/raid1/www/Hosts/bankrupt/TCREUR_Public/160817.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
Wednesday, August 17, 2016, Vol. 17, No. 162
Headlines
A Z E R B A I J A N
EXPRESS BANK: Fitch Affirms Long-Term IDR at 'B', Outlook Neg.
C Y P R U S
FG BCS: S&P Assigns 'B-/C' Counterparty Credit Ratings
G R E E C E
FRIGOGLASS: Net Loss Widens to EUR491,000 in 2nd Quarter 2016
I T A L Y
MONTE DEI PASCHI: Fintech Reduces Stake to 2.24%
R U S S I A
CB EUROCITYBANKBY: Liabilities Exceed Assets, Assessment Shows
CB MILBANK: Liabilities Exceed Assets, Examination Shows
LENOBLBANK LLC: Bank of Russia Uncovers Underassessment of Risks
NATSCORPBANK JSC: Liabilities Exceed Assets, Assessment Shows
RUSSIAN TRUST: Placed Under Provisional Administration
SNCI PRIPOLYARKOM: Bank of Russia Cancels Banking License
U N I T E D K I N G D O M
GULF KEYSTONE: Receives US$15MM Payment from Kurdistan Gov't
HIGHER EDUCATION: Moody's Cuts Ratings on 2 Note Classes to Caa1
JOHNSTON PRESS: Plans to Buy Back Debt at Steep Discount
JOHNSTON PRESS: Moody's Lowers CFR to Caa2; Outlook Negative
ROYAL BANK: Fitch Assigns 'BB-' Rating to USD2.65-Bil. Notes
*********
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A Z E R B A I J A N
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EXPRESS BANK: Fitch Affirms Long-Term IDR at 'B', Outlook Neg.
--------------------------------------------------------------
Fitch Ratings has affirmed Azerbaijan-based Expressbank's (EB)
Long-Term Issuer Default Rating (IDR) at 'B' with a Stable
Outlook. The agency has also affirmed Atabank's (AB) Long-Term
IDR at 'B-' and removed it from Rating Watch Negative (RWN). A
Negative Outlook has been assigned.
KEY RATING DRIVERS
The affirmation of the banks' ratings reflects only a moderate
worsening of EB's credit profile amid a challenging economic
environment and the already low rating level of AB, which makes
it tolerant to a more acute worsening of its metrics.
AB is rated one notch lower than EB to reflect its lower loss-
absorption capacity, as a result of weaker pre-impairment
profitability and a modest capital buffer, relative to the amount
of unreserved non-performing loans (81% of the Fitch Core Capital
(FCC) at end-2015). Exposure to foreign currency lending is also
higher in AB (54% of loans at end-1Q16) than in EB (below 30% at
end-1H16).
The ratings continue to reflect the banks' vulnerable earnings
and asset quality (less so in EB), significant exposure to
related parties and limited domestic franchises.
The Stable Outlook on EB reflects Fitch's expectation that the
bank will be able to absorb credit losses through earnings
without them eating into capital. The Negative Outlook on AB
reflects higher asset quality risks, which given the small
profitability and capital buffers, may erode the bank's capital
base unless it is replenished by the shareholders.
EB
EB's corporate loan book (55% of gross loans at end-1H16) mostly
consists of exposures to the bank's main corporate shareholder
and its subsidiaries (92% of FCC), including a large construction
company, engaged in infrastructure construction, and to a start-
up diversified production plant, the development of which is
actively supported by the government.
Although the related-party exposures are reportedly performing,
there are sizeable grace periods on the interest and principal.
However, credit risks in corporate lending are mitigated by (i)
these companies directly or indirectly benefiting from the state
contracts, (ii) generally adequate financial profiles, albeit
weakened by 2015 manat devaluation, and (iii) solid capital
buffer, which has been generally larger than the related-party
exposures.
Retail non-performing loans (90 days overdue; NPLs) spiked to 20%
of total retail loans at end-1H16 from 11% at end-2015 and 2.5%
at end-2014, although these were fully covered by impairment
reserves. The annualized NPL origination ratio (defined as
increase in NPLs plus write-offs divided by average performing
loans) was also high at 20% in 1H16, while retail pre-provision
operating profit was only about 16% of retail loans. This means
the bank needs to significantly improve retail loan quality to
achieve break-even in 2016, which is challenging in Fitch's view.
EB's capital position is robust as expressed by a high 48% FCC
ratio (defined as FCC/FCC-adjusted risk-weighted assets) at end-
1H16. Near-term loan growth potential is limited, and capital
ratios are unlikely to significantly decrease in the next couple
of years. However, Fitch views EB's capital position in the
context of the bank's sizeable related party lending (92% of FCC
at end-1H16).
EB is funded by customer deposits (77% of total liabilities at
end-1H16) and liquidity risks are mitigated by a sizeable
liquidity buffer, which was sufficient to repay 31% of customer
funding at end-1H16, and by a fast retail loan turnover.
Wholesale funding (17% of end-1H16 liabilities) is mostly short-
term and sourced domestically. Near-term refinancing needs
equalled to AZN19 million (13% of end-1H16 liabilities). Although
EB's funding raised from related parties was negligible at end-
1H16, there were some large deposits from companies considered as
friendly to the bank's shareholders.
ATABANK
The affirmation of AB and resolution of RWN follows Fitch's
assessment of the bank's capital position post-manat devaluation.
The Negative Outlook reflects deterioration of the bank's credit
profile in the form of increased unreserved NPLs to AZN43 million
(81% of FCC) at end-2015 from AZN16 million (27%) at end-2014,
which may erode equity unless rectified by new injections.
According to the bank's management the bank's shareholders plan
to inject new equity by end-2016, which, if completed, may help
address AB's current asset quality issues.
AB's asset quality deteriorated sharply in 2015-1Q16, with NPLs
increasing to 16% of gross loans at end-1Q16 from 6% at end-2014
due to a weaker economic environment. AB's NPLs were only 27%
covered by impairment reserves at end-1Q16 and their additional
provisioning could erode the bank's capital position. Loans to
related parties accounted for a significant 26% of gross loans at
end-2015, but they were mostly covered by pledged deposits.
At end-2015 AB's FCC ratio equalled to a moderate 11.6%, although
this should be viewed against the bank's significant unreserved
NPLs and weak core earnings. Fitch estimates that at end-2015 the
bank's regulatory capital would allow reserving of only around
20% of these unreserved NPLs.
Internal capital generation capacity is also weak. Pre-impairment
profit (PIP) net of non-recurring gains was only about AZN13m
(2.7% of average gross loans) in 2015, while earning quality is
questionable as 22% of interest was not received in cash.
AB's liquidity profile has deteriorated rather significantly due
to funding outflows in 4Q15-1H16. Although funding outflows have
mostly abated, at end-1H16 the bank's total available liquidity
net of potential debt repayments equalled to a low 5.4% of
customer accounts. This is particularly weak in light of the
bank's rather concentrated customer funding and largely long-term
nature of the bank's corporate book.
On 24 December 2015, Fitch placed AB's ratings on RWN due to the
risk of material erosion of its loss absorption capacity
following the devaluation of the manat. Since the RWN, AB has
avoided reporting FX losses. However, the negative developments
in the bank's profile described above warranted the Negative
Outlook.
KEY RATING DRIVERS - SUPPORT RATINGS AND SUPPORT RATING FLOORS
(SRF)
The SRFs of 'No Floor' and Support Ratings of '5' for both banks
reflect their limited scale of operations and market share.
Although Fitch expects some regulatory forbearance to be
available for these banks, in case of need, any extraordinary
direct capital support from the Azerbaijan authorities cannot be
relied upon, in the agency's view. The potential for support from
banks' private shareholders is not factored into the ratings.
RATING SENSITIVITIES
Positive rating action for EB is contingent on substantial
franchise development through growth of third-party business, a
reduction in volume of operations with affiliated parties and
moderation of downside asset quality risks.
Negative rating actions could be triggered by significant asset
quality deterioration resulting in considerable impairment losses
exceeding pre-impairment profit and eroding capital (more likely
in AB) unless this is addressed by new capital injections.
Negative rating pressure for AB could also stem from a further
liquidity squeeze. Conversely, if AB receives new capital
injection and asset quality pressure recedes, the Outlook may be
revised to Stable.
Fitch believes that positive rating actions on the banks' SR and
SRFs are unlikely in the near-term.
The rating actions are as follows:
Expressbank:
-- Long-Term IDR: affirmed at 'B', Outlook Stable
-- Short-Term IDR: affirmed at 'B'
-- Viability Rating: affirmed at 'b'
-- Support Rating: affirmed at '5'
-- Support Rating Floor: affirmed at 'No Floor'
Atabank:
-- Long-Term IDR: affirmed at 'B-'; off RWN; Outlook Negative
-- Short-Term IDR: affirmed at 'B'; off RWN
-- Viability Rating: affirmed at 'b-'; off RWN
-- Support Rating: affirmed at '5'
-- Support Rating Floor: affirmed at No Floor
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C Y P R U S
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FG BCS: S&P Assigns 'B-/C' Counterparty Credit Ratings
------------------------------------------------------
S&P Global Ratings said that it has assigned its 'B-/C' long- and
short-term counterparty credit ratings to Cyprus-based
nonoperating holding company FG BCS Ltd. The outlook is stable.
At the same time, S&P affirmed and consequently withdrew its
'B-/C' long- and short-term counterparty credit ratings on BCS
Holding International Ltd. at the company's request. At the time
of the withdrawal, the outlook was stable.
FG BCS is the new top-level nonoperating holding company of BCS
Group, a large independent Russian financial services group with
key operating subsidiaries in Russia, Cyprus, and the U.K.
S&P's ratings on FG BCS reflect S&P's opinion of BCS Group as one
of the largest and most diversified brokers in the Russian
market, with a 25% share of the equity market's turnover and 12%
of the retail clientele across Russia. S&P also takes into
account the group's noticeable international presence and its
gradual emergence as a key execution platform for global players
in Russia-related markets.
"We consider the group's capitalization to be adequate, given
what we view as reasonable leverage and a risk-adjusted capital
(RAC) ratio of about 10.8% as of year-end 2015, which we expect
will be sustained over the next 12-18 months. The group's
earnings are also adequate in our view, supported by a pick-up of
the stable portion of revenues in 2015. Risk management
procedures are robust, but commensurate with the complexity of
the group's operations and activities. The group maintains a
considerable liquidity cushion, with adequate liquidity coverage
metrics: The ratio of broad liquid assets plus available
committed unsecured lines to short-term wholesale funding was
about 200% as of year-end 2015. However, it frequently resorts
to short-term wholesale funding for operating activities, causing
volatility in funding ratios," S&P said.
S&P's long-term rating on FG BCS is one notch lower than S&P's
assessment of the group credit profile to reflect the structural
subordination of the nonoperating holding company's liabilities
to those of the operating companies.
The stable outlook on FG BCS reflects S&P's opinion that BCS
Group will be able to withstand potential deterioration of
operating conditions in Russia in the next 12-18 months while
maintaining sufficient capitalization and liquidity.
S&P may take a negative rating action if it sees that the group's
capitalization is insufficient to absorb potential losses, with
the RAC ratio declining to less than 7%. This could result from
an increased risk appetite or higher risks in Russia or other
countries. A disruption of market confidence in the group or the
creation of barriers to liquidity transfer among group members
may also result in a negative rating action.
A positive rating action is likely to be contingent on an
improvement of operating conditions in Russia, including a more
robust and credible regulatory regime. However, should S&P sees
further consistent strengthening of profitability, supported by
strong capitalization with a RAC ratio above 10%, S&P may also
take a positive rating action.
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G R E E C E
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FRIGOGLASS: Net Loss Widens to EUR491,000 in 2nd Quarter 2016
-------------------------------------------------------------
Angeliki Koutantou at Reuters reports that Frigoglass widened its
net loss in the second quarter, hurt by tough conditions in its
key market Russia.
The company, which supplies Coca-Cola HBC and European brewers,
reported a net loss of EUR491,000 (US$547,000) in the second
quarter versus a loss of EUR94,000 in the same period a year ago,
Reuters relates.
According to Reuters, Frigoglass said soft demand for beer in
Russia and currency headwinds in Nigeria will continue for the
remainder of the year but the company will mitigate the impact by
cost cutting.
Frigoglass, which has been facing financial difficulties due to
lower demand for its products in Europe and in Nigeria, announced
last month it will shut its Chinese plant by September and shift
production to India and Indonesia to save costs, Reuters
recounts.
Frigoglass is a Greek refrigerator maker.
* * *
As reported by the Troubled Company Reporter-Europe on April 18,
2016, Standard & Poor's Ratings Services said that it raised to
'CCC+' from 'CCC' its long-term corporate credit rating on Greek
manufacturer of commercial refrigeration products (also known as
an ice-cold merchandiser) Frigoglass SAIC. In addition, S&P
raised to 'CCC+' from 'CCC' the issue rating on the EUR250
million senior unsecured bond issued by group financing vehicle
Frigoglass Finance B.V. S&P also removed the corporate credit and
issue ratings from CreditWatch with developing implications where
they were placed on Feb. 20, 2016. The negative outlook reflects
that S&P expects Frigoglass to face high refinancing risks on
March 31, 2017, when most of the bank debt matures. It also
reflects the vulnerability of the cash flow generation to
uncertain market conditions in Russia and Nigeria.
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I T A L Y
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MONTE DEI PASCHI: Fintech Reduces Stake to 2.24%
------------------------------------------------
Silvia Aloisi at Reuters reports that a filing by market
regulator Consob said on Aug. 12 investment firm Fintech, the top
shareholder in Monte dei Paschi di Siena has cut its stake in
Italy's third biggest bank to 2.24% from 4.5%.
The filing said the stake reduction took place on Aug. 4, around
a week after the Tuscan lender announced a rescue plan including
a EUR5-billion (GBP4 billion) capital increase to avert the risk
of being wound down, Reuters relates.
About Monte dei Paschi
Banca Monte dei Paschi di Siena SpA -- http://www.mps.it/-- is
an Italy-based company engaged in the banking sector. It
provides traditional banking services, asset management and
private banking, including life insurance, pension funds and
investment trusts. In addition, it offers investment banking,
including project finance, merchant banking and financial
advisory services. The Company comprises more than 3,000
branches, and a structure of channels of distribution. Banca
Monte dei Paschi di Siena Group has subsidiaries located
throughout Italy, Europe, America, Asia and North Africa. It has
numerous subsidiaries, including Mps Sim SpA, MPS Capital
Services Banca per le Imprese SpA, MPS Banca Personale SpA, Banca
Toscana SpA, Monte Paschi Ireland Ltd. and Banca MP Belgio SpA.
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R U S S I A
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CB EUROCITYBANKBY: Liabilities Exceed Assets, Assessment Shows
--------------------------------------------------------------
The provisional administration of PJSC CB EurocityBank appointed
by Bank of Russia Order No. OD-2158, dated July 7, 2016, due to
the revocation of its banking license encountered an obstruction
of its activity starting the first day of performing its
functions which the Bank of Russian believes was aimed at
concealing the fact of diverting assets from PJSC CB
EurocityBank, according to the Central Bank of Russia's Press
Service.
Examination of the bank's premises detected that the greater part
of electronic media (servers) used to store information about the
credit institution's assets, liabilities and their flow was
missing. Also, it was noted that the integrity of information
stored in some electronic devices must have been intentionally
damaged.
Besides, the provisional administration has detected that many
right-establishing documents as regards the bank's outstanding
loans worth RUR5.1 billion was missing. At the same time, the
provisional administration revealed the existence of loan
assignment contracts worth RUR1.4 billion rubles to a dummy
company.
The preliminary examination launched by the provisional
administration revealed that the asset value of the bank did not
exceed RUR3.2 billion, while its liabilities to creditors
amounted to RUR6.4 billion. This data is written down in the
report submitted by the provisional administration to the Bank of
Russia. On August 1, 2016, the Bank of Russia submitted a
petition to the Court of Arbitration of the city of Moscow to
recognise PJSC CB EurocityBank insolvent (bankrupt).
The Bank of Russia has submitted the information on the financial
transactions bearing the evidence of criminal offences conducted
by the former management and owners of PJSC CB EurocityBank to
the Prosecutor General's Office of the Russian Federation, the
Russian Ministry of Internal Affairs and the Investigation
Committee of the Russian Federation for consideration and
procedural decision making.
CB MILBANK: Liabilities Exceed Assets, Examination Shows
--------------------------------------------------------
During the examination of financial standing of the credit
institution, the provisional administration appointed by Bank of
Russia Order No. OD-673, dated February 26, 2016, due to the
revocation of the banking license of LLC CB MILBANK revealed
operations conducted by the LLC CB MILBANK's former management
bearing the evidence of moving out assets in the total amount of
more than RUR860 million through lending shell companies and
purchasing promissory notes issued by companies bearing the
evidence of non-operating institutions, according to the Central
Bank of Russia's Press Service.
According to the estimate of the provisional administration, the
assets of LLC CB MILBANK do not exceed RUR3.3 billion, whereas
the bank's liabilities to its creditors amount to RUR3.9 billion.
On April 27, 2016, the Court of Arbitration of the city of Moscow
ruled to recognize LLC CB MILBANK insolvent (bankrupt) and
initiate bankruptcy proceedings with the state corporation
Deposit Insurance Agency appointed as a receiver.
The Bank of Russia submitted the information on financial
transactions bearing the evidence of the criminal offence
conducted by the former management and owners of LLC CB MILBANK
to the Prosecutor General's Office of the Russian Federation, the
Ministry of Internal Affairs of the Russian Federation and the
Investigative Committee of the Russian Federation for
consideration and procedural decision making.
LENOBLBANK LLC: Bank of Russia Uncovers Underassessment of Risks
----------------------------------------------------------------
In the course of supervision activities the Bank of Russia has
detected the underassessment of risks assumed by LLC LENOBLBANK
resulting from a low quality of its assets, according to the
Central Bank of Russia's Press Service. In the wake of a
corresponding request made by the Bank of Russia the credit
institution management performed a partial replacement of the
troubled asset worth RUR1.7 billion with units of a closed-end
real estate unit investment fund (hereinafter, CREUIF) which had
been overvalued in accounting documents.
The provisional administration of LLC LENOBLBANK appointed by
Bank of Russia Order No. OD-2837, dated October 16, 2015, due to
the revocation of the banking license during the examination of
the bank's financial standing revealed other operations to
replace assets of the credit institution with CREUIF units which
bear the evidence of moving out liquid assets.
Besides, LLC LENOBLBANK management avoided the transfer to the
provisional administration of credit agreements and CREUIF unit
acquisition contracts worth RUR0.2 billion.
According to estimates by the provisional administration, the
asset value of LLC LENOBLBANK did not exceed RUR2.2 billion,
while its liabilities to creditors amounted to RUR5.3 billion.
On December 17, 2015, the Court of Arbitration of the city of
Saint Petersburg and the Leningrad Region took a decision to
recognise LLC LENOBLBANK insolvent (bankrupt) and to initiate
bankruptcy proceedings with the state corporation Deposit
Insurance Agency appointed as a receiver.
The Bank of Russia has submitted the information on the financial
transactions bearing the evidence of criminal offences conducted
by the former management and owners of LLC LENOBLBANK to the
Prosecutor General's Office of the Russian Federation, the
Russian Ministry of Internal Affairs and the Investigative
Committee of the Russian Federation for consideration and
procedural decision making.
NATSCORPBANK JSC: Liabilities Exceed Assets, Assessment Shows
-------------------------------------------------------------
The provisional administration of NATSCORPBANK (JSC) appointed by
Bank of Russia Order No. OD-901, dated March 17, 2016, due to the
revocation of its banking license encountered an obstruction of
its activity starting the first day of performing its functions,
according to the Central Bank of Russia's Press Service.
In violation of Russian legislation NATSCORPBANK (JSC) management
failed to provide the provisional administration with original
loan agreements worth about RUR400 million.
The provisional administration of NATSCORPBANK (JSC) detected in
the course of examination of the credit institution's financial
standing operations carried out by its former management which
bear the evidence of moving out assets worth over RUR495 million
mainly through extending loans to companies not involved in any
real business operations.
According to estimates by the provisional administration, the
asset value of NATSCORPBANK (JSC) did not exceed RUR996.4
million, while its liabilities to creditors amounted to
RUR1,620.9 million rubles.
On June 14, 2016, the Court of Arbitration of the city of Moscow
took a decision to recognize NATSCORPBANK (JSC) insolvent
(bankrupt) and initiate bankruptcy proceedings with the state
corporation Deposit Insurance Agency appointed as a receiver.
The Bank of Russia has submitted the information on the financial
transactions bearing the evidence of criminal offences conducted
by the former management and owners of NATSCORPBANK (JSC) to the
Prosecutor General's Office of the Russian Federation, the
Russian Ministry of Internal Affairs and the Investigative
Committee of the Russian Federation for consideration and
procedural decision making.
RUSSIAN TRUST: Placed Under Provisional Administration
------------------------------------------------------
The Bank of Russia, by its Order No. OD-2636, dated August 16,
2016, revoked the banking license of the Moscow-based credit
institution Joint-Stock Commercial Bank Russian Trust Bank
(joint-stock company) or JSCB Russian Trust Bank (JSC) from
August 16, 2016, according to the Central Bank of Russia's Press
Service.
The Bank of Russia took such an extreme measure -- revocation of
the banking license -- due to the credit institution's failure to
comply with federal banking laws and Bank of Russia regulations,
capital adequacy ratios being below 2%, decrease in capital below
the minimal value of the authorized capital established by the
Bank of Russia as of the date of the state registration of the
credit institution, and the repeated application within a year of
measures envisaged by the Federal Law "On the Central Bank of the
Russian Federation (Bank of Russia)".
Given unsatisfactory quality of its assets, JSCB Russian Trust
Bank (JSC) inadequately assessed the risks assumed. A proper
assessment of the credit risk on a supervisor's demand revealed a
full loss of the bank's capital. Both management and owners of
the credit institution did not take any effective measures to
bring its activities back to normal. Under these circumstances
based on Article 20 of the Federal Law "On Banks and Banking
Activities" the Bank of Russia fulfilled its duty to revoke the
banking license of JSCB Russian Trust Bank (JSC).
The Bank of Russia, by its Order No. OD-2637, dated August 16,
2016, appointed a provisional administration to JSCB Russian
Trust Bank (JSC) for the period until the appointment of a
receiver pursuant to the Federal Law "On the 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 Russian Trust Bank (JSC) 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 legislation.
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 not more than RUR1.4
million per depositor.
According to reporting data, as of August 1, 2016, JSCB Russian
Trust Bank (JSC) ranked 262th in the Russian banking system in
terms of assets.
SNCI PRIPOLYARKOM: Bank of Russia Cancels Banking License
---------------------------------------------------------
The Bank of Russia, by its Order No. OD-2616, dated August 12,
2016, cancelled the banking license of Tyumen-based credit
institution JSC SNCI PRIPOLYARKOM from August 12, 2016.
The Bank of Russia cancelled the banking license of JSC SNCI
PRIPOLYARKOM, based on Article 23 of the Federal Law "On Banks
and Banking Activities", following the decision of the credit
institution's authorized body to terminate its activity through
liquidation pursuant to Article 61 of the Civil Code of the
Russian Federation and the submission of the respective
application to the Bank of Russia.
Based on the data provided by JSC SNCI PRIPOLYARKOM the credit
institution has enough property to satisfy creditors' claims.
In compliance with Article 62 of the Civil Code of the Russian
Federation and Article 21 of the Federal Law 'On Joint-stock
Companies', a liquidation commission will be appointed to JSC
SNCI PRIPOLYARKOM.
According to the financial statements, as of August 1, 2016, JSC
SNCI PRIPOLYARKOM ranked 641st by assets in the Russian banking
system.
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U N I T E D K I N G D O M
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GULF KEYSTONE: Receives US$15MM Payment from Kurdistan Gov't
------------------------------------------------------------
Niamh Burns at Energy Voice reports that Gulf Keystone Petroleum
said it has received a gross payment of US$15 million from the
Kurdistan Regional Government for Shaikan crude oil export sales
in June.
The company and the region's Ministry of Natural Resources (MNR)
are working together on agreeing the final form of invoices from
May and June in comparison with the negotiation and finalization
of the second amendment to the Shaikan Production Sharing
Contract as per the bilateral agreement between the two, Energy
Voice relates.
According to Energy Voice, Gulf Keystone said following receipt
of the payment, the company's cash position will be US$79.5
million.
Debt-for-Equity Swap
As reported by the Troubled Company Reporter-Europe on July 19,
2016, Reuters related that distressed debt funds will become big
shareholders in troubled oil firm Gulf Keystone after bondholders
agreed to swap US$500 million of debt for equity, wiping out some
of the world's top funds as shareholders. According to Reuters,
the firm has been fighting to avoid insolvency after low oil
prices and overdue oil export payments from the Kurdistan
regional government crippled its balance sheet.
Gulf Keystone Petroleum Limited is an oil and gas exploration and
production company operating in the Kurdistan region of Iraq. It
is listed on the main market of the London Stock Exchange.
HIGHER EDUCATION: Moody's Cuts Ratings on 2 Note Classes to Caa1
----------------------------------------------------------------
Moody's Investors Service has downgraded the ratings of class A3
and A4 notes to Caa1 (sf) from B3 (sf) in The Higher Education
Securitised Investments Series No. 1 PLC (THESIS). At the same
time, Moody's affirmed the accrual facility notes' A3 (sf)
rating. THESIS is a UK asset-backed securities (ABS) transaction
backed by student loans.
Issuer: The Higher Education Securitised Investments Series No. 1
PLC (THESIS)
GBP101.3 mil. A3 Notes, Downgraded to Caa1 (sf); previously on
Oct 19, 2015, Downgraded to B3 (sf)
GBP27.3 mil. A4 Notes, Downgraded to Caa1 (sf); previously on
Oct. 19, 2015, Downgraded to B3 (sf)
Accrual Facility Note, Affirmed A3 (sf); previously on Oct. 19,
2015, Affirmed A3 (sf)
The transaction is a static cash securitization of student loans
extended to obligors in the UK, which closed in March 1998. The
loans were originated by the Student Loan Company, a UK public
sector organization established to provide loans and grants to
over one million students annually across the UK.
RATINGS RATIONALE
The rating action is prompted by the worse-than-expected
performance of the collateral backing the affected notes, which
resulted in a decrease in the class A3 and A4 notes' credit
enhancement. Moody's has affirmed the accrual facility notes'
rating, as the tranche benefits from the UK Government
cancelation indemnity on the loans, due to its seniority in the
structure.
WORSE THAN EXPECTED COLLATERAL PERFORMANCE
Defaulted loans (which are overdue for more than 24 months) have
increased by GBP3 million between Aug 2015 and June 2016. The
rise in defaulted loans has resulted in an increase in the
principal deficiency ledger to GBP61.5 million from GBP58.5
million, and reduced the class A3 and A4 notes' credit
enhancement to 4% from 5.5% over the same period.
Moody's considers the performance deterioration to be partially
linked to the fact that a higher portion of loans left deferment
in April 2015 due to a lower deferment threshold (-7.1% lower
than April 2014) and that these borrowers did not go back in
deferment in April 2016 when the threshold went back to its April
2014 level. A borrower may be entitled to defer loan payments if
their income is lower than the deferment threshold, which is
equal to 85% of the average full-time earnings in the UK.
The recent decrease of the GBP Libor 1 month and the anticipated
increase in RPI will lower the UK Government subsidy, reducing
the revenue available for the transaction.
PROJECTION OF FUTURE LOSSES
Moody's projected future default on the outstanding portfolio by
assessing the proportion of loans leaving deferment each year.
In its analysis, the rating agency assumed that the future
deferment threshold would either stay stable or increase with the
average monthly salary in the UK.
Out of the loans that left deferment, Moody's estimated the
amount of loans that would benefit from the UK government's
cancelation indemnity which covers loans outstanding for more
than 25 years. For the remaining part of the pool which is not
covered by this cancelation indemnity, Moody's assumed a default
rate of 14% on loans in repayment without arrears and 30% on
loans in repayment with arrears with a 30% recovery rate for both
loan type.
Loans that continue to be in deferment and satisfy the
aforementioned criteria will benefit from the cancelation
indemnity. In Moody's view, these loans are unlikely to result
in incremental losses to the transaction.
Moody's concluded than under most scenarios the likelihood of
classes A3 and A4 to incur a loss was high. As a result, Moody's
has downgraded the ratings on these tranches to Caa1 (sf) from
B3 (sf).
Moody's also affirmed the A3 (sf) rating of the accrual facility
notes, the most senior tranche in the structure, given the
current 31% credit enhancement level and the fact that the notes
will benefit from the UK Government cancelation indemnity on the
loans that will continue to be deferred and on the repaying ones
meeting the criteria of age.
The principal methodology used in these ratings was "Moody's
Approach to Monitoring Scheduled Amortisation UK Student Loan-
Backed Securities" published in April 2015.
Factors that would lead to an upgrade or downgrade of the
ratings:
Factors or circumstances that could lead to an upgrade of the
rating are (1) better-than-expected underlying collateral
performance, (2) deleveraging of the capital structure, (3)
improvement of the counterparties' credit quality, and (4)
stability or increase in the amount of loans in deferment.
Factors or circumstances that could lead to a downgrade of the
rating are (1) worse-than-expected underlying collateral
performance, (2) deterioration of the notes' available credit
enhancement, (3) deterioration of the counterparties' credit
quality, and (4) faster than anticipated decrease in the amount
of loans in deferment.
JOHNSTON PRESS: Plans to Buy Back Debt at Steep Discount
--------------------------------------------------------
Roy Greenslade at The Guardian reports that regional publisher
Johnston Press is planning to buy back some of its heavy debt
pile at a steep discount.
According to The Guardian, sources cited by the Sunday Telegraph
said the company, led by chief executive Ashley Highfield, is
hoping to take advantage of fears that it will struggle to repay
GBP220 million in bonds due in 2019.
It is understood that Highfield plans to use the proceeds from
the sale of titles it no longer regards as part of its core
business in order to buy back the bonds, which are now trading at
a discount of around 40p in the pound, The Guardian notes.
Although it would be regarded as a controversial move, and could
well have a negative impact on credit ratings, it would help to
reduce the company's debt burden and, in effect, give Highfield
some breathing space as he seeks to turn around the publisher's
fortunes, The Guardian states.
Johnston Press is a newspaper publisher.
* * *
As reported by the Troubled Company Reporter-Europe on March 29,
2016, Standard & Poor's Ratings Services said that it had lowered
its long-term corporate credit rating on U.K.-based newspaper
publisher Johnston Press PLC to 'CCC+' from 'B'. The outlook is
stable. The downgrade stems from S&P's opinion that, despite the
lack of short-term debt and positive free cash flow generation,
Johnston Press' current capital structure is unsustainable when
combined with its vulnerable operations, primarily reflecting
S&P's view of declining trends in the publishing industry.
The TCR-Europe Reporter-Europe reported on March 9, 2016, that
Moody's Investors Service downgraded the ratings of UK local and
regional media company Johnston Press plc, including its
Corporate Family Rating to Caa1 from B3, its Probability of
Default Rating to Caa1-PD from B3-PD, and the rating of the
GBP225 million senior secured notes issued by its subsidiary,
Johnston Press Bond Plc to Caa1 from B3. The outlook on all
ratings is stable. "The downgrade of Johnston Press' ratings to
Caa1 reflects the ongoing structural shift in the industry toward
digital formats which is causing a persistent erosion of the
company's print based revenues. The company has made some
progress in expanding its digital formats and has implemented
cost actions to accommodate the ongoing top line pressures.
Nevertheless, Moody's expects that the industry trends will put
ongoing negative pressure on the company's operating
performance", said Gunjan Dixit, a Moody's Vice President and
lead analyst for Johnston Press.
JOHNSTON PRESS: Moody's Lowers CFR to Caa2; Outlook Negative
------------------------------------------------------------
Moody's Investors Service downgraded the ratings of UK local and
regional media company Johnston Press plc, namely the Corporate
Family Rating to Caa2 from Caa1, the Probability of Default
Rating (PDR) to Caa2-PD from Caa1-PD and the rating on the
company's GBP225 million senior secured notes issued by its
subsidiary Johnston Press Bond Plc to Caa2 from Caa1. The
outlook on the ratings has been changed to negative from stable.
RATINGS RATIONALE
The rating actions reflect the worse than expected weakening in
Johnston Press' performance as detailed in the company's H1 2016
interim results which showed revenue declining -9.7% and EBITDA -
12.5% on the back of continued structural decline in print
circulation as well as a drop in print advertising revenue.
While Moody's notes the good performance of the newly acquired
"i" business, it is outweighed by the slowdown experienced by the
rest of the company. Given the structural challenges of the
print industry as well as the uncertainty over advertising demand
in H2 2016, we believe that the company liquidity profile is weak
with meager to neutral adjusted free cash flow generation
expected in 2016 and heightened risk of a breach under its RCF
covenant as this continues to tighten.
The company has announced plans to dispose of some non-core
assets the proceeds of which are planned to be used to repay
debt. While the successful implementation of these sales would
be credit enhancing, there is execution risk on concluding these
sales and any positive impact on the quantum of debt would be
analyzed in conjunction with any reduction in EBITDA and free
cash flow generation. Moody's also cautions that, as per its
standard definition of default, purchases of debt at a discount
to par might be seen by the rating agency as amounting to a
distressed exchange.
Liquidity Profile
Moody's views Johnston Press' liquidity profile as weak and this
despite the company historically generating positive free cash
flow as Moody's believes that access to the company's GBP25
revolving credit facility (undrawn at H1 2016) could be
jeopardized by a potential covenant breach resulting from the
compound effect of the weakening performance and the scheduled
tightening of the covenant level. Based on H1 2016 results,
Moody's estimates that the company's headroom under its RCF
covenant is now well below 10%.
The negative outlook reflects the continued fundamental
structural headwinds the company is facing as well as the
heightened risk that the company could breach its covenant under
the RCF and lose access to that facility.
WHAT COULD MOVE THE RATING UP
While upward pressure on the rating is unlikely in the short
term, the outlook could be stabilized should the company's
performance stabilize and long-term access to the RCF be
maintained.
WHAT COULD MOVE THE RATING DOWN
Further downward pressure on the ratings could occur should
Johnston Press lose access to its revolving credit facility or
should free cash flow turn negative.
The principal methodology used in these ratings was Global
Publishing Industry published in December 2011.
Johnston Press plc is a leading UK multimedia company that
publishes 13 paid-for daily newspapers, including The Scotsman,
The Yorkshire Post and The News (Portsmouth), 154 paid for
weeklies, 37 free newspapers and a number of lifestyle magazines.
ROYAL BANK: Fitch Assigns 'BB-' Rating to USD2.65-Bil. Notes
------------------------------------------------------------
Fitch Ratings has assigned The Royal Bank of Scotland Group plc's
(RBSG, BBB+/Stable/F2/bbb+) USD2.65 billion perpetual
subordinated contingent convertible capital notes (CCCN) a final
rating of 'BB-'.
The notes are perpetual, but can be redeemed at the option of the
issuer after five years from the issue date and every fifth
anniversary thereafter, subject to regulatory approval, and pay
an annual coupon of 8.625%.
The final rating is in line with the expected rating Fitch
assigned to the notes on August 8, 2016.
KEY RATING DRIVERS
The CCCN qualify as additional Tier 1 (AT1) instruments with
fully discretionary interest payments and are subject to
conversion into RBSG's ordinary shares on breach of a
consolidated 7% CRD IV common equity Tier 1 (CET1) ratio, which
is calculated on a fully loaded basis.
The rating of the securities is five notches below RBSG's 'bbb+'
Viability Rating (VR), in line with Fitch's criteria, for
assigning ratings to hybrid instruments. The securities are
notched twice for loss severity to reflect the conversion into
common shares on a breach of the 7% fully loaded CET1 ratio
trigger, and three times for incremental non-performance risk
relative to the VR.
The notching for non-performance risk reflects the instruments'
fully discretionary coupons, which Fitch views as the most easily
activated form of loss absorption. Under the terms of the
securities, the issuer will be subject to restrictions on
interest payments if it has insufficient distributable items
(RBSG's distributable reserves stood at GBP14.6 billion at
June 30, 2016), is insolvent or fails to meet the combined buffer
capital requirements that are being gradually introduced from
2016. Potential other factors are a breach of the minimum
regulatory leverage ratio.
RBSG's fully loaded Basel III CET1 ratio at June 30, 2016, was
14.5%, providing it with a buffer in excess of GBP18 billion for
the 7% CET1 ratio trigger, although non-performance in the form
of non-payment of interest would likely be triggered before
reaching the 7% trigger, most likely by breaching the bank's
regulatory requirements. RBSG's indicative minimum CET1
requirement applicable from January 1, 2019, is 10.8%, made up of
4.5% CET1 requirement under Pillar 1, 2.8% under Pillar 2A, a
capital conservation buffer of 2.5% and a 1% G-SIB buffer.
RATING SENSITIVITIES
The CCCN's rating is primarily sensitive to changes in RBSG's VR.
The rating is also sensitive to a change in the notching of the
securities, which could arise if Fitch changes its assessment of
the probability of their non-performance relative to the risk
captured in the VR. This may reflect a change in Fitch's
assessment of capital management at RBSG, reducing the holding
company's flexibility to service the securities or an unexpected
shift in regulatory buffer requirements, for example.
*********
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, Julie Anne Lopez, 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 * * *