/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/160628.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 Tuesday, June 28, 2016, Vol. 17, No. 126 Headlines B E L G I U M VLM AIRLINES: Files for Bankruptcy Following Financial Woes G E R M A N Y BILFINGER SE: S&P Revises Outlook to Stable & Affirms BB+/B CCRs KION GROUP: Moody's Puts Ba1 CFR on Review for Downgrade I R E L A N D MELLON COUNTRY: KBC Bank Appoints Administrative Receivers NAVIGATOR MORTGAGE: Moody's Cuts Class C Notes Rating to Ba2(sf) I T A L Y CREDITO VALTELLINESE: Fitch Affirms 'BB' LT Issuer Default Rating N E T H E R L A N D S DECO 14 - PAN EUROPE: Moody's Affirms C Rating on Class D Notes P O R T U G A L NOVO BANCO: Seeks to Buy Back EUR500MM Senior Debt at Discount R U S S I A BRUNSWICK RAIL: Debt Refinancing Talks with Creditors Collapse S P A I N CAIXABANK CONSUMO 2: Fitch Assigns 'B+sf' Rating to Class B Debt CAIXABANK CONSUMO 2: DBRS Finalizes BB Rating on Series B Notes PYMES BANESTO 2: S&P Affirms CCC- Rating on Class C Notes S W I T Z E R L A N D NEUCHATEL XAMAX: Debt Pile Totals CHF20MM Following Bankruptcy U N I T E D K I N G D O M COUNTYROUTE PLC: S&P Raises Rating on GBP5.5MM Loan to 'B-' DRACO PLC: Moody's Affirms Caa2 Rating on Class E Notes ECOTECH LONDON: Undergoes Liquidation Following Administration FHB MORTGAGE: Moody's Reviews Ba1 Covered Bonds for Downgrade TAURUS UK 2014-1: DBRS Confirms BB Rating on Class C Debt * Brexit Vote to Impact UK Corporate Insolvency Regime U Z B E K I S T A N KAPITALBANK: S&P Raises Counterparty Credit Ratings to 'B/B' ********* ============= B E L G I U M ============= VLM AIRLINES: Files for Bankruptcy Following Financial Woes ----------------------------------------------------------- Kurt Hofmann at Air Transport World reports that Belgian regional VLM Airlines has confirmed it has filed for bankruptcy. The carrier had filed a formal application in May asking for creditor protection for six months to avoid bankruptcy, ATW recounts. However, the company said it did not have enough time in those six months to compensate for the number of pilots who left the carrier and bring in additional financial resources, ATW relates. Also, a planned sale-leaseback deal for several aircraft in its fleet had failed because VLM would have needed at least two or three additional months for a successful re-capitalization, ATW discloses. "We realized that all restructuring measures we had implemented from January onward had been come too late for a sustainable restructuring," ATW quotes CEO Hamish Davidson as saying in the statement. In addition, several charter clients canceled some contracts, ATW notes. VLM Airlines, which was established in 1993, operated 11 Fokker 50s, transported 300,000 passengers in 2015 and employed 160 workers, according to ATW. ============= G E R M A N Y ============= BILFINGER SE: S&P Revises Outlook to Stable & Affirms BB+/B CCRs ---------------------------------------------------------------- S&P Global Ratings revised the outlook on Germany-based Bilfinger SE to stable from negative and affirmed the 'BB+/B' long- and short-term corporate credit ratings. S&P also affirmed the issue ratings on Bilfinger's outstanding rated debt instruments. The outlook revision follows Bilfinger's recent announcement that it has signed an agreement to sell its Building and Facility business segment to EQT for a purchase price of EUR1.2 billion. The transaction is subject to approval from the responsible authorities. Should the transaction be completed as expected, S&P believes the immediate impact on Bilfinger's business risk profile would be negative because it would significantly reduce the group's diversification, likely leading to higher earnings volatility. S&P therefore now views Bilfinger's business risk profile as fair rather than satisfactory. Nevertheless, S&P believes Bilfinger's credit ratios would significantly improve because the cash proceeds from the transaction would place the group in a net cash position post the closing. S&P understands Bilfinger intends not to make an extraordinary dividend to shareholders, but to use the proceeds to develop the group's industrial services business through acquisitions and to permanently strengthen its balance sheet. In S&P's view, the improving financial risk profile offsets the weakening business risk profile in the short term. Over the medium to long term, S&P understands that Bilfinger will focus on industrial services, where it intends to increase its market share, improve its portfolio of services, and enhance operating margins through strategic investments and targeted acquisitions. These acquisitions could again improve the business risk profile of the group over the longer run. S&P also expects a permanent significant reduction of adjusted net debt due to a decrease in operating leases and pensions, as well as lower financial indebtedness. S&P could lower the rating if the group's operating and financial performance weakened, or if its future financial policy was more aggressive than expected, for instance through the inclusion of material shareholder distributions from the sales proceeds or debt-funded acquisitions resulting in higher-than-expected financial leverage. Furthermore, a lack of success in executing restructuring and initiating strategic business development measures to enhance profitability in the existing business and provide future direction could result in rating pressure. S&P views upside potential for the rating over the next 12 months as limited, as this would require a tangible and sustainable strengthening of Bilfinger's business risk profile without weakening key credit ratios, in particular FFO to debt, from the currently expected levels. KION GROUP: Moody's Puts Ba1 CFR on Review for Downgrade -------------------------------------------------------- Moody's Investors Service has placed on review for downgrade the Ba1 corporate family rating and Ba1-PD probability of default rating of KION GROUP AG. RATINGS RATIONALE The rating action has been triggered by KION's announcement to acquire Dematic (DH Services Luxembourg S.a.r.l, B2 Positive), which will increase KION's leverage significantly above our downgrade trigger of 3.0x debt/EBITDA for its Ba1 rating. On June 21, 2016, KION announced the acquisition of Dematic at an enterprise value of $3.25 billion. The transaction will be initially financed with a EUR3 billion committed bridge loan facility, which will be refinanced through equity, long-term bond and bank debt. Supported by its main shareholder, Weichai Power, KION said it planned to utilize its authorized capital to issue up to 10% new shares and was also considering additional spectrum of equity generating instruments in line with its conservative financial policy. Moody's estimates the leverage to increase to a range between 3.3x to 4.3x by the end of 2017 from 2.7x as of December 2015, depending on the final financing mix and operating performance. The lower end assumes additional capital measures beyond the 10% authorized capital utilization and improvement of profitability for both Dematic and KION in line with the management's expectations. The higher end assumes just a 10% capital increase and more moderate improvements in profitability for both KION and Dematic. Despite the fact that the transaction enhances KION's business profile, the leverage range is above our triggers for a downgrade and therefore the transaction could result in a downgrade of one notch. In a severe scenario in the higher end of the range there is a possibility of a downgrade by up to two notches. The purchase of Dematic makes strategic sense for KION because it will broaden the service offering of KION and enable the company to provide full-range intralogistics solutions to its customers. Dematic has benefited from the strong market growth in supply chain automation, as reflected in very double-digit organic growth since 2013, which is expected to continue in the next few years. In addition, Dematic has a complementary geographical footprint compared to KION with 2/3 of revenues generated in the US, which will enhance KION's presence in North America (sales share to increase to 20% from 5%). The rating review will focus on the execution and integration risks and final capital structure of KION after completion of the acquisition, its financial policy and business strategy going forward as well as liquidity risks and hedging connected to the transaction. The principal methodology used in these ratings was Global Manufacturing Companies published in July 2014. Headquartered in Luxembourg, Dematic is a leading provider of logistics and material handling solutions with a strong focus on food, general merchandise and apparel retail. For the calendar year ended December 2015, the company generated revenues of USD1.8 billion and adj. EBIT margin of USD166 million (adjusted in line with KION's reported margin). Dematic is owned by funds managed by private equity firms AEA Investors LP and Teachers' Private Capital (the private equity arm of Ontario Teachers' Pension Plan). Combined with Dematic, KION will generate more than EUR6.7 billion in revenue for the calendar year 2015 and has a profitability of approx. 9.4% combined adjusted EBIT margin for this period. The transaction is subject to customary closing conditions and regulatory approvals and is expected to be closed in the fourth quarter of 2016. WHAT COULD CHANGE THE RATINGS - UP/DOWN Downward pressure might develop on the ratings if KION were to employ more aggressive financial policies, as exemplified by debt/EBITDA above 3.0x on a sustainable basis. Moody's would also consider a downgrade, if there is an evidence of permanent erosion of KION's profitability and sustained negative free cash flow. Upward pressure on the ratings would develop if KION were to demonstrate the ability to sustain double digit Moody's adjusted EBITA margin and further build a track record of conservative financial policies, with Moody's adjusted debt/EBITDA sustainably below 2.5x, while maintaining meaningful free cash flow generation through the cycle. ============= I R E L A N D ============= MELLON COUNTRY: KBC Bank Appoints Administrative Receivers ---------------------------------------------------------- Margaret Canning at Belfast Telegraph reports that a Co Tyrone hotel and country music venue has said it is business as usual following the appointment of receivers. KBC Bank Ireland appointed administrative receivers to the company behind Mellon Country Hotel last week, Belfast Telegraph relates. It's understood around 30 staff, who are mainly part-time, are employed at the hotel, Belfast Telegraph discloses. Insolvency experts Keenan Corporate Finance were appointed receivers by the bank, Belfast Telegraph relays. No one was available for comment but it's understood the business of the hotel is being scrutinized and options for its future are being considered, Belfast Telegraph notes. One possibility is that the hotel could go on the market, Belfast Telegraph states. Its last accounts, to the end of January 2015, showed liabilities of just over GBP673,000, according to Belfast Telegraph. NAVIGATOR MORTGAGE: Moody's Cuts Class C Notes Rating to Ba2(sf) ---------------------------------------------------------------- Moody's Investors Service has downgraded the rating of one note in Navigator Mortgage Finance No. 1 plc. The rating action reflects a correction of an assumption in the cash flow modelling for this deal as well as a re-assessment of the mitigating factors in relation to counterparty risk. Issuer: Navigator Mortgage Finance No. 1 plc -- EUR10 million C Notes, Downgraded to Ba2 (sf); previously on May 6, 2016 Upgraded to Ba1 (sf) RATINGS RATIONALE Moody's said, "The rating downgrade reflects corrections of both an assumption in our cash flow modelling for this transaction and our assessment of the mitigating factors to counterparty risk exposure." In the last rating action on May 6, 2016, an Expected Loss assumption of 6.09% was used in the cash flow modelling of the transaction instead of an updated assumption of 3.32%. Moody's also underestimated the sensitivity of class C to the counterparty risk related to set off and commingling. The action reflects the correct cash flow modelling and assessment of its result, as well as a correction of Moody's assessment of the mitigating factors to counterparty risk exposure. Moody's also took into consideration the updated assessment of the servicer and originator in the analysis. ========= I T A L Y ========= CREDITO VALTELLINESE: Fitch Affirms 'BB' LT Issuer Default Rating ----------------------------------------------------------------- Fitch Ratings has affirmed Credito Valtellinese's (Creval) Long- Term Issuer Default Rating (IDR) at 'BB' and Viability Rating at 'bb'. The Outlook is Stable. KEY RATING DRIVERS IDRS AND VR Creval's IDRs are driven by the bank's standalone profile, as captured by the Viability Rating (VR). Creval's capitalization is weak relative to the bank's risk profile and this factor has a strong influence on the VR. In our opinion, Creval's large stock of unreserved impaired loans, which were equal to a high 140% of Fitch Core Capital (FCC) at end- 2015, renders the institution highly vulnerable to even moderate shocks. The ratio has increased despite a strengthening of regulatory capital in recent years as impaired loans have continued to increase, and because of the bank's reliance on collateral, which results in a fairly low coverage of impaired loans. We expect the bank's capitalization to remain under pressure as long as the stock of impaired loans remains high and internal capital generation remains at its current low levels. Fitch said, "Gross impaired loans accounted for 25% of gross loans at end-1Q16, which is high compared with domestic and international peers. Asset quality deteriorated because of a weak economic environment in Italy, but also because of the bank's fairly high exposure to a weak real estate sector. Because loan impairment allowances take into account the value of collateral backing the loan, which takes a long time to realise, the bank is exposed to changes in the value of collateral, which is often in the form of real estate assets. We expect Creval's VR to remain rated below investment-grade at least as long as unreserved impaired loans account for more than 100% of FCC. "Creval has reduced its risk appetite and is addressing its asset quality problems more actively than peers through tighter underwriting standards, more efficient recovery and collection processes and sales of impaired loans. While these actions are positive for asset quality, we believe that any improvement in asset quality will only be gradual given the nascent market for impaired loans in Italy, and pressure on commercial real estate prices. "The bank posted operating losses from 2012 to 2015, but net income was boosted in 2015 by a EUR250m one-off gain. We expect operating profitability to remain weak throughout 2016. Creval's business model largely depends on traditional commercial lending and deposit-taking, which makes its profitability vulnerable to low interest rates and keen competition for better-quality clients. The bank has been successful in sustaining its net interest margin by reducing funding costs but high operating expenses and loan impairment charges (LICs) have resulted in weak overall profitability. "The bank's cost/income ratio of above 60% in 2015 is high but shows a moderately improving trend. Creval is focusing on managing costs more efficiently and has implemented plans to reduce staff numbers and to simplify its group structure. However, we do not expect these cuts to be large enough to result in a significant improvement in efficiency. "LICs have fallen as the flow of new impaired loans has reduced in recent quarters but we believe that current reserve coverage is insufficient for the bank to sell existing impaired loans at book value and that it may have to write down the loans further before a sale." Funding and liquidity are adequate and have proved stable to date. Funding sources are adequately diversified, but Creval's status of regional bank means that funding will remain largely dependent on customer deposits, particularly in the bank's home region of Lombardy. Customer deposits are sufficiently granular, reflecting the prevalence of private depositors over SME and corporate deposits. This should also underpin funding stability. Creval has access to central bank sources, if required. KEY RATING DRIVERS SUPPORT RATING AND SUPPORT RATING FLOOR The SR and SRF reflect Fitch's view that senior creditors can no longer rely on receiving full extraordinary support from the sovereign in the event that a bank becomes non-viable. The EU's Bank Recovery and Resolution Directive (BRRD) and the Single Resolution Mechanism (SRM) for eurozone banks provide a framework for resolving banks that require senior creditors participating in losses, if necessary, instead of or ahead of a bank receiving sovereign support. RATING SENSITIVITIES IDRS AND VR Creval's ratings are primarily sensitive to a further deterioration in asset quality, which could be the result of a further deterioration in the operating environment, and to a reduction in the reserve coverage of existing impaired loans. A further increase in impaired loans net of reserves in relation to FCC would likely result in a downgrade. Creval's ratings would also come under pressure if the bank fails to improve its operating efficiency or to improve sustainable operating profitability. An upgrade would be contingent on a material improvement in asset quality and substantially stronger internal capital generation through a sustained improvement in operating profitability. SUPPORT RATING AND SUPPORT RATING FLOOR An upgrade of the SR and upward revision of the SRF would be contingent on a positive change in the sovereign's propensity to support Creval. While not impossible, this is highly unlikely, in Fitch's view. The rating actions are as follows: Credito Valtellinese Long-Term IDR: affirmed at 'BB'; Outlook Stable Short-Term IDR: affirmed at 'B' Viability Rating: affirmed at 'bb' Support Rating: affirmed at '5' Support Rating Floor: affirmed at 'No Floor' Senior unsecured notes and EMTN: affirmed at 'BB'/'B' ===================== N E T H E R L A N D S ===================== DECO 14 - PAN EUROPE: Moody's Affirms C Rating on Class D Notes --------------------------------------------------------------- Moody's Investors Service has upgraded the rating of Class A3 and affirmed the ratings of Classes B, C and D Notes issued by DECO 14 -- Pan Europe 5 B.V. Moody's rating action is as follows: Issuer: DECO 14 - Pan Europe 5 B.V. -- EUR65 million Class A3 Notes, Upgraded to Aa2 (sf); previously on Mar 25, 2014 Downgraded to A1 (sf) -- EUR100 million Class B Notes, Affirmed Ba1 (sf); previously on Mar 25, 2014 Downgraded to Ba1 (sf) -- EUR65 million Class C Notes, Affirmed Caa1 (sf); previously on Mar 25, 2014 Downgraded to Caa1 (sf) -- EUR101 million Class D Notes, Affirmed C (sf); previously on Mar 25, 2014 Downgraded to C (sf) Moody's does not rate the Class E, Class F, Class G and the Class X Notes. RATINGS RATIONALE The upgrade action reflects the positive impact of repayment proceeds of EUR126 million over the last year as well as our improved view of the refinancing prospects for the Armilla Clarice 2 loan that is scheduled to mature in October 2016. This improvement reflects the positive impact of the 11-year weighted average lease extension with the single tenant Telecom Italia S.p.A. (Ba1) on the property portfolio." The ratings on the Classes B, C and D Notes are affirmed because the ratings are commensurate with the risk assessment on the defaulted loans in the pool (72% of the current pool balance). The decline in the Euribor rate to negative levels has been one of the drivers behind a decrease in the Issuer revenue triggering interest shortfalls on the Class F and Class G Notes at the April 2016 IPD. The continued negative interest rate environment combined with a scenario in which the higher margin Armilla Clarice 2 and Arcadia loans repay, could further exacerbate the interest shortfalls on the remaining class of notes. Moody's understanding is that in the absence of loan level interest shortfalls the liquidity facility covers senior expenses incurred by the Issuer but does not cover Note level interest shortfalls. Moody's rating action reflects a base expected loss in the range of 40%-50% of the current balance similar to the previous review. Moody's derives this loss expectation from the analysis of the default probability of the securitized loans (both during the term and at maturity) and its value assessment of the collateral. =============== P O R T U G A L =============== NOVO BANCO: Seeks to Buy Back EUR500MM Senior Debt at Discount -------------------------------------------------------------- Alice Gledhill at Reuters reports that Novo Banco is seeking to buy back up to EUR500 million of senior debt, some of which is held by retail investors, at a discount to par as it looks to bolster its balance sheet. The Portuguese bank has launched a discounted cash tender offer on eight euro and US dollar bonds, which have a face value of EUR2.39 billion-equivalent, through an unmodified Dutch auction, Reuters relates. Banks bought billions of subordinated debt at discounted prices during the financial crisis as a way of bolstering their balance sheets but senior purchases below par are much more unusual, Reuters discloses. "Novo Banco's business plan for the medium-to-long term, which was developed on the basis of the restructuring plan focuses on restoring Novo Banco's profitability while continuing the orderly reduction of exposure to non-core assets," Reuters quotes the bank as saying in a statement. The bonds' secondary prices have been under pressure due to concerns around the Portuguese economy, the status of Novo Banco as a bridge bank and its sale process, among other things, Reuters relays. The bank reminded investors that while the Bank of Portugal said the transfer of assets at the end of last year was "final and definitive", Novo Banco remained investors that they could be bailed in, Reuters notes. Headquartered in Lisbon, Novo Banco, S.A. provides various financial products and services to private, corporate, and institutional customers. * * * As reported in the Troubled Company Reporter-Europe on Jan. 6, 2016, Moody's Investors Service downgraded to Caa1 from B2 the senior debt and long-term deposit ratings of Portugal's Novo Banco, S.A. and its supported entities. This follows the Bank of Portugal's (BoP) announcement on Dec. 29, 2015, that it had approved the recapitalization of Novo Banco by transferring EUR1,985 million of senior debt back to Banco Espirito Santo, S.A. (BES unrated). Moody's said the outlook on Novo Banco's deposit and senior debt ratings is now developing. =========== R U S S I A =========== BRUNSWICK RAIL: Debt Refinancing Talks with Creditors Collapse -------------------------------------------------------------- Eric J. Weiner at Bloomberg News reports that talks between Brunswick Rail Ltd. and a group of creditors on refinancing the company's debt broke down as both sides rejected proposals to clear the impasse. Brunswick said in a statement on June 24, it had been meeting with a group of holders of its US$600 million of 6.5% unsecured notes due 2017, Bloomberg relates. According to Bloomberg, the company had offered the noteholders an all-cash swap valued at about US$480 per US$1,000 of principle and an exchange involving cash, pay-in-kind debt and warrants for 25% of the company's enlarged equity. But the group rejected it, Bloomberg relays. The noteholders countered with a proposal to inject US$15 million of new cash into Brunswick in return for a cash tender valued at between US$550 to US$600 per US$1,000 of principal of the notes, PIK notes and 49% of the company's stock, Bloomberg discloses. The company rejected that offer, Bloomberg recounts. In January, the creditors -- which include VR Capital Group Ltd., Ashmore Group Plc and Pacific Investment Management Co. -- questioned Brunswick about its decision to refinance a loan before entering debt-restructuring talks, Bloomberg relays. Brunswick Rail Ltd. is a Russian rail car company. ========= S P A I N ========= CAIXABANK CONSUMO 2: Fitch Assigns 'B+sf' Rating to Class B Debt ---------------------------------------------------------------- Fitch Ratings has assigned Caixabank Consumo 2, FTA's asset- backed floating-rate notes, due April 2060, final ratings, as follows: EUR 1,170 million Class A: 'Asf'; Outlook Stable EUR 130 million Class B: 'B+sf'; Outlook Stable This transaction is a securitization of unsecured loans and real estate-secured consumer loans. All the loans are originated and serviced by CaixaBank (BBB/Positive/F2), which is also the account bank counterparty. KEY RATING DRIVERS Mixed Risk and Dual Criteria Approach The collateral comprises two product types: unsecured consumer loans (around 75%) and real estate (RE) secured consumer loans (around 25%). The RE secured consumer loans have a weighted remaining life to maturity of 16 years and the unsecured portion of the collateral is shorter with a weighted remaining life to maturity of four years. The agency used its Global Consumer ABS Criteria to analyze unsecured consumer loans granted to individuals and its EMEA RMBS Rating Criteria complemented by Criteria Addendum: Spain - Residential Mortgage Assumptions to analyze the remaining portfolio. Limited Credit Losses Fitch has analyzed the unsecured portfolio's credit risks and formed a base case default expectation of 4.5% and a recovery rate expectation of 30% for the lifetime of the portfolio. These base cases were derived based on historical data provided by CaixaBank, dating back to 2006. Fitch's lifetime default base case and recoveries expectations for RE secured consumer loans are 10.6% and 43.8% respectively, derived from its proprietary Spanish RMBS default model (ResiGlobal), which is based on the criteria for analyzing securities backed by Spanish residential mortgage loans. Counterparty Dependency Caps Rating CaixaBank acts as originator, servicer, bank account provider and paying agent. CaixaBank's rating sufficiently mitigates payment interruption risk for a note rating up to 'Asf' category. CaixaBank will post a reserve upon the loss of a 'BBB' rating to address commingling risk. The rating of the notes is capped at 'A+sf', one notch higher than the initial rating of the senior notes, as the rating trigger upon which the account bank would be replaced is set at 'BBB'. Interest Rate Risk The transaction is exposed to interest rate risk as a relevant portion of the assets (around 72%) pay fixed interest rate while both class A and B pay a floating coupon. Fitch found that notes were able to withstand an increasing interest rate stress commensurate with their rating derived in accordance with Fitch's criteria for interest rate stresses in structured finance. The impact of increasing interest rates is mitigated by the high interest rate of fixed paying loans (around 9%), which makes excess spread available at the beginning of the life of the transaction even under an increasing interest rate scenario and the fact that RE secured consumer loans (the ones with the longest time to maturity) are majorly floating, thereby reducing the potential mismatch at the end of the life of the deal. RATING SENSITIVITIES Rating sensitivity to increased default rate assumptions (class A/ class B) Current rating: 'Asf' / 'B+sf' Increase in default rate by 15: 'A-sf' / 'B-sf' Increase in default rate by 30%: 'BBB+sf' / 'CCCsf' Increase in default rate by 45%: 'BBBsf' / 'CCsf' or below Rating sensitivity to reduced recovery rate assumptions (class A/ class B) Current rating: 'Asf' / 'B+sf' Decrease in recovery rate by 15: 'Asf' / 'B-sf' Decrease in recovery rate by 30%: 'A-sf' / 'B-sf' Decrease in recovery by 45%: 'A-sf' / 'CCCsf' Rating sensitivity to multiple factors (class A/ class B) Current rating: 'Asf'/'B+sf' Increase in default rate by 15%, decrease in recovery rate by 15%: 'BBB+sf' / 'CCCsf' Increase in default rate by 30%, decrease in recovery rate by 30%: 'BBBsf' / 'CCsf'' or below Increase in default rate by 45%, decrease in recovery rate by 45%: 'BBB-sf' / 'CCsf'' or below DUE DILIGENCE USAGE No third party due diligence was provided or reviewed in relation to this rating action. DATA ADEQUACY Fitch reviewed the results of a third party assessment conducted on the asset portfolio information, which indicated one error related to the loan formalization information. This finding was immaterial to this analysis, as set out more fully in the new issue report. In addition, the loan affected by the finding was excluded from the securitized pool as described in the transaction prospectus Overall, Fitch's assessment of the asset pool information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. CAIXABANK CONSUMO 2: DBRS Finalizes BB Rating on Series B Notes --------------------------------------------------------------- DBRS Ratings Limited finalized its provisional ratings on the following notes issued by Caixabank Consumo 2 FT (the Issuer): -- EUR1,170,000,000 Series A at A (low) (sf); -- EUR130,000,000 Series B at BB (sf). The Issuer is a static securitization of unsecured consumer loans and mortgage consumer loans originated by Caixabank S.A. (Caixabank). The mortgage consumer loans include standard loans and current drawdowns of a revolving mortgage credit line called Credito Abierto. Mortgage consumer loans are secured by first- and second-lien mortgage on properties located in Spain. At the closing of the transaction, the Issuer will use the proceeds of the Series A and Series B notes to fund the purchase of the unsecured consumer loans and the mortgage consumer loans from the Seller, Caixabank. Caixabank will also be the servicer of the portfolio. In addition, Caixabank will provide separate subordinated loans to fund the initial expenses and the Reserve Fund. The securitization will take place in the form of a fund, in accordance with Spanish Securitisation Law. The ratings are based on DBRS's review of the following analytical considerations: -- The transaction's capital structure and the form and sufficiency of available credit enhancement. The Series A notes benefit from EUR130 million (10%) subordination of the Series B notes and the EUR52 million (4.0%) Reserve Fund, which is available to cover senior fees as well as interest and principal of the Series A notes and Series B notes once the Series A notes are paid in full. The Reserve Fund target will amortize subject to the target levels and performance triggers. The Series A notes will benefit from full sequential amortization, whereby principal on the Series B notes will not be paid until the Series A notes have been redeemed in full. Additionally, the Series A principal will be senior to the Reserve Fund replenishment and Series B notes interest payments in the priority of payments. -- DBRS has been provided with the final portfolio equal to EUR1.3 billon (as June 22, 2016). DBRS based the rating on the provisional portfolio (as of May 23, 2016). The main characteristics of the portfolio include: (1) 75.0% of the portfolio are unsecured consumer loans and 25.0% of the portfolio are mortgage consumer loans (standard loans and Credito Abierto drawdowns); (2) the top three geographical concentrations areas are Catalonia (34.1%), Andalusia (16.9%) and Madrid (11.5%); (3) weighted-average (WA) seasoning of 2.5 years; (4) the WA margin of floating loans is 2.20% and the WA coupon is 7.30%; and (5) 65.9% of the portfolio corresponds to fixed-rate loans and the WA remaining term is 7.0 years. DBRS has separately analyzed the consumer mortgage loans and the unsecured consumer portion. -- The mortgage consumer loans represented 25.0% of the total portfolio balance and it was analyzed using the European RMBS Insight Model (the Model) to estimate the defaults and losses of the portfolio. DBRS assigned a Spanish Underwriting Score of 3 to the standard loan portion and a Spanish Underwriting Score of 1 to the Credito Abierto drawdowns portion. The main characteristics of the mortgage consumer loans are: (1) 71.1% indexed WA current loan-to-value (INE Q2 2015); (2) WA seasoning of 6.3 years; (3) 21.0 % of the portfolio classified as self-employed; (4) the WA margin of the assets is 1.50%, which is considerably high for mortgage loans; and (5) 23.9% of the mortgage portfolio had a remaining term greater than 20.0 years. -- The unsecured consumer loans represented the 75.0% of the total portfolio balance and its main characteristics are: (1) 86.8% of the portfolio are fixed-rate loans; (2) the WA fixed-rate coupon is 9.6% and the WA margin for floating-rate loans is 3.8%; (3) WA seasoning is 1.3 years; and (4) the WA remaining term is 4.0 years. -- The floating-rate loans are mainly linked to 12-month Euribor. The Series A and Series B notes are floating-rate liabilities indexed to three-month Euribor. The basis risk is mitigated by the amounts credited to the Reserve Fund. Additionally, the Series A notes benefit from the senior position in the priority of payments to the Series B notes and DBRS stressed the interest rates as described in the DBRS methodology "Unified Interest Rate Model for European Securitisations." -- The credit quality of the portfolio backing the notes and the ability of the servicer to perform its servicing responsibilities. DBRS was provided with Caixabank's historical performance data divided by unsecured consumer loans and consumer mortgage loans (both standard loans and Credito Abierto drawdowns). -- In accordance with the transaction documentation, the servicer is able to grant loan modifications without consent of the management company within the range of permitted variations. According to the documentation, permitted variations for up to 5% of the initial portfolio for maturity extension to September 2056 and reduction of loan margins to a portfolio spread equal to three-month Euribor plus 1.25%. DBRS stressed the margin of the portfolio and extended the maturity date for 5% of the mortgage loans up to September 2056 in its cash flow analysis. -- The transaction's account bank agreement and respective replacement trigger require Caixabank acting as treasury account to find (1) a replacement account bank or (2) an account bank guarantor upon the loss of a BBB (low) account bank applicable rating. The DBRS Critical Obligations Rating (COR) of Caixabank is A (high) while the DBRS rating for Caixabank's Senior Debt is A (low). The account bank applicable rating is the higher between one notch below the Caixabank COR or Caixabank's Senior Debt rating. -- The legal structure and presence of legal opinions addressing assignment of the assets to the Issuer and the consistency with DBRS's "Legal Criteria for European Structured Finance Transactions" methodology. As a result of the analytical considerations for mortgage consumer assets, DBRS derived a base-case probability of default rate (PDR) of 8.6% and loss given default (LGD) of 21.9%, which resulted in an estimated loss (EL) of 2.1% using the Model. For the unsecured consumer loans, the gross loss and recovery assumption inferred from the received information are 12.5% and 21.6%, respectively. DBRS cash flow assumptions stress the timing of defaults and recoveries, prepayment speeds and interest rates. Based on a combination of these assumptions, a total of 16 cash flow scenarios were applied to test the capital structure and ratings on the notes. PYMES BANESTO 2: S&P Affirms CCC- Rating on Class C Notes --------------------------------------------------------- S&P Global Ratings raised its credit ratings on Fondo de Titulizacion de Activos PYMES Banesto 2's class A2 and B notes. At the same time, S&P has affirmed its rating on the class C notes. "We have used data from the March 2016 investor report to perform our credit and cash flow analysis and have applied our European small and midsize enterprise (SME) collateralized loan obligation (CLO) criteria and our current counterparty criteria. For ratings in this transaction that are above our rating on the sovereign, we have also applied our criteria for rating single- jurisdiction securitizations above the sovereign foreign currency rating," S&P said. CREDIT ANALYSIS PYMES Banesto 2 is a single-jurisdiction cash flow CLO transaction securitizing a portfolio of SME loans that was originated by Banco Santander S.A. in Spain. The transaction closed in November 2006. S&P has applied its European SME CLO criteria to determine the scenario default rate (SDR)--the minimum level of portfolio defaults that S&P expects each tranche to be able to withstand at a specific rating level using CDO Evaluator. To determine the SDR, S&P adjusted the archetypical European SME average 'b+' credit quality to reflect two factors (country and originator, and portfolio selection adjustments). S&P ranks the originator in the moderate category. Taking into account Spain's Banking Industry Country Risk Assessment (BICRA) score of 5 and the originator's average annual observed default frequency, S&P has applied a downward adjustment of one notch to the 'b+' archetypical average credit quality. To address differences in the creditworthiness of the securitized portfolio compared with the originator's entire loan book, S&P further adjusted the average credit quality by one notch. As a result of these adjustments, S&P's average credit quality assessment of the portfolio was 'b-', which it used to generate S&P's 'AAA' SDRs. After determining the average portfolio quality, where an originator's internal SME scoring system is not used as a building block in S&P's rating analysis, it uses the same average portfolio quality for each performing asset in the portfolio for the purpose of inclusion in CDO Evaluator. S&P has calculated the 'B' SDR, based primarily on its analysis of historical SME performance data and S&P's projections of the transaction's future performance. S&P has reviewed the originator's historical default data, and assessed market developments, macroeconomic factors, changes in country risk, and the way these factors are likely to affect the loan portfolio's creditworthiness. S&P interpolated the SDRs for rating levels between 'B' and 'AAA' in accordance with S&P's European SME CLO criteria. RECOVERY RATE ANALYSIS S&P applied a weighted-average recovery rate (WARR) at each liability rating level by considering the asset type and its seniority, the country recovery grouping, and the observed historical recoveries in this transaction. COUNTRY RISK S&P's long-term rating on the Kingdom of Spain is 'BBB+'. S&P's RAS criteria require the tranche to have sufficient credit enhancement to pass a minimum of a severe stress to qualify to be rated above the sovereign. CASH FLOW ANALYSIS S&P used the reported portfolio balance that it considered to be performing, the principal cash balance, the current weighted- average spread, and the weighted-average recovery rates that S&P considered to be appropriate. S&P subjected the capital structure to various cash flow stress scenarios, incorporating different default patterns and timings and interest rate curves, to determine the rating level, based on the available credit enhancement for each class of notes under S&P's European SME CLO criteria. Under S&P's RAS criteria, it can rate a securitization up to four notches above its foreign currency rating on the sovereign if the tranche can withstand severe stresses. The available credit enhancement for the class A2 notes does withstand severe stresses. S&P has therefore raised to 'AA- (sf)' from 'BBB+ (sf)' its rating on the class A2 notes. The increased available credit enhancement for the class B notes is commensurate with a higher rating than currently assigned. S&P has therefore raised to 'A+ (sf)' from 'BB- (sf)' its rating on the class B notes. Given that the rating level for the class C notes is lower than the sovereign rating, S&P has not applied its RAS criteria to its analysis of this class of notes. The available credit enhancement for the class C notes is commensurate with its currently assigned rating. S&P has therefore affirmed its 'CCC- (sf)' rating on the class C notes. RATINGS LIST Fondo de Titulizacion de Activos PYMES Banesto 2 EUR1 bil floating-rate notes Rating Rating Class Identifier To From A2 ES0372260010 AA- (sf) BBB+ (sf) B ES0372260028 A+ (sf) BB- (sf) C ES0372260036 CCC- (sf) CCC- (sf) ===================== S W I T Z E R L A N D ===================== NEUCHATEL XAMAX: Debt Pile Totals CHF20MM Following Bankruptcy -------------------------------------------------------------- Swissinfo.ch reports that officials have concluded Swiss football club FC Neuchatel Xamax, which slipped into near-oblivion in 2012 after being declared bankrupt, left debts totalling CHF20 million (US$20.8 million), more than double earlier estimates. According to Swissinfo.ch, the former owner, Bulat Chagaev, is to face trial in Neuchatel in August for mismanagement and attempted fraud. On June 23, Alain Rivaux, a member of the Neuchatel cantonal government, announced that the club's bankruptcy on January 26, 2012 had left debts amounting to CHF20 million, Swissinfo.ch relates. Xamax was formally declared bankrupt by a court in canton Neuchatel in late January 2012, Swissinfo.ch recounts. A week earlier, the Swiss League revoked the team's license because of suspected fraud and failure to prove it could meet its financial obligations, Swissinfo.ch relays. At that time, the debts were estimated to be at least CHF8 million, Swissinfo.ch notes. =========================== U N I T E D K I N G D O M =========================== COUNTYROUTE PLC: S&P Raises Rating on GBP5.5MM Loan to 'B-' ----------------------------------------------------------- S&P Global Ratings raised its issue rating on the GBP5.5 million subordinated secured mezzanine bank loan (junior debt) issued by U.K.-based concessionaire CountyRoute (A130) PLC (CountyRoute or the project) to 'B-' from 'CCC+'. The outlook is stable. At the same time, S&P affirmed its 'B+' issue rating on CountyRoute's GBP88 million senior secured bank loan. The outlook is stable. Summary CountyRoute issued debt in 1999 to fund the construction of a shadow toll and availability road, the A130, a 15-kilometer road between Chelmsford and Basildon in southeast England. The A130 was the first local authority road to be built using a private finance initiative in the U.K. It is operated under a 30-year concession granted by Essex County Council. The project has experienced a third consecutive year of positive traffic growth, averaging 3.5% overall in the year through March 2016. The robust traffic performance has led to solid financial performance and strengthening of future ratio expectations. The improved financial performance expectations have prompted S&P to increase its view of the operations phase stand-alone credit profile (SACP) on the senior debt by one-notch to 'bb-' from 'b+'. This reflects S&P's expectations that the forecast senior debt service coverage ratios (DSCR) will be above 1.0x coverage for the remainder of the debt repayment period. However, S&P assesses the project's parent linkage as capped. Consequently, S&P's view of the credit quality of its sole shareholder, John Laing Group PLC, constrains the project's SACP. S&P has therefore affirmed its 'B+' rating on the senior secured debt. At the same time, the improved financial performance has enabled the junior debt to exit temporarily from debt service lock-up. All due principal and interest payments have subsequently been made. Junior debt lock-up occurs when loan covenants are breached and results in a permitted deferral of principal and interest. S&P anticipates that full junior debt service (principal and interest) from cash flows will occur by the maturity date of March 2026, despite a return to lock-up between 2018 and 2022, when the project cash flows are suppressed by lifecycle maintenance obligations. S&P do not anticipate that reserves built up in a voluntary reserve account will be needed for the debt repayment, but they provide an additional layer of liquidity protection. Operations Phase SACP As construction is complete, the operations phase SACP drives the rating. It reflects the weak, but improving, financial performance, under S&P's base case, resulting from relatively low traffic volumes. However, this risk is partially mitigated by the strength of the project under S&P's downside sensitivity stress case. Under S&P's stress case, CountyRoute can withstand an extended period of traffic stress supported by cash balances in the debt service, junior, and voluntary reserve accounts. The project's forecast financial performance continues to be at a level such that S&P anticipates periodic breaches of shareholder and junior debt distribution covenants will occur in the remaining debt repayment period, resulting in free cash flow being swept into a voluntary reserve account and providing an additional layer of liquidity to lenders. Senior Debt The stable outlook on the senior secured debt rating reflects S&P's opinion that, despite continued solid traffic growth over 2015-2016, traffic volume growth on this mature road is unlikely to markedly outperform U.K. economic performance indicators in the remainder of the debt repayment period. S&P expects the project to be able to meet its operational costs and senior debt service requirements in full and on schedule from operational cash flow, with extra liquidity protection provided by trapped cash reserves, as a result of periodic junior debt and distribution covenant breaches. Downside scenario. S&P could take a negative rating action on the senior debt, if project cash flows were to weaken materially as a result of, for example, lower-than-forecast traffic growth or higher-than- expected operating and major maintenance costs driven by structural integrity issues of the pavement. S&P could also take negative action if its view of John Laing Group PLC's credit quality were to decrease further. Upside scenario The rating on the senior debt is capped by S&P's view of the parent's credit quality. Rating upside is limited and depends on an improvement in S&P's view of the credit quality of John Laing PLC. S&P could revise upward its assessment of the SACP of the senior debt if the project's forecast financial profile improved. This could occur, for example, if traffic volumes were to grow faster than S&P forecasts over the next few years. Junior Debt The stable outlook on the junior debt reflects S&P's expectation that although the terms of the debt covenants will periodically prevent junior debt service over the next few years, full repayment (including all due interest and principal) will occur by the debt's maturity in March 2026. Repayment will likely be covered by the project's cash flows, which S&P forecasts will strengthen materially toward the back end of the concession, following completion of the majority of pavement lifecycle expenditure and the repayment of the majority of senior debt. Extra protection is provided by the cash swept into the voluntary reserve account. Downside scenario S&P could take negative rating on the junior debt if it forecasts debt service deferral will occur for a sustained period over the course of the debt repayment period and S&P anticipates that project cash flows and cash reserves are not sufficient to fully repay the debt. This could occur, for example, if traffic volumes are noticeably below our base-case expectations. Upside scenario S&P currently sees limited scope for rating upside. That said, S&P could raise its rating on the junior debt if traffic volumes rise significantly above S&P's base-case forecast or if funds from the voluntary reserve account are used to repay junior debt, leading to a forecast minimum average DSCR comfortably above 1x at all times. DRACO PLC: Moody's Affirms Caa2 Rating on Class E Notes ------------------------------------------------------- Moody's Investors Service has affirmed the rating of Class E Notes issued by Draco (Eclipse 2005-4) plc. Issuer: DRACO (ECLIPSE 2005-4) plc GBP12.1 mil. Class E Notes, Affirmed Caa2 (sf); previously on Dec. 22, 2014, Downgraded to Caa2 (sf) Moody's does not rate the Class F Notes. RATINGS RATIONALE The rating on Class E is affirmed as Moody's continues to maintain its loss expectation on the single remaining loan, the Herbert House Loan. The loan is backed by a single office asset located in Birmingham, UK and has been vacant since the single tenant exercised the break option and terminated the lease in July 2015. According to the 2012 valuation report, the property is in a poor state of repair. The vacant property is in the process of being sold and Moody's understands from the Special Servicer (Capita Asset Services (London) Ltd) that the sale process is currently at final bids stage with a view of completing the sale as soon as possible. The reported 2012 underwritten VPV of the asset is GBP3.2 million which, if achieved, would redeem the Class E in full. However, the sale price has not yet been confirmed or sale contracts signed, and Moody's is still of the opinion that the Class E may experience losses between 10% - 20% of the current note balance. At the last IPD in April 2016, GBP650,000 proceeds were released by the Special Servicer from dilapidation funds to amortize the Class E notes, this has increased credit enhancement for Class E to 64.5% from 59.2% since last review. Methodology Underlying the Rating Action: The principal methodology used in this rating was Moody's Approach to Rating EMEA CMBS Transactions published in July 2015. Other factors used in this rating are described in European CMBS: 2016-18 Central Scenarios published in April 2016. Factors that would lead to an upgrade or downgrade of the rating: Main factor or circumstance that could lead to a downgrade of the rating is a lower than expected recovery proceeds following the sale of the vacant property. Main factor or circumstance that could lead to an upgrade of the rating is a higher sales price of the property than anticipated, resulting in higher recovery proceeds. MOODY'S PORTFOLIO ANALYSIS As of the April 2016 IPD, the transaction balance has declined by 97% to GPB7.19 Million from GPB284.98 Million at closing in December 2005 due to the pay-off of four loans originally in the pool. The notes are currently secured by one first-ranking legal mortgage over one commercial property remaining in the pool. Since the last review no loans repaid/prepaid. The pool has an above average concentration in terms of geographic location (100% UK) and property type (100% Office). Moody's uses a variation of the Herfindahl Index, in which a higher number represents greater diversity, to measure the diversity of loan size. Large multi- borrower transactions typically have a Herf of less than 10 with an average of around 5. This pool has a Herf of 1, the same as at Moody's prior review. Moody's weighted average LTV ratio on the securitized pool is 312%. SUMMARY OF MOODY'S LOAN ASSUMPTIONS Herbert House Loan - LTV: 340.9%; Defaulted; Expected Loss 65%- 75%. The GBP7.2 million Herbert House Loan is secured by an office property in the central business district of Birmingham. In October 2014, the Special Servicer appointed fixed charge receivers to work-out the loan with the aim to maximize recoveries for the noteholders. The property has been vacant since July 2015 when the single tenant exercised their break option. The loan defaulted on its maturity date in January 2014 and was transferred to Special Servicing. The Herbert House property is an early 1900s office building situated in the prime office district of Birmingham of 52,150 sq ft. (4,845 sqm). Based on the valuation as of 2012, the property's vacant possession value (VPV) was GBP 3.2 million. According to the valuation, the property is in a tired state of repair and requires significant capital expenditures to improve the specification of the building. Moody's has based its updated assessment on a vacant possession value (VPV) in the range of GBP2.0 to 2.5 million and therefore expects the principal loss on the loan at the upper end of the 65% to 75% range. ECOTECH LONDON: Undergoes Liquidation Following Administration -------------------------------------------------------------- Platts reports that Ecotech London is undergoing liquidation after being placed under administration. "On May 31, we went into administration. We tried working out something," which did not come to fruition, so we are "now going into liquidation," Platts quotes Javed Mawji, the CEO of Ecotech London, as saying. According to Platts, market participants said British PET recyclers were at a disadvantage to their European counterparts due to the mixed collection system in place within the UK, which pushed their cost base higher due to lower yields of recyclable PET from the bales. Ecotech London is a UK-based PET recycler. The company specializes in the regrinding of PET and is capable of processing clear and coloured bottles, preforms, as well as post-industrial PET scrap. FHB MORTGAGE: Moody's Reviews Ba1 Covered Bonds for Downgrade ------------------------------------------------------------- Moody's Investors Service has placed on review for downgrade the Ba1 assigned to the covered bonds issued by FHB Mortgage Bank Co. Plc. (FHB or the issuer, CR assessment B2(cr) on review for downgrade). RATINGS RATIONALE The review of the covered bonds follows the review of the CR assessment of the issuer. 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 1 notch. The CR assessment reflects an issuer's ability to avoid defaulting on certain senior bank operating obligations and contractual commitments, including covered bonds. Moody's may use a CB anchor of CR assessment plus one notch in the European Union or otherwise where an operational resolution regime is particularly likely to ensure continuity of covered bond payments. The cover pool losses for this program are 36.2%. 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 25.5% and collateral risk of 10.8%. 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 16.1%. The over-collateralization in the cover pool is 15%, of which FHB provides 13% net present value OC on a "committed" basis. The minimum OC level consistent with the Ba1 rating is 0%. These numbers show that Moody's is not relying on "uncommitted" OC in its expected loss analysis. All numbers in this section are based on the most recent Performance Overview (based on data, as per December 31, 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. Moody's has assigned a TPI of Improbable to the covered bonds. Factors that would lead to an upgrade or downgrade of the ratings: 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 the rating agency downgrades the covered bonds because of TPI framework constraints. The TPI assigned to this program is Improbable. The TPI Leeway for this program is limited. Any reduction of the CB anchor may lead to a downgrade of the covered bonds. 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. TAURUS UK 2014-1: DBRS Confirms BB Rating on Class C Debt --------------------------------------------------------- DBRS Ratings Limited confirmed the ratings on all classes of Commercial Mortgage-Backed Floating-Rate Notes due May 2022 (the Notes) issued by Taurus CMBS UK 2014-1 Limited as follows: -- Class A at A (sf) -- Class B at BBB (sf) -- Class C at BB (sf) All trends are Stable. The rating confirmations reflect the performance of the transaction since issuance in July 2014. The transaction consists of one interest-only, floating-rate loan with an initial securitized balance of GBP211.5 million, which was secured by 132 properties located throughout the U.K. The loan represents the 95% pari passu interest of the whole loan that was granted to 13 affiliated borrowing entities, all of which are cross-defaulted and cross-collateralized. The loan had an initial three-year term (maturity in May 2017) with two one-year extension options remaining. The predominant property type within the portfolio is retail (high street retail, shopping centers and retail warehouses). Other property types are office and industrial. The sponsor is an affiliate of Apollo Global Management, which purchased the portfolio through various loan foreclosures. The sponsor's business plan is to fully dispose of the property portfolio before the loan maturity. As of the May 2016 remittance report, 42 properties have been sold since closing, resulting in a 39.6% property collateral reduction. The outstanding securitized balance has been reduced to GBP 127.7 million. The sold properties were subject to a 20% or 10% release premium based on their designation as tier-1 or tier-2 assets, respectively. As of May 2016, 65.1% and 34.8% of the remaining property portfolio was classified as tier-1 and tier-2, respectively. According servicer reporting, the annual contracted rent of the portfolio is GBP28.2 million. The projected April 2016 annualized passing net rental income is reported with GBP13.9 million, equating to a reported interest coverage ratio (ICR) of 2.7 times (x), which is higher than the issuance ICR of 2.3x. Vacancy across the portfolio was 25.1% in April 2016, slightly higher than the 23.2% figure at the time of the last review in June 2015. Currently, there are 904 leases across the portfolio with a weighted-average lease term to expiry of 6.0 years. As of the April 2016 rent roll, 23.7% of contractual income expires on or before April 2017. DBRS applied additional stress to its NCF to account for this concentration. The portfolio was last valued in September 2015. The reported value for the 90 properties remaining is GBP 249.8 million, a 4% like-for-like increase since closing. As a result of the release premium paid for disposed properties and the marginal value increase, the reported loan-to-value ratio is 53.8%, down from 65.0% at issuance. The transaction does not benefit from a liquidity facility. The final maturity date of the CMBS Notes is in May 2022, three years beyond the fully extended maturity date of the loan in May 2019. To date, the transaction is performing in line with DBRS's initial expectations. As a result of the stable performance, DBRS kept its underwriting assumptions for the 90 remaining properties unchanged and confirmed its ratings on the Notes. * Brexit Vote to Impact UK Corporate Insolvency Regime ------------------------------------------------------ Commenting on the decision by the UK to leave the European Union, Andrew Tate, president of UK insolvency trade body R3, said: "Leaving the EU will have a major impact on the way corporate insolvency works in the UK. The UK's insolvency regime does not exist in a vacuum. It is entwined with rules on employment, tax, property, and more; and all of these are linked with European rules." "There will naturally be uncertainty for UK businesses and the decision to leave could create immediate problems for some. Businesses should seek out informed, professional, and regulated advice to help them navigate any uncertainties they encounter, and the sooner they seek advice, the more options they will have." "While domestic insolvency legislation itself is likely to be unaffected, the insolvency profession is involved in a lot of cross-border work in Europe. One key change is that it could become much harder to retrieve assets on behalf of creditors from across Europe. With some exceptions, once the UK leaves, a UK insolvency practitioner's powers may no longer be automatically recognized elsewhere in Europe, nor will UK insolvency proceedings enjoy automatic recognition. New deals will need to be negotiated." "The decision to leave comes as the government is in the middle of renewing the UK's corporate insolvency framework. This is an incredibly complex and important project, but there may now be some uncertainty around the future of this work. Some of the proposals have their origin in EU harmonization programs, while it's not clear where insolvency reform will fit on the government's agenda in the next couple of months." =================== U Z B E K I S T A N =================== KAPITALBANK: S&P Raises Counterparty Credit Ratings to 'B/B' ------------------------------------------------------------ S&P Global Ratings said that it had raised its long- and short- term counterparty credit ratings on Uzbekistan-based Kapitalbank to 'B/B' from 'B-/C'. The outlook is stable. The upgrade stems from S&P's view of Kapitalbank's improved capital position. The bank's risk-adjusted capital (RAC) ratio before diversification adjustments was 4.2% at the end of 2015, supported by robust core earnings that exceeded S&P's previous expectations. S&P believes the bank will likely maintain its current level of capitalization, with the RAC ratio remaining in the 4.0%-4.5% range, compared with 3.0%-3.5% previously. Consequently, S&P has revised its assessment of the bank's capital and earnings to weak from very weak. S&P bases its RAC ratio forecast on its assumption that the bank's loan book will expand by about 25% per year over the next 12-18 months, with assets increasing 30%-35%. The net interest margin is expected to stay high at 5.5%-6.0%, while the cost of risk will likely remain at 1.5%-2.0%, which is in line with the historical average for the bank. S&P notes that Kapitalbank's tempered growth appetite owes partly to the Central Bank of Uzbekistan's efforts to tighten capital adequacy regulations. In particular, the regulator increased the minimum total capital adequacy ratio to 11.5% in 2016 from 10%, and this ratio will increase by one percentage point every year until it reaches 14.5% by 2019. S&P believes that, during that transition period, Kapitalbank is likely to continue operating with a capital cushion of 100 basis points higher than the minimum capital requirement. "Our forecast also factors in the bank's planned issuance of preferred shares in accordance with presidential decree No.2454, which stipulates that 15% of a bank's chartered capital should be from foreign investors. We understand that the bank plans to issue preferred shares with an option to convert them into ordinary shares totaling 15% of its chartered capital. But we don't expect the new investors will exercise this option over the next 12-18 months or have a significant impact on the dividend policy. We do not expect any dividends on common equity to be paid within the next two years," S&P said. "We continue to assess the bank's risk position as adequate, balancing its good asset quality against higher-than-average foreign currency risk. We note that Kapitalbank is dependent on deposits in foreign currency, which constitute 62.5% of total deposits. While this risk is relatively easy to price in Uzbekistan's managed-peg environment, and the bank prudently hedges this exposure, we believe this may turn out to be a primary source of risk in the future, if the currency regime changes or there is an unexpected currency shock. We also note that the bank's exposure to related parties may exceed 5% of total loans stated in the accounts based on International Financial Reporting Standards. We note that part of this exposure is to leasing companies with somewhat diverse underlying risks," S&P said. The stable outlook reflects S&P's expectation that, over the next 12-18 months, Kapitalbank will maintain its capital buffers, despite tightening minimum requirements in Uzbekistan, with the RAC ratio consistently at 4%-4.5%. Moreover, S&P assumes that Kapitalbank will not expand into untested areas beyond its core banking activities. A positive rating action, although unlikely in the next 12-18 months, may occur if Kapitalbank's capitalization improved to levels S&P would consider adequate, with the RAC ratio exceeding 7%, or if S&P see the bank's business position strengthening significantly toward that of state-owned banks. A negative rating action may follow if S&P observed that the bank was not able to build its capital base, putting it at risk of not meeting the central bank's capital adequacy requirements, or if the bank's competitive standing in the market were to weaken. Failure to maintain asset quality in line with systemwide levels, with the cost of risk materially exceeding 2%, may also trigger a downgrade. A change in the central bank's managed peg policy may also lead S&P to reassess Kapitalbank's foreign currency risk and take a negative rating action. ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than US$3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/booksto order any title today. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Europe is a daily newsletter co- published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA. Valerie U. Pascual, Marites O. Claro, Rousel Elaine T. Fernandez, Joy A. Agravante, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2016. All rights reserved. ISSN 1529-2754. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Europe subscription rate is US$775 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter Chapman at 215-945-7000 or Nina Novak at 202-362-8552. * * * End of Transmission * * *