moody's current expectations, such that
retained cash flow/net adjusted debt falls consistently below 20%
and EBIT/interest expense remains below 5.0x on a sustained
basis. Other factors that might lead to a rating downgrade
include (1) evidence of reduced state support; (2) state measures
that would seriously impair SOCAR's credit quality (e.g.,
materially unfavorable regulatory changes, increased tax rates or
significant equity withdrawals); or (3) deterioration of the
government's financial standing and its ability to provide
support.
The principal methodology used in these ratings was Global
Integrated Oil & Gas Industry published in April 2014. Other
methodologies used include the Government-Related Issuers
methodology published in October 2014.
List of Affected Ratings
Confirmations:
Issuer: State Oil Company of the Azerbaijan Republic
-- Probability of Default Rating, Confirmed at Ba1-PD
-- Corporate Family Rating, Confirmed at Ba1
-- Senior Unsecured Regular Bond/Debenture , Confirmed at Ba1
Outlook Actions:
Issuer: State Oil Company of the Azerbaijan Republic
-- Outlook, Changed To Negative From Rating Under Review
===========================
C Z E C H R E P U B L I C
===========================
NEW WORLD: Ministers Assess Impact of OKD Insolvency on Employees
-----------------------------------------------------------------
Krystof Chamonikolas at Bloomberg News reports that the Czech
government is trying to avert a social crisis in one of the
country's poorest regions after OKD AS, the main unit of coal
producer New World Resources Plc, filed for insolvency.
Cabinet ministers met for an emergency session on May 4 to
discuss ways to limit the impact of the company's insolvency
petition on its 13,000 employees in eastern Czech Republic,
Bloomberg relates. The Prague meeting is taking place a day
after OKD said it couldn't pay its obligations and sought a court
approval for a business restructuring and a potential government
assistance, Bloomberg discloses.
"The government doesn't feel any responsibility toward OKD
owners," Bloomberg quotes Industry and Trade Minister Jan Mladek
as saying on May 3 after the insolvency announcement. "It does,
however, feel responsible toward its employees, to make sure they
get wages for their work, or severance pay if job cuts take
place."
The sole Czech producer of hard coal turned to the court after
its owners and the government failed to agree on rescuing the
unprofitable business, Bloomberg relays.
New World Resources Plc is the largest Czech producer of coking
coal.
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F R A N C E
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REXEL SA: Moody's Affirms Ba2 Corporate Family Rating
-----------------------------------------------------
Moody's Investors Service affirmed Rexel SA's Ba2 corporate
family rating (CFR), Ba2-PD probability of default rating (PDR),
Ba3 ratings on the company's existing senior unsecured notes and
the NP short-term rating of the company's EUR500 million
commercial paper program. Moody's also assigned a provisional
(P)Ba3 rating to Rexel's proposed EUR500 million senior unsecured
notes, due 2023. The outlook on all ratings is stable.
Moody's understands that the proceeds of the EUR500 million of
new senior unsecured notes, together with cash on balance sheet
of approximately EUR170 million, will be used to redeem Rexel's
5.125% EUR650million senior unsecured notes due 2020 and related
transaction expenses.
Moody's issues provisional ratings in advance of the final sale
of securities and these reflect Moody's credit opinion regarding
the transaction only. Upon closing of the transaction and a
conclusive review of the final documentation, Moody's will
endeavor to assign definitive ratings to the proposed notes. A
definitive rating may differ from a provisional rating.
RATINGS RATIONALE
Moody's affirmed Rexel's existing ratings due to resilience in
the company's performance despite the adverse impact from the oil
and gas exposure in North America and weak macroeconomic
environment in some key markets in Europe. Moody's adjusted
leverage at 5.2x and cash flow metrics stayed stable year-on-year
in 2015, supported by the company's prudent financial policy of
debt repayment and positive working capital development.
Profitability declined during the year, however quarter-on-
quarter adjusted EBITA margin demonstrated an improvement,
primarily due to significant opex reduction in North America.
Sequential improvement was also the case in Q1 2016 whereas year-
on-year comparison was affected by strong Q1 2015 results, with
organic sales and adjusted EBITA margin down year-on-year by 2%
and 0.2% respectively. North American sales (34% of total)
continued to be strongly impacted by the drop in O&G sector and
the industrial slowdown whereas in Europe (57% of total) sales in
France (36% of regional sales) returned to growth at 2.5% due to
current improvement in the French housing market. In APAC (9% of
sales), growth was mainly driven by Australia which was partially
offset by more difficult macroeconomic conditions in China.
The (P)Ba3 rating assigned to the proposed issuance of EUR500
million of senior unsecured notes due 2023, reflects their pari
passu ranking with all other unsecured indebtedness issued by
Rexel and their unmitigated structural subordination to non-
financial liabilities at the operating companies. Similar to
EUR500 million senior unsecured notes due 2022 issued in May 2015
new notes will have a light covenant package. While the covenant
package for the new notes are largely in line with existing notes
issued prior to 2015, including limitations on indebtedness, it
no longer includes clauses for limitation on: restricted
payments; sales of assets and subsidiary stock; and restrictions
on distributions.
The transaction is expected to have a minimal effect on Moodys'
gross adjusted leverage, with 0.2x decline reflecting partial
repayment of the existing notes with cash on balance sheet.
Moody's expects that the company will demonstrate generally flat
year-on-year results in 2016 with a potential upside if the
current macroeconomic environment improves. Rexel's liquidity
remains adequate post the proposed transaction, with cash on
balance sheet expected EUR264 million, although reduced because
of the increase in budgeted acquisitions and dividend paid
entirely in cash. It is further supported by EUR1.1 billion
undrawn revolving credit facility (RCF) due 2019/2020.
Rexel's Ba2 rating is supported by (1) the company's large scale
and geographic diversification; (2) strong market positions with
either number one or two market rankings in most Western European
countries and North American states; and (3) prudent financial
policy balancing net leverage target of 3.0x with M&A and
dividend payments.
Rexel's Ba2 rating is constrained by: (1) the company's weak
credit metrics over the last few years; (2) the uncertainty about
the pace at which credit metrics might improve on an organic
basis given the slow macroeconomic recovery in Europe and the
late-cycle nature of the industry; (3) deleveraging largely
dependent on future acquisitions and macroeconomic recovery.
RATIONALE FOR THE STABLE OUTLOOK
"The stable outlook reflects our expectation that Rexel will
continue to demonstrate resilient performance in current
macroeconomic climate with sales growth and profitability level
improving from current levels. The stable outlook also assumes no
adverse change in the company's current financial policy in
relation to dividends and acquisitions."
WHAT COULD CHANGE THE RATING UP/DOWN
While unlikely at this stage, upward pressure on the rating could
materialise over the medium term if Rexel demonstrates a prudent
financial policy as well as successfully achieving its target for
improving its profitability, leading to a leverage ratio (gross
debt/EBITDA, as adjusted by Moody's) trending towards 3.5x and a
Retained Cash Flow/debt (as adjusted by Moody's) above 15%.
The ratings could be downgraded if as a result of continued
volume pressure and a decline in Rexel's margins its leverage
(gross debt/EBITDA, as adjusted by Moody's) rises materially
above 5.0x or if its Retained Cash Flow/ debt (as adjusted by
Moody's) falls substantially below 10%.
Corporate Profile
Headquartered in Paris, France, Rexel SA (Rexel) is a global
leader in the low and ultra-low voltage electrical distribution
market. Rexel addresses three main markets: Commercial (44% of
2015 sales); Industrial (34%); and residential (22%). The
company's distribution network is comprised of 2,064 branches
across 35 countries employing 27,703 employees as at December 31,
2015. For the financial year ended 31 December 2015 ('FY15'),
Rexel reported total sales and Adjusted EBITA of EUR13.5 billion
and EUR593 million respectively representing 4.4% of 2015 sales.
Rexel is a public company listed on Euronext Paris.
REXEL SA: S&P Affirms BB CCR, Outlook Remains Stable
----------------------------------------------------
S&P Global Ratings said that it had affirmed its 'BB' long-term
and 'B' short-term corporate credit ratings on France-based
electrical parts distributor Rexel S.A. The outlook remains
stable.
At the same time, S&P lowered its issue ratings on Rexel's
unsecured and unguaranteed EUR982 million RCF and its EUR650
million, EUR500 million, and $500 million notes to 'BB-' from
'BB'. This reflects that S&P brought its liquidity stress for
Rexel in line with that of its rated peers and increased S&P's
drawing assumptions on the RCF at its hypothetical default point,
thereby increasing the projected debt level. For this reason,
S&P revised the recovery rating to '5' from '4', reflecting its
expectation of recovery prospects in the higher half of the 10%-
30% range. Although S&P perceives some recovery on those
instruments, this no longer supports equalization of the issue
ratings with the long-term corporate credit rating.
The affirmation reflects S&P's view that, over the next two
years, Rexel's reported revenues will continue to increase,
although in 2016 they will likely be flat on a constant and same
day basis. S&P expects the group will maintain profitability
broadly at current levels, despite tougher conditions in its
North American and Asia-Pacific markets and negative effects from
low copper prices, on the back of restructuring efforts,
continued cost control measures, and disposals of weaker business
divisions. S&P also expects that over the medium term the group
will gradually reduce leverage to levels commensurate with the
'BB' rating.
The rating is constrained by Rexel's exposure to cyclical
construction markets and copper price volatility. However, this
is counterbalanced by the group's solid market position in
electrical distribution, significant presence in the less-
volatile maintenance and replacement market, its large size, and
broad diversity of end markets, geography, products, and
customers.
Despite a continued decline in sales and margin pressure in
Rexel's North American and Asia-Pacific markets, S&P believes the
group has sufficient financial flexibility for the 'BB' rating.
If necessary, Rexel could partly reduce its acquisition and
capital spending, and it has already announced a lower dividend
payout for 2016.
In S&P's view, Rexel's financial leverage is significant, but the
capital structure is balanced, and the group won't face large
debt repayments in 2016-2018. If the S&P Global Ratings-adjusted
debt-to-EBITDA ratio stayed at about 4x in the next year or two,
indicating that financial risk had increased, this would not
necessarily trigger a downgrade.
The stable outlook reflects S&P's view that in 2016-2017 Rexel
will maintain S&P Global Ratings-adjusted EBITDA margins of about
6%, due to ongoing optimization, despite challenging market
conditions in North America and Asia-Pacific and pressure from
low copper prices. The stable outlook also incorporates S&P's
expectation that the group will maintain adequate liquidity and
gradually reduce leverage, with adjusted debt to EBITDA reducing
to less than 4x and FFO to debt remaining above 15%.
S&P could raise the ratings if a sustainable recovery in Rexel's
key markets, mainly France and the U.S., underpinned an
improvement of its EBITDA margin and credit metrics, with FFO to
debt increasing to more than 20%. However, S&P currently sees
this scenario as unlikely over the next 12 months.
S&P could lower the ratings over the next 12 months if
challenging market conditions led to continued deterioration of
the group's adjusted EBITDA margin and leverage metrics, with
debt to EBITDA above 4x and FFO to debt reducing to about 12%.
Weaker liquidity or a more aggressive financial policy than S&P
currently anticipates, demonstrated for example by larger debt-
financed acquisitions and higher capex or cash dividend payments
than S&P assumes in its base case, could weigh on the ratings.
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I R E L A N D
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IRISH PSYCHICS: "Legal Matters" Delay Winding-Up Process
-------------------------------------------------------
Gordon Deegan at Irish Examiner reports that unspecified legal
matters are delaying the winding up of the collapsed firm behind
Irish Psychics Live.
The firm, founded and subsequently sold on by space buff,
Tom Higgins, left debts of over EUR2 million to unsecured
creditors when it collapsed -- four years after Mr. Higgins sold
the business, Irish Examiner relates.
Realm Communications was behind what was Ireland's most high
profile and controversial premium phone line service before it
ceased trading in 2013, Irish Examiner recounts.
Eight months later in February 2014, Eamon Leahy of Leahy & Co,
Fairview, Dublin was appointed as liquidator to the firm after
Revenue petitioned the High Court to wind up the company, Irish
Examiner relays.
According to Irish Examiner, documents lodged with the Companies
Office show that there is little prospect of the unsecured
creditors recovering any of their monies.
The liquidator has realised only EUR631 from the liquidation to
date with assets valued at "nil", Irish Examiner discloses.
Total disbursements made from the liquidation up to February 23
of this year are "nil", Irish Examiner states.
Under the heading of "the causes which delay the termination of
the winding up", the liquidator's statement reads "legal
matters", Irish Examiner says. The winding up of the firm will
take two years, Irish Examiner states.
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L U X E M B O U R G
===================
GESTAMP FUNDING: Moody's Assigns Ba3 Rating to EUR400MM Notes
-------------------------------------------------------------
Moody's Investors Service assigned a Ba3 rating to the EUR400
million senior secured notes due 2023 launched by Gestamp Funding
Luxembourg S.A. under an unconditional and irrevocable guarantee
of Gestamp Automocion, S.A.
RATINGS RATIONALE
The Ba3 rating assigned to the new instrument is one notch below
the group's corporate family rating. This reflects the fact that
subsidiaries representing approximately 45% of Gestamp's
consolidated EBITDA for the year ended Dec. 31, 2015, are
providing guarantees while the other subsidiaries are not. This
leads us to distinguish between these two groups, giving first
rank to financial and non-financial debt at non-guaranteeing
subsidiaries including estimated EUR569 million trade payables
and EUR34 million leasing liabilities. Moody's ranks debt at
guaranteeing subsidiaries and the senior facilities agreement and
the notes issued on the second rank. Finally, we see a somewhat
weaker position for borrowings from associated companies and
other non-bank financial debt at the level of Gestamp Automocion,
S.A., that is not participating in the security package.
Gestamp's Ba2 corporate family rating (CFR) is supported by (i)
the company's solid business profile reflecting strong and
growing market positions, technology leadership and a diversified
base of established customer relationships, (ii) a relatively
stable margin generation through the cycle and (iii) a strong
pipeline of new business mirrored by a consistently high capex
level leading to the expectation of further improving credit
metrics.
At the same time, the ratings are constrained by (i) the negative
free cash flow generation as result of the high capex spending
due to expansion programs, (ii) the dependency on cyclical new
car production due to lack of aftermarket business and (iii) the
complexity resulting from of Gestamp not only being a subsidiary
of Acek, Desarrollo y Gestion Industrial, S.L. (unrated, formerly
Corporaci¢n Gestamp, S.L.) but also having material related party
transactions in its books.
Moody's considers Gestamp's liquidity position to be adequate.
Moody's expects the company's cash outflow for the twelve months
period ending in December 2016 including capital expenditure,
dividends, working capital and working cash required to run the
business, to add up to approximately EUR900 million. This should
be covered by the company's funds from operations estimated to
exceed EUR600 million during 2016, full availability under the
company's EUR280 million 5-year working capital facility maturing
in March 2020 and EUR 356 million cash on hand as per 31 December
2015.
The principal methodology used in this rating was Global
Automotive Supplier Industry published in May 2013.
Gestamp Automocion, S.A., headquartered in Madrid / Spain,
designs, develops, and manufactures metal components for the
automotive industry. The company, which generated EUR 7.0
billion revenues during 2015, employs around 33,000 employees and
operates 95 plants and 12 R&D centers in 20 countries.
Gestamp is owned by the Riberas family, which hold, through Acek,
Desarrollo y Gestion Industrial, S.L. (formerly Corporacion
Gestamp, S.L.) and Risteel Corporation, B.V., 100% of the
ordinary shares of Gestamp.
GESTAMP FUNDING: S&P Rates Proposed EUR400MM Sr. Notes BB+
----------------------------------------------------------
S&P Global Ratings said that it has assigned its 'BB+' issue
rating and '2' recovery rating to the proposed EUR400 million
senior secured notes due 2023 to be issued by Gestamp Funding
Luxemburg SA, a finance subsidiary of Gestamp Automocion S.A.
At the same time, S&P affirmed the 'BB+' issue ratings on the
existing EUR500 million senior secured notes due 2020, which will
be repurchased or redeemed with proceeds of the new notes, as
well as on the $300 million senior secured notes due 2020. S&P
expects to withdraw the ratings on the euro notes once they have
been repaid.
The issue rating of 'BB+' is one notch above the corporate credit
rating on Gestamp Automocion (BB/Stable/--) because the recovery
rating on the proposed and existing senior secured notes is '2'
indicating S&P's expectation of substantial (70%-90%) recovery in
the event of a payment default. S&P's recovery expectations are
in the lower half of the 70%-90% range.
RECOVERY ANALYSIS
The issue and recovery ratings on the proposed senior secured
notes are supported by S&P's going concern valuation of the
company and its valuable asset base, but are constrained by the
existence of material prior-ranking and pari passu debt, and
S&P's view of the relatively weak security package, which mainly
consists of share pledges.
According to the intercreditor agreement, the collateral will
secure the senior secured notes and the senior secured bank
facilities on a pari passu basis, without preference between the
different categories of senior secured debt. S&P highlights that
the notes' documentation allows for significant additional debt
baskets, and, given that recovery prospects are in the lower half
of the 70%-90% range, any additional debt incurrence could result
in a deterioration of S&P's recovery expectations for
noteholders.
In S&P's hypothetical default scenario, it assumes a cyclical
downturn in the auto sector, intensified competition, and the
company's inability to adjust its cost structure resulting in
material deterioration in EBITDA and cash flows. S&P values
Gestamp as a going concern in view of its leading market
positions. S&P has valued the business using an EBITDA multiple
approach, in line with peers.
Simulated default assumptions
-- Year of default: 2021
-- EBITDA at default: EUR314 million
-- Implied enterprise value multiple: 5.0x
-- Jurisdiction: Spain
Simplified waterfall
-- Gross enterprise value at default: About EUR1.57 billion
-- Administrative costs: About EUR110 million
-- Net value available to creditors: EUR1.46 billion
-- Priority claims: EUR254 million
-- Senior secured debt claims: about EUR1.54 billion*
-- Recovery expectation: 70%-90% (lower half of the range)
* All debt amounts include six months' prepetition interest
MAGNOLIA MIDCO: Moody's Raises Corporate Family Rating to B1
------------------------------------------------------------
Moody's Investors Service has upgraded Magnolia (BC) Midco
S.a.r.l.'s (Maisons du Monde) corporate family rating (CFR) to B1
from B2 and probability of default rating (PDR) to Ba3-PD from
B1-PD. Concurrently, Moody's has upgraded to B1 from B2 the
EUR325 million senior secured notes due 2020 issued by Magnolia
(BC) S.A., a subsidiary of Maisons du Monde. The rating outlook
is stable.
RATINGS RATIONALE
"The rating action reflects (1) Maisons du Monde's significant
de-leveraging in fiscal year (FY) 2015 thanks to its strong
operating performance, (2) the good growth prospects for the
business leading to a further moderate de-leveraging over the
medium-term which may be accelerated thanks to a successful
capital raising via an initial public offering (IPO), and (3)
Moody's assumption that the company will maintain a prudent
expansion strategy and maintain an adequate liquidity position",
says Sebastien Cieniewski, Moody's lead analyst for Maisons du
Monde. Nevertheless, the rating remains constrained by (1) the
company's relatively small scale with revenue concentration in
France, (2) the high seasonality of sales and profits and the
operating risks induced by the positioning of Maisons du Monde's
"stylish" product range, and (3) the limited free cash flow (FCF)
generation over the medium term.
Moody's positively views the significant improvement in Maisons
du Monde's adjusted leverage (as adjusted by Moody's mainly for
operating leases) to 4.5x as of FYE 2015 from 5.0x a year
earlier. This de-leveraging resulted from the strong operating
performance of the company in 2015 when it experienced an 8.7%
like-for-like (LfL) increase in customer sales compared to FY2014
or a total 15.7% increase on a reported basis including store
openings while maintaining a strong margin. This performance was
driven by the strong execution, relatively lower comparables in
FY 2014, and the recent acceleration in the growth of the French
decoration and furniture market.
Moody's projects further moderate de-leveraging by less than half
a turn over the next 18 months supported by continued positive
LfL growth driven by (1) a favorable market trend with the French
decoration and furniture market expected to grow at 1.5-2.0% over
the medium-term, and (2) Maisons du Monde's strong track record
of outperforming the market and its relatively higher exposure to
online sales (17% of customer sales in 2015), which is the
fastest growing distribution channel for the decoration and
furniture market.
Moody's notes though that de-leveraging could be accelerated
thanks to a successful IPO. On 19 April 2016, Maisons du Monde
announced that it filed its registration document with the French
stock market authorities as a first step towards the IPO of
Maisons du Monde S.A.'s (a subsidiary of Maisons du Monde) shares
on Euronext Paris. If successful, the IPO, to be launched before
the end of June 2016, will enable the company to raise EUR150
million to EUR180 million of capital. These proceeds alongside
new 5-year EUR250 million Senior Credit Facilities, and drawings
under a new 5-year EUR75 million revolving credit facility will
be used to (1) replace the existing EUR60 million super senior
revolving credit facility (RCF), (2) redeem the EUR325 million
high yield bonds maturing 2020 with an estimated EUR19.4 million
make-whole redemption premium, (3) pay transaction fees, and (4)
repay a EUR60.5 million vendor loan. While credit positive,
Moody's considers that the IPO will have a relatively marginal
impact of 0.3x on the company's pro-forma leverage and will not
lead to immediate rating pressure.
Maisons du Monde has an adequate liquidity profile as of FYE 2015
supported by EUR76.4 million of cash on balance sheet and the
undrawn EUR60 million RCF. The RCF, which has limited
conditionality (see further below), is very important given the
company's high seasonality of operations.
"Moody's expects FCF to remain limited over the medium-term at 3%
to 5% of total adjusted debt due to the company's high capex and
working capital needs in order to deliver its store expansion
plan. In 2016, FCF should be negative due to the normalization of
inventories by the end of the year due to delays in the reception
of a portion of the 2016 collection at the end of 2015. The
majority of capex projected at between 5-6% of customer sales
over the next 2 years, which management expects to reduce to 4.0-
4.5% by 2020 will support management's target to open 25 to 30
stores per annum in 2017-2020 with 20 net openings projected by
management in 2016. While the store openings will constrain
capex, they will contribute to improving the company's
geographical diversification -- two thirds of these openings will
take place outside of France. Pro-forma for the IPO, free cash
flow will benefit from significant interest savings resulting
from the refinancing of the high yield notes with a 9% annual
coupon leading to a reduction in interest paid by c.EUR23
million. However we expect this positive impact to be mostly
offset by higher tax and dividend payments equal to 30% to 40% of
the consolidated net income to be paid from 2017 on the basis of
results of FY 2016."
The B1 rating assigned to senior secured notes, in line with the
CFR, reflects their position behind certain operating
subsidiaries' non-financial debt, including trade payables, and
the EUR60 million RCF. The notes and the RCF benefit from a
similar maintenance guarantor package, including upstream
guarantees from guarantor subsidiaries. Both instruments are also
secured, on a first-priority basis, by certain share pledges,
intercompany receivables and bank accounts. However, the notes
are contractually subordinated to the RCF with respect to the
collateral enforcement proceeds.
"The super-senior facility has only one maintenance covenant,
which is tested at year-end and only when the RCF is drawn. In
our opinion, this is not a very restrictive covenant. Maisons du
Monde's probability of default rating (PDR) of Ba3-PD reflects
the use of a 35% family recovery assumption, consistent with an
all-bond capital structure."
RATIONALE FOR THE STABLE OUTLOOK
The stable rating outlook reflects Moody's expectation that
Maisons du Monde will experience continued LfL revenue growth and
maintain a disciplined approach to the expansion of its store
network while preserving its adequate liquidity position.
WHAT COULD CHANGE THE RATING UP/DOWN
Upwards pressure on the ratings could arise if (1) Maisons du
Monde successfully increases its geographical presence outside of
France while maintaining its level of profitability, (2) reduces
its adjusted debt/EBITDA ratio to below 3.5x and improves its
adjusted EBIT/interest expense towards 3.0x, and (3) builds
itself a cushion of liquidity limiting its reliance on the RCF.
Conversely, negative pressure could arise if (1) Maisons du
Monde's operating performance weakens translated into flat or
negative LfL sales growth, (2) adjusted (gross) debt/EBITDA ratio
increases towards 5.0x, and (3) the liquidity position
deteriorates.
=====================
N E T H E R L A N D S
=====================
AES ANDRES: S&P Assigns BB- Global Scale Rating, Outlook Stable
---------------------------------------------------------------
S&P Global Ratings assigned its 'BB-' global scale rating on AES
Andres B.V. The outlook is stable.
At the same time, S&P assigned a 'BB-' issue-level rating on the
proposed notes of Andres and DPP, as the co-borrowers of the
notes.
S&P views AES Andres and DPP as core entities for AES Hispanola
Holdings II B.V. (AES Hispanola; not rated), the ultimate parent
of both companies given the integration of their business
activities and operational and financial strategy. Therefore
S&P's ratings on these two companies are based on AES Hispanola's
consolidated figures and business strategy. Another key
consideration is S&P's belief that AES Hispanola is a non-
strategic subsidiary for its controlling shareholder, The AES
Corp (AES Corp, BB/Stable). The latter provides it with
technical, managerial, and operating expertise.
The stable outlook on AES Andres B.V. reflects S&P's expectation
that the group will continue to post EBITDA margins of around 34%
and debt to EBITDA of less than 3.0x for the next two years while
it performs the conversion of DPP steam turbines to combined
cycle.
S&P could lower the ratings if the company's key credit metrics
fall significantly short of S&P's expectations, which could be
the result of sustained periods of downtime, resulting in FFO to
debt lower than 30% and debt to EBITDA higher than 3.0x.
Additionally, an increase in working capital needs due to higher
accounts receivables, which weakens the company's liquidity
significantly, could trigger a downgrade.
The ratings could also come under pressure if the government
fails to support the sector through subsidies or if S&P was to
downgrade the sovereign.
The potential for an upgrade is limited by the sovereign rating,
because power generators (and other energy participants) in the
DR depend heavily on government subsides.
DRYDEN 44 EURO: S&P Preliminary Rates Class F Notes B-
------------------------------------------------------
S&P Global Ratings has assigned its preliminary credit ratings to
Dryden 44 Euro CLO 2015 B.V.'s class A-1, A-2, B-1, B-2, C, D, E,
and F notes. At closing, Dryden 44 Euro CLO 2015 will also issue
an unrated subordinated class of notes.
"We have assigned our preliminary ratings following our
assessment of the transaction's capital structure and the
collateral portfolio's credit quality, a cash flow analysis, and
a review of the transaction documents. We understand that the
portfolio at closing will be diversified, primarily comprising
broadly syndicated speculative-grade senior secured term loans
and senior secured bonds. Therefore, we have conducted our
credit and cash flow analysis by applying our criteria for
corporate cash flow collateralized debt obligations," S&P said.
In S&P's cash flow analysis, it used the target par amount of
EUR400 million, the covenanted weighted-average spread of 4.10%,
the covenanted weighted-average coupon of 6.00%, and the
covenanted weighted-average recovery rates at each rating level.
S&P's analysis also shows that the credit enhancement available
to each rated class of notes is sufficient to withstand the
defaults applicable under the supplemental tests outlined in
S&P's CDO criteria.
S&P considers that the transaction's documented counterparty
replacement and remedy mechanisms adequately mitigate its
exposure to counterparty risk under S&P's current counterparty
criteria.
Following the application of S&P's nonsovereign ratings criteria,
it considers the transaction's exposure to country risk to be
limited at the assigned preliminary rating levels, as the
concentration of the pool comprising assets in countries rated
lower than 'A-' does not exceed 10% of the aggregate collateral
balance.
At closing, S&P considers that the transaction's legal structure
will be bankruptcy remote, in line with S&P's European legal
criteria.
Following S&P's analysis of the credit, cash flow, counterparty,
operational, and legal risks, S&P believes its preliminary
ratings are commensurate with the available credit enhancement
for each class of notes.
Dryden 44 Euro CLO 2015 is a European cash flow collateralized
loan obligation (CLO) transaction, securitizing a portfolio of
primarily senior secured loans and bonds issued by speculative-
grade European borrowers. PGIM Ltd. is the collateral manager.
RATINGS LIST
Preliminary Ratings Assigned
Dryden 44 Euro CLO 2015 B.V.
EUR412.90 Million Floating- And Fixed-Rate Notes
(Including EUR43.40 Million Subordinated Notes)
Class Prelim. Prelim.
rating amount
(mil. EUR)
A-1 AAA (sf) 232.40
A-2 AAA (sf) 12.30
B-1 AA (sf) 36.00
B-2 AA (sf) 7.20
C A (sf) 23.00
D BBB (sf) 18.70
E BB (sf) 28.10
F B- (sf) 11.80
Sub NR 43.40
NR--Not rated.
JACOBS DOUWE: Moody's Assigns Definitive Ba3 Corp. Family Rating
----------------------------------------------------------------
Moody's Investors Service assigned a definitive Ba3 corporate
family rating (CFR) and B1-PD probability of default rating (PDR)
to Jacobs Douwe Egberts Holdings B.V. (JDE), an intermediate
parent entity of JDE group, global coffee manufacturer and
retailer based in the Netherlands. Moody's has also assigned a
definitive Ba3 rating to the equivalent EUR6.1 billion currently
outstanding credit facilities (including EUR500 million undrawn
RCF) raised by Jacobs Douwe Egberts International B.V.
(previously Charger Opco B.V.). The outlook on all ratings is
positive. Concurrently, Moody's has withdrawn (P)Ba3 CFR of
Jacobs Douwe Egberts International B.V.
RATINGS RATIONALE
Positive outlook assigned to the ratings reflects the removal of
uncertainty associated with the transaction closing and initial
integration and Moody's expectation of deleveraging of the
combined business through further synergies and cost savings.
The Ba3 CFR reflects JDE's (i) scale and strong market position
in key countries of operation; (ii) geographical and segmental
diversification within the defensive coffee segment; (iii)
further synergies potential leading to deleveraging expectation;
and (iv) good liquidity profile. The ratings also reflect (i)
exposure to low volume growth in Europe, mitigated by
premiumization trend; (ii) residual execution risk of combining
two businesses; (iii) Moody's adjusted gross leverage (mostly
excluding integration costs) expected to remain high at around
5.6x after 18 months from post-closing; and (iv) short-term
volatility of earnings due to coffee price fluctuations.
The Ba3 rating on the bank debt, in line with the CFR, reflects
the single-tier nature of the capital structure, their pari-passu
ranking and upstream guarantees from the operating subsidiaries.
The bank facilities are secured by share pledges and do not
benefit from asset security.
The JDE transaction, formed by the merger of DEMB and Mondelez'
International, Inc. (Mondelez)'s coffee business on 2 July 2015,
created the second-largest global coffee company, with a c. 25%
global market share according to the company, behind the leader
in the coffee industry, NestlÇ S.A. (Aa2, stable). The company
reported that the markets in which it is the leader or holds the
second position represent approximately 76% of its 2015 total
sales (or 94% of retail sales). The strength of JDE's position
within its key markets is supported by its strong global and
regional brands, together representing c. 80% of combined sales
as estimated by the company.
Although present in over 80 countries, JDE derives c. 75% of its
sales from EU countries, where overall volume growth is low due
to high penetration. The company needs to execute on its strategy
to grow in premium segments and faster-growing emerging markets
as well as to stay innovative to grow its topline.
Moody's understands that the integration between Mondelez and
DEMB is mostly completed, although some lT platform integration
and further optimization steps still remain to be executed. The
integration costs incurred were higher than expected although
this is partially offset by higher than expected synergies. The
company generated EUR1,256 million sales and EUR224 million
adjusted EBIT in Q1 2016 leading to 17.8% adjusted EBIT margin.
Since closing the company's scope, organizational and financial
structure has undergone a few changes following regulatory,
shareholder and integration developments. As a result of
shareholder reorganization AHBV's stake increased to 73.5% from
56.5% and Mondelez's share declined accordingly to 26.5%. The
company also repaid EUR1.65 billion of its credit facilities out
of the proceeds from regulatory disposals, internally generated
cash and shareholder reorganization. Furthermore EBITDA also
underwent changes due to change in scope and regulatory
divestments. As a result Moody's adjusted leverage is estimated
at around 5.6x at the end of 2016 (on a proforma basis and
excluding most of integration costs). Moody's expects the company
to de-lever further through EBITDA growth and voluntary debt
repayment out of cashflow generation.
JDE's liquidity profile is good, supported by EUR883 million cash
on balance sheet as of 31 March 2016 (before voluntary debt
repayment of EUR200 million in April) and an undrawn EUR500
million revolving credit facility (RCF). Despite significant
costs to be incurred during the next few quarters related to the
integration of JDE, the company is expected to generate solid
positive Free Cash Flow (FCF). Cash generation is also improved
due to reduced amount of expected dividend.
RATIONALE FOR POSITIVE OUTLOOK
The positive outlook is based on Moody's expectation of
improvement in the company's profitability and leverage as
further growth and synergies come through.
WHAT COULD CHANGE THE RATING UP/DOWN
Positive rating pressure could develop if (1) Moody's adjusted
debt/EBITDA reduces sustainably below 5.0x; and (2) adjusted
retained cash flow (RCF)/net debt increases above high single-
digits.
Negative pressure could materialize if Moody's anticipates that
adjusted debt/EBITDA will remain above 6.0x in 2016, or if
adjusted RCF/net debt declines to the low single digits.
Headquartered in the Netherlands, Jacobs Douwe Egberts ("JDE") is
a JV formed on July 2, 2015, between Mondelez International, Inc.
(Baa1, stable) ("Mondelez") and Acorn Holdings B.V. ("AHBV").
AHBV is owned by an investor group led by JAB (Joh. A. Benckiser)
Holding Company S.a r.l. (Baa1, negative) ("JAB") in partnership
with BDT Capital Partners, Quadrant Capital Advisors and SociÇtÇ
Familiale d'Investissements. JDE manufactures and sells coffee
and tea products in retail and out-of-home markets in more than
80 countries across Europe, Latin America and Australia. JDE's
key brands include Douwe Egberts, Jacobs, Tassimo, Moccona,
Senseo, L'OR, Kenco, Pilao and Gevalia.
NORTHERN LIGHTS III: Moody's Lowers Rating on US$1-Bil. Notes
-------------------------------------------------------------
Moody's Investors Service has downgraded the rating of Northern
Lights III B.V.:
-- US$1,000,000,000 Loan Participation Notes due August 2019
Series 2012-1, Downgraded to B1; previously on Mar 11, 2016
Ba2 Placed Under Review for Possible Downgrade
RATING RATIONALE
Moody's explained that the rating action taken today is the
result of a rating action on the Government of Angola, which was
downgraded to B1 from Ba2 on April 29, 2016.
The issue proceeds from the notes were used to fund a loan
facility agreement ("the Loan Agreement") made between Northern
Lights III B.V. ("the Issuer") as lender and the Government of
Angola through its Ministry of Finance as borrower. Payments
received by the Issuer under the Loan Agreement are used to make
payments due under the Notes.
Factors that would lead to an upgrade or downgrade of the rating:
This rating is essentially a pass-through of the rating of the
underlying loan. Noteholders are exposed to the credit risk of
the Government of Angola and therefore the rating moves in lock-
step.
===========
R U S S I A
===========
CB EL BANK: Placed Under Provisional Administration
---------------------------------------------------
The Bank of Russia, by its Order No. OD-1406, dated May 5, 2016,
revoked the banking license of Togliatti-based credit institution
limited liability company Commercial Bank El Bank or LLC CB El
Bank from May 5, 2016.
The Bank of Russia took such an extreme measure -- revocation of
the banking license -- because of the credit institution's
failure to comply with federal banking laws and Bank of Russia
regulations, inability to satisfy its creditors' claims on
monetary liabilities, and taking into account the repeated
application within a year of measures envisaged by the Federal
Law "On the Central Bank of the Russian Federation (Bank of
Russia)".
LLC CB El Bank failed to timely satisfy depositors' claims, and
the period of the bank's default on making repayments to them has
exceeded 14 days.
The management and owners of the bank have not taken measures
required to normalize its activities. In this situation, the
Bank of Russia performed its duty on the revocation of the
banking license from the credit institution in accordance with
Article 20 of the Federal Law "On Banks and Banking Activities".
The Bank of Russia, by its Order No. OD-1407, dated May 5, 2016,
has appointed a provisional administration to LLC CB El Bank for
the period until the appointment of a receiver pursuant to the
Federal Law "On Insolvency (Bankruptcy)" or a liquidator under
Article 23.1 of the Federal Law "On Banks and Banking
Activities". In accordance with the federal laws, the powers of
the credit institution's executive bodies have been suspended.
LLC CB El Bank is a member of the deposit insurance system. The
revocation of the banking license is an insured event as
stipulated by Federal Law No. 177-FZ "On the Insurance of
Household Deposits with Russian Banks" in respect of the bank's
retail deposit obligations, as defined by law. The said Federal
Law provides for the payment of indemnities to the bank's
depositors, including individual entrepreneurs, in the amount of
100% of the balance of funds but no more than 1.4 million per one
depositor.
According to reporting data, as of April 1, 2016, LLC CB El Bank
ranked 295th in the Russian banking system in terms of assets.
MOSTRANSBANK OJSC: Placed Under Provisional Administration
----------------------------------------------------------
The Bank of Russia, by its Order No. OD-1408, dated May 5, 2016,
revoked the banking license of Moscow-based credit institution
Joint-Stock Commercial Bank Passenger Transport Enterprises
Development of Moscow Mostransbank Open Joint-Stock Company (JSCB
Mostransbank OJSC) from May 5, 2016.
The Bank of Russia took such an extreme measure -- revocation of
the banking license -- because of the credit institution's
failure to comply with federal banking laws and Bank of Russia
regulations, and application of supervisory measures envisaged by
the Federal Law "On the Central Bank of the Russian Federation
(Bank of Russia)", given the real threat to the creditors' and
depositors' interests.
JSCB Mostransbank OJSC invested funds in low-quality assets and
failed to create provisions adequate to the risks assumed. Due
to the unsatisfactory quality of assets which failed to generate
sufficient cash flow, the credit institution faced reasons for
implementing insolvency (bankruptcy) prevention measures. The
management and owners of the bank did not take measures to
normalize its activities.
The Bank of Russia, by its Order No. OD-1409, dated May 5, 2016,
has appointed a provisional administration to JSCB Mostransbank
OJSC for the period until the appointment of a receiver pursuant
to the Federal Law "On Insolvency (Bankruptcy)" or a liquidator
under Article 23.1 of the Federal Law "On Banks and Banking
Activities". In accordance with federal laws, the powers of the
credit institution's executive bodies are suspended.
JSCB Mostransbank OJSC is a member of the deposit insurance
system. The revocation of banking license is an insured event
envisaged by Federal Law No. 177-FZ "On Insurance of Household
Deposits with Russian Banks" regarding the bank's obligations on
deposits of households determined in accordance with the
legislation. This Federal Law provides for the payment of
insurance indemnity to the bank's depositors, including
individual entrepreneurs, in the amount of 100% of their balances
but not exceeding the total of 1.4 million rubles per depositor.
According to the financial statements, as of April 1, 2016, JSCB
Mostransbank OJSC ranked 538th by assets in the Russian banking
system.
=========
S P A I N
=========
CAR RENTALS: Moody's Raises CFR to B1, Outlook Stable
-----------------------------------------------------
Moody's Investors Service has upgraded Car Rentals Parentco,
S.L.U.'s ('Goldcar' or the 'company') corporate family rating
(CFR) to B1 from B2 and probability of default rating (PDR) to
B2-PD from B3-PD. At the same time Moody's has upgraded the
instrument rating to B1 from B2 for the EUR275 million Term Loan
B, the EUR50 million Term Loan A, and the senior secured
Revolving Credit Facility (RCF) issued by Car Rentals Subsidiary,
S.L.U. The outlook on all ratings is stable.
RATINGS RATIONALE
"The upgrade of the CFR to B1 from B2 has been triggered by
Goldcar's solid trading in FY2015 and positive outlook for
FY2016, primarily driven by continued rental transaction volume
growth in Spain and the company's ability to leverage its lean
cost structure, resulting in Moody's adjusted gross leverage
ratio to reduce to 2.6x as of December 2015", says
Pieter Rommens, Vice President and Moody's senior analyst for
Goldcar.
However, the company's B1 CFR rating is constrained by (1) fairly
high geographic concentration with focus on Spanish leisure car
rental market and 31.4% of FY 2015 revenues generated in top 3
locations; (2) exposure to the inherently cyclical European
Mediterranean tourism; (3) strong competition with relatively low
barriers to entry and customer loyalty; (4) seasonal business
requiring careful fleet and working capital management and (5)
regulatory risks.
Positively, the ratings are supported by the company's (1)
leading position in the Spanish leisure car rental market; (2)
lean operating structure and high occupancy rates leading to best
in class Moody's adjusted 2015 EBITDA margin of around 64%; (3)
good cash flow generation and moderate, but seasonal leverage
with Moody's adjusted year-end FY2016 leverage expected at 2.5x;
and (4) fragmented customer base, mainly consisting of individual
tourists.
Moody's considers Goldcar's near-term liquidity position to be
adequate. This is based on the company's cash balance of roughly
EUR48 million as of March 31, 2016, with additional liquidity for
working capital stemming from a EUR162 million RCF, which was
totally undrawn as at that date. The size of the RCF, which has
been increased in 2015 by EUR37 million and will most probably be
additionally increased during Q2 2016 by EUR13 million through
the accordion feature, is expected to cover the swings and volume
growth in working capital, particularly related to the company's
fleet.
The term loan facilities benefit from two maintenance covenants
(net leverage and interest cover) tested quarterly and set with a
minimum 30% headroom. The first quarterly test occurred in
September 2015, with Goldcar maintaining ample headroom under
both covenants since then.
RATING OUTLOOK
The stable outlook reflects Moody's view that the company's
operating performance will continue to benefit from strong
operating margins and cash flow performance, with modest
deleveraging expectations.
WHAT COULD CHANGE THE RATING UP
Given the company's current scale and its continuously high,
albeit decreasing exposure to the Spanish leisure market, Moody's
does not expect upward rating pressure in the near term.
However, upward rating pressure could arise over time if the
company increases its scale and improves its geographical and
airport diversification while reducing Moody's-adjusted gross
debt/EBITDA ratio sustainably below 2.0x (at year-end).
WHAT COULD CHANGE THE RATING DOWN
The rating would most likely come under pressure as a result of a
significant slowdown in the European economies impacting
Mediterranean tourism destinations. Credit metrics that could
indicate downward rating pressure include Debt/EBITDA exceeding
3.0x at year-end or weakening of liquidity profile with FCF/Debt
dropping below 10.0%. Additionally, any material debt-funded
acquisition or shareholder-friendly recapitalization could result
in negative pressure.
The principal methodology used in these ratings was Equipment and
Transportation Rental Industry published in December 2014.
Goldcar is a leading car rental operator in Spain, with a growing
office network in Portugal and Italy, and recently opened offices
in France, Greece and Croatia. It is market leader in leisure
car rentals in Spain, and a close second behind Europcar Groupe
S.A. (B1 stable) in the Spanish car rental market as a whole
(including business rental). The company has a network of 70
rental offices mainly targeting key Southern European airports,
supplemented with city and train stations offices.
Founded in 1985 and headquartered in Spain, Goldcar operates a
business strategy based on low rental price and high ancillary
revenue generated through services such as insurance. In FY
2015, the company reported sales and EBITDA of EUR237.4 million
and EUR124.9 million, respectively, and employed on average ca.
600 full-time employees.
===========
T U R K E Y
===========
DENIZBANK AS: Moody's Confirms Ba2 Deposits Rating
--------------------------------------------------
Moody's Investors Service has confirmed the A3 assigned to the
SME covered bond ratings issued by Denizbank A.S. (the
issuer/Denizbank) (deposits Ba2 negative; adjusted baseline
credit assessment ba2; counterparty risk (CR) assessment Ba1(cr))
RATINGS RATIONALE
This rating action follows Moody's decision to confirm
Denizbank's Ba1(cr) Counterparty Risk (CR) Assessment.
KEY RATING ASSUMPTIONS/FACTORS
Moody's determines covered bond ratings using a two-step process:
an expected loss analysis and a TPI framework analysis.
EXPECTED LOSS: Moody's uses its Covered Bond Model (COBOL) to
determine a rating based on the expected loss on the bond. COBOL
determines expected loss as (1) a function of the probability
that the issuer will cease making payments under the covered
bonds (a CB anchor event); and (2) the stressed losses on the
cover pool assets following a CB anchor event.
The CB anchor for this program is CR assessment plus 0 notches.
The CR assessment reflects an issuer's ability to avoid
defaulting on certain senior bank operating obligations and
contractual commitments, including covered bonds.
The cover pool losses for this program are 28.9%. This is an
estimate of the losses Moody's currently models following a CB
anchor event. Moody's splits cover pool losses between market
risk of 13.8% and collateral risk of 15.1%. Market risk measures
losses stemming from refinancing risk and risks related to
interest-rate and currency mismatches (these losses may also
include certain legal risks). Collateral risk measures losses
resulting directly from cover pool assets' credit quality.
Moody's derives collateral risk from the collateral score, which
for this program is currently 22.5%.
The over-collateralization in the cover pool is 221.1%, of which
Denizbank provides 25% on a "committed" basis. The minimum OC
level consistent with the A3 rating target is 9.5%, of which the
issuer should provide 4% in a "committed" form. These numbers
show that Moody's is not relying on "uncommitted" OC in its
expected loss analysis.
For further details on cover pool losses, collateral risk, market
risk, collateral score and TPI Leeway across covered bond
programs rated by Moody's please refer to "Moody's Global Covered
Bonds Monitoring Overview", published quarterly. All numbers in
this section are based on the most recent Performance Overview
(based on data, as of end December 2015).
TPI FRAMEWORK: Moody's assigns a "timely payment indicator"
(TPI), which measures the likelihood of timely payments to
covered bondholders following a CB anchor event. The TPI
framework limits the covered bond rating to a certain number of
notches above the CB anchor.
For Denizbank's SME covered bonds, Moody's has assigned a TPI of
Probable.
Factors that would lead to an upgrade or downgrade of the
ratings:
The CB anchor is the main determinant of a covered bond programs
rating robustness. A change in the level of the CB anchor could
lead to an upgrade or downgrade of the covered bonds. The TPI
Leeway measures the number of notches by which Moody's might
lower the CB anchor before the rating agency downgrades the
covered bonds because of TPI framework constraints.
Based on the current TPI of Probable, the TPI Leeway for this
program is 0-1 notches. This implies that Moody's might downgrade
the covered bonds because of a TPI cap if it lowers the CB anchor
by one notch, all other variables being equal.
A multiple-notch downgrade of the covered bonds might occur in
certain circumstances, such as (1) a country ceiling or sovereign
downgrade capping a covered bond rating or negatively affecting
the CB Anchor and the TPI; (2) a multiple-notch downgrade of the
CB Anchor; or (3) a material reduction of the value of the cover
pool.
TURKIYE VAKIFLAR: Moody's Assigns ba1 Adjusted BCA Rating
---------------------------------------------------------
Moody's Investors Service assigned a definitive A3 long-term
rating to the euro-denominated covered bonds issued under the
mortgage covered bond program of Turkiye Vakiflar Bankasi TAO
(the issuer, VakifBank, deposits Baa3 negative, adjusted baseline
credit assessment (BCA) ba1, counterparty risk assessment
Baa3(cr)).
There are mitigants in place to lower the risk of transferability
and convertibility. Therefore the A3 assigned to the euro
denominated covered bond is higher than the foreign currency
ceiling of Baa1. The covered bond rating is capped at the local
country ceiling of A3.
The covered bonds are full recourse to the issuer. Furthermore,
following a covered bond anchor event (CB anchor event), the
covered bondholders would have priority claims over a pool of
assets (cover pool). The cover pool consists of mortgage loans
originated by VakifBank. In addition, 1.2% of the pool currently
consists of substitute assets. As of the cut-off date (3 April
2016), the assets in VakifBank's cover pool totaled TL 3,035
million. The Turkish covered bond law (the CommuniquÇ) will
govern the covered bonds. English and Turkish law govern the
transaction documents.
RATINGS RATIONALE
A covered bond benefits from (1) the issuer's promise to pay
interest and principal on the bonds; and (2) following a CB
anchor event, the economic benefit of a collateral pool (the
cover pool). The rating, therefore, reflects the following
factors:
(1)The credit strength of the issuer (CR assessment Baa3(cr)).
The covered bonds are full recourse to the issuer.
(2)Following a CB anchor event, the value of the cover pool. The
stressed level of losses on the cover pool assets following a
CB anchor event (cover pool losses) for this transaction is
52.9%.
Moody's considered the following factors in its analysis of the
cover pool's value:
a) The credit quality of the assets backing the covered bonds.
Claims against Turkish mortgage loans form the cover pool
that backs the mortgage covered bonds, and the collateral
score for the cover pool is 10.5%.
b) The Turkish legal framework for covered bonds. Notable
aspects of the legislation include:
(i) The ring-fencing of cover pool assets from the issuer's
bankruptcy estate. Also, issuer insolvency does not trigger
the acceleration of the covered bonds.
(ii) The segregation of transaction accounts and cash flows from
the issuer's bankruptcy estate
(iii) Various asset and liability requirements, which include
(1) a nominal value test to ensure that the nominal value
of assets cannot be lower than the nominal value of the
covered bonds; (2) a cash flow test to ensure that the
interest and revenues expected to be generated in one year
cannot be lower than that expected to arise from the
covered bonds; (3) a net present value (NPV) test to ensure
that the NPV of the assets must exceed at least 2% of the
NPV of the covered bonds and (4) stress test on interest
rates and foreign-currency denominated cashflows.
(iv) A cover pool monitor that is responsible for monitoring the
cover pool on an ongoing basis and observing the compliance
with the CommuniquÇ
c) The transaction structural features that aim to mitigate
various risks. The features are:
(i) A committed over-collateralization (OC) of 20% for the first
series that aims to mitigate credit risk. Unlike in most covered
bond programs, committed OC is series-specific and not program-
based. However, the highest then-existing committed OC level for
any series must be adhered to for the entire program. The OC
commitment terminates once the series it is attached to matures;
therefore, future series of covered bonds may have different
ratings because they may benefit from different levels of
protections at the time of a CB anchor event. This feature adds a
degree of complexity in the monitoring of each series issued
under the program.
(ii) An 18-month maturity extension, which aims to mitigate
refinancing risk
(iii) A currency swap entered into with one or more offshore
banks, which aims to mitigate currency risk, given that cover
assets pay in Turkish liras while the notes can be denominated in
a foreign currency.
(iv) Offshore bank accounts under English law that aims to ring-
fence foreign-currency swap proceeds from Turkey, while ensuring
the swap counterparty receives Turkish liras proceeds from the
issuer in an account opened onshore.
An offshore security agent controls the offshore accounts, which
are assigned for the benefit of the covered bondholders and other
senior creditors. This mechanism significantly lowers the risk
that the Turkish government will interfere successfully with the
offshore accounts in order to repatriate foreign currency
proceeds if it adopts moratorium on the foreign-currency debt
repayments of domestic issuers. As a result of the lower risk of
transfer and convertibility of foreign currency, the deal has
pierced Turkey's foreign-currency ceiling from Baa1 to A3, the
local country ceiling.
d) The exposure to market risk, which is 45.9% for this cover
pool. The main components are the interest-rate risk, the
refinancing risk and other risks such as set-off and commingling
risk.
e) The OC in the cover pool is currently 88.5% on a nominal value
basis, of which VakifBank provides 20% on a "committed" basis for
the first series to be issued (see Key Rating
Assumptions/Factors, below).
Moody's uses the Covered Bond (CB) anchor to determine the
probability that the issuer will cease to make payments under the
covered bonds. The CB anchor will typically be the Counterparty
Risk (CR) Assessment plus one notch for covered bonds that fall
under either (1) the EU directive on bank resolution and recovery
or (2) a resolution regime that Moody's believes provides an
equivalent level of protection for covered bonds. Otherwise, the
CB anchor will typically be the CR Assessment.
For Turkish covered bond issuers, the CB anchor is the
Counterparty Risk Assessment (CR Assessment) with no uplift.
VakifBank's CR assessment is Baa3(cr).
Moody's believes that the strength of the Communique and the
program's structural mechanisms partly mitigate refinancing and
operational risks. Nevertheless, Moody's says that illiquid
scenarios are more likely in a less mature mortgage market, such
as Turkey, so the cover pool would still pose refinancing risk if
an illiquidity scenario were to develop, despite the mitigants.
There are also some risks, such as set-off or commingling, and
some other uncertainties that make it less likely that the issuer
will be able to make timely payments to covered bondholders
following a CB anchor event.
As of April 3, 2016, the total value of the cover pool is
approximately TL 3,035 million, consisting of 98.8% residential
mortgage loans and 1.2% of substitute assets. The residential
mortgage loans have a weighted-average (WA) seasoning of 33
months, a WA remaining term of 68 months and a WA loan-to-value
ratio of 47.2%. The substitute assets represent 1.2% of the cover
pool and consist of domestic government bonds.
The timely payment indicator (TPI) assigned to this transaction
is "Improbable", and Moody's TPI framework does not constrain the
rating.
The rating that Moody's has assigned addresses the expected loss
posed to investors. Moody's ratings address only the credit risks
associated with the transaction. Moody's did not address other
non-credit risks, but these may have a significant effect on
yield to investors.
KEY RATING ASSUMPTIONS/FACTORS
Moody's determines covered bond ratings using a two-step process:
an expected loss analysis and a TPI framework analysis.
EXPECTED LOSS: Moody's uses its Covered Bond Model (COBOL) to
determine a rating based on the expected loss on the bond. COBOL
determines expected loss as (1) a function of the probability
that the issuer will cease making payments under the covered
bonds (a CB anchor event), and (2) the stressed losses on the
cover pool assets following a CB anchor event.
The cover pool losses for this program are 52.9%. This is an
estimate of the losses Moody's currently models following a CB
anchor event. Moody's splits cover pool losses between market
risk of 45.9% and collateral risk of 7.0%. Market risk measures
losses stemming from refinancing risk and risks related to
interest-rate and currency mismatches (these losses may also
include certain legal risks, such as set-off and commingling
risks). Collateral risk measures losses resulting directly from
cover pool assets' credit quality. Moody's derives collateral
risk from the collateral score, which for this program is
currently 10.5%.
The OC in the cover pool is currently 88.5%, of which the issuer
provides 20.0% on a "committed" basis for the first series to be
issued. The minimum OC level consistent with the A3 rating is
18.0%.
For further details on cover pool losses, collateral risk, market
risk, collateral score and TPI Leeway across covered bond
programs rated by Moody's, please refer to "Moody's Global
Covered Bonds Monitoring Overview", published quarterly. All
numbers in this section are based on Moody's most recent
modelling (based on data, as of 3 April 2016).
TPI FRAMEWORK: Moody's assigns a TPI, which measures the
likelihood of timely payments to covered bondholders following a
CB anchor event. The TPI framework limits the covered bond rating
to a certain number of notches above the CB anchor.
Factors that would lead to an upgrade or downgrade of the rating:
The CB anchor is the main determinant of a covered bond program's
rating robustness. A change in the level of the CB anchor could
lead to an upgrade or downgrade of the covered bonds. The TPI
Leeway measures the number of notches by which Moody's might
lower the CB anchor before downgrading the covered bonds because
of TPI framework constraints.
Based on the current TPI of "Improbable", the TPI Leeway for
VakifBank's mortgage covered bonds is zero to one notches. This
implies that Moody's might downgrade the covered bonds because of
a TPI cap if it lowers VakifBank's CB anchor, all other variables
being equal.
A multiple-notch downgrade of the covered bonds might occur in
certain limited circumstances, such as (1) a sovereign downgrade
negatively affecting both the CB anchor and the TPI, (2) a
multiple-notch downgrade of the CB anchor, or (3) a material
reduction of the value of the cover pool.
===========================
U N I T E D K I N G D O M
===========================
ANGLO AMERICAN: Moody's Affirms Ba3 CFR & Changes Outlook to Pos.
-----------------------------------------------------------------
Moody's Investors Service has changed the outlook for all ratings
of Anglo American plc (AAL or the company) and its rated
subsidiaries to positive from negative. Concurrently, Moody's
has affirmed the Ba3 corporate family rating of AAL, the Ba3
senior unsecured instrument ratings of Anglo American Capital
Plc, as well as AAL's (P)NP short-term ratings and the Baa2.za/P-
2.za national scale ratings of Anglo American SA Finance Limited.
The change in the outlook to positive follows the announcement by
AAL that it has agreed to sell its niobium and phosphates
businesses for about $1.5 billion in cash and expects to close
the transaction in the second part of this year after clearing
standard regulatory approvals. The business generated $145
million in EBITDA in 2015 and is expected to grow in 2016. The
realized valuation and planned use of proceeds to reduce debt
will add to the deleveraging momentum initiated by the company's
purchase of about $1.9 billion notes for cash in March.
"As Anglo American continues to downsize its operations, we
expect the execution of divestments to become one of the main
drivers of deleveraging. While future divestments are not
factored into the rating, we will continue to assess their credit
impact as transactions are executed," said Elena Nadtotchi, Vice
President Senior Credit Officer and Moody's lead analyst on Anglo
American plc.
RATINGS RATIONALE
CHANGE OF OUTLOOK TO POSITIVE
The change of outlook to positive recognizes the company's rapid
progress in negotiating material asset sales, a higher than
expected valuation for the sale of the niobium and phosphate
businesses, and improving prospects for the global diamond
market, backed by the significantly stronger rough diamond demand
than that observed at the end of 2015, as actions taken by
diamond producers continue to have a positive effect. Revising
the outlook to positive reflects some potential for an upgrade if
the company deleverages substantially faster than expected, and
stabilizes cash flow from ongoing operating activities at a level
that results in financial performance that would be consistent
with a Ba2 rating. This would include Moody's expectation that
the company can achieve sustainable decline in leverage with Net
Debt/EBITDA below 2x based upon its continuing operations and
annual free cash flow from operations of around $400 million
after sufficient capital spending to maintain its business.
Moody's will also expect the company to exhibit sustainable
improvement in the performance of the business and a solid
liquidity profile.
The Ba3 rating continues to factor execution risks related to the
restructuring and downsizing program and a degree of uncertainty
about future divestments. As the company continues to sell
assets and reduce its EBITDA, its leverage profile will depend on
its ability to deliver valuations that will support further
deleveraging.
LIQUIDITY POSITION
The Ba3/Ba3-PD ratings recognize that AAL maintains a sizeable
defensive cash balance, which stood at $6.9 billion at the end of
2015. The group also has around $7.9 billion of funds available
under its committed credit facilities (as reported at end of
2015), which includes unguaranteed bi-lateral facilities at its
South African subsidiaries that have financial covenants. In
February 2016, AAL put in place an additional $1.5 billion 2-year
bank facility to support its liquidity position, as it used a
portion of its cash balances to purchase notes.
Moody's expects that AAL will continue to maintain sufficient
resources-at-hand to meet its near-term bond and bank maturities.
AAL said it targets $3-4 billion in divestment proceeds in 2016
(including the announced $1.5 billion divestment) that will add
to cash balances, if executed.
WHAT COULD CHANGE THE RATING UP/DOWN
An upgrade to Ba2 would require the company to demonstrate
successful progress in its restructuring program and sustained
solid performance as AAL is reshaping its portfolio. Delivery
beyond current expectations on the restructuring program, strong
liquidity, positive free cash flow generation and reduced
leverage, with Moody's adjusted Net Debt/EBITDA maintained below
2x, would put positive pressure on the ratings.
The rating could be downgraded if the company's leverage, as
measured by Moody's adjusted Net Debt/EBITDA, were to increase to
above 3x. The rating could also be downgraded if the company's
liquidity profile were to meaningfully weaken, as Moody's expects
that AAL will use cash balances and/or bank facilities to repay
its maturing obligations.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Global Mining
Industry published in August 2014.
List of Affected Ratings:
Affirmations:
Issuer: Anglo American plc
Corporate Family Rating, Affirmed Ba3
Probability of Default Rating, Affirmed Ba3-PD
Senior Unsecured Medium-Term Note Program, Affirmed (P)NP
Senior Unsecured Medium-Term Note Program, Affirmed (P)Ba3
Issuer: Anglo American Capital Plc
BACKED Senior Unsecured Commercial Paper, Affirmed NP
BACKED Senior Unsecured Medium-Term Note Program, Affirmed
(P)NP
BACKED Senior Unsecured Medium-Term Note Program, Affirmed
(P)Ba3
BACKED Senior Unsecured Regular Bond/Debenture, Affirmed Ba3
Senior Unsecured Regular Bond/Debenture, Affirmed Ba3
Issuer: Anglo American SA Finance Limited
BACKED NSR Senior Unsecured Medium-Term Note Program, Affirmed
P-2.za
BACKED NSR Senior Unsecured Medium-Term Note Program, Affirmed
Baa2.za
BACKED NSR Senior Unsecured Regular Bond/Debenture, Affirmed
Baa2.za
Outlook Actions:
Issuer: Anglo American plc
Outlook, Changed To Positive From Negative
Issuer: Anglo American Capital Plc
Outlook, Changed To Positive From Negative
Issuer: Anglo American SA Finance Limited
Outlook, Changed To Positive From Negative
AUSTIN REED: PPF Receives Formal Notification From Administrators
-----------------------------------------------------------------
Stephanie Baxter at Professional Pensions reports that the
Pension Protection Fund (PPF) has received formal notification
from Austin Reed's administrators, which could trigger an
assessment period for its pension scheme.
It comes as the 116-year-old high street retailer filed for
insolvency on April 26 just a day after British Home Stores (BHS)
called in the administrators, PP relays.
The privately owned company operates one combined defined benefit
(DB) scheme called the Austin Reed Group Pension Fund, PP
discloses.
A PPF spokesperson told PP: "We have now received formal
notification of the Austin Reed situation via a Section 120
Notice. If the scheme is eligible it will be deemed to have
started the PPF assessment period and members will be protected."
The lifeboat fund will now work with the trustees to obtain the
necessary information to decide whether the scheme is eligible to
pass into the PPF, PP says. Once it has this information the PPF
has 28 days to make a decision, PP notes.
A spokesperson from Austin Reed's administrators AlixPartners, as
cited by PP, said: "The administrative administrators are
currently working with all stakeholders to determine the best
route for the business. Once we have evaluated all the
appropriate options we will be better able to confirm the
requirements regarding the pension fund."
The scheme had already been through the PPF assessment period a
year ago, triggered by a company voluntary arrangement (CVA) that
was agreed in February 2015, PP recounts.
According to the group's latest annual accounts for the year
ended January 31, 2015, it had a net pension deficit of GBP11.3
million and total pension deficit of GBP14.1 million, PP
discloses. The situation had worsened from the previous year
when the net deficit was GBP10.5 million and the total deficit
was GBP13.2 million, PP states.
Over 99% of creditors voted in favor of the CVA and closure of
the scheme to accrual on February 5, 2015, PP notes.
Austin Reed is a Thirsk-based fashion retailer.
BAKKAVOR FINANCE: Moody's Raises CFR to B1, Outlook Stable
----------------------------------------------------------
Moody's Investors Service has upgraded London-based private label
fresh prepared food company Bakkavor Finance (2) plc's (Bakkavor
or the company) corporate family rating to B1 from B2,
probability of default rating to B1-PD from B2-PD and the ratings
on its senior secured notes to B1 from B2. The outlook is
stable.
The action was prompted by Bakkavor's strong improvements in
credit metrics over the last two years combined with Moody's
expectations that the company will be able to sustain them at
level commensurate with a B1 CFR despite a challenging trading
environment in the UK and potential moderate downward pressures
on margins.
RATINGS RATIONALE
As mentioned above, the rating upgrade follows the company's
continued improvements in credit metrics since 2013 as reflected
by, amongst other things, the Moody's-adjusted EBIT margin
improving to 5.6% at year-end 2015 compared to 3.9% at year-end
2013 and the Moody's-adjusted debt to EBITDA declining to 3.9x
from 5.2x over the same period. The improvements were driven by
a combination of factors including (i) positive like-for-like
sales growth, (ii) higher margins thanks to lower raw material
prices, exit of lower margin businesses and efficiency
improvements, and (iii) early debt repayment.
Although not immune to current market conditions for food
companies in the UK, we see volume growth in the fresh prepared
food segment remaining resilient because this category is
benefiting from consumers' current preference for convenience and
freshness. Ongoing product innovation has also helped maintain
its appeal with consumers.
"Despite supportive market fundamentals, we caution that
Bakkavor's margins might experience downward pressure in the
coming years due to commercial pressures from retailer customers,
the introduction of a national living wage in the UK and its
exposure to volatile raw material prices, albeit we see low
inflationary risks in the next 12 months", says Eric Kang, a
Moody's Analyst. That being said, Moody's expects any decline in
margins and subsequent impact on credit metrics to be moderate
thanks to the company's good track record to date with respect to
input cost inflation and efficiency improvements. The rating
agency anticipates leverage of around 3.3-3.5x at year-end 2016
driven by moderate EBITDA growth expectation and the early
redemption of GBP75 million of senior secured notes due 2018 in
February.
Moody's views the liquidity profile as adequate. As of Dec. 31,
2015, and pro-forma for the early partial redemption of the 2018
notes, the cash balance was GBP22 million and both the GBP70
million revolving credit facility and the GBP65 million
receivables facility were undrawn. The 2018 notes and the bank
facilities are both due in February 2018 but the ratings assume
that the company will address these maturities in a timely
manner. Moody's also expects the company to continue generating
positive free cash flow and maintaining adequate financial
maintenance covenant headroom under its bank credit facilities.
RATING OUTLOOK
The stable outlook reflects Moody's expectations that Bakkavor
will maintain credit metrics in line with a B1 CFR over the next
12 to 18 months despite a challenging trading environment in the
UK and potential moderate downward pressures on margins.
FACTORS THAT COULD LEAD TO AN UPGRADE/DOWNGRADE
Positive pressure on the rating could materialize if Bakkavor
were to achieve (1) a Moody's-adjusted EBIT margin in the mid to
high single digit (2) a Moody's-adjusted debt/EBITDA ratio
sustainably at around 3.0x; and (3) a solid liquidity profile
including positive free cash flow. For a potential upgrade there
would also be an expectation of an improvement in the company's
business profile including among other things a reduced customer
concentration and a wider geographic footprint as well as the
maintenance of a financial policy consistent with a Ba rating.
Negative pressure will materialize if the company's liquidity
profile and credit metrics deteriorate as a result of (1) a
stronger-than-expected weakening of its operational performance;
(2) material debt-funded acquisitions; or (3) a change in its
financial policy. Quantitatively, Moody's would consider
downgrading Bakkavor's ratings if the company's Moody's-adjusted
(1) EBIT margin falls below 5.0%; (2) debt/EBITDA ratio is
sustainably above 4.5x; or (3) free cash flow is negative.
The principal methodology used in these ratings was Global
Packaged Goods published in June 2013.
Headquartered in London, UK, Bakkavor is a leading producer of
private label fresh prepared foods. It employs approximately
18,000 people and manufactures products across 18 product
categories such as ready meals, pizzas, desserts, leafy salads,
convenience salads, dips, soups, sauces, prepared fruit and
vegetables. It generated sales of GBP1.7 billion in 2015.
NORD ANGLIA: Moody's Affirms B1 CFR, Outlook Negative
-----------------------------------------------------
Moody's Investors Service has changed Nord Anglia Education,
Inc's (NAE) rating outlook to negative from stable.
Moody's has also affirmed the company's B1 corporate family
rating (CFR), as well as the B1 ratings on its $869 million
senior secured term loan B, $125 million senior secured revolving
credit facility, and CHF200 million senior secured notes.
All issuances have been issued by Nord Anglia Education Finance
LLC and are guaranteed by NAE.
RATINGS RATIONALE
"The change in the outlook to negative reflects Moody's
expectations that acquisitions and modest pressure on margins
will delay an expected reduction in leverage, with adjusted
debt/EBITDA likely to remain near 7.0x for fiscal 2016," says Joe
Morrison, a Moody's Vice President and Senior Credit Officer.
NAE has said that it would continue to pursue acquisitions of
schools utilizing the proceeds of its planned sale-and-lease back
transactions of $167 million.
Moody's says that continued acquisition activity could constrain
NAE's ability to realize lower leverage, even though it will
benefit from incremental earnings contributions from acquired
schools, as well as increases in enrollments and tuition fees
that should result in a decrease in the level of leverage in
FY2017.
Projected adjusted debt/EBITDA of 6.5x -- 7.0x over the next 12
months is high for the B1 category.
NAE's results for fiscal second quarter ended 29 February 2016
reflected modest pressure on reported profit margins, arising in
turn from the impact of recent acquisitions of lower margin
schools; expenses associated with start-up schools (particularly
in Chicago), new school openings; and new employment-related
taxes in China.
Moody's estimates that on a pro forma basis, which assumes full-
year revenue contributions from acquired schools and factors in
the recent announced sale-leasebacks of three schools in the US,
NAE's adjusted EBITDA margin, EBITDA interest coverage, and
debt/EBITDA for the 12 months ended 29 February 2016 were about
30%, about 2.9x, and over 7.0x, respectively.
However, at end-February 2016, NAE had $155 million in cash
holdings, excluding bank overdrafts, which was more than
sufficient to cover short-term borrowings under its revolving
credit facility of $74 million. Moody's notes that the second
quarter of the fiscal year is typically the seasonal low for the
company's cash holdings.
NAE's stable and predictable cash flows, which stem from demand
for its premium educational services, support the ratings.
Moody's expects that NAE will be disciplined in executing its
acquisition strategy, acquiring individual schools in existing
markets that are accretive to earnings and cash flow.
Upward rating pressure is unlikely over the next 12-18 months,
given the negative outlook. However, the outlook would likely
return to stable, if the company establishes a track record of
pursuing acquisitions in a more conservative manner and reduces
leverage, such that debt/EBITDA trends toward 6.0-6.5x on a
sustainable basis.
Negative pressure on the ratings could arise if business
conditions deteriorate and/or the company undertakes large-scale
acquisitions, such that leverage -- as measured by adjusted debt
to EBITDA -- stays above 6.0-6.5x over the next 12-18 months.
Furthermore, a material deterioration in the company's liquidity
position would heighten downward pressure on the ratings.
Nord Anglia Education, Inc. is headquartered in Hong Kong and
operates 42 international premium schools in Asia, Europe, the
Middle East, and North America, with more than 35,300 students
ranging in level from pre-school through to secondary school. NAE
also provides outsourced education and training contracts with
governments and curriculum products through its Learning Services
division. For the 12 months ended February 2016, NAE generated
revenues of about $749 million.
TATA STEEL UK: Sales Process Pushed Back Beyond EU Referendum
-------------------------------------------------------------
Jim Pickard and Michael Pooler at The Financial Times report that
the sales process for Tata Steel UK has been pushed back beyond
the EU referendum as the government seeks to remove unwelcome
distractions ahead of the plebiscite.
Around the weekend of June 25-26, when Tata's board is expected
to meet in Mumbai, is now understood to be the final deadline for
any potential buyers to sign a sales agreement with the Indian
company, the FT discloses.
That means that in the absence of a successful sale of the entire
business there will not be unwelcome headlines about thousands of
job losses ahead of referendum day on June 23, the FT notes.
According to the FT, one senior government figure insisted that
the Tata sale process had not been arranged to save face for
ministers: "It's fanciful to suggest that we have the power to
order Tata to do what we like."
But industry sources said there had been heavy pressure from the
government to extend the timeframe for the sale for as long as
possible, the FT relates. Tata originally wanted to wrap up a
deal by the end of May with a possible extension into mid-June,
the FT relays, citing people familiar with the situation.
Tata Steel is the UK's biggest steel company.
TATA STEEL UK: Management Team Won't Take on Pension Obligations
----------------------------------------------------------------
Michael Pooler at The Financial Times reports that the management
team leading a buyout bid for Tata Steel UK has said that taking
on the company's large pension obligations is "off the table".
Excalibur has emerged as one of the two main bidders for the
troubled steel factories alongside Liberty House, the commodities
trading group led by the entrepreneur Sanjeev Gupta, the FT
discloses.
According to the FT, it is in discussions with the government and
banks over an investment package of slightly more than GBP300
million to turn around the business, which employs 11,000 people
and was put up for sale by Tata following years of losses.
Stuart Wilkie, the head of Tata's UK strip steel unit who is
running the approach, as cited by the FT, said: "We want to be a
steel company, not a pension company that makes steel. . .The
pension [liability] for us is off the table".
This will raise further questions about who will carry the
responsibility for the GBP15 billion retirement fund with 130,000
members, but which is in deficit by GBP485 million and seen as a
potential obstacle to a sell-off, the FT says.
Mr. Wilkie, as cited by the FT, said Excalibur would look to set
up a defined-contribution fund in place of current arrangements.
Excalibur also intends to take up the government's offer of a
part-nationalization of the business and millions of pounds in
loans to fund around a quarter of the investment package, the FT
discloses.
Tata Steel is the UK's biggest steel company.
===============
X X X X X X X X
===============
* BOOK REVIEW: AS WE FORGIVE OUR DEBTORS: Bankruptcy and Consumer
-----------------------------------------------------------------
Authors: Teresa A. Sullivan, Elizabeth Warren,
& Jay Westbrook
Publisher: Beard Books
Softcover: 370 Pages
List Price: $34.95
Review by: Susan Pannell
Order your personal copy today at
http://www.beardbooks.com/beardbooks/as_we_forgive_our_debtors.ht
ml
So you think you know the profile of the average consumer
debtor: either deadbeat slouched on a sagging sofa with a
threeday growth on his chin or a crafty lower-middle class type
opting for bankruptcy to avoid both poverty and responsible debt
repayment.
Except that it might be a single or divorced female who's the
one most likely to file for personal bankruptcy protection, and
her petition might be the last stage of a continuum of crises
that began with her job loss or divorce. Moreover, the dilemma
might be attributable in part to consumer credit industry that
has increased its profitability by relaxing its standards and
extending credit to almost anyone who can scribble his or her
name on an application.
Such are among the unexpected findings in this painstaking study
of 2,400 bankruptcy filings in Illinois, Pennsylvania, and Texas
during the seven-year period from 1981 to 1987. Rather than
relying on case counts or gross data collected for a court's
administrative records, as has been done elsewhere, the authors
use data contained in the actual petitions. In so doing, they
offer a unique window into debtors' lives.
The authors conclude that people who file for bankruptcy are, as
a rule, neither impoverished families nor wily manipulators of
the system. Instead, debtors are a cross-section of America. If
one demographic segment can be isolated as particularly
debtprone, it would be women householders, whom the authors found
often live on the edge of financial disaster. Very few debtors
(3.7 percent in the study) were repeat filers who might be
viewed as abusing the system, and most (70 percent in the study)
of Chapter 13 cases fail and become Chapter 7s. Accordingly, the
authors conclude that the economic model of behavior -- which
assumes a petitioner is a "calculating maximizer" in his in his
decision to seek bankruptcy protection and his selection of
chapter to file under, a profile routinely used to justify
changes in the law -- is at variance with the actual debtor
profile derived from this study.
A few stereotypes about debtors are, however, borne out. It is
less than surprising to learn, for example, that most debtors
are simply not as well-off as the average American or that while
bankrupt's mortgage debts are about average, their consumer
debts are off the charts. Petitioners seem particularly
susceptible to the siren song of credit card companies. In the
study sample, creditors were found to have made between 27
percent and 36 percent of their loans to debtors with incomes
below $12,500 (although the loans might have been made before
the debtors' income dropped so low). Of course, the vigor with
which consumer credit lenders pursue their goal of maximizing
profits has a corresponding impact on the number of bankruptcy
filings.
The book won the ABA's 1990 Silver Gavel Award. A special 1999
update by the authors is included exclusively in the Beard Book
reprint edition.
*********
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.
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